File No. 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. 73 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 73 [ X ]
(Check appropriate box or boxes.)
THE DREYFUS/LAUREL FUNDS, INC.
___________________________________________________
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
The Dreyfus Corporation
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)
----
X 60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
The following post-effective amendment to the Registrant's Registration
Statement on Form N-1A relates only to Dreyfus Premier Balanced Fund, Dreyfus
Premier Large Company Stock Fund, Dreyfus Premier Midcap Stock Fund and Dreyfus
Premier Small Company Stock Fund and does not affect the Registration Statement
of the following series of the Registrant:
DREYFUS BOND MARKET INDEX 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 DISCIPLINED INTERMEDIATE BOND FUND
DREYFUS PREMIER LIMITED TERM INCOME FUND
DREYFUS PREMIER SMALL CAP VALUE FUND
DREYFUS DISCIPLINED STOCK FUND
DREYFUS DISCIPLINED SMALLCAP STOCK FUND
DREYFUS TAX-SMART GROWTH FUND
DREYFUS PREMIER TAX MANAGED GROWTH FUND
Dreyfus Premier Small Company Stock Fund
Investing in small-cap stocks for investment returns that exceed the Russell
2500(tm) Stock Index
PROSPECTUS August 16, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Small Company Stock Fund
---------------------------------
Ticker Symbols CLASS A: DPSAX
CLASS B: DPSBX
CLASS C: DPSCX
CLASS R: DPSRX
CLASS T: N/A
Contents
The Fund
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Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 3
Management 4
Financial Highlights 5
Your Investment
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Account Policies 7
Distributions and Taxes 10
Services for Fund Investors 10
Instructions for Regular Accounts 12
Instructions for IRAs 13
For More Information
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INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Russell 2500(tm) Stock Index
(Russell 2500). This objective may be changed without shareholder approval. To
pursue its goal, the fund normally invests at least 65% of total assets in a
blended portfolio of growth and value stocks of small and mid-size domestic
companies, whose market values generally range between $100 million and $3
billion. Stocks are chosen through a disciplined process combining computer
modelling techniques, fundamental analysis and risk management. Consistency of
returns and stability of the fund's share price compared to the Russell 2500 are
primary goals of the investment process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic
worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Dreyfus then 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 Russell 2500.
Concepts to understand
SMALL COMPANIES: new and often entrepreneurial companies. Small companies tend
to grow faster than large-cap companies, but are also more volatile and have a
higher failure rate.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks. Dreyfus reviews each of the screens on a regular basis and
maintains the flexibility to adapt the screening criteria to changes in market
conditions.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. 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 carry additional risks because their operating
histories may be more limited and their earnings are less predictable, their
share prices more volatile and their securities less liquid than larger, more
established companies. Some of the fund's investments will rise and fall based
on investor perception rather than economics.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile similar to the Russell 2500, the fund holds
fewer securities than the index. Owning fewer securities and the ability to
purchase companies not listed in the index can cause the fund to underperform
the index.
By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
Other potential risks
The fund may invest in initial public offerings, options, futures and foreign
currencies to hedge the fund's portfolio or to increase returns. There is the
risk that such practices may reduce returns or increase volatility.
The fund may invest in securities of foreign issuers, which carry additional
risks such as less liquidity, changes in currency exchange rates, a lack of
adequate company information and political instability.
The Fund 1
<PAGE 1>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table compares the performance of each of the fund's share classes over
time to that of the Russell 2500, a widely recognized unmanaged index of
small-cap stock performance. These returns reflect any applicable sales loads.
Both tables assume the reinvestment of dividends. Of course, past performance is
no guarantee of future results. Since Class T shares are new, past performance
information for that class is not included in this section of the prospectus.
Performance for Class T shares will vary from the performance of the fund's
other share classes due to differences in charges and expenses.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
40.43 22.13 22.01 -5.85
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q4 '98 +16.40%
WORST QUARTER: Q3 '98 -21.81%
THE YEAR-TO-DATE TOTAL RETURN FOR THE FUND'S CLASS R SHARES AS OF 6/30/99 WAS
__%.
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<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/98
Since
Inception date 1 Year inception
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<S> <C> <C> <C>
CLASS A (9/2/94) -11.50% 14.77%
CLASS B (12/19/94) -10.58% 17.94%
CLASS C (12/19/94) -7.73% 18.26%
CLASS R (9/2/94) -5.85% 16.61%
RUSSELL 2500 0.38% 15.91%*
* BASED ON THE LIFE OF CLASS A AND CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE
OF THE INDEX ON 8/31/94 IS USED AS THE BEGINNING VALUE ON 9/2/94.
</TABLE>
What this fund is -- and isn't
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 this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
2
<PAGE 2>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
Fee table
CLASS A CLASS B CLASS C CLASS R CLASS T
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<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE NONE*
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ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.25 1.25 1.25 1.25 1.25
Rule 12b-1 fee .25 1.00 1.00 NONE .50
Other expenses .00 .00 .00 .00 .00**
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TOTAL 1.50 2.25 2.25 1.25 1.75
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1 MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF
REDEEMED WITHIN ONE YEAR.
** "OTHER EXPENSES" FOR CLASS T SHARES ARE ESTIMATED FOR THE CURRENT FISCAL YEAR BASED ON THE APPLICABLE AMOUNTS FOR CLASS A, B, C
AND R SHARES FOR THE FUND'S LAST FISCAL YEAR.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
CLASS A $719 $1,022 $1,346 $2,263
CLASS B
WITH REDEMPTION $628 $1,003 $1,405 $2,223***
WITHOUT REDEMPTION $228 $703 $1,205 $2,223***
CLASS C
WITH REDEMPTION $328 $703 $1,205 $2,585
WITHOUT REDEMPTION $228 $703 $1,205 $2,585
CLASS R $127 $397 $686 $1,511
CLASS T $620 $976 $1,356 $2,420
*** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
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. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. 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.
The Fund 3
<PAGE 3>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $120
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 1.25% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management and $1.9 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. Mellon is headquartered in Pittsburgh, Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
The fund is co-managed by James C. Wadsworth and Anthony J. Galise. Mr.
Wadsworth has been employed by Dreyfus as a portfolio manager since October 1994
and is also chief investment officer at Laurel Capital Advisors, an affiliate of
Dreyfus. He is also chief equity officer and senior vice president of Mellon
Private Asset Management. He has been employed by Mellon Bank since 1977. Mr.
Galise has been employed by Dreyfus as a portfolio manager since April 1996. He
is also a portfolio manager at Laurel Capital Advisors and a vice president and
portfolio manager at Mellon Bank. He joined Mellon in 1993 with over 20 years of
equity investment experience.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
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.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
4
<PAGE 4>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of Classes A, B, C and R for the
fiscal periods indicated. "Total return" shows how much your investment in the
fund would have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These financial highlights (other
than those for the six-month period ended April 30, 1999) have been
independently audited by KPMG LLP, whose report, along with the fund's financial
statements, is included in the annual report, which is available upon request.
Since Class T shares are new, financial highlights information is not available
for that class as of the date of this prospectus.
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS A 1999 1998 1997 1996 1995 1994(1)
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<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 15.18 18.89 15.13 13.09 10.07 10.00
Investment operations: Investment income (loss) -- net (.01) (.02) (.04) (.02) .02 .01
Net realized and unrealized
gain (loss) on investments 1.51 (2.78) 4.52 2.48 3.03 .06
Total from investment operations 1.50 (2.80) 4.48 2.46 3.05 .07
Distributions: Dividends from investment
income -- net -- -- -- -- (.03) --
Dividends from net realized
gain on investments -- (.91) (.72) (.42) -- --
Total distributions -- (.91) (.72) (.42) (.03) --
Net asset value, end of period 16.68 15.18 18.89 15.13 13.09 10.07
Total return (%)(2) 9.81(3) (15.42) 30.73 19.22 30.31 .70(3)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .74(3) 1.50 1.50 1.50 1.50 .25(3)
Ratio of net investment income (loss) to
average net assets (%) (.08)(3) (.32) (.35) (.16) .10 .14(3
Portfolio turnover rate (%) 20.73(3) 47.44 39.18 49.03 56.00 8.00(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 15,399 13,462 9,190 3,884 1,359 60
(1) FROM SEPTEMBER 2, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994.
(2) EXCLUSIVE OF SALES CHARGE. (3) NOT ANNUALIZED.
(UNAUDITED)
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS B 1999 1998 1997 1996 1995(1)
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PER-SHARE DATA ($)
Net asset value, beginning of period 14.75 18.51 14.95 13.05 9.49
Investment operations: Investment income (loss) -- net (.09) (.11) (.03) (.07) (.03)
Net realized and unrealized gain
(loss) on investments 1.47 (2.74) 4.31 2.39 3.59
Total from investment operations 1.38 (2.85) 4.28 2.32 3.56
Distributions: Dividends from net realized gain
on investments -- (.91) (.72) (.42) --
Net asset value, end of period 16.13 14.75 18.51 14.95 13.05
Total return (%)(2) 9.42(3) (16.10) 29.72 18.17 37.51(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.12(3) 2.25 2.25 2.24 1.95(3)
Ratio of net investment income (loss) to average net assets (%) (.46)(3) (1.07) (1.02) (.93) (.56)(3)
Portfolio turnover rate (%) 20.73(3) 47.44 39.18 49.03 56.00(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 25,637 25,183 19,257 4,633 1,025
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
The Fund 5
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
(UNAUDITED)
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS C 1999 1998 1997 1996 1995(1)
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PER-SHARE DATA ($)
Net asset value, beginning of period 14.75 18.52 14.95 13.04 9.49
Investment operations: Investment income (loss) -- net (.11) (.14) .01 (.09) (.01)
Net realized and unrealized gain
(loss) on investments 1.50 (2.72) 4.28 2.42 3.56
Total from investment operations 1.39 (2.86) 4.29 2.33 3.55
Distributions: Dividends from net realized gain
on investments -- (.91) (.72) (.42) --
Net asset value, end of period 16.14 14.75 18.52 14.95 13.04
Total return (%)(2) 9.35(3) (16.08) 29.79 18.27 37.41(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.12(3) 2.25 2.25 2.25 1.14(3)
Ratio of net investment income (loss) to average net assets (%) (.45)(3) (1.08) (1.01) (.93) (.33)(3)
Portfolio turnover rate (%) 20.73(3) 47.44 39.18 49.03 56.00(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 4,134 4,323 3,647 514 147
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
(UNAUDITED)
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS R 1999 1998 1997 1996 1995 1994(1)
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PER-SHARE DATA ($)
Net asset value, beginning of period 15.27 18.96 15.15 13.10 10.07 10.00
Investment operations: Investment income (loss) -- net .01 (.01) -- .01 .04 .02
Net realized and unrealized gain
(loss) on investments 1.52 (2.77) 4.53 2.48 3.04 .05
Total from investment operations 1.53 (2.78) 4.53 2.49 3.08 .07
Distributions: Dividends from investment
income -- net -- -- -- (.02) (.05) --
Dividends from net realized gain
on investments -- (.91) (.72) (.42) -- --
Total distributions -- (.91) (.72) (.44) (.05) --
Net asset value, end of period 16.80 15.27 18.96 15.15 13.10 10.07
Total return (%) 10.02(2) (15.31) 31.04 19.43 30.70 .70(2)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .62(2) 1.25 1.25 1.25 1.25 .21(2)
Ratio of net investment income (loss) to
average net assets (%) .04(2) (.07) .02 .09 .35 .18(2)
Portfolio turnover rate (%) 20.73(2) 47.44 39.18 49.03 56.00 8.00(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 292,419 238,953 244,292 112,209 44,091 10,747
(1) FROM SEPTEMBER 2, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994.
(2) NOT ANNUALIZED.
</TABLE>
6
<PAGE 6>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institutions on behalf of their
clients (individuals may not purchase these shares directly)
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments and
have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B, C or T shares
in this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A or Class T investment for
purposes of calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
The Fund 7
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay or may qualify for a reduced sales charge to buy or sell shares. Consult
your financial representative or the SAI to see if this may apply to you.
Shareholders holding Class A shares since December 19, 1994 are not subject to
any front-end sales loads. Shareholders holding Class A shares since November
30, 1996 are subject to reduced loads. Because Class A has lower expenses than
Class T, if you invest $1 million or more in the fund you should consider buying
Class A shares.
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<TABLE>
<CAPTION>
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class Class Class Class
A T A T
- ---------------------------------------------------------------------------------------------------------------------------------
Up to $49,999 5.75% 4.50% 6.10% 4.70%
$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%
$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%
$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%
$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%
$1 million or more* 0.00% 0.00% 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through dividend reinvestment).
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
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CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (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's transfer agent or other
authorized entity. 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.
ORDERS TO BUY AND SELL SHARES received by dealers by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
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Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
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.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A and Class T shares are offered to the public at NAV plus a sales charge.
Classes B, C and R are offered at NAV, but Classes B and C generally are subject
to higher annual operating expenses and a CDSC.
8
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. 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.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the Statement of
Additional Information for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that 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 or until it has collected payment.
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:
* 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)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
* change its minimum investment amounts
* 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).
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
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.
Your Investment 9
<PAGE 9>
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income and distributes any net capital gains it has realized once a year. Each
share class will generate a different dividend because each has different
expenses. Your distributions will be reinvested in additional shares of 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 in cash. In general,
distributions are federally 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
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
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 your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
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.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
10
<PAGE 10>
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A, B or T
shares you redeemed within 45 days of selling them at the current share price
without any sales charge. If you paid a CDSC, it will be credited back to your
account. This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 11
<PAGE 11>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4410" for
Class A, "4420" for Class B, "4430" for Class C, "4960" for Class R, or "xxxx"
for Class T.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative 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.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
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. Wire redemptions from the fund are subject to a
$1,000 minimum.
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.
12
<PAGE 12>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
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
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
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 to:
The Dreyfus Trust Company, Custodian
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Depost & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4410" for
Class A, "4420" for Class B, "4430" for Class C, "4960" for Class R, or "xxxx"
for Class T.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any 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
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427 Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 13
<PAGE 13>
NOTES
<PAGE>
ACCOUNT APPLICATION p1
<PAGE>
ACCOUNT APPLICATION p2
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Small Company Stock Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (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).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
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.
(c) 1999 Dreyfus Service Corporation
385P0899
<PAGE>
Dreyfus Premier Large Company Stock Fund
Investing in large-cap stocks for investment returns that exceed the S&P
500((reg.tm))
PROSPECTUS August 16, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Large Company Stock Fund
---------------------------------
Ticker Symbols CLASS A: DRDEX
CLASS B: DRLBX
CLASS C: DLCCX
CLASS R: DEIRX
CLASS T: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 9
Services for Fund Investors 10
Instructions for Regular Accounts 11
Instructions for IRAs 12
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's 500 Composite
Stock Price Index (S&P 500). This objective may be changed without shareholder
approval. To pursue its goal, the fund invests at least 65% of total assets in a
blended portfolio of growth and value stocks chosen through a disciplined
investment process. Consistency of returns and stability of the fund's share
price compared to the S&P 500 are primary goals of the process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic
worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Dreyfus then 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 500.
Concepts to understand
S&P 500: an unmanaged index of 500 common stocks chosen to reflect the
industries of the U.S. economy.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks, screening each stock for relative attractiveness within
its economic sector and industry. To ensure that the model remains effective,
Dreyfus reviews each of the screens on a regular basis, and maintains the
flexibility to adapt the screening criteria to changes in market conditions.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile very similar to the S&P 500, the fund holds
fewer securities than the index. Owning fewer securities and the ability to
purchase companies not listed in the index can cause the fund to underperform
the index.
By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table compares the performance of Class A and R shares over time to that
of the S&P 500, a widely recognized unmanaged index of stock performance. These
returns reflect any applicable sales loads. Both tables assume the reinvestment
of dividends. Of course, past performance is no guarantee of future results.
Since Class B, C and T shares have less than one calendar year of performance,
past performance information is not included in this section of the prospectus
for those classes. Performance for Class B, C and T shares will vary from the
performance of the fund's other share classes due to differences in charges and
expenses.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
35.77 22.51 34.93 26.46
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q4 '98 +22.70%
WORST QUARTER: Q3 '98 -12.28%
THE YEAR-TO-DATE TOTAL RETURN FOR THE FUND'S CLASS R SHARES AS OF 6/30/99 WAS
___%.
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
Since
Inception date 1 Year inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (9/2/94) 18.99% 24.27%
CLASS R (9/2/94) 26.46% 26.27%
S&P 500 28.60% 27.12%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 8/31/94 IS USED AS THE
BEGINNING VALUE ON 9/2/94.
</TABLE>
What this fund is -- and isn't
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 this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
<PAGE 1>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
Fee table
CLASS A CLASS B CLASS C CLASS R CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE NONE*
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees .90 .90 .90 .90 .90
Rule 12b-1 fee .25 1.00 1.00 NONE .50
Other expenses .00 .00 .00 .00 .00**
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.15 1.90 1.90 .90 1.40
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
**"OTHER EXPENSES" FOR CLASS T SHARES ARE ESTIMATED FOR THE CURRENT FISCAL YEAR
BASED ON THE APPLICABLE AMOUNTS FOR CLASS A, B, C AND R SHARES FOR THE FUND'S
LAST FISCAL YEAR.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $685 $919 $1,172 $1,892
CLASS B
WITH REDEMPTION $593 $897 $1,226 $1,848***
WITHOUT REDEMPTION $193 $597 $1,026 $1,848***
CLASS C
WITH REDEMPTION $293 $597 $1,026 $2,222
WITHOUT REDEMPTION $193 $597 $1,026 $2,222
CLASS R $92 $287 $498 $1,108
CLASS T $586 $873 $1,181 $2,054
*** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
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. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. 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.
2
<PAGE 2>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $120
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.90% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management and $1.9 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. Mellon is headquartered in Pittsburgh, Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
Bert Mullins has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Mr. Mullins has been employed
as a portfolio manager by Laurel Capital Advisors, an affiliate of Dreyfus,
since October 1990. He is also a vice president, portfolio manager and senior
securities analyst for Mellon Bank, N.A.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
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.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund 3
<PAGE 3>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of Classes A, B, C and R for the
fiscal periods indicated. "Total return" shows how much your investment in the
fund would have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These financial highlights (other
than those for the six-month period ended April 30, 1999) have been
independently audited by KPMG LLP, whose report, along with the fund's financial
statements, is included in the annual report, which is available upon request.
Since Class T shares are new, financial highlights information is not available
for that class as of the date of this prospectus.
<TABLE>
<CAPTION>
(UNAUDITED) SIX MONTHS
ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS A 1999 1998 1997 1996 1995 1994(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 20.45 18.23 14.49 12.00 9.95 10.00
Investment operations: Investment income -- net .01 .07 .20 .27 .22 .03
Net realized and unrealized gain (loss)
on investments 3.97 3.39 4.26 2.54 2.05 (.08)
Total from investment operations 3.98 3.46 4.46 2.81 2.27 (.05)
Distributions: Dividends from investment income -- net (.03) (.15) (.20) (.20) (.22) --
Dividends from net realized gain
on investments (1.15) (1.09) (.52) (.12) -- --
Total distributions (1.18) (1.24) (.72) (.32) (.22) --
Net asset value, end of period 23.25 20.45 18.23 14.49 12.00 9.95
Total return (%)(2) 20.09(3) 19.85 32.01 23.87 23.20 (.50)(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .57(3) 1.15 1.15 1.15 1.15 .19(3)
Ratio of net investment income to average net assets (%) .04(3) .52 1.23 1.81 2.32 .44(3)
Portfolio turnover rate (%) 31.32(3) 81.27 37.17 44.33 37.57 5.00(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 41,446 25,421 6,456 4,599 1,714 1
(1) FROM SEPTEMBER 2, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994.
(2) EXCLUSIVE OF SALES LOAD. (3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED) SIX MONTHS PERIOD ENDED
ENDED APRIL 30, OCTOBER 31,
CLASS B 1999 1998(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 20.38 17.93
Investment operations: Investment income (loss) -- net (.04) (.02)
Net realized and unrealized gain (loss) on investments 3.93 2.48
Total from investment operations 3.89 2.46
Distributions: Dividends from investment income -- net -- (.01)
Dividends from net realized gain on investments (1.15) .00
Total distributions (1.15) (.01)
Net asset value, end of period 23.12 20.38
Total return (%)(2) 19.65(3) 13.76(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .94(3) 1.51(3)
Ratio of net investment income (loss) to average net assets (%) (.34)(3) (.24)
(3)
Portfolio turnover rate (%) 31.32(3) 81.27(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 34,920 14,410
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1998.
(2) EXCLUSIVE OF SALES LOAD. (3) NOT ANNUALIZED.
</TABLE>
4
<PAGE 4>
<TABLE>
<CAPTION>
(UNAUDITED) SIX MONTHS PERIOD ENDED
ENDED APRIL 30, OCTOBER 31,
CLASS C 1999 1998(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 20.38 17.93
Investment operations: Investment income (loss) -- net (.03) (.02)
Net realized and unrealized gain (loss) on investments 3.92 2.48
Total from investment operations 3.89 2.46
Distributions: Dividends from investment income -- net -- (.01)
Dividends from net realized gain on investments (1.15) --
Total distributions (1.15) (.01)
Net asset value, end of period 23.12 20.38
Total return (%)(2) 19.71(3) 13.70(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .94(3) 1.51(3)
Ratio of net investment income (loss) to average net assets (%) (.35)(3) (.24)
(3)
Portfolio turnover rate (%) 31.32(3) 81.27(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 16,002 3,154
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1998.
(2) EXCLUSIVE OF SALES LOAD. (3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED) SIX MONTHS
ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS R 1999 1998 1997 1996 1995 1994(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 20.44 18.23 14.49 12.00 9.95 10.00
Investment operations: Investment income -- net .04 .17 .23 .21 .28 .05
Net realized and unrealized gain (loss)
on investments 3.96 3.33 4.27 2.63 2.02 (.10)
Total from investment operations 4.00 3.50 4.50 2.84 2.30 (.05)
Distributions: Dividends from investment income -- net (.05) (.20) (.24) (.23) (.25) --
Dividends from net realized gain
on investments (1.15) (1.09) (.52) (.12) -- --
Total distributions (1.20) (1.29) (.76) (.35) (.25) --
Net asset value, end of period 23.24 20.44 18.23 14.49 12.00 9.95
Total return (%) 20.25(2) 20.10 32.25 24.18 23.48 (.50)(2)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .45(2) .90 .90 .90 .90 .15(2)
Ratio of net investment income to average net assets (%) .18(2) .85 1.46 2.06 2.57 .48(2)
Portfolio turnover rate (%) 31.32 81.27 37.17 44.33 37.57 5.00(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 34,088 29,933 28,224 13,387 4,509 5,005
(1) FROM SEPTEMBER 2, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994.
(2) NOT ANNUALIZED.
</TABLE>
The Fund 5
<PAGE 5>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from those
described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institu-
tions on behalf of their clients; individuals may not purchase these shares
directly (this share class is not available for new accounts)
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments and
have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B, C or T shares
in this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A or Class T investment for
purposes of calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
6
<PAGE 6>
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders holding Class A shares
since January 15, 1998 are not subject to any front-end sales loads. Because
Class A has lower expenses than Class T, if you invest $1 million or more in the
fund you should consider buying Class A shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class Class Class Class
A T A T
- ---------------------------------------------------------------------------------------------------------------------------------
Up to $49,999 5.75% 4.50% 6.10% 4.70%
$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%
$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%
$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%
$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%
$1 million or more* 0.00% 0.00% 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through dividend reinvestment).
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (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's transfer agent or other
authorized entity. 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.
ORDERS TO BUY AND SELL SHARES received by dealers by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
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.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A and Class T shares are offered to the public at NAV plus a sales charge.
Classes B, C and R are offered at NAV, but Classes B and C generally are subject
to higher annual operating expenses and a CDSC.
Your Investment 7
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. 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.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the Statement of
Additional Information for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that 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 or until it has collected payment.
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:
* 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)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
* change its minimum investment amounts
* 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).
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
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.
8
<PAGE 8>
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS quarterly dividends from its net
investment income and distributes any net capital gains it has realized once a
year. Each share class will generate a different dividend because each has
different expenses. 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 in cash. In general,
distributions are federally 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
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at left also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
Your Investment 9
<PAGE 9>
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
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 your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a 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.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A, B or T
shares you redeemed within 45 days of selling them at the current share price
without any sales charge. If you paid a CDSC, it will be credited back to your
account. This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
10
<PAGE 10>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4070" for
Class A, "4680" for Class B, "4690" for Class C, "4910" for Class R, or "xxxx"
for Class T.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 8).
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
WIRE Call us or your financial representative to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be wired
to your bank.
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
CHECK Call us or your financial representative to request your transaction. A
check will be sent to the address of record.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative 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.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
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. Wire redemptions from the fund are subject to a
$1,000 minimum.
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.
Your Investment 11
<PAGE 11>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
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
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
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 to:
The Dreyfus Trust Company, Custodian
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4070" for
Class A, "4680" for Class B, "4690" for Class C, "4910" for Class R, or "xxxx"
for Class T.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any 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
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 8).
Mail in your request to:
The Dreyfus Trust Company
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
12
<PAGE 12>
ACCOUNT APPLICATION page 1
<PAGE>
ACCOUNT APPLICATION page 2
<PAGE>
- --------------------------------------------------------------------------------
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Large Company Stock Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (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).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
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.
(c) 1999, Dreyfus Service Corporation
318/718P0899
<PAGE>
Dreyfus Premier Balanced Fund
Investing in stocks and bonds for total return
PROSPECTUS August 16, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Balanced Fund
---------------------------------
Ticker Symbols CLASS A: PRBAX
CLASS B: PRBBX
CLASS C: DPBCX
CLASS R: PDBLX
CLASS T: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 3
Management 4
Financial Highlights 5
Your Investment
- --------------------------------------------------------------------------------
Account Policies 7
Distributions and Taxes 10
Services for Fund Investors 10
Instructions for Regular Accounts 12
Instructions for IRAs 13
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks to outperform an unmanaged hybrid index, 60% of which is the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500") and 40% of which
is the Lehman Brothers Intermediate Government/Corporate Bond Index
("Intermediate Index"). This objective may be changed without shareholder
approval. To pursue its goal, the fund invests in a diversified mix of stocks
and investment grade bonds of both U.S. and foreign issuers.
The fund's normal asset allocation is around 60% stocks and 40% bonds. However,
the fund is permitted to invest up to 75% and as little as 40% of its assets in
stocks, and up to 60% and as little as 25% of its assets in bonds.
In allocating assets between stocks and bonds, the portfolio managers assess the
relative return and risks of each asset class using a model which analyzes
several factors, including interest-rate-adjusted price/ earnings ratio, the
valuation and volatility levels of stocks relative to bonds, and other economic
factors, such as interest rates.
In selecting stocks, Dreyfus uses a valuation model to identify and rank stocks
within an industry or sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic
worth
* GROWTH, in this case the sustainability or growth
of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities. Then Dreyfus manages risk by diversifying across
companies and industries and by maintaining risk characteristics such as growth,
size, quality and yield that are similar to those of the S&P 500.
In choosing bonds, the portfolio managers review economic, market and other
factors, leading to valuations by sector, maturity and quality. The fund's bond
component consists primarily of domestic and foreign bonds issued by
corporations or governments and rated investment grade or considered to be of
comparable quality by Dreyfus. The fund's dollar-weighted average maturity
normally will not exceed 10 years.
<PAGE>
MAIN RISKS
Because stocks and bonds fluctuate in price, the value of your investment will
go up and down, and you could lose money. The stock and bond markets can perform
differently from each other, so the fund will be affected by its asset
allocation. If the fund favors an asset class during a period when that class
underperforms, performance may be hurt.
The fund is exposed to risks of both growth and value companies. Value stocks
may never reach what the manager believes is their full market value and, even
though they are undervalued, may decline in price. Prices of growth stocks are
based in part on future expectations, which means they can fall sharply if the
prospects for a stock, industry or the economy in general are below the market's
expectations.
Prices of bonds tend to move inversely with changes in interest rates. When
rates rise, bond prices and the fund's share price usually drop. The fund's
share price could also be hurt if it holds bonds of issuers that default on
payments of interest or principal or if there is a decline in the credit quality
of a bond it holds, or the perception of a decline.
In general, the risks of foreign stocks and bonds are greater than the risks of
their U.S. counterparts because of less liquidity, changes in currency exchange
rates, a lack of adequate company information and political instability.
Other potential risks
The fund may, at times, invest some of its assets in options and futures to
hedge its portfolio and to increase returns. These practices, when employed, may
lower returns or increase volatility. The fund may also engage in short-term
trading. This could increase the fund's transaction costs and taxable
distributions, lowering its after-tax performance accordingly.
What this fund is -- and isn't
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 this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
<PAGE 1>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table compares the performance of each of the fund's share classes over
time to that of the listed indexes. These returns reflect any applicable sales
loads. Both tables assume the reinvestment of dividends. Of course, past
performance is no guarantee of future results. Since Class T shares are new,
past performance information for that class is not included in this section of
the prospectus. Performance for Class T shares will vary from the performance of
the fund's other share classes due to differences in charges and expenses.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
-1.31 29.63 18.18 24.90 22.58
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q4 '98 +14.53%
WORST QUARTER: Q1 '94 -4.24%
THE YEAR-TO-DATE TOTAL RETURN FOR THE FUND'S CLASS R SHARES AS OF 6/30/99 WAS
___%.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/98
Since
Inception date 1 Year 5 Years inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (4/14/94) 15.21% -- 18.70%
CLASS B (12/19/94) 17.35% -- 22.07%
CLASS C (12/19/94) 20.37% -- 22.42%
CLASS R (9/15/93) 22.58% 18.28% 17.55%
S&P 500 28.60% 24.05% 22.74%*
HYBRID INDEX 20.54% 17.12% 16.23%*
INTERMEDIATE INDEX 8.44% 6.60% 6.30%*
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF EACH INDEX ON
8/31/93 IS USED AS THE BEGINNING VALUE ON 9/15/93.
</TABLE>
Concepts to understand
S&P 500: a widely recognized unmanaged index of stock market performance.
INTERMEDIATE INDEX: a widely accepted unmanaged index of government and
corporate bond market performance composed of U.S. government, Treasury and
agency securities, fixed-income securities and nonconvertible investment grade
corporate debt, with an average maturity of one to ten years.
HYBRID INDEX: an unmanaged index composed of 60% S&P 500 and 40% Intermediate
Index.
2
<PAGE 2>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
Fee table
CLASS A CLASS B CLASS C CLASS R CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE NONE*
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.00 1.00 1.00 1.00 1.00
Rule 12b-1 fee .25 1.00 1.00 NONE .50
Other expenses .00 .00 .00 .00 .00**
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.25 2.00 2.00 1.00 1.50
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1 MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF
REDEEMED WITHIN ONE YEAR.
** "OTHER EXPENSES" FOR CLASS T SHARES ARE ESTIMATED FOR THE CURRENT FISCAL YEAR BASED ON THE APPLICABLE AMOUNTS FOR CLASS A, B, C
AND R SHARES FOR THE FUND'S LAST FISCAL YEAR.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $695 $949 $1,222 $1,999
CLASS B
WITH REDEMPTION $603 $927 $1,278 $1,956***
WITHOUT REDEMPTION $203 $627 $1,078 $1,956***
CLASS C
WITH REDEMPTION $303 $627 $1,078 $2,327
WITHOUT REDEMPTION $203 $627 $1,078 $2,327
CLASS R $102 $318 $552 $1,225
CLASS T $596 $903 $1,232 $2,160
*** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
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. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. 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.
The Fund 3
<PAGE 3>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $120
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 1.00% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management and $1.9 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. Mellon is headquartered in Pittsburgh, Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
The asset allocation and equity portion of the fund's portfolio are managed by
Ron Gala. Mr. Gala has managed the fund since its inception and has been
employed by Dreyfus as a portfolio manager since October 1994. Mr. Gala is a
senior vice president and portfolio manager at Mellon Bank and has been employed
there since 1982.
The bond portion of the fund's portfolio is managed by Laurie Carroll. Ms.
Carroll has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Ms. Carroll is a senior vice
president and portfolio manager at Mellon Bank. Ms. Carroll has been employed by
Mellon Bank since 1986.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
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.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
4
<PAGE 4>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of Classes A, B, C and R for the
fiscal periods indicated. "Total return" shows how much your investment in the
fund would have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These financial highlights (other
than those for the six-month period ended April 30, 1999) have been
independently audited by KPMG LLP, whose report, along with the fund's financial
statements, is included in the annual report, which is available upon request.
Since Class T shares are new, financial highlights information is not available
for that class as of the date of this prospectus.
<TABLE>
<CAPTION>
(UNAUDITED) SIX MONTHS
ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS A 1999 1998 1997 1996 1995 1994(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 14.88 15.17 13.71 11.91 10.08 9.73
Investment operations: Investment income -- net .17 .33 .34 .31 .28 .11
Net realized and unrealized
gain (loss) on investments 1.60 1.81 2.77 1.88 1.82 .34
Total from investment operations 1.77 2.14 3.11 2.19 2.10 .45
Distributions: Dividends from investment
income -- net (.18) (.37) (.28) (.31) (.27) (.10)
Dividends from net realized
gain on investments (.93) (2.06) (1.37) (.08) -- --
Total distributions (1.11) (2.43) (1.65) (.39) (.27) (.10)
Net asset value, end of period 15.54 14.88 15.17 13.71 11.91 10.08
Total return (%) (2) 12.38(3) 16.06 25.24 18.71 21.17 4.68(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .62(3) 1.25 1.25 1.25 1.25 .71(3)
Ratio of net investment income to average net assets (%) 1.07(3) 2.44 2.21 2.39 2.65 1.09(3
Portfolio turnover rate (%) 60.33(3) 69.71 98.88 85.21 53.20 83.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 78,550 40,780 14,687 6,275 1,650 1,798
(1) FROM APRIL 14, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1994.
(2) EXCLUSIVE OF SALES CHARGE. (3) NOT ANNUALIZED.
(UNAUDITED) SIX MONTHS
ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS B 1999 1998 1997 1996 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.83 15.12 13.68 11.89 9.76
Investment operations: Investment income -- net .11 .24 .23 .21 .14
Net realized and unrealized
gain (loss) on investments 1.60 1.79 2.77 1.87 2.11
Total from investment operations 1.71 2.03 3.00 2.08 2.25
Distributions: Dividends from investment
income -- net (.12) (.26) (.19) (.21) (.12)
Dividends from net realized
gain on investments (.93) (2.06) (1.37) (.08) --
Total distributions (1.05) (2.32) (1.56) (.29) (.12)
Net asset value, end of period 15.49 14.83 15.12 13.68 11.89
Total return (%) (2) 11.98(3) 15.20 24.27 17.76 23.19(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .99(3) 2.00 2.00 2.00 1.73(3)
Ratio of net investment income to average net assets (%) .70(3) 1.70 1.47 1.65 2.16(3)
Portfolio turnover rate (%) 60.33(3) 69.71 98.88 85.21 53.20
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 132,301 62,324 28,940 9,141 3,118
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) EXCLUSIVE OF SALES CHARGE. (3) NOT ANNUALIZED.
The Fund 5
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
(UNAUDITED) SIX MONTHS
ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS C 1999 1998 1997 1996 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.87 15.16 13.70 11.90 9.76
Investment operations: Investment income -- net .11 .22 .24 .25 .11
Net realized and unrealized
gain (loss) on investments 1.61 1.81 2.78 1.84 2.15
Total from investment operations 1.72 2.03 3.02 2.09 2.26
Distributions: Dividends from investment
income -- net (.12) (.26) (.19) (.21) (.12)
Dividends from net realized
gain on investments (.93) (2.06) (1.37) (.08) --
Total distributions (1.05) (2.32) (1.56) (.29) (.12)
Net asset value, end of period 15.54 14.87 15.16 13.70 11.90
Total return (%) (2) 11.94(3) 15.24 24.41 17.83 23.29(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .99(3) 2.00 2.00 2.00 1.73(3)
Ratio of net investment income to average net assets (%) .71(3) 1.69 1.47 1.62 2.16(3)
Portfolio turnover rate (%) 60.33(3) 69.71 98.88 85.21 53.20
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 31,283 8,004 2,017 237 6
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) EXCLUSIVE OF SALES CHARGE. (3) NOT ANNUALIZED.
(UNAUDITED) SIX MONTHS
ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS R 1999 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.88 15.18 13.72 11.92 10.09 10.18
Investment operations: Investment income -- net .17 .38 .36 .34 .31 .20(1)
Net realized and unrealized
gain (loss) on investments 1.62 1.79 2.79 1.88 1.81 (.13)
Total from investment operations 1.79 2.17 3.15 2.22 2.12 .07
Distributions: Dividends from investment
income -- net (.19) (.41) (.32) (.34) (.29) (.16)
Dividends from net realized
gain on investments (.93) (2.06) (1.37) (.08) -- --
Total distributions (1.12) (2.47) (1.69) (.42) (.29) (.16)
Net asset value, end of period 15.55 14.88 15.18 13.72 11.92 10.09
Total return (%) 12.53(2) 16.37 25.56 18.99 21.46 .68
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .50(2) 1.00 1.00 1.00 1.00 1.04(3)
Ratio of net investment income to average net assets (%) 1.20(2) 2.71 2.44 2.68 2.89 2.23
Portfolio turnover rate (%) 60.33(2) 69.71 98.88 85.21 53.20 83.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 366,919 207,132 148,605 129,744 97,881 75,720
(1) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER WAS $.2031.
(2) NOT ANNUALIZED.
(3) EXPENSE RATIO BEFORE VOLUNTARY REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER WAS 1.09%.
</TABLE>
6
<PAGE 6>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institu-
tions on behalf of their clients (individuals may not purchase these shares
directly)
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments and
have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B, C or T shares
in this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A or Class T investment for
purposes of calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
The Fund 7
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay or may qualify for a reduced sales charge to buy or sell shares. Consult
your financial representative or the SAI to see if this may apply to you.
Shareholders holding Class A shares since December 19, 1994 are not subject to
any front-end sales loads. Shareholders owning Class A shares since November 30,
1996 are subject to reduced loads. See the SAI. Because Class A has lower
expenses than Class T, if you invest $1 million or more in the fund you should
consider buying Class A shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class Class Class Class
A T A T
- ---------------------------------------------------------------------------------------------------------------------------------
Up to $49,999 5.75% 4.50% 6.10% 4.70%
$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%
$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%
$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%
$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%
$1 million or more* 0.00% 0.00% 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through dividend reinvestment).
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (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's transfer agent or other
authorized entity. 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.
ORDERS TO BUY AND SELL SHARES received by dealers by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
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.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A and Class T shares are offered to the public at NAV plus a sales charge.
Classes B, C and R are offered at NAV, but Classes B and C generally are subject
to higher annual operating expenses and a CDSC.
8
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. 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.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the SAI for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that 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 or until it has collected payment.
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:
* 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)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
* change its minimum investment amounts
* 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).
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
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.
Your Investment 9
<PAGE 9>
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS quarterly dividends from its net
investment income, and distributes any net capital gains it has realized once a
year. Each share class will generate a different dividend because each has
different expenses. 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 in cash. In general,
distributions are federally 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
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
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 your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
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.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above can provide a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
or exchanged up to 12 months after buying them. "Long-term capital gains"
applies to shares sold or exchanged after 12 months.
10
<PAGE 10>
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A, B or T
shares you redeemed within 45 days of selling them at the current share price
without any sales charge. If you paid a CDSC, it will be credited back to your
account. This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 11
<PAGE 11>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4130" for
Class A, "4140" for Class B, "4150" for Class C, "4160" for Class R, or "xxxx"
for Class T.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative 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.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
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. Wire redemptions from the fund are subject to a
$1,000 minimum.
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.
12
<PAGE 12>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
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
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
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 to:
The Dreyfus Trust Company, Custodian
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4130" for
Class A, "4140" for Class B, "4150" for Class C, "4160" for Class R, or "xxxx"
for Class T.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any 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
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail in your request to:
The Dreyfus Trust Company
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 13
<PAGE 13>
NOTES
<PAGE>
ACCOUNT APPLICATION page 1
<PAGE>
ACCOUNT APPLICATION page 2
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Balanced Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (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).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
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.
(c) 1999 Dreyfus Service Corporation
342P0899
<PAGE>
Dreyfus Premier Midcap Stock Fund
Investing in midcap stocks for investment returns that exceed the S&P
400((reg.tm))
PROSPECTUS August 16, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Midcap Stock Fund
----------------------------------
Ticker Symbols CLASS A: DPMAX
CLASS B: DMSBX
CLASS C: N/A
CLASS R: DDMRX
CLASS T: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 3
Management 4
Financial Highlights 5
Your Investment
- --------------------------------------------------------------------------------
Account Policies 7
Distributions and Taxes 10
Services for Fund Investors 10
Instructions for Regular Accounts 12
Instructions for IRAs 13
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's 400 Midcap Index
(S&P 400). This objective may be changed without shareholder approval. To pursue
its goal, the fund invests at least 65% of total assets in a blended portfolio
of growth and value stocks of medium- size companies, those whose market values
range between $500 million and $10 billion. Stocks are chosen through a
disciplined process combining computer modelling techniques, fundamental
analysis and risk management. Consistency of returns and stability of the fund's
share price compared to the S&P 400 are primary goals of the process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic
worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Dreyfus then 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 400.
Concepts to understand
MIDCAP COMPANIES: established companies that may not be well known. Midcap
companies have the potential to grow faster than large-cap companies, but may
lack the resources to weather economic shifts, and are more volatile than large
companies.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks. Dreyfus reviews each of the screens on a regular basis.
Dreyfus also maintains the flexibility to adapt the screening criteria to
changes in market conditions.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Midsize companies carry additional risks because their earnings tend to be less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies. Some of the fund's investments will
rise and fall based on investor perception rather than economics.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile very similar to the S&P 400, the fund holds
fewer securities than the index. Owning fewer securities and the ability to
purchase companies not listed in the index can cause the fund to underperform
the index.
By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
Other potential risks
The fund may, at times, invest in options and futures to hedge the fund's
portfolio and also to increase returns. There is the risk that such practices,
when employed, may reduce returns or increase volatility.
The fund may invest in securities of foreign issuers, which carry additional
risks such as less liquidity, changes in currency exchange rates, a lack of
adequate company information and political instability.
The Fund 1
<PAGE 1>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table compares the performance of Class A and R shares over time to that
of the S&P 400, a widely recognized unmanaged index of midcap stock performance.
These returns reflect any applicable sales loads. Both tables assume the
reinvestment of dividends. Of course, past performance is no guarantee of future
results. Since Class B, C and T shares have less than one calendar year of
performance, past performance information for those classes is not included in
this section of the prospectus. Performance for Class B, C and T shares will
vary from the performance of the fund's other share classes due to differences
in charges and expenses.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
-6.71 38.00 26.70 36.10 8.90
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q4 '98 +22.30%
WORST QUARTER: Q3 '98 -16.74%
THE YEAR-TO-DATE TOTAL RETURN FOR THE FUND'S CLASS R SHARES AS OF 6/30/99 WAS
__%.
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
Since
Inception date 1 Year 5 Years inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (4/6/94) 2.40% -- 18.92%
CLASS R (11/12/93) 8.90% 19.31% 19.00%
S&P 400 19.11% 18.84% 18.71%*
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON
10/31/93 IS USED AS THE BEGINNING VALUE ON 11/12/93.
</TABLE>
What this fund is -- and isn't
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 this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
2
<PAGE 2>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
Fee table
CLASS A CLASS B CLASS C CLASS R CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE NONE*
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.10 1.10 1.10 1.10 1.10
Rule 12b-1 fee .25 1.00 1.00 NONE .50
Other expenses .00 .00 .00 .00 .00**
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.35 2.10 2.10 1.10 1.60
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1 MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF
REDEEMED WITHIN ONE YEAR.
** "OTHER EXPENSES" FOR CLASS T SHARES ARE ESTIMATED FOR THE CURRENT FISCAL YEAR BASED ON THE APPLICABLE AMOUNTS FOR CLASS A, B, C
AND R SHARES FOR THE FUND'S LAST FISCAL YEAR.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $705 $978 $1,272 $2,105
CLASS B
WITH REDEMPTION $613 $958 $1,329 $2,064***
WITHOUT REDEMPTION $213 $658 $1,129 $2,064***
CLASS C
WITH REDEMPTION $313 $658 $1,129 $2,431
WITHOUT REDEMPTION $213 $658 $1,129 $2,431
CLASS R $112 $350 $606 $1,340
CLASS T $605 $932 $1,282 $2,265
*** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
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. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. 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.
The Fund 3
<PAGE 3>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $120
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 1.10% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management and $1.9 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. Mellon is headquartered in Pittsburgh, Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
John O'Toole has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Mr. O'Toole is a senior vice
president and a portfolio manager for Mellon Equity Associates. He has been
employed by Mellon Bank since 1979.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
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.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
4
<PAGE 4>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of Classes A, B, C and R for the
fiscal periods indicated. "Total return" shows how much your investment in the
fund would have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These financial highlights (other
than those for the six-month period ended April 30, 1999) have been
independently audited by KPMG LLP, whose report, along with the fund's financial
statements, is included in the annual report, which is available upon request.
Since Class T shares are new, financial highlights information is not available
for that class as of the date of this prospectus.
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS A 1999 1998 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 14.24 17.02 14.36 11.92 9.75 10.00
Investment operations: Investment income (loss) -- net -- (.01) .02 .04 .09 .05
Net realized and unrealized
gain (loss) on investments 1.96 (.29) 4.79 2.98 2.17 (.26)
Total from investment operations 1.96 (.30) 4.81 3.02 2.26 (.21)
Distributions: Dividends from investment
income -- net -- (.01) (.01) (.05) (.09) (.04)
Dividends from net realized
gain on investments -- (2.47) (2.14) (.53) -- --
Total distributions -- (2.48) (2.15) (.58) (.09) (.04)
Net asset value, end of period 16.20 14.24 17.02 14.36 11.92 9.75
Total return (%) (2) 13.76(3) (2.16) 38.40 26.29 23.39 (2.06)(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .67(3) 1.35 1.35 1.35 1.35 .80(3)
Ratio of net investment income (loss) to
average net assets (%) (.08)(3) (.19) .16 .28 .86 .42(3
Portfolio turnover rate (%) 37.36(3) 78.02 81.87 90.93 71.00 83.00(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 102,380 38,267 6,847 3,205 1,417 54
(1) FROM APRIL 6, 1994 (COMMENCEMENT OF INITIAL OFFERING) THROUGH OCTOBER 31, 1994.
(2) EXCLUSIVE OF SALES CHARGE. (3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED) PERIOD ENDED
SIX MONTHS ENDED APRIL 30, OCTOBER 31,
CLASS B 1999 1998(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 14.16 14.65
Investment operations: Investment income (loss) -- net (.05) (.06)
Net realized and unrealized gain (loss) on investments 1.93 (.43)
Total from investment operations 1.88 (.49)
Net asset value, end of period 16.04 14.16
Total return (%)(2) 13.36(3) (3.41)(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.04(3) 1.66(3)
Ratio of net investment income (loss) to average net assets (%) (.45)(3) (.77)(3)
Portfolio turnover rate (%) 37.36(3) 78.02(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 23,348 16,867
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) THROUGH OCTOBER
31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
The Fund 5
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
(UNAUDITED) PERIOD ENDED
SIX MONTHS ENDED APRIL 30, OCTOBER 31,
CLASS C 1999 1998(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 14.17 14.65
Investment operations: Investment income (loss) -- net (.05) (.06)
Net realized and unrealized gain (loss) on investments 1.94 (.42)
Total from investment operations 1.89 (.48)
Net asset value, end of period 16.06 14.17
Total return (%)(2) 13.34(3) (3.28)(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.04(3) 1.66(3)
Ratio of net investment income (loss) to average net assets (%) (.45)(3) (.77)
(3)
Portfolio turnover rate (%) 37.36(3) 78.02(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 5,030 3,485
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) THROUGH OCTOBER
31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
CLASS R 1999 1998 1997 1996 1995 1994(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 14.28 17.03 14.36 11.92 9.76 10.00
Investment operations: Investment income -- net .01 .01 .05 .07 .12 .09(2)
Net realized and unrealized
gain (loss) on investments 1.97 (.26) 4.80 2.98 2.16 (.27)
Total from investment operations 1.98 (.25) 4.85 3.05 2.28 (.18)
Distributions: Dividends from investment
income -- net -- (.03) (.04) (.08) (.12) (.06)
Dividends from net realized
gain on investments -- (2.47) (2.14) (.53) -- --
Total distributions -- (2.50) (2.18) (.61) (.12) (.06)
Net asset value, end of period 16.26 14.28 17.03 14.36 11.92 9.76
Total return (%) (2) 13.87(3) (1.88) 38.88 26.61 23.57 (1.77)(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .54(3) 1.10 1.10 1.10 1.10 1.13(3,4)
Ratio of net investment income to average net assets (%) .04(3) .05 .42 .57 1.11 .95(3
Portfolio turnover rate (%) 37.36(3) 78.02 81.87 90.93 71.00 83.00(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 68,535 53,888 31,769 15,644 12,129 18,169
(1) FROM NOVEMBER 12, 1993 (COMMENCEMENT OF OPERATIONS) THROUGH OCTOBER 31, 1994.
(2) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER WAS $0.06.
(3) NOT ANNUALIZED.
(4) ANNUALIZED EXPENSE RATIO BEFORE VOLUNTARY REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER WAS 1.48%.
</TABLE>
6
<PAGE 6>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
* CLASS A shares may be appropriate for investors who prefer to pay the fund's
sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institutions on behalf of their
clients (individuals may not purchase these shares directly)
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B, C or T shares
in this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A or Class T investment for
purposes of calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
The Fund 7
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders holding Class A shares
since January 15, 1998 are not subject to any front-end sales loads. Because
Class A has lower expenses than Class T, if you invest $1 million or more in the
fund, you should consider buying Class A shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class Class Class Class
A T A T
- ---------------------------------------------------------------------------------------------------------------------------------
Up to $49,999 5.75% 4.50% 6.10% 4.70%
$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%
$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%
$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%
$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%
$1 million or more* 0.00% 0.00% 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through dividend reinvestment).
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (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's transfer agent or other
authorized entity. 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.
ORDERS TO BUY AND SELL SHARES received by dealers by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
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.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A and Class T shares are offered to the public at NAV plus a sales charge.
Classes B, C and R are offered at NAV, but Classes B and C generally are subject
to higher annual operating expenses and a CDSC.
8
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. 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.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the Statement of
Additional Information for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that 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 or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
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:
* 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)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
* change its minimum investment amounts
* 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).
Your Investment 9
<PAGE 9>
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income and distributes any net capital gains it has realized once a year. Each
share class will generate a different dividend because each has different
expenses. Your distributions will be reinvested in additional shares of the fund
unless you instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
FUND DIVIDENDS AND OTHER 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 in cash. In general,
distributions are federally 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
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
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 your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a 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.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
10
<PAGE 10>
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A, B or T
shares you redeemed within 45 days of selling them at the current share price
without any sales charge. If you paid a CDSC, it will be credited back to your
account. This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 11
<PAGE 11>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4040" for
Class A, "4700" for Class B, "4710" for Class C, "4030" for Class R, or "xxxx"
for Class T.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
WIRE Call us or your financial representative to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be wired
to your bank.
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
CHECK Call us or your financial representative to request your transaction. A
check will be sent to the address of record.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative 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.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
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. Wire redemptions from the fund are subject to a
$1,000 minimum.
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.
12
<PAGE 12>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
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
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
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 to:
The Dreyfus Trust Company, Custodian
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4040" for
Class A, "4700" for Class B, "4710" for Class C, "4030" for Class R, or "xxxx"
for Class T.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any 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
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail in your request to:
The Dreyfus Trust Company
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 13
<PAGE 13>
NOTES
<PAGE>
ACCOUNT APPLICATION page 1
<PAGE>
ACCOUNT APPLICATION page 2
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Midcap Stock Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (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).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
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.
(c) 1999 Dreyfus Service Corporation
330/730P0899
<PAGE>
DREYFUS PREMIER SMALL COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C, CLASS R AND CLASS T SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 16, 1999
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Premier Small Company Stock Fund (the "Fund"), dated August 16,
1999, as it may be revised from time to time. The Fund is a separate,
diversified portfolio of The Dreyfus/Laurel Funds, Inc., an open-end
management investment company (the "Company"), known as a mutual fund. To
obtain a copy of the Fund's Prospectus, please write to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call one of the
following numbers:
Call Toll Free 1-800-554-4611
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-20
Management Arrangements ....................................B-27
Purchase of Shares .........................................B-29
Distribution and Service Plans .............................B-37
Redemption of Shares .......................................B-40
Shareholder Services .......................................B-44
Additional Information About Purchases, Exchanges
and Redemptions ..........................................B-50
Determination of Net Asset Value ...........................B-51
Dividends, Other Distributions and Taxes ...................B-52
Portfolio Transactions .....................................B-58
Performance Information ....................................B-60
Information About the Fund/Company .........................B-62
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors .......B-63
Financial Statements .......................................B-63
Appendix ...................................................B-64
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.
Prior to March 1, 1997, the Fund's name was Premier Small Company Stock Fund
and prior to October 17, 1994, the Fund's name was Laurel Smallcap Stock
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.
The Fund seeks investment returns that exceed those of the Russell 2500
Stock Index. The Russell 2500 Stock Index, published by Frank Russell
Company, is comprised of the bottom 500 companies in the Russell 1000 Index
as ranked by total market capitalization, and all 2,000 stocks in the
Russell 2000 Index. The Russell 2000 Index consists of the smallest 2,000
companies in the Russell Index 3000, representing approximately 10% of the
Russell 3000 Index total market capitalization. The Russell 3000 Index is
composed of 3,000 large U.S. companies, as determined by market
capitalization. The Russell 1000 Index consists of the 1,000 largest
companies in the Russell 3000 Index. The Fund's managers do not attempt to
time the financial market, or use sector or industry rotation techniques.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's Prospectus.
Bank Instruments. The Fund may invest in bank instruments. Bank
instruments consist mainly of certificates of deposit, time deposits and
bankers' acceptances.
American Depository Receipts ("ADRs"). The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market. Investment in
securities of foreign issuers presents certain risks. See "Foreign
Securities."
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. Treasury to lend to such 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.
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. This technique
offers a method of earning income on idle cash. 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, including interest, 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.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's Rating Services ("Standard & Poor's "), Prime-1 by Moody's
Investors Service, Inc. ("Moody's"), F-1 by Fitch IBCA, Inc. or Duff-1 by
Duff & Phelps Credit Rating Co.
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal
of funds or other assets of the Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the yield on such securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holder.
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 apply to the
distribution of IPOs. Corporations offering IPOs generally have a limited
operating history and may involve greater risk.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
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. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
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.
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 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
("NAV").
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 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.
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 loss if the institution to which it has lent its
securities fails financially or 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. The Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. 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.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
including financial futures contracts (such as interest rate, index and
foreign currency futures contracts), options (such as options on securities,
indices, foreign currencies and futures contracts), forward currency
contracts and interest rate, equity index and currency swaps, caps, collars
and floors. The index Derivative Instruments which the Fund may use may be
based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or
spread, to lock in unrealized market value gains or losses, to facilitate or
substitute for the sale or purchase of securities, to manage the duration of
securities, to alter the exposure of a particular investment or portion of
the Fund's portfolio to fluctuations in interest rates or currency rates, to
uncap a capped security or to convert a fixed rate security into a variable
rate security or a variable rate security into a fixed rate security.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments 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 not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities, currency and interest rate markets, which requires
different skills than predicting changes in the prices of individual
securities. There can be no assurance that any particular strategy will
succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs, and may result in certain
tax consequences.
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 unless the
option is closed out in an offsetting transaction.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value and the Fund would experience losses to the extent of premiums
paid for them.
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 put or call
options that are traded on a national exchange in an amount exceeding 5% of
its net assets.
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 price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
Generally, the OTC debt and foreign currency options used by the Fund
are European style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American style
options, which are exercisable at any time prior to the expiration date of
the option.
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. A call
option is covered if the Fund owns the underlying security or a call option
on the same security with a lower strike price.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund 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.
Futures strategies also can be used to manage the average duration of
the Fund's fixed income portfolio. If Dreyfus wishes to shorten the average
duration of the Fund's fixed income portfolio, the Fund may sell an interest
rate futures contract or a call option thereon, or purchase a put option on
that futures contract. If Dreyfus wishes to lengthen the average duration
of the Fund's fixed income portfolio, the Fund may buy an interest rate
futures contract or a call option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts for hedging purposes.
Foreign Currency Transactions. The Fund may engage in currency
exchange transactions on a spot or forward basis. The Fund may exchange
foreign currency on a spot basis at the spot rate then prevailing for
purchasing or selling foreign currencies in the foreign exchange market.
The Fund may also enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date either
with respect to specific transactions or portfolio positions in order to
minimize the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. For example, when the Fund
anticipates purchasing or selling a security denominated in a foreign
currency, the Fund may enter into a forward contract in order to set the
exchange rate at which the transaction will be made. The Fund may also
enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's securities positions
denominated in that currency.
Forward currency contracts may substantially change the Fund's
investment exposure to changes in currency exchange rates and could result
in losses if currencies do not perform as Dreyfus anticipates. There is no
assurance that Dreyfus' use of forward currency contracts will be
advantageous to the Fund or that it will hedge at an appropriate time.
Foreign Currency Strategies - Special Considerations. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in
the values of the foreign currencies in which the Fund's securities are
denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such
hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
The Fund might seek to hedge against changes in the value of particular
currency when no Derivative Instruments on that currency are available or
such Derivative Instruments are more expensive than certain other Derivative
Instruments. In such cases, the Fund may hedge against price movements in
that currency by entering into transactions using Derivative Instruments on
another currency or a basket of currencies, the values of which Dreyfus
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the
Derivative Instrument will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
foreign currency Derivative Instruments, the Fund could be disadvantaged by
having to deal in the odd lot market (generally consisting of transactions
of less than $1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions
in the interbank market and thus might not reflect odd-lot transactions
where rates might be less favorable. The interbank market in foreign
currencies is a global, round-the clock market.
Settlement of transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Forward Contracts. A forward foreign currency exchange contract
("forward contract") is a contract to purchase or sell a currency at a
future date. The two parties to the contract set the number of days and the
price. Forward contracts are used as a hedge against future movements in
foreign exchange rates. The Fund may enter into forward contracts to
purchase or sell foreign currencies for a fixed amount of U.S. dollars or
other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund may
purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Fund intends to acquire. Forward
contracts may also serve as short hedges -- for example, the Fund may sell a
forward contract to lock in the U.S. dollar equivalent of the proceeds from
the anticipated sale of a security denominated in a foreign currency or from
anticipated dividend or interest payments denominated in a foreign currency.
Dreyfus may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or basket of
currencies, the value of which Dreyfus believes will bear a positive
correlation to the value of the currency being hedged.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are
usually entered into a principal basis, no fees or commissions are involved.
When the Fund enters into a forward contract, it relies on the counterparty
to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of
any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets generally
do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by negotiating
directly with the counterparty. Thus, there can be no assurance that the
Fund will in fact be able to close out a forward contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the
counterparty, the Fund might be unable to close out a forward contract at
any time prior to maturity. In either event, the Fund would continue to be
subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that are
the subject of the hedge or to maintain cash or securities in a segregated
account.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value
of such securities measured in the foreign currency will change after the
forward contract has been established. Thus, the Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest
rate, equity index and currency swaps, caps, collars and floors, may be
individually negotiated and structured to include exposure to a variety of
different types of investments or market factors. Swaps involve two parties
exchanging a series of cash flows at specified intervals. In the case of an
interest rate swap, the parties exchange interest payments based on an
agreed upon principal amount (referred to as the "notional principal
amount"). Under the most basic scenario, Party A would pay a fixed rate on
the notional principal amount to Party B, which would pay a floating rate on
the same notional principal amount to Party A. Depending on their
structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors.
Swap agreements can take many different forms and are known by a variety of
names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a swap
agreement on a net basis (that is, the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount
of the two payments), the Fund will maintain cash or liquid assets with a
daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis or writes a cap, collar or floor, it
will maintain cash or liquid assets with a value equal to the full amount of
the Fund's accrued obligations under the agreement.
The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that
determine the amounts of payments due to and from the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declines, the value of a swap agreement would likely decline, potentially
resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with
banks and recognized securities dealers believed by Dreyfus to present
minimal credit risks. 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.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amounts to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in such securities would exceed 5% of the Fund's
total assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) Paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
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.
If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains
an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company'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 nine 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") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board 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
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.), a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources), a temporary placement agency. 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: 55 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.; Chairman of the
Board, Davidson Cotton Company. Age: 64 years old. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 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. Age: 77 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Director of the Company; President and CEO, The
Palladium Company; President and CEO, Himmel and Company, Inc.; CEO,
American Food Management; former Director, The Boston Company, Inc.
("TBC"), an affiliate of Dreyfus, and Boston Safe Deposit and Trust
Company. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and
CEO, LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 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. Age: 67 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 Health Care, Inc.; Director, Massachusetts Electric
Company; Director, the Hyams Foundation, Inc. Age: 49 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. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
________________________________
* "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: 39
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: 42 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. Age: 30 years old.
#JOHN P. COVINO. Vice President and Assistant Treasurer of the Company.
Vice President and Treasury Group Manager of Treasury Servicing and
Administration of Funds Distributor, Inc. From December 1995 to
November 1998, he was employed by Fidelity Investments where he held
multiple positions in their Institutional Brokerage Group. Prior to
joining Fidelity, he was employed by SunGard Brokerage Systems where
he was responsible for the technology and development of the accounting
product group. Age: 35 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor Inc. From 1988 to August 1994, he was Manager of
High Performance Fabrics Division of Springs Industries, Inc. Age: 37
years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, Mr. Kelley was
Assistant Counsel at Forum Financial Group. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 26 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. 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. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was a Second
Vice President with Chase Manhattan Bank. Age: 30 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. Age: 44 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: 37 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: 37 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor, Inc. From June
1994 to January 1996, she was Manager of SEC Registration at Scudder,
Stevens & Clark, Inc. Age: 32 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 Company 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. Effective July 1, 1998,
the Dreyfus/Laurel Funds pay each Director/Trustee who is not an "interested
person" of the Company (as defined in the 1940 Act) $40,000 per annum, plus
$5,000 per joint Dreyfus/Laurel Funds Board meeting attended, $2,000 for
separate committee meetings attended which are not held in conjunction with
a regularly scheduled Board meeting and $500 for Board meetings and separate
committee meetings attended that are conducted by telephone. The
Dreyfus/Laurel Funds also reimburse each Director/Trustee who is not an
"interested person" of the Company (as defined in the 1940 Act) for travel
and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000
fee will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High
Yield Strategies Fund. The compensation structure described in this
paragraph is referred to hereinafter as the "Current Compensation
Structure."
In addition, the Company currently has three Emeritus Board members who
are entitled to receive an annual retainer and a per meeting fee of one-half
the amount paid to them as Board members pursuant to the Current
Compensation Structure.
Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Company (as
defined in the 1940 Act) $27,000 per annum (and an additional $25,000 for
the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel Funds)
and $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750
per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimbursed each such Director/Trustee for travel and out-of-pocket expenses
(the "Former Compensation Structure").
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1998, and
from all other funds in the Dreyfus Family of Funds for which such person
was a Board member (the number of which is set forth in parenthesis next to
each Board member's total compensation)* during the year ended December 31,
1998, pursuant to the Former Compensation Structure for the period from
November 1, 1997 through June 30, 1998 and the Current Compensation
Structure for the period from July 1, 1998 through October 31, 1998, were as
follows:
Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member
Joseph S. DiMartino** $17,710.00 $619,660 (187)
James M. Fitzgibbons $17,710.00 $ 60,010 (31)
J. Tomlinson Fort*** none none (31)
Arthur L. Goeschel $18,376.67 $ 61,010 (31)
Kenneth A. Himmel $14,793.34 $ 50,260 (31)
Stephen J. Lockwood $15,043.34 $ 51,010 (31)
John J. Sciullo $17,710.00 $ 59,010 (31)
Roslyn M. Watson $18,376.67 $ 61,010 (31)
Benaree Pratt Wiley**** $12,194.38 $ 49,628 (31)
____________________________
# 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 $5,313.37 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Company and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal year
ended October 31, 1998, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Company
was $17,710. For the year ended December 31, 1998, the aggregate amount
of fees received by Mr. Fort for serving as a Board member of all funds in
the Dreyfus/Laurel Funds (including the Company) and Dreyfus High Yield
Strategies Fund (for which payment is made directly by the fund) was
$59,010. In addition, Dreyfus reimbursed Mr. Fort a total of $733.11 for
expenses attributable to the Company's Board meetings which is not
included in the $5,313.37 amount in note # above.
****Payments to Ms. Wiley were for the period from April 23, 1998 (the date
she was elected as a Board member) through October 31, 1998.
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 July 28,
1999.
Principal Shareholders. As of July 28, 1999, the following
shareholder(s) owned beneficially or of record 5% or more of Class A shares
of the Fund: MLPF&S For The Sole Benefit of Its Customers, 4800 Deer Lake
Drive East, Jacksonville, FL 32246-6484, ______%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class B shares of the Fund: MLPF&S For The Sole
Benefit of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-
6484, ______%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class C shares of the Fund: MLPF&S For The Sole
Benefit of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-
6484, ______%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class R shares of the Fund: MLPF&S For The Sole
Benefit of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-
6484, ______%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
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 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994, subject to the overall authority of the Company's Board of
Directors in accordance with Maryland law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus manages
the Fund by making investment decisions based on the Fund's investment
objective, policies and restrictions. The Management Agreement is subject
to review and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. 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 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Diane P. Durnin, Vice President-Product
Development; Patrice M. Kozlowski, Vice President-Corporate Communications;
Mary Beth Leibig, Vice President-Human Resources; Andrew S. Wasser, Vice-
President-Information Systems; Theodore A. Schachar, Vice President; Wendy
Strutt, Vice President; Richard Terres, Vice President; William H. Maresca,
Controller; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott,
Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"),
Dreyfus employees must preclear personal transactions in securities not
exempt under the Policy. In addition, Dreyfus employees must report their
personal securities transactions and holdings, which are reviewed for
compliance with the Policy. In that regard, Dreyfus portfolio managers and
other investment personnel also are subject to the oversight of Mellon's
Investment Ethics Committee. Dreyfus portfolio managers and other
investment personnel who comply with the Policy's preclearance and
disclosure procedures, and the requirements of the Committee, may be
permitted to purchase, sell or hold securities which also may be or are held
in fund(s) they manage or for which they otherwise provide investment
advice.
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. 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.
For the last three years, the Fund had the following expenses:
For the Fiscal Year Ended October 31,
1998 1997 1996
Management fees $3,780,009 $2,337,782 $1,035,858
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 sub-administrator for the Fund and as distributor
for the other funds in the Dreyfus Family of Funds.
For the fiscal year ended October 31, 1998, the Distributor retained no
sales loads on the Fund's Class A shares. For the fiscal year ended October
31, 1998, the Distributor retained $78,006 from the contingent deferred
sales charge ("CDSC") on Class B shares of the Fund. For the same period,
the Distributor retained $5,462 from the CDSC on Class C shares for the
Fund.
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. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most
beneficial to you depends on the amount and the intended length of your
investment. You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee, service fee
and CDSC, if any, on Class B shares or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares or
the accumulated distribution fee, service fee and initial sales charge on
Class T shares, purchased at the same time, and to what extent, if any, such
differential would be offset by the return on Class A shares and Class T
shares, respectively. You may also want to consider whether, during the
anticipated life of your investment in the Fund, the accumulated
distribution fee, service fee, and initial sales charge on Class T shares
would be less than the accumulated distribution fee and higher initial sales
charge on Class A shares purchased at the same time, and to what extent, if
any, such differential could be offset by the return of Class A.
Additionally, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution and service fees on Class B shares or Class C shares and the
accumulated distribution fee, service fee and initial sales charge on Class
T shares may exceed the accumulated distribution fee and initial sales
charge on Class A shares during the life of the investment. Finally, you
should consider the effect of the CDSC period and any conversion rights of
the Classes in the context of your own investment time frame. For example,
while Class C shares have a shorter CDSC period than Class B shares, Class C
shares do not have a conversion feature and, therefore, are subject to
ongoing distribution and service fees. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares will be most appropriate for investors
who invest $1,000,000 or more in Fund shares, and Class A and Class T shares
will not be appropriate for investors who invest less than $50,000 in Fund
shares. The Fund reserves the right to reject any purchase order.
Class A, Class B, Class C and Class T shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus
or any of its affiliates or subsidiaries, directors of Dreyfus, Board
members of a fund advised by Dreyfus, including members of the Company's
Board, or the spouse or minor child of any of the foregoing may purchase
Class A shares directly through the Distributor. Subsequent purchases may be
sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
or to customers who have received and hold shares of the Fund distributed to
them by virtue of such an account or relationship. Class R shares may be
purchased for a retirement plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such a plan.
Institutions effecting transactions in Class R shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum on subsequent purchases except the no minimum on Education
IRAs does not apply until after the first year. The initial investment must
be accompanied by the Fund's Account Application. The Fund reserves the
right to offer Fund shares without regard to minimum purchase requirements
to employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value."
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined NAV. It is
the dealers' responsibility to transmit orders so that they will be received
by the Distributor or its designee before the close of its business day.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received 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.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the Fund's Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $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.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service ("IRS").
Class A Shares. The public offering price for Class A shares is the
NAV per share of that Class, plus, except for shareholders owning Class A
shares of the Fund on November 30, 1996, a sales load as shown below:
<TABLE>
Total Sales Load Dealers'
Amount of Transaction as a % Reallowance
of Offering Price as a % of Offering
Per Share Price
<S> <C> <C>
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more 0 0
</TABLE>
For shareholders who opened Fund accounts after December 19, 1994, but
who beneficially owned Class A shares on November 30, 1996, the public
offering price for Class A shares is the NAV per share of that Class plus a
sales load as shown below:
Total Sales Load Dealers'
Amount of Transaction as a % Reallowance
of Offering Price as a % of Offering
Per Share Price
Less than $50,000 4.50 4.25
$50,000 to less than $100,000 4.00 3.75
$100,000 to less than $250,000 3.00 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more 0 0
Holders of Class A accounts of the Fund as of December 19, 1994 may
continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to any applicable front-end sales load.
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to sales of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
Class T Shares. The public offering price for Class T shares is the
NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of
Offering Price
Less than $50,000 4.50 4.00
$50,000 to less than $100,000 4.00 3.50
$100,000 to less than $250,000 3.00 2.50
$250,000 to less than $500,000 2.00 1.75
$500,000 to less than $1,000,000 1.50 1.25
$1,000,000 or more -0- -0-
There is no initial sales charge on purchases of $1,000,000 or more of
Class T shares. However, if you purchase Class T shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class T shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class T shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class T shares.
Because the expenses associated with Class A shares will be lower than those
associated with Class T shares, purchasers investing $1,000,000 or more in
the Fund will generally find it beneficial to purchase Class A shares rather
than Class T shares.
Dealer Reallowance -- Class A and Class T Shares. The dealer
reallowance provided with respect to Class A and Class T shares may be
changed from time to time but will remain the same for all dealers. The
Distributor, at its own expense, may provide additional promotional
incentives to dealers that sell shares of funds advised by Dreyfus which are
sold with a sales load, such as Class A and Class T shares. In some
instances, these incentives may be offered only to certain dealers who have
sold or may sell significant amounts of such shares.
Sales Loads -- Class A and Class T Shares. The scale of sales loads
applies to purchases of Class A and Class T shares made by any "purchaser,"
which term includes an individual and/or spouse purchasing securities for
his, her or their own account or for the account of any minor children, or a
trustee or other fiduciary purchasing securities for a single trust estate
or a single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under Section
401 of the Code) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457
of the Code); or an organized group which has been in existence for more
than six months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the NAV of a Class A share at the close of business on October 31, 1998:
NAV per share $15.18
Per Share Sales Charge - 5.75%* of offering price
(6.10% of NAV per share) $ .93
Per Share Offering Price to Public $16.11
__________________________________________
* Class A shares purchased by shareholders beneficially owning Class A
shares on November 30, 1996, but who opened their accounts after
December 19, 1994, are subject to a different sales load schedule as
described above.
Set forth below is an example of the method of computing the offering
price of the Fund's Class T shares. The example assumes a purchase of Class
T shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the initial offering price of $12.50:
NAV per share $12.50
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .59
Per Share Offering Price to Public $13.09
Right of Accumulation-Class A and Class T Shares. Reduced sales loads
apply to any purchase of Class A and T shares, shares of other funds in the
Dreyfus Premier Family of Funds, shares of certain other funds advised by
Dreyfus which are sold with a sales load and shares acquired by a previous
exchange of such shares (hereinafter referred to as "Eligible Funds"), by
you and any related "purchaser" as defined above, where the aggregate
investment, including such purchase, is $50,000 or more. If, for example,
you previously purchased and still hold Class A or Class T shares of the
Fund, or shares of any other Eligible Fund or combination thereof, with an
aggregate current market value of $40,000 and subsequently purchase Class A
or T shares of the Fund or shares of an Eligible Fund having a current value
of $20,000, the sales load applicable to the subsequent purchase would be
reduced to 4.50% of the offering price in the case of Class A shares or
4.00% of the offering price in the case of Class T shares. All present
holdings of Eligible Funds may be combined to determine the current offering
price of the aggregate investment in ascertaining the sales load applicable
to each subsequent purchase. Class A shares purchased by shareholders
beneficially owning Fund shares on November 30, 1996, but who opened their
Fund accounts after December 19, 1994, are subject to a different sales load
structure, as described above.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in the Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class R Shares. The public offering for Class R shares is the NAV per
share of that Class.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the 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 that is an Automated Clearing House ("ACH")
member may be so designated. TeleTransfer purchase orders may be made at
the Transfer Agent any time. Purchase orders received by 4:00 p.m., New
York time, on any business day that the Transfer Agent and the NYSE are open
for business will be credited to the shareholder's Fund account on the next
bank business day following such purchase order. Purchase orders made after
4:00 p.m., New York time, on any business day the Transfer Agent and the
NYSE are open for business, or orders made on Saturday, Sunday or any Fund
holiday (e.g., when the NYSE is not open for business), will be credited to
the shareholder's Fund account on the second bank business day following
such purchase order. To qualify to use the TeleTransfer Privilege, the
initial payment for purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares - TeleTransfer Privilege." The Fund may modify or terminate this
Privilege at any time or charge a service fee upon notice to shareholders.
No such fee currently is contemplated.
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 NAVs 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 AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual 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--Class A Shares. The Company has adopted a
Distribution Plan pursuant to the Rule with respect to the Class A shares of
the Fund (the "Class A Plan"), whereby Class A shares of the Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A 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 Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution-related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Class A shares of the Fund. The Company's Board of
Directors believes that there is a reasonable likelihood that the Class A
Plan will benefit the Fund and the holders of Class A shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without approval of the holders of
Class A shares, and that other material amendments of the Class A Plan must
be approved by the vote of a majority of the Directors and of the Directors
who are not "interested persons" (as defined in the 1940 Act) of the Company
and who do not have any direct or indirect financial interest in the
operation of the Class A Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Class A Plan is subject to
annual approval by the entire Board of Directors and by the Directors who
are neither interested persons nor have any direct or indirect financial
interest in the operation of the Class A Plan, by vote cast in person at a
meeting called for the purpose of voting on the Class A Plan. The Class A
Plan was so approved by the Directors at a meeting held on February 4, 1999.
The Class A Plan is terminable, as to the Fund's Class A shares, at any time
by vote of a majority of the Directors who are not interested persons and
have no direct or indirect financial interest in the operation of the Class
A Plan or by vote of the holders of a majority of the outstanding shares of
such class of the Fund.
Distribution and Service Plans -- Class B, Class C and Class T Shares.
In addition to the above described current Class A Plan for Class A shares,
the Board of Directors has adopted a Service Plan (the "Service Plan") under
the Rule for Class B, Class C and Class T shares, pursuant to which the Fund
pays the Distributor and Dreyfus Service Corporation a fee at the annual
rate of 0.25% of the value of the average daily net assets of Class B, Class
C and Class T shares for the provision of certain services to the holders of
Class B, Class C and Class T shares. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and providing services related to the maintenance of such
shareholder accounts. With regard to such services, each Agent is required
to disclose to its clients any compensation payable to it by the Fund and
any other compensation payable by its clients in connection with the
investment of their assets in Class B, Class C and Class T shares. The
Distributor may pay one or more Agents in respect of services for these
Classes of shares. The Distributor determines the amounts, if any, to be
paid to Agents under the Service Plan and the basis on which such payments
are made. The Company's Board of Directors has also adopted a Distribution
Plan pursuant to the Rule with respect to Class B and Class C shares (the
"Class B and Class C Plan") and a separate Distribution Plan pursuant to the
Rule with respect to Class T shares (the "Class T Plan"). Pursuant to the
Class B and Class C Plan, the Fund pays the Distributor for distributing the
Fund's Class B and Class C shares at an aggregate annual rate of 0.75% of
the value of the average daily net assets of Class B and Class C shares,
respectively. Pursuant to the Class T Plan, the Fund pays the Distributor
for distributing the Fund's Class T shares at an annual rate of 0.25% of the
value of the average daily net assets of Class T shares. The Distributor
may pay one or more Agents in respect of advertising, marketing and other
distribution services for Class T shares, and determines the amounts, if
any, to be paid to Agents and the basis on which such payments are made.
The Company's Board of Directors believes that there is a reasonable
likelihood that the Service Plan, the Class B and Class C Plan and the Class
T Plan (each a "Plan" and collectively, the "Plans") will benefit the Fund
and the holders of Class B, Class C and Class T shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B, Class C
or Class T shares may bear pursuant to the Plan without the approval of the
holders of such Classes and that other material amendments of the Plan must
be approved by the Board of Directors and by the Directors who are not
interested persons of the Company and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. Each Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. The Service Plan with respect to
Class B and Class C shares and the Class B and Class C Plan were so approved
by the Directors at a meeting held on February 4, 1999. The Service Plan
with respect to Class T shares and the Class T Plan were initially approved
by the Directors at a meeting held on July 29, 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B, Class C or
Class T shares, as applicable.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan described above are payable
without regard to actual expenses incurred. The Fund and the Distributor
may suspend or reduce payments under any of the plans at any time, and
payments are subject to the continuation of the Fund's plans and the
Agreements described above. From time to time, the Agents, the Distributor
and the Fund may voluntarily agree to reduce the maximum fees payable under
the plans.
For the fiscal year ended October 31, 1998, the Fund paid the
Distributor and Dreyfus Service Corporation $15,148 and $13,570,
respectively, pursuant to the Class A Plan. For the fiscal year ended
October 31, 1998, the Fund paid the Distributor $187,216 and $33,521
pursuant to the Class B and Class C Plan with respect to Class B shares and
Class C shares, respectively, and paid the Distributor and Dreyfus Service
Corporation $16,830 and $45,575, respectively, pursuant to the Service Plan
with respect to Class B shares and $0 and $11,174, respectively, pursuant to
the Service Plan with respect to Class C shares. The Class T Plan and the
Service Plan with respect to Class T shares were not in effect during the
fiscal year ended October 31, 1998, and accordingly, no fees were paid
pursuant to those plans with respect to Class T shares during that period.
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."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the TeleTransfer Privilege. If you are a client of a
Selected Dealer, you may redeem shares through the Selected Dealer. Other
redemption procedures may be in effect for clients of certain Agents and
institutions. The Fund makes available to certain large institutions the
ability to issue redemption instructions through compatible computer
facilities. The Fund reserves the right to refuse any request made by
telephone, including requests made shortly after a change of address, and
may limit the amount involved or the number of such requests. The Fund may
modify or terminate any redemption privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs, or other retirement plans, and shares
for which certificates have been issued, are not eligible for the
TeleTransfer Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TeleTransfer
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus Touchr automated
telephone system) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of 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 NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A, Class B or Class T shares you have redeemed, within
45 days of redemption, at the then-prevailing NAV without a sales load, or
reinstate your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A or Class T shares
if such shares were subject to a CDSC, your account will be credited with an
amount equal to the CDSC previously paid upon redemption of the shares
reinvested. The Reinvestment Privilege may be exercised only once.
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two days
after receipt of the redemption request. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a wire
redemption will be effected as a TeleTransfer transaction through the ACH
system unless more prompt transmittal specifically is requested. Holders of
jointly registered Fund or bank accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account only up to $250,000 within any
30-day period. See "Purchase of Shares-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 NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
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 NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect the Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years; then of amounts representing the cost
of shares purchased six years prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1%
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC. - The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described below. If the Company's Board determines to discontinue the
waiver of the CDSC, the disclosure herein will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Prospectus or this Statement of Additional Information at the time of the
purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
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. Shares of any Class of the Fund may be exchanged for
shares of the same Class of another fund in the Dreyfus Premier Family of
Funds or shares of certain other funds advised or administered by Dreyfus.
Shares of other funds purchased by exchange will be purchased on the basis
of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
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. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr automated telephone system) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class of certain other funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to
the schedule the investor has selected. This Privilege is available only
for existing accounts. With respect to Class R shares held by a Retirement
Plan, exchanges may be made only between the investor's Retirement Plan
account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV as described
above under "Fund Exchanges." Enrollment in or modification or cancellation
of this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs 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.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification Dreyfus Premier Small
Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
The Fund may charge a service fee for the use of this Privilege. No such
fee currently is contemplated. For more information concerning this
Privilege and the funds in the Dreyfus Premier Family of Funds or the
Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free 1-
800-554-4611.
Fund Exchanges and the 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. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to Dreyfus
Premier Small Company Stock Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587 and the notification will be effective three business days
following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. 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.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A or Class T
shares to which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A or Class T shares where the sales load is imposed
concurrently with withdrawals of Class A or Class T shares generally are
undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from the Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-554-4611. You
may cancel these Privileges by mailing a written notification to Dreyfus
Premier Small Company Stock Fund, P.O. Box 6587, Providence Rhode Island,
02940-6587. To select a new fund after cancellation, you must submit a new
Dividend Options Form. Enrollment in or cancellation of these privileges is
effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for Dreyfus Dividend
Sweep. The Fund may modify or terminate these privileges at any time or
charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for
Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Letter of Intent-Class A and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of
Eligible Fund shares purchased in a 13-month period pursuant to the terms
and conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter
of Intent) in any Eligible Fund that may be used toward "Right of
Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales load will be
applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
or Class T shares, as applicable, of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or
the Fund to sell, the full amount indicated at the sales load in effect at
the time of signing, but you must complete the intended purchase to obtain
the reduced sales load. At the time you purchase Class A or Class T shares,
you must indicate your intention to do so under a Letter of Intent.
Purchases pursuant to a Letter of Intent will be made at the then-current
NAV plus the applicable sales load in effect at the time such Letter of
Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
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.
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
anticipates receiving simultaneous orders that may significantly affect the
Fund (e.g., amounts equal to 1% or more of the Fund's total assets). If an
exchange request is refused, the Fund will take no other action with respect
to the shares until it receives further instructions from the investor. The
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount
of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy
on excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend 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 NAV
but the purchase order would be effective only at the NAV 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. The 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. Where market
quotations are not readily available, the Fund's investments are valued
based on fair value as determined in good faith by the Company's Board.
Debt 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. 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 NAV 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,
are accrued daily and taken into account for the purpose of determining the
NAV 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 of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors 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 of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and
Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income and distributes net realized capital gains and gains from
foreign currency transactions, if any, once a year, but it may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the 1940
Act. All expenses are accrued daily and deducted before declaration of
dividends to investors. The Fund will not make distributions from net
realized capital gains unless all capital loss carryovers, if any, have been
utilized or have expired. Investors other than qualified retirement plans
may choose whether to receive dividends and other distributions in cash, to
receive dividends in cash and reinvest other distributions in additional
Fund shares at NAV, or to reinvest both dividends and other distributions in
additional Fund shares at NAV; dividends and other distributions paid to
qualified retirement plans are reinvested automatically in additional Fund
shares at NAV. Dividends and other distributions paid by each Class are
calculated at the same time and in the same manner and will be in the same
amount, except that the expenses attributable solely to a particular Class
are borne exclusively by that Class. Class B and Class C shares will
receive lower per share dividends than Class T shares, which will in turn
receive lower per share dividends than Class A shares, which will in turn
receive lower per share dividends than Class R shares, because of the higher
expenses borne by the relevant Classes. See "Expenses" in the Fund's
Prospectus.
It is expected that the Fund will continue to qualify for treatment as
a regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve the Fund of any liability for federal income tax
to the extent its earnings and realized gains are distributed in accordance
with applicable provisions of the Code. 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) (the "Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
(the "Income Requirement"), and (3) must meet certain asset diversification
and other requirements. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency. The Fund will be subject to a non-deductible 4%
excise tax ("Excise Tax") to the extent it fails to distribute substantially
all of its taxable income and capital gains. If the Fund failed to qualify
for treatment as a RIC for any taxable year, (1) it would be taxed at
corporate rates on the full amount of its taxable income for that year
without being able to deduct the distributions it makes to its shareholders
and (2) the shareholders would treat all those distributions, including
distributions of net capital gain (the excess of net long-term capital gain
over net short-term capital loss), as dividends (that is, ordinary income)
to the extent of the Fund's earnings and profits. In addition, the Fund
could be required to recognize unrealized gains, pay substantial taxes and
interest and make substantial distributions before requalifying for RIC
treatment.
Distributions. If you elect to receive dividends and other
distributions in cash, and your dividend or distribution check is returned
to the Fund as undeliverable or remains uncashed for six months, the Fund
reserves the right to reinvest that distribution and all future
distributions payable to you in additional Fund shares at NAV. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains, net realized gains
from certain foreign currency transactions and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess net of long-term capital gain over net short-term
capital loss) will be taxable to those shareholders as long-term capital
gains regardless of how long the shareholders have held their Fund shares
and whether the distributions are received in cash or reinvested in
additional Fund shares.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subjected to U.S. withholding tax at the rate of 30%,
unless the foreign investor claims the benefit of a lower rate specified in
a tax treaty. Distributions from net capital gain paid by the Fund to a non-
resident foreign investor, as well as the proceeds of any redemptions by
such an investor, regardless of the extent to which gain or loss may be
realized, generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to dividends and distributions
from net capital gain, if any, paid during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A and Class T shares if a shareholder redeems those shares
or exchanges them for shares of another fund advised or administered by
Dreyfus, within 90 days of purchase, and (1) in the case of a redemption,
the shareholder acquires other fund Class A or Class T shares through
exercise of the Reinvestment Privilege or (2) in the case of an exchange,
the other fund reduces or eliminates its otherwise applicable sales load.
In these cases, the amount of the sales load charged on the purchase of the
original Class A or Class T shares, up to the amount of the reduction of
sales load pursuant to the Reinvestment Privilege or on the exchange, as the
case may be, is not included in the tax basis of those shares for purposes
of computing gain or loss and instead is added to the tax basis of the
acquired shares.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
IRS distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of non-
deductible contributions thereto, will be taxable as ordinary income and, if
made prior to the time the participant reaches age 59 1/2, generally will be
subject to an additional tax equal to 10% of the taxable portion of the
distribution. The administrator, trustee or custodian of a qualified
retirement plan will be responsible for reporting distributions from the
plans to the IRS. Moreover, certain contributions to a qualified retirement
plan in excess of the amounts permitted by law may be subject to an excise
tax. If a distributee of an "eligible rollover distribution" from a
qualified retirement plan does not elect to have the distribution paid
directly from the plan to an eligible retirement plan in a "direct
rollover," the distribution will be subject to a 20% income tax withholding.
The Fund must withhold and remit to the U.S. treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if such
shareholder fails to furnish a TIN to the Fund and certify that it is
correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income. A TIN is either the
Social Security number, individual taxpayer identification number or
employer identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax and may be claimed as a credit on the record owner's Federal income tax
return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such a distribution would be a
return on investment in an economic sense, although taxable as stated in the
Fund's Prospectus. In addition, if a shareholder sells shares of the Fund
held for six months or less and receives any capital gain distributions 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 those distributions.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
federal alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries
and U.S. possessions that would reduce the yield on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign
investors. If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, it
will be eligible to, and may, file an election ("Election") with the IRS
that will enable its shareholders, in effect, to receive the benefit of the
foreign tax credit with respect to any foreign or U.S. possessions' income
taxes paid by it. Pursuant to the Election, the Fund would treat those
taxes as dividends paid to its shareholders and each shareholder would be
required to (1) include in gross income, and treat as paid by him or her,
his or her proportionate share of those taxes, (2) treat his or her share of
those taxes and of any dividend paid by the Fund that represents income from
foreign or U.S. possession sources as his or her own income from those
sources and (3) either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her federal
income tax. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions. Generally, a credit for foreign taxes may
not exceed the shareholder's federal income tax attributable to his total
foreign source taxable income. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the income from
sources within, and taxes paid to, foreign countries and U.S. possessions if
it makes the Election.
Passive Foreign Investment Companies. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at
least 75% of its gross income is passive or (2) an average of at least 50%
of its assets produce, or are held for the production of, passive income.
Under certain circumstances, the Fund will be subject to federal income tax
on a portion of any "excess distribution" received on the stock of a PFIC or
of any gain on disposition of the stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly,
will not be taxable to it to the extent that income is distributed to its
shareholders. If the Fund invests in a PFIC and elects to treat the PFIC as
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its
pro rata share of the qualified electing fund's annual ordinary earnings and
net capital gain (the excess of net long-term capital gain over net short-
term capital loss) -- which probably would have to be distributed to satisfy
the Distribution Requirement and avoid imposition of the 4% excise tax
referred to in the Fund's Prospectus under "Dividends, Other Distributions
and Taxes" -- even if those earnings and gain were not received by the Fund.
Pursuant to proposed regulations, open-end RICs, such as the Fund,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market
value of each such PFIC's stock over the adjusted basis in that stock
(including mark-to-market gain for each prior year for which an election was
in effect).
Foreign Currency, Futures, Forward and Hedging Transactions. Gains
from the sale or other disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or loss
from the disposition of foreign currencies and certain foreign-currency-
denominated instruments (including debt instruments and financial forward,
futures and option contracts) may be treated as ordinary income or loss
under Section 988 of the Code. In addition, all or a portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income. Moreover, all or a portion of the gain
realized from engaging in "conversion transactions" that otherwise would be
valued as capital gain may be treated as ordinary income under Section 1258
of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and straddle transactions, transactions marketed or
sold as producing capital gains and transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures, forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss
to the Fund characterized in the same manner.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles," which are defined to include "offsetting
positions" in actively traded personal property. Under Section 1092 of the
Code, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on
the offsetting position(s) of the straddle. In addition, these rules may
postpone the recognition of loss that otherwise would be recognized under
the mark-to-market rules discussed above. The regulations under Section
1092 also provide certain "wash sale" rules, which apply to transactions
where a position is sold at a loss and a new offsetting position is acquired
within a prescribed period, and "short sale" rules applicable to straddles.
If the Fund makes certain elections (including an election as to straddles
that include a position in one or more Section 1256 Contracts (so-called
"mixed straddles")), the amount, character, and timing of recognition of
gains and losses from the affected straddle positions would be determined
under rules that vary according to the elections made. Because only a few
of the regulations implementing the straddle rules have been promulgated,
the tax consequences to the Fund of straddle transactions are not entirely
clear.
Foreign Currency Gains and Losses. Gains and losses attributable to
fluctuations in foreign currency exchange rates that occur between the time
the Fund accrues dividends, interest or other receivables, or expenses or
other liabilities, denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on the disposition
of a debt security denominated in a foreign currency, or of an option or
forward contract on a foreign currency, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security, option or contract and the date of disposition
also are treated as ordinary income or loss. These gains or losses may
increase or decrease the amount of the Fund's investment company taxable
income to be distributed to its shareholders.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. Shareholders are
advised to consult their tax advisers concerning the application of state
and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed below. Special
U.S. federal income tax rules that differ from those described below may
apply to certain foreign persons who invest in the Fund, such as a foreign
shareholder entitled to claim the benefits of an applicable tax treaty.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to a U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) generally will not be subject to U.S. federal income tax
unless the foreign shareholder is a non-resident alien individual and is
physically present in the United States for more than 182 days during the
taxable year. In the case of certain foreign shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% of capital
gain distributions and of the gross proceeds from a redemption of Fund
shares unless the shareholder furnishes the Fund with a certificate
regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commission 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.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions amounting to $470,403, $347,777 and $179,990,
respectively.
The aggregate amount of transactions during the fiscal year ended
October 31, 1998 in securities effected on an agency basis through a broker
dealer for research services was $_____, and the commissions and concessions
related to such transactions was $_____.
Portfolio Turnover. Under normal market conditions, the Fund's
portfolio turnover rate is expected to be less than 100%. A portfolio
turnover rate of 100% would occur, for example, if all the securities held
by the Fund were replaced once in a period of one year. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions
and other expenses that must be borne directly by the Fund and, thus,
indirectly by its shareholders. In addition, a higher rate of portfolio
turnover may result in the realization of larger amounts of short-term
capital gains that, when distributed to the Fund's shareholders, are taxable
to them as ordinary income. Nevertheless, securities transactions for the
Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus deems its appropriate to
make changes in the Fund's assets. 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. The portfolio
turnover rates for the fiscal years ended October 31, 1997 and 1998 were
39.18% and 47.44%, respectively.
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 returns (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of the Fund for
the periods noted were:
Average Annual Total Return for the
Periods Ended April 30, 1999
1 Year Since Inception
Class A shares (19.41)% 13.31% (9/2/94)
Class B shares (18.57)% 16.08% (12/19/94)
Class C shares (16.02)% 16.35% (12/19/94)
Class R shares (14.28)% 15.01% (9/2/94)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase
and the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price
in the case of Class A and Class T) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result. The average
annual total return figures for a Class calculated in accordance with such
formula assume that, in the case of Class A or Class T, the maximum sales
load has been deducted from the hypothetical initial investment at the time
of purchase or, in the case of Class B or Class C, the maximum applicable
CDSC has been paid upon redemption at the end of the period.
The Fund's total return for the period September 2, 1994 (commencement
of operations) to April 30, 1999 for Class R was 91.92%. The Fund's total
return for Class A for the period September 2, 1994 (commencement of
operations) to April 30, 1999 was 79.02%. Based on NAV per share, the total
return for Class A was 89.94% for this period. The Fund's total return for
Class B and Class C for the period from December 19, 1994 (commencement of
operations of Class B and Class C) through April 30, 1999 was 91.55% and
93.55%, respectively. Without giving effect to the applicable CDSC, total
return for Class B and Class C was 93.55% and 93.55%, respectively, for this
period.
Total return is calculated by subtracting the amount of the Fund's NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of a stated period from the NAV per share at the end of the period
(after giving effect to the reinvestment of dividends and other
distributions during the period and any applicable CDSC), and dividing the
result by the NAV (maximum offering price in the case of Class A and Class
T) per share at the beginning of the period. Total return also may be
calculated based on the NAV per share at the beginning of the period instead
of the maximum offering price per share at the beginning of the period for
Class A or Class T shares or without giving effect to any applicable CDSC at
the end of the period for Class B or Class C shares. In such cases, the
calculation would not reflect the deduction of the sales load with respect
to Class A or Class T shares or any applicable CDSC with respect to Class B
or Class C shares, which, if reflected would reduce the performance quoted.
No performance information is provided for Class T shares since they
were not offered as of April 30, 1999.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i)
Russell 2500 Index, the Russell 2000 Value Index, the Russell 2000 Growth
Index, or the Russell 2000 Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives and assets,
or tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund, or the Fund's performance against inflation to
the performance of other instruments against inflation; 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, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market. From time
to time, advertising materials for the Fund may refer to Morningstar ratings
and related analyses supporting that rating.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
From time to time, advertising materials may refer to studies performed
by The Dreyfus Corporation or its affiliates, such as "The Dreyfus Tax
Informed Investing Study" or "The Dreyfus Gender Investment Comparison Study
(1996 & 1997)" or other such studies.
INFORMATION ABOUT THE FUND/COMPANY
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 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 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 Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 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.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. The financial statements for the six-month period ended April
30, 1999, which are unaudited, are included in the Fund's Semi-Annual Report
to shareholders. Copies of the Annual Report and Semi-Annual Report
accompany this Statement of Additional Information. The financial
statements included in the Annual Report, and the Independent Auditors'
Report thereon contained therein, and Semi-Annual Report and related notes,
are incorporated herein by reference.
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
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.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Inc. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
modest but
AA may vary slightly from time to time because of economic
conditions.
AA-
A+ Protection factors are average but adequate. However, risk
factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
for prudent
BBB investment. Considerable variability in risk during economic
cycles.
BBB-
BB+ Below investments grade but deemed likely to meet obligations when
due.
BB Present or prospective financial protection factors fluctuate
according to
BB- industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
not be met
B when due. Financial protection factors will fluctuate widely
according to
B- economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends.
Protection factors are narrow and risk can be substantial with
unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or
interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
____________________________________________________________________________
DREYFUS PREMIER LARGE COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C, CLASS R AND CLASS T SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 16, 1999
____________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Premier Large Company Stock Fund (the "Fund"), dated August 16,
1999, as it may be revised from time to time. The Fund is a separate,
diversified portfolio of The Dreyfus/Laurel Funds, Inc., an open-end
management investment company (the "Company"), known as a mutual fund. To
obtain a copy of the Fund's Prospectus, please write to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call one of the
following numbers:
Call Toll Free 1-800-554-4611
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-17
Management Arrangements B-23
Purchase of Shares B-25
Distribution and Service Plans B-33
Redemption of Shares B-36
Shareholder Services B-41
Additional Information About Purchases,
Exchanges and Redemptions B-48
Determination of Net Asset Value B-49
Dividends, Other Distributions and Taxes B-50
Portfolio Transactions B-56
Performance Information B-58
Information About the Fund/Company B-60
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-61
Financial Statements B-62
Appendix B-63
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.
Prior to January 16, 1998, the Fund's name was Dreyfus Disciplined Equity
Income Fund. Prior to November 22, 1995, the Fund's name was Dreyfus Equity
Income Fund and prior to October 17, 1994, the Fund's name was Laurel Equity
Income 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.
The Fund seeks investment returns (consisting of capital appreciation
and income) that are consistently superior to the Standard & Poor's 500
Composite Stock Price Index ("S&P 500"). The S&P 500 is composed of 500
common stocks, most of which are traded on the New York Stock Exchange
("NYSE"), chosen to reflect the industries of the U.S. economy. The
inclusion of a stock in the S&P 500 does not imply that Standard and Poor's
Rating Services ("Standard & Poor's") believes the stock to be an attractive
or appropriate investment, nor is Standard & Poor's affiliated with the
Company or the Fund. "S&P 500" is a trademark of Standard & Poor's.
Prior to January 16, 1998, the Fund's investment objective was to seek
an above-average level of income along with moderate long-term growth of
income and principal.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
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."
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. Treasury to lend to such 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, Small Business Administration 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.
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. This technique
offers a method of earning income on idle cash. 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, including interest, 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.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's, Prime-1 by Moody's Investors Service, Inc., F-1 by Fitch
IBCA, Inc. or Duff-1 by Duff & Phelps Credit Rating Co.
Bank Instruments. 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 of foreign banks, domestic
savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs"),
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are U.S. dollar-
denominated time deposits in a foreign branch of a U.S. bank or a foreign
bank. Yankee CDs are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States. The
Fund may also invest in Eurodollar bonds and notes, which are obligations
that pay principal and interest in U.S. dollars held in banks outside the
United States, primarily in Europe. All of these obligations are subject to
somewhat different risks than are the obligations of domestic banks or
issuers in the United States. See "Foreign Securities."
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers 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 return on such securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holders.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
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. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
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.
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 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
("NAV").
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 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.
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 loss if the institution to which it has lent its
securities fails financially or 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. The Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. 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.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (such as index futures contracts) and
options (such as options on U.S. and foreign securities or indices of such
securities). The index Derivative Instruments which the Fund may use may be
based on indices of U.S. or foreign equity securities. These Derivative
Instruments may be used, for example, to preserve a return or spread or to
facilitate or substitute for the sale or purchase of securities. The Fund
may invest in futures contracts and options to a limited extent but does not
currently intend to invest more than 5% of its assets in such instruments.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments 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 not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities.
There can be no assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs, and may result in certain
tax consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value unless
the option is closed out in an offsetting transaction.
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 and the Fund would experience losses to the extent of premiums
paid for them.
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 price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write options on securities only if it covers the
transaction through: an offsetting option with respect to the security
underlying the option it has written, exercisable by it at a more favorable
price; ownership of (in the case of a call) or a short position in (in the
case of a put) the underlying security; or segregation of cash or certain
other assets sufficient to cover its exposure.
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.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5%, the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts for hedging purposes.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in such securities would exceed 5% of the Fund's
total assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board of Directors.
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.
If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains
an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company'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 nine 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") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board 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
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.), a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources) a temporary placement agency. 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: 55 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. Chairman of the
Board, Davidson Cotton Company. Age: 64 years old. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 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. Age: 77 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Director of the Company; President & CEO, The
Palladium Company; President & CEO, Himmel and Company, Inc.; CEO,
American Food Management; former Director, The Boston Company, Inc.
("TBC"), an affiliate of Dreyfus, and Boston Safe Deposit and Trust
Company. Age: 53 years old: 625 Madison Avenue, New York, New York
10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 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. Age: 67 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 Health Care, Inc.; Director, Massachusetts Electric
Company; Director, the Hyams Foundation, Inc. Age: 49 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. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
________________________________
* "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: 39
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: 42 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. Age: 30 years old.
#JOHN P. COVINO. Vice President and Assistant Treasurer of the Company.
Vice President and Treasury Group Manager of Treasury Servicing and
Administration of Funds Distributor, Inc. From December 1995 to
November 1998, he was employed by Fidelity Investments where he held
multiple positions in their Institutional Brokerage Group. Prior to
joining Fidelity, he was employed by SunGard Brokerage Systems where
he was responsible for the technology and development of the accounting
product group. Age: 35 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor, Inc. From 1988 to August 1994, he was Manager of
High Performance Fabrics Division of Springs Industries, Inc. Age: 37
years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, Mr. Kelley was
Assistant Counsel at Forum Financial Group. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. 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. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was a Second
Vice President with Chase Manhattan Bank. Age: 30 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. Age: 44 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: 37 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: 37 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor, Inc. From June
1994 to January 1996, she was Manager of SEC Registration at Scudder,
Stevens & Clark, Inc. Age: 32 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 Company 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. Effective July 1, 1998,
the Dreyfus/Laurel Funds pay each Director/Trustee who is not an "interested
person" of the Company (as defined in the 1940 Act) $40,000 per annum, plus
$5,000 per joint Dreyfus/Laurel Funds Board meeting attended, $2,000 for
separate committee meetings attended which are not held in conjunction with
a regularly scheduled Board meeting and $500 for Board meetings and separate
committee meetings attended that are conducted by telephone. The
Dreyfus/Laurel Funds also reimburse each Director/Trustee who is not an
"interested person" of the Company (as defined in the 1940 Act) for travel
and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000
fee will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High
Yield Strategies Fund. The compensation structure described in this
paragraph is referred to hereinafter as the "Current Compensation
Structure."
In addition, the Company currently has three Emeritus Board members who
are entitled to receive an annual retainer and a per meeting fee of one-half
the amount paid to them as Board members pursuant to the Current
Compensation Structure.
Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Company (as
defined in the 1940 Act) $27,000 per annum (and an additional $25,000 for
the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel Funds)
and $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750
per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimbursed each such Director/Trustee for travel and out-of-pocket expenses
(the "Former Compensation Structure").
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1998, and
from all funds in the Dreyfus Family of Funds for which such person was a
Board member (the number of which is set forth in parenthesis next to each
Board member's total compensation)* during the year ended December 31, 1998,
pursuant to the Former Compensation Structure for the period from November
1, 1997 through June 30, 1998 and the Current Compensation Structure for the
period from July 1, 1998 through October 31, 1998, were as follows:
Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member
Joseph S. DiMartino** $17,710.00 $619,660 (187)
James M. Fitzgibbons $17,710.00 $60,010 (31)
J. Tomlinson Fort*** none none (31)
Arthur L. Goeschel $18,376.67 $61,010 (31)
Kenneth A. Himmel $14,793.34 $50,260 (31)
Stephen J. Lockwood $15,043.34 $51,010 (31)
John J. Sciullo $17,710.00 $59,010 (31)
Roslyn M. Watson $18,376.67 $61,010 (31)
Benaree Pratt Wiley**** $12,194.38 $49,628 (31)
____________________________
# 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 $5,313.37 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October
31, 1998, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Company was $17,710.00. For
the year ended December 31, 1998, the aggregate amount of fees received by
Mr. Fort for serving as a Board member of all funds in the Dreyfus/Laurel
Funds (including the Company) and Dreyfus High Yield Strategies Fund (for
which payment is made directly by the fund) was $59,010.00. In addition,
Dreyfus reimbursed Mr. Fort a total of $733.11 for expenses attributable to
the Company's Board meetings which is not included in the $5,313.37 amount
in note # above.
****Payments to Ms. Wiley were for the period from April 23, 1998 (the date
she was elected as a Board member) through October 31, 1998.
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 July 28,
1999.
Principal Shareholders. As of July 28, 1999, the following
shareholder(s) owned beneficially or of record 5% or more of Class A of the
Fund: MLPF & S For the Sole Benefit of It's Customers, 4800 Deer Lake Drive
East, Jacksonville, FL 32246-6484, ____%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class B of the Fund: MLPF & S For the Sole Benefit
of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-6484,
_____%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class C of the Fund: MLPF & S For The Sole Benefit
of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-6484;
____%.
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 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994, subject to the overall authority of the Company's Board of
Directors in accordance with Maryland law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus manages
the Fund by making investment decisions based on the Fund's investment
objective, policies and restrictions. The Management Agreement is subject
to review and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. 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 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman Institutional and
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Diane P. Durnin, Vice President-Product
Development; Patrice M. Kozlowski, Vice President-Corporate Communications;
Mary Beth Leibig, Vice President-Human Resources; Andrew S. Wasser, Vice-
President-Information Systems; Theodore A. Schachar, Vice President; Wendy
Strutt, Vice President; Richard Terres, Vice President; William H. Maresca,
Controller; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott,
Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"),
Dreyfus employees must preclear personal transactions in securities not
exempt under the Policy. In addition, Dreyfus employees must report their
personal securities transactions and holdings, which are reviewed for
compliance with the Policy. In that regard, Dreyfus portfolio managers and
other investment personnel also are subject to the oversight of Mellon's
Investment Ethics Committee. Dreyfus portfolio managers and other
investment personnel who comply with the Policy's preclearance and
disclosure procedures, and the requirements of the Committee, may be
permitted to purchase, sell or hold securities which also may be or are held
in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.90% 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. 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.
For the last three years, the Fund had the following expenses:
For the Fiscal Year Ended October 31,
1998 1997 1996
Management fees $467,761 $229,763 $94,844
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 sub-administrator for the Fund and as distributor
for the other funds in the Dreyfus Family of Funds.
For the fiscal year ended October 31, 1998, the Distributor retained no
sales loads on the Fund's Class A shares. For the period January 16, 1998
(inception date of Class B and Class C shares) through October 31, 1998, the
Distributor retained no fees from the contingent deferred sales charge
("CDSC") on Class B and Class C shares of the Fund, respectively.
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. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most
beneficial to you depends on the amount and the intended length of your
investment. You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee, service fee
and CDSC, if any, on Class B or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares or
the accumulated distribution fee, service fee and initial sales charge on
Class T shares, purchased at the same time, and to what extent, if any, such
differential would be offset by the return on Class A shares and Class T
shares, respectively. You may also want to consider whether, during the
anticipated life of your investment in the Fund, the accumulated
distribution fee, service fee, and initial sales charge on Class T shares
would be less than the accumulated distribution fee and higher initial sales
charge on Class A shares purchased at the same time, and to what extent, if
any, such differential could be offset by the return of Class A.
Additionally, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution and service fees on Class B or Class C shares and the
accumulated distribution fee, service fee and initial sales charge on Class
T shares may exceed the accumulated distribution fee and initial sales
charge on Class A shares during the life of the investment. Finally, you
should consider the effect of the CDSC period and any conversion rights of
the Classes in the context of your own investment time frame. For example,
while Class C shares have a shorter CDSC period than Class B shares, Class C
shares do not have a conversion feature and, therefore, are subject to
ongoing distribution and service fees. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares will be most appropriate for investors
who invest $1,000,000 or more in Fund shares, and Class A and Class T shares
will not be appropriate for investors who invest less than $50,000 in Fund
shares. The Fund reserves the right to reject any purchase order.
</R
Class A, Class B, Class C and Class T shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus
or any of its affiliates or subsidiaries, directors of Dreyfus, Board
members of a fund advised by Dreyfus, including members of the Company's
Board, or the spouse or minor child of any of the foregoing may purchase
Class A shares directly through the Distributor. In addition, holders of
Investor shares of the Fund as of January 15, 1998 may continue to purchase
Class A shares of the Fund at NAV. Subsequent purchases may be sent
directly to the Transfer Agent or your Agent.
Class R shares are sold only to holders of Restricted shares of the
Fund as of November 30, 1997. Such shareholders were primarily bank trust
departments and other financial service providers (including Mellon Bank and
its affiliates) acting on behalf of customers having a qualified trust or
investment account or relationship at such institution, customers who
received and held shares of the Fund distributed to them by virtue of such
an account or relationship, or other persons who acquired Restricted shares
when they were generally available to the public.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum on subsequent purchases except the no minimum on Education
IRAs does not apply until after the first year. The initial investment must
be accompanied by the Fund's Account Application. The Fund reserves the
right to offer Fund shares without regard to minimum purchase requirements
to employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value."
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so
that they will be received by the Distributor or its designee before the
close of its business day. For certain institutions that have entered into
agreements with the Distributor, payment for the purchase of Fund shares may
be transmitted, and must be received by the Transfer Agent, within three
business days after the order is placed. If such payment is not received
within three business days after the order is placed, the order may be
canceled and the institution could be held liable for resulting fees and/or
losses.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the Fund's Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $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.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares is the
NAV per share of that Class, plus, except for shareholders owning Investor
shares of the Fund on January 15, 1998, a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Holders of Investor shares of the Fund as of January 15, 1998 may
continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to any applicable front-end sales load. Omnibus accounts will be
eligible to purchase Class A shares without a front-end sales load only on
behalf of their customers who held Investor shares of the Fund through such
omnibus account on January 15, 1998.
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or intrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
Class T Shares. The public offering price for Class T shares is the
NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 4.50 4.00
$50,000 to less than $100,000 4.00 3.50
$100,000 to less than $250,000 3.00 2.50
$250,000 to less than $500,000 2.00 1.75
$500,000 to less than $1,000,000 1.50 1.25
$1,000,000 or more -0- -0-
There is no initial sales charge on purchases of $1,000,000 or more of
Class T shares. However, if you purchase Class T shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class T shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class T shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class T shares.
Because the expenses associated with Class A shares will be lower than those
associated with Class T shares, purchasers investing $1,000,000 or more in
the Fund will generally find it beneficial to purchase Class A shares rather
than Class T shares.
Dealer Reallowance -- Class A and Class T Shares. The dealer
reallowance provided with respect to Class A and Class T shares may be
changed from time to time but will remain the same for all dealers. The
Distributor, at its own expense, may provide additional promotional
incentives to dealers that sell shares of funds advised by Dreyfus which are
sold with a sales load, such as Class A and Class T shares. In some
instances, these incentives may be offered only to certain dealers who have
sold or may sell significant amounts of such shares.
Sales Loads -- Class A and Class T Shares. The scale of sales loads
applies to purchases of Class A and Class T shares made by any "purchaser,"
which term includes an individual and/or spouse purchasing securities for
his, her or their own account or for the account of any minor children, or a
trustee or other fiduciary purchasing securities for a single trust estate
or a single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under Section
401 of the Code although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457
of the Code); or an organized group which has been in existence for more
than six months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the NAV of a Class A share at the close of business on October 31, 1998:
NAV per share $20.45
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ 1.25
Per Share Offering Price to Public $21.70
Set forth below is an example of the method of computing the offering
price of the Fund's Class T shares. The example assumes a purchase of Class
T shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the initial offering price of $12.50:
NAV per share $12.50
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .59
Per Share Offering Price to Public $13.09
Right of Accumulation--Class A and Class T Shares. Reduced sales loads
apply to any purchase of Class A and Class T shares, shares of other funds
in the Dreyfus Premier Family of Funds, shares of certain other funds
advised by Dreyfus which are sold with a sales load and shares acquired by a
previous exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined above, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you previously purchased and still hold Class A or Class T shares
of the Fund, or shares of any other Eligible Fund or combination thereof,
with an aggregate current market value of $40,000 and subsequently purchase
Class A or Class T shares of the Fund or shares of an Eligible Fund having a
current value of $20,000, the sales load applicable to the subsequent
purchase would be reduced to 4.50% of the offering price in the case of
Class A shares or 4.00% of the offering price in the case of Class T shares.
All present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the sales
load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in the Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class R Shares. The public offering price for Class R shares is the
NAV per share of that Class.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the 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 that is an Automated Clearing House ("ACH")
member may be so designated. 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 the Transfer Agent and the NYSE are open for business will
be credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New
York time, on any business day the Transfer Agent and the NYSE are open for
business, or orders made on Saturday, Sunday or any Fund holiday (e.g., when
the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order.
To qualify to use the TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to,
the same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Shares -
TeleTransfer Privilege." The Fund may modify or terminate this Privilege at
any time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
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 NAVs 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
1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual 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--Class A Shares. The Company has adopted a
Distribution Plan pursuant to the Rule with respect to the Class A shares of
the Fund (the "Class A Plan"), whereby Class A shares of the Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A 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 Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Class A shares of the Fund. The Company's Board of
Directors believes that there is a reasonable likelihood that the Class A
Plan will benefit the Fund and the holders of Class A shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without the approval of the
holders of Class A shares, and that other material amendments of the Class A
Plan must be approved by the vote of a majority of the Directors and of the
Directors who are not "interested persons" (as defined in the 1940 Act) of
the Company or the Distributor and who do not have any direct or indirect
financial interest in the operation of the Class A Plan, cast in person at a
meeting called for the purpose of considering such amendments. The Class A
Plan is subject to annual approval by the entire Board of Directors and by
the Directors who are neither interested persons nor have any direct or
indirect financial interest in the operation of the Class A Plan, by vote
cast in person at a meeting called for the purpose of voting on the Class A
Plan. The Class A Plan was approved by the Directors at a meeting held on
February 4, 1999. The Class A Plan is terminable, as to the Fund's Class A
shares, at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B, Class C and Class T Shares.
In addition to the above described current Class A Plan for Class A shares,
the Board of Directors has adopted a Service Plan (the "Service Plan") under
the Rule for Class B, Class C and Class T shares, pursuant to which the Fund
pays the Distributor and Dreyfus Service Corporation a fee at the annual
rate of 0.25% of the value of the average daily net assets of Class B, Class
C and Class T shares for the provision of certain services to the holders of
Class B, Class C and Class T shares, respectively. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and providing services related to the maintenance of such
shareholder accounts. With regard to such services, each Agent is required
to disclose to its clients any compensation payable to it by the Fund and
any other compensation payable by its clients in connection with the
investment of their assets in Class B, Class C and Class T shares. The
Distributor may pay one or more Agents in respect of services for these
Classes of shares. The Distributor determines the amounts, if any, to be
paid to Agents under the Service Plan and the basis on which such payments
are made. The Company's Board of Directors has also adopted a Distribution
Plan pursuant to the Rule with respect to Class B and Class C shares (the
"Class B and Class C Plan") and a separate Distribution Plan pursuant to the
Rule with respect to Class T shares (the "Class T Plan"). Pursuant to the
Class B and Class C Plan, the Fund pays the Distributor for distributing the
Fund's Class B and Class C shares at an aggregate annual rate of 0.75% of
the value of the average daily net assets of Class B and Class C shares,
respectively. Pursuant to the Class T Plan, the Fund pays the Distributor
for distributing the Fund's Class T shares at an annual rate of 0.25% of the
value of the average daily net assets of Class T shares. The Distributor
may pay one or more Agents in respect of advertising, marketing and other
distribution services for Class T shares, and determines the amounts, if
any, to be paid to Agents and the basis on which such payments are made.
The Company's Board of Directors believes that there is a reasonable
likelihood that the Service Plan, the Class B and Class C Plan and the Class
T Plan (each a "Plan" and collectively, the "Plans") will benefit the Fund
and the holders of Class B, Class C and Class T shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B, Class C
or Class T shares may bear pursuant to the Plan without the approval of the
holders of such Classes and that other material amendments of the Plan must
be approved by the Board of Directors and by the Directors who are not
interested persons of the Company and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. Each Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. The Service Plan with respect to
Class B and Class C shares and the Class B and Class C Plan were so approved
by the Directors at a meeting held on February 4, 1999. The Service Plan
with respect to Class T shares and the Class T Plan were initially approved
by the Directors at a meeting held on July 29, 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B, Class C or
Class T shares, as applicable.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan described above are payable
without regard to actual expenses incurred. The Fund and the Distributor
may suspend or reduce payments under any of the plans at any time, and
payments are subject to the continuation of the Fund's plans and the
Agreements described above. From time to time, the Agents, the Distributor
and the Fund may voluntarily agree to reduce the maximum fees payable under
the plans.
For the fiscal year ended October 31, 1998, the Fund paid the
Distributor and Dreyfus Service Corporation $11,975 and $23,180,
respectively, pursuant to the Class A Plan. For the fiscal year ended
October 31, 1998, the Fund paid the Distributor $38,241 and $8,030 pursuant
to the Class B and Class C Plan with respect to Class B and Class C shares,
respectively, and paid the Distributor and Dreyfus Service Corporation
$3,324 and $9,452, respectively, pursuant to the Service Plan with respect
to Class B shares and $44 and $2,633, respectively, pursuant to the Service
Plan with respect to Class C shares. The Class T Plan and the Service Plan
with respect to Class T shares were not in effect during the fiscal year
ended October 31, 1998, and accordingly, no fees were paid pursuant to those
plans with respect to Class T shares during that period.
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."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege, which is granted automatically unless you specifically refuse it
by checking the applicable "No" box on the Account Application. The
Telephone Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form or by oral request from any of
the authorized signatories on the account by calling 1-800-554-4611. You
also may redeem shares through the Wire Redemption Privilege or the
TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you are a client of
certain Agents ("Selected Dealers"), you can also redeem Fund shares through
the Selected Dealer. Other redemption procedures may be in effect for
clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs, or other
retirement plans, and shares for which certificates have been issued, are
not eligible for the Wire Redemption, Telephone Redemption or TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
The Dreyfus Touchr automated telephone system) from any person representing
himself or herself to be you, or a representative of your Agent, and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of 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 NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A, Class B or Class T shares you have redeemed, within
45 days of redemption, at the then-prevailing NAV without a sales load, or
reinstate your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A or Class T shares
if such shares were subject to a CDSC, your account will be credited with an
amount equal to the CDSC previously paid upon redemption of the shares
reinvested. The Reinvestment Privilege may be exercised only once.
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 by the Transfer Agent of 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. Holders of jointly registered Fund or bank accounts may
have redemption proceeds of only up to $250,000 wired within any 30-day
period. Fees ordinarily are imposed by such bank and usually are borne by
the investor. Immediate notification by the correspondent bank to the
investor's bank is necessary to avoid a delay in crediting the funds to the
investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two days
after receipt of the redemption request. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a
TeleTransfer transaction will be effected through the ACH system unless more
prompt transmittal specifically is requested. Holders of jointly registered
Fund or bank accounts may redeem through the TeleTransfer Privilege for
transfer to their bank account only up to $250,000 within any 30-day period.
See "Purchase of Shares-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 NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
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 NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect the Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years; then of amounts representing the cost
of shares purchased six years prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1%
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC. The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described below. If the Company's Board determines to discontinue the
waiver of the CDSC, the disclosure herein will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Prospectus or this Statement of Additional Information at the time of the
purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
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. Shares of any Class of the Fund may be exchanged for
shares of the same Class of another fund in the Dreyfus Premier Family of
Funds or shares of certain other funds advised or administered by Dreyfus.
Shares of other funds purchased by exchange will be purchased on the basis
of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
You also may exchange your Fund shares that are subject to a CDSC for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can
be made into certain other funds managed or administered by Dreyfus. No
CDSC is charged when an investor exchanges into an Exchange Account;
however, the applicable CDSC will be imposed when shares are redeemed from
an Exchange Account or other applicable Fund account. Upon redemption, the
applicable CDSC will be calculated without regard to the time such shares
were held in an Exchange Account. See "Redemption of Shares." Redemption
proceeds for Exchange Account shares are paid by Federal wire or check only.
Exchange Account shares also are eligible for the Auto-Exchange Privilege,
Dividend Sweep and the Automatic Withdrawal Plan.
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. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr automated telephone system) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class of certain other funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to
the schedule the investor has selected. This Privilege is available only
for existing accounts. With respect to Class R shares held by a Retirement
Plan, exchanges may be made only between the investor's Retirement Plan
account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV as described
above under "Fund Exchanges." Enrollment in or modification or cancellation
of this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs 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.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier
Large Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-
6587. The Fund may charge a service fee for the use of this Privilege. No
such fee currently is contemplated. For more information concerning this
Privilege and the funds in the Dreyfus Premier Family of Funds or the
Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free 1-
800-554-4611.
Fund Exchanges and the 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. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to Dreyfus
Premier Large Company Stock Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587 and the notification will be effective three business days
following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. 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.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A or Class T
shares to which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A or Class T shares where the sales load is imposed
concurrently with withdrawals of Class A or Class T shares generally are
undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from the Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Large
Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To
select a new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dreyfus Dividend Sweep. The Fund
may modify or terminate these privileges at any time or charge a service
fee. No such fee currently is contemplated. Shares held under Keogh Plans,
IRAs or other retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you
may have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the ACH system at each pay period. To
establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. Your employer
must complete the reverse side of the form and return it to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. You
may obtain the necessary authorization form by calling 1-800-554-4611. You
may change the amount of purchase or cancel the authorization only by
written notification to your employer. It is the sole responsibility of
your employer, not the Distributor, your Agent, Dreyfus, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for this Privilege.
Dreyfus Step Program. Holders of the Fund's Investor shares prior to
January 16, 1998 who had enrolled in Dreyfus Step Program may continue to
purchase shares of the same class (currently designated Class A shares)
without regard to the Fund's minimum initial investment requirements through
Dreyfus-Automatic Asset Builderr, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. Participation in this Program
may be terminated by the shareholder 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 reserves the right to
redeem your account if you have terminated your participation in the Program
and your account's NAV is $500 or less. See "Account Policies-General
Policies" in the Fund's Prospectus. The Fund may modify or terminate this
Program at any time. The Dreyfus Step Program is not available to open new
accounts in any Class of the Fund.
Letter of Intent-Class A and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of
Eligible Fund shares purchased in a 13-month period pursuant to the terms
and conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter
of Intent) in any Eligible Fund that may be used toward "Right of
Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales load will be
applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
or Class T shares, as applicable, of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or
the Fund to sell, the full amount indicated at the sales load in effect at
the time of signing, but you must complete the intended purchase to obtain
the reduced sales load. At the time you purchase Class A or Class T shares,
you must indicate your intention to do so under a Letter of Intent.
Purchases pursuant to a Letter of Intent will be made at the then-current
NAV plus the applicable sales load in effect at the time such Letter of
Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
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.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is engaged in excessive
trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole
or part any purchase or exchange request, with respect to such investor's
account. Such investors also may be barred from purchasing other funds in
the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year (for calendar year
1998 beginning on January 15th) or who makes exchanges that appear to
coincide with an active market-timing strategy may be deemed to be engaged
in excessive trading. Accounts under common ownership or control will be
considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if, in the judgment of the Fund's
management, the Fund would be unable to invest the money effectively in
accordance with its investment objective and policies or could otherwise be
adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts
equal to 1% or more of the Fund's total assets). If an exchange request is
refused, the Fund will take no other action with respect to the shares until
it receives further instructions from the investor. The Fund may delay
forwarding redemption proceeds for up to seven days if the investor
redeeming shares is engaged in excessive trading or if the amount of the
redemption request otherwise would be disruptive to efficient portfolio
management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to non-IRA plan accounts.
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 NAV
but the purchase order would be effective only at the NAV 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. The 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. Where market
quotations are not readily available, the Fund's investments are valued
based on fair value as determined in good faith by the Company's Board.
Debt 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. 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 NAV 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, are
accrued daily and taken into account for the purpose of determining the NAV
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 of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors 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 of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and
Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income, if any, four times yearly and distributes net realized
capital gains and gains from foreign currency transactions, if any, once a
year, but it may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with of the 1940 Act. All expenses are accrued daily and
deducted before declaration of dividends to investors. The Fund will not
make distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Investors other
than qualified retirement plans may choose whether to receive dividends and
other distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both
dividends and other distributions in additional Fund shares at NAV;
dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV. Dividends and
other distributions paid by each Class are calculated at the same time and
in the same manner and will be in the same amount, except that the expenses
attributable solely to a particular Class are borne exclusively by that
Class. Class B and Class C shares will receive lower per share dividends
than Class T shares, which will in turn receive lower per share dividends
than Class A shares, which will in turn receive lower per share dividends
than Class R shares, because of the higher expenses borne by the relevant
Classes.
It is expected that the Fund will continue to qualify for treatment as
a regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve the Fund of any liability for federal income tax
to the extent its earnings and realized gains are distributed in accordance
with applicable provisions of the Code. 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. The term "regulated investment company" does not imply
the supervision of management or investment practices or policies by any
government agency. If the Fund failed to qualify for treatment as a RIC for
any taxable year, (1) it would be taxed at corporate rates on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (2) the shareholders would
treat all those distributions, including distributions of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
as dividends (that is, ordinary income) to the extent of the Fund's earnings
and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment. The Fund will be
subject to a non-deductible 4% excise tax ("Excise Tax"), to the extent it
fails to distribute as substantially all of its taxable investment income
and capital gains.
Distributions. If you elect to receive dividends and other
distributions in cash, and your distribution check is returned to the Fund
as undeliverable or remains uncashed for six months, the Fund reserves the
right to reinvest that distribution and all future distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains not realized gains
from certain foreign currency transactions and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to those shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and
whether the distributions are received in cash or reinvested in additional
Fund shares. Dividends and other distributions also may be subject to state
and local taxes.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of
30%,unless the foreign investor claims the benefit of a lower rate specified
in a tax treaty. Distributions from net capital gain paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions by
such an investor, regardless of the extent to which gain or loss may be
realized, generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions if any, paid
during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A and Class T shares if a shareholder redeems those shares
or exchanges them for shares of another fund advised or administered by
Dreyfus, within 90 days of purchase, and (1) in the case of a redemption,
the shareholder acquires other fund Class A or Class T shares through
exercise of the Reinvestment Privilege (2) or, in the case of an exchange,
the other fund reduces or eliminates its otherwise applicable sales load.
In these cases, the amount of the sales load charged on the purchase of the
original Class A or Class T shares, up to the amount of the reduction of the
sales load pursuant to the Reinvestment Privilege or on the exchange, as the
case may be, is not included in the tax basis of those shares for purposes
of computing gain or loss and instead is added to the tax basis of the
acquired shares.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
Internal Revenue Service ("IRS") distributions paid to such plans.
Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be
taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to
10% of the taxable portion of the distribution. The administrator, trustee
or custodian of a qualified retirement plan will be responsible for
reporting distributions from the plan to the IRS. Moreover, certain
contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not
elect to have the distribution paid directly from the plan to an retirement
plan in a "direct rollover," the distribution is subject to 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if the
shareholder fails to furnish a TIN to the Fund and certify that it is
correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income. A TIN is either the
Social Security number, IRS individual taxpayer identification number or
employer identification number of the record owner of an account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax imposed on the record owner and may be claimed as a credit on his or her
federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such distribution would be a
return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives any capital gain distributions 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 those distributions.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
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 total return on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate 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 that it distributes 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 -- which likely would have to be distributed by the Fund to
satisfy the Distribution Requirement and avoid imposition of the Excise Tax
- -- even if those earnings and gain were not distributed to the Fund by 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 and under regulations proposed in 1992 that provided a similar
election with respect to the stock of certain PFIC(s).
Foreign Currency 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
on the exercise or lapse of, or closing transactions respecting, certain
options, futures and forward contracts ("Section 1256 Contracts") will 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 same manner.
Offsetting positions held by the Fund involving certain options,
futures or forward contracts may constitute "straddles", which are defined
to include "offsetting positions" in actively traded personal property.
Under Section 1092 of the Code, any loss from the disposition of a position
in a straddle generally may be deducted only to the extent the loss exceeds
the unrealized gain on the offsetting positions(s) of the straddle. In
addition, these rules may postpone the recognition of loss that otherwise
would be recognized under the mark-to-market rules discussed above. The
regulations under Section 1092 also provide certain "wash sale" rules, which
apply to transactions where a position is sold at a loss and a new
offsetting position is acquired within a prescribed period, and "short sale"
rules applicable to straddles. If the Fund makes certain elections
(including an election as to straddles that include a position in one or
more Section 1256 Contracts (so-called "mixed straddles')), the amount,
character, and timing of recognition of gains and losses from the affected
straddle positions would be determined under rules that vary according to
the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
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 using the Fund to
recognize income prior to the receipt of cash payments. For example, the
Fund would be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and could
need to distribute that income to satisfy the Distribution Requirement and
avoid the Excise Tax. In that case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the
Fund may be subject to the tax laws thereof. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes 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 below. Special
U.S. federal income tax rules that differ from those described below may
apply to certain foreign persons who invest in the Fund, such as a foreign
shareholder entitled to claim the benefits of an applicable tax treaty.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain generally will not be subject to U.S. federal income tax unless
the foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable year.
In the case of certain foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transaction may be executed through brokers acting as agent. The Fund will
pay a spread or commission 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.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.
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.
Dreyfus may use research services of and place brokerage transactions
with broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated
brokerage firms for similar services. During the fiscal years ended October
31, 1998, 1997 and 1996, the Fund paid brokerage commissions of $27,084,
$8,315 and $7,643, respectively, to affiliates of Dreyfus or Mellon Bank.
The amount paid to affiliated brokerage firms during the fiscal years ended
October 31, 1998, 1997 and 1996, was approximately 24%, 28% and 42%,
respectively, of the aggregate brokerage commissions paid by the Fund, for
transactions involving approximately 30%, 32% and 48%, respectively, of the
aggregate dollar volume of transactions for which the Fund paid brokerage
commissions. The difference in these percentages was due to the lower
commissions paid to affiliates of Dreyfus.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions amounting to $113,263, $29,323 and $18,186,
respectively.
The aggregate amount of transactions during the fiscal year ended
October 31, 1998 in securities effected on an agency basis through a broker
for research services was $_____, and the commissions and concessions
related to such transactions was $______.
Portfolio Turnover. While securities are purchased for the fund on the
basis of potential for high current income and possible capital appreciation
and not for short-term trading profits, the Fund's portfolio turnover rate
may exceed 100%. A portfolio turnover rate of 100% would occur, for
example, if all the securities held by the Fund were replaced once in a
period of one year. A higher rate of portfolio turnover involves
correspondingly greater brokerage commissions and other expenses that must
be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a higher rate of portfolio turnover may result in the realization
of larger amounts of short-term capital gains that, when distributed to the
Fund's shareholders, are taxable to them as ordinary income. Nevertheless,
securities transactions for the Fund will be based only upon investment
considerations and will not be limited by any other considerations when
Dreyfus deems its appropriate to make changes in the Fund's assets. 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. The portfolio turnover rates for the
fiscal years ended October 31, 1998 and 1997 were 81.27% and 37.17%,
respectively.
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 returns (expressed as a percentage) for Class A,
Class B, Class C and Class R shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended April 30, 1999
1 Year Since Inception
Class A shares 15.82% 23.94% (9/2/94)
Class B shares 10.95% 24.09% (1/16/98)
Class C shares 14.01% 27.00% (1/16/98)
Class R shares 16.12% 25.82% (9/2/94)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase
and the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price
in the case of Class A and Class T) per share with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result. The average annual total return figures
for a Class calculated in accordance with such formula assume that, in the
case of Class A or Class T, the maximum sales load has been deducted from the
hypothetical initial investment at the time of purchase or, in the case of Class
B or Class C, the maximum applicable CDSC has been paid upon redemption at the
end of the period.
The Fund's total return for Class A shares (formerly called Investor
shares) for the period from September 2, 1994 (inception date of Class A
shares) to April 30, 1999 was 171.89% (assuming deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase,
although no sales load was applicable to Class A shares or its predecessor
class until January 16, 1998). Without giving effect to the applicable
front-end sales load, the total return for Class A was 188.47% for this
period. The Fund's total return for Class B and Class C shares for the
period from January 16, 1998 (inception date of Class B and Class C shares)
to April 30, 1999 was 36.11% and 36.11%, respectively. Without giving
effect to the applicable CDSC, the total return for Class B and Class C
shares was 32.11% and 36.11% respectively, for the same period. The Fund's
total return for Class R shares (formerly called Restricted shares) for the
period September 2, 1994 (inception date of Class R shares) to April 30,
1999 was 191.62%. Total return is calculated by subtracting the amount of
the Fund's NAV (maximum offering price in the case of Class A and Class T)
per share at the beginning of a stated period from the NAV per share at the
end of the period (after giving effect to the reinvestment of dividends and
other distributions during the period and any applicable CDSC), and dividing
the result by the NAV (maximum offering price in the case of Class A and
Class T) per share at the beginning of the period. Total return also may be
calculated based on the NAV per share at the beginning of the period instead
of the maximum offering price per share at the beginning of the period for
Class A or Class T shares or without giving effect to any applicable CDSC at
the end of the period for Class B or Class C shares. In such cases, the
calculation would not reflect the deduction of the sales load with respect
to Class A or Class T shares or any applicable CDSC with respect to Class B
or C shares, which, if reflected would reduce the performance quoted.
No performance information is provided for Class T shares since they
were not offered as of April 30, 1999.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
S&P 500, 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; (ii) 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; (iii) the Consumer Price Index (a
measure of inflation) to assess the real rate of return from an investment
in the Fund or the Fund's performance against inflation to the performance
of other instruments against inflation; and (iv) 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 Morningstar
ratings and related analyses supporting the rating.
From time to time, advertising material for the Fund may include: (i)
biographical information relating to its portfolio manager, including honors
and awards and may refer to, or include commentary by the Fund's portfolio
manager relating to investment strategy, asset growth, current or past
business, political, economic or financial conditions and other matters of
general interest to investors; (ii) 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; (iii) the approximate number of
then current Fund shareholders; (iv) references to the Fund's quantitative,
disciplined approach to stock market investing and the number of stocks
analyzed by Dreyfus; and (v) Lipper or Morningstar ratings and related
analysis supporting the ratings. 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 may refer to studies performed
by The Dreyfus Corporation or its affiliates, such as "The Dreyfus Tax
Informed Investing Study" or "The Dreyfus Gender Investment Comparison Study
(1996 & 1997)" or other such studies.
INFORMATION ABOUT THE FUND/COMPANY
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 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 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 Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 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.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. The financial statements for the six-month period ended April
30, 1999, which was unaudited, are included in the Fund's Semi-Annual Report
to shareholders. Copies of the Annual Report and Semi-Annual Report
accompany this Statement of Additional Information. The financial
statements included in the Annual Report, and the Independent Auditors'
Report thereon contained therein, and the Semi-Annual Report and related
notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
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.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Credit Rating Co. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
DREYFUS PREMIER LIMITED TERM INCOME FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
DREYFUS PREMIER BALANCED FUND
CLASS A, CLASS B, CLASS C, CLASS R and CLASS T SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 16, 1999
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Premier Limited Term Income Fund (the "Limited Term Income
Fund") and the current Prospectus of the Dreyfus Premier Balanced Fund (the
"Balanced Fund") (Limited Term Income Fund and Balanced Fund are referred to
herein individually as a "Fund" and collectively as the "Funds") each dated
August 16, 1999, as they may be revised from time to time. The Funds are
separate, diversified portfolios of The Dreyfus/Laurel Funds, Inc., an open-
end management investment company (the "Company"), known as a mutual fund.
To obtain a copy of a Fund's Prospectus, please write to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call one of the
following numbers:
Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Funds B-2
Management of the Funds B-19
Management Arrangements B-26
Purchase of Shares B-29
Distribution and Service Plans B-38
Redemption of Shares B-41
Shareholder Services B-45
Additional Information About Purchases,
Exchanges and Redemptions B-51
Determination of Net Asset Value B-52
Dividends, Other Distributions and Taxes B-53
Portfolio Transactions B-58
Performance Information B-61
Information About the Funds/Company B-63
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-64
Financial Statements B-65
Appendix B-66
DESCRIPTION OF THE FUNDS
The following information supplements and should be read in conjunction
with the sections of each 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 Funds, each of which is treated as a separate
fund. Prior to March 1, 1997, the name of Limited Term Income Fund was
Premier Limited Term Income Fund and the name of Balanced Fund was Premier
Balanced Fund. Prior to December 19, 1994, the name of Limited Term Income
Fund was Laurel Limited Term Income Fund and the name of Balanced Fund was
Laurel Balanced Fund. Each Fund is diversified, which means that, with
respect to 75% of its total assets, each Fund will not invest more than 5%
of its assets in the securities of any single issuer.
Limited Term Income Fund seeks to provide shareholders with as high a
level of current income as is consistent with safety of principal and
maintenance of liquidity.
Balanced Fund seeks to outperform a hybrid index, 60% of which is the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500") and 40% of
which is the Lehman Brothers Intermediate Government/Corporate Bond Index
("Intermediate Index"). The S&P 500 is composed of 500 common stocks which
are chosen by Standard & Poor's to best capture the price performance of a
large cross-section of the U.S. publicly traded stock market. The S&P 500
is structured to approximate the general distribution of industries in the
U.S. economy. The inclusion of a stock in the S&P 500 does not imply that
Standard & Poor's believes the stock to be an attractive or appropriate
investment, nor is Standard & Poor's in any way affiliated with the Fund.
The 500 securities, most of which trade on the New York Stock Exchange
("NYSE"), represent approximately 75% of the market value of all U.S. common
stocks. Each stock in the S&P 500 is weighted by its market capitalization.
That is, each security is weighted by its total market value relative to the
total market values of all the securities in the S&P 500. Component stocks
included in the S&P 500 are chosen with the aim of achieving a distribution
at the index level representative of the various components of the U.S.
economy and therefore do not represent the 500 largest companies. Aggregate
market value and trading activity are also considered in the selection
process. A limited percentage of the S&P 500 may include foreign
securities. The Intermediate Index is an index established by Lehman
Brothers, Inc. which includes fixed rate debt issues rated investment grade
or higher by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Rating Services, a division of McGraw-Hill Companies, Inc. ("Standard &
Poor's"), or Fitch IBCA, Inc. ("Fitch"). All issues have at least one year
to maturity and an outstanding par value of at least $100 million for U.S.
Government issues and $50 million for all others. The Intermediate Index
includes bonds with maturities of up to ten years.
The Dreyfus Corporation ("Dreyfus") serves as each Fund's investment
manager.
Certain Portfolio Securities
The following information regarding the securities that the Funds may
purchase supplements that found in each Fund's Prospectus.
American Depository Receipts ("ADRs"). The Funds may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market. Investment in
securities of foreign issuers presents certain risks. See "Foreign
Securities."
Corporate Obligations. The Funds may invest in corporate obligations
rated at least Baa by Moody's or BBB by Standard & Poor's, or if unrated, of
comparable quality as determined by Dreyfus. Securities rated BBB by
Standard & Poor's or Baa by Moody's are considered by those rating agencies
to be "investment grade" securities, although Moody's considers securities
rated Baa to have speculative characteristics. Further, while bonds rated
BBB by Standard & Poor's exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and principal for debt in this category
than debt in higher rated categories. Each Fund will dispose in a prudent
and orderly fashion of bonds whose ratings drop below these minimum ratings.
Government Obligations. Each Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, each Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities 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. Treasury to lend to such 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, Small Business Administration 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.
GNMA Certificates. The Funds may invest in Government National
Mortgage Association ("GNMA") Certificates. GNMA Certificates are mortgage-
backed securities representing part ownership of a pool of mortgage loans.
These loans are made by mortgage bankers, commercial banks, savings and loan
associations, and other lenders and are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A
"pool" or group of such mortgages is assembled and, after being approved by
GNMA, is offered to investors through securities dealers. Once approved by
GNMA, the timely payment of interest and principal on each mortgage is
guaranteed by the full faith and credit of the U.S. Government. Although
the mortgage loans in a pool underlying a GNMA Certificate will have
maturities of up to 30 years, the average life of a GNMA Certificate will be
substantially less because the mortgages will be subject to normal principal
amortization and also may be prepaid prior to maturity. Prepayment rates
vary widely and may be affected by changes in mortgage interest rates. In
periods of falling interest rates, the rate of prepayment on higher interest
mortgage rates tends to increase, thereby shortening the actual average life
of the GNMA Certificate. Conversely, when interest rates are rising, the
rate of prepayment tends to decrease, thereby lengthening the average life
of the GNMA Certificates. Reinvestment of prepayments may occur at higher
or lower rates than the original yield of the Certificates. Due to the
prepayment feature and the need to reinvest prepayments of principal at
current rates, GNMA Certificates, with underlying mortgages bearing higher
interest rates can be less effective than typical non-callable bonds of
similar maturities at locking in yields during periods of declining interest
rates, although they may have comparable risks of decline in value during
periods of rising interest rates.
Fixed-Income Securities. The Funds may invest in fixed-income
securities. In periods of declining interest rates, a Fund's yield (its
income from portfolio investments over a stated period of time) may tend to
be higher than prevailing market rates, and in periods of rising interest
rates, a Fund's yield may tend to be lower than prevailing interest rates.
Also, in periods of falling interest rates, the inflow of net new money to a
Fund from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of a Fund's
portfolio, thereby reducing the yield of the Fund. In periods of rising
interest rates, the opposite can be true. The net asset value ("NAV") of a
Fund investing in fixed-income securities also may change as general levels
of interest rates fluctuate. When interest rates increase, the value of a
portfolio of fixed-income securities can be expected to decline.
Conversely, when interest rates decline, the value of a portfolio of fixed-
income securities can be expected to increase.
Variable Amount Master Demand Notes. The Funds may invest in Variable
Amount Master Demand Notes. Variable amount master demand notes are
unsecured obligations that are redeemable upon demand and are typically
unrated. These instruments are issued pursuant to written agreements
between their issuers and holders. The agreements permit the holders to
increase (subject to an agreed maximum) and the holders and issuers to
decrease the principal amount of the notes, and specify that the rate of
interest payable on the principal fluctuates according to an agreed-upon
formula. If an issuer of a variable amount master demand note were to
default on its payment obligations, a Fund might be unable to dispose of the
note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Funds will
only invest in variable amount master demand notes issued by entities that
Dreyfus considers creditworthy.
Floating Rate Securities (Limited Term Income Fund only). The Fund may
invest in floating rate securities. A floating rate security provides for
the automatic adjustment of its interest whenever a specified interest rate
changes. Interest rates on these securities are ordinarily tied to, and are
a percentage of, a widely recognized interest rate, such as the yield on 90-
day U.S. Treasury bills or the prime rate of a specified bank. These rates
may change as often as twice daily. Generally, changes in interest rates
will have a smaller effect on the market value of floating rate securities
than on the market value of comparable fixed income obligations. Thus,
investing in variable and floating rate securities generally allows less
opportunity for capital appreciation and depreciation than investing in
comparable fixed income securities.
Mortgage Pass-Through Certificates. Each Fund may invest in mortgage
pass-through certificates. Mortgage pass-through certificates are issued by
governmental, government-related and private organizations and are backed by
pools of mortgage loans. These mortgage loans are made by lenders such as
savings and loan associations, mortgage bankers, commercial banks and others
to residential home buyers throughout the United States. The securities are
deemed "pass-through" securities because they provide investors with monthly
payments of principal and interest that, in effect, are a "pass-through" of
the monthly payments made by the individual borrowers on the underlying
mortgage loans. The principal governmental issuer of such securities is
GNMA, which is a wholly owned U.S. government corporation within the
Department of Housing and Urban Development. Government related issuers
include the Federal Home Loan Mortgage Corporation ("FHLMC"), and the
Federal National Mortgage Association ("FNMA"), both government-sponsored
corporations owned entirely by private stockholders. Commercial banks,
savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers also create pass-through
pools of conventional residential mortgage loans. Such issuers may be
originators of the underlying mortgage loans as well as the guarantors of
the mortgage-related securities. The market value of mortgage-related
securities depends on, among other things, the level of interest rates, the
certificates' coupon rates and the payment history of underlying mortgage
loans.
Repurchase Agreements. The Funds may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the Funds' credit guidelines. This technique
offers a method of earning income on idle cash. In a repurchase agreement, a
Fund buys a security from a seller that has agreed to repurchase the same
security at a mutually agreed upon date and price. A Fund's resale price
will be in excess of the purchase price, reflecting an agreed upon interest
rate. This interest rate is effective for the period of time the Fund is
invested in the agreement and is not related to the coupon rate on the
underlying security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by a Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and
at no time will a Fund invest in repurchase agreements for more than one
year. A Fund will always receive as collateral securities whose market value
including accrued interest is, and during the entire term of the agreement
remains, at least equal to 100% of the dollar amount invested by the Fund in
each agreement, including interest, 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, a 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 Funds seek to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligors
under repurchase agreements, in accordance with the Funds' credit
guidelines.
Commercial Paper. The Funds may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Funds will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's, Prime-1 by Moody's, F-1 by Fitch or Duff-1 by Duff &
Credit Ratings, Co.
Bank Instruments. The Funds 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 of foreign banks, domestic
savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs"),
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are U.S. dollar-
denominated time deposits in a foreign branch of a U.S. bank or a foreign
bank. Yankee CDs are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States. The
Funds may also invest in Eurodollar bonds and notes which are obligations
that pay principal and interest in U.S. dollars held in banks outside the
United States, primarily in Europe. All of these obligations are subject to
somewhat different risks than are the obligations of domestic banks or
issuers in the United States. See "Foreign Securities."
Foreign Securities. The Funds may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal
of funds or other assets of a Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the yield on such securities.
Illiquid Securities. A 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 Funds may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Funds may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Funds, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors, like the Funds, through or with the assistance of
the issuer or investment dealers who make a market in the Section 4(2)
paper, thus providing liquidity. Rule 144A securities generally must be
sold to other qualified institutional buyers. If a particular investment in
Section 4(2) paper or Rule 144A securities is not determined to be liquid,
that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities
to qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from a Fund or other holders.
Other Investment Companies. A Fund may invest in securities issued by
other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, a Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that a Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in each
Fund's Prospectus, the Funds also may engage in the investment techniques
described below. The Funds might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
Borrowing. The Funds are authorized, within specified limits, to
borrow money for temporary administrative purposes and to pledge its assets
in connection with such borrowings.
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. Each Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt securities
equal to the amount of the above commitments will be segregated on each
Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a "when-issued" basis and the securities held
by each Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income each Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's NAV.
When payment for "when-issued" securities is due, each Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities 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, each 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 a 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 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. Each 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.
Loans of Fund Securities. A Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. A 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 a 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 a Fund at any time upon specified notice. A
Fund might experience loss if the institution to which it has lent its
securities fails financially or breaches its agreement with the Fund. In
addition, it is anticipated that a Fund may share with the borrower some of
the income received on the collateral for the loan or that it will be paid a
premium for the loan. In determining whether to lend securities, a Fund
considers all relevant factors and circumstances including the
creditworthiness of the borrower.
Reverse Repurchase Agreements. A Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, a Fund: (1) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (2) agrees to repurchase the
securities at a future date by repaying the cash with interest. The Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. Cash or liquid high-grade debt
securities held by a 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.
Futures, Options and Other Derivative Instruments (Balanced Fund only;
Limited Term Income Fund may enter into futures contracts and related
options for hedging purposes but does not intend to do so during the coming
year). The Fund may purchase and sell various financial instruments
("Derivative Instruments"), such as financial futures contracts (including
interest rate and index futures contracts) and options (including options on
securities, indices, and futures contracts). The index Derivative
Instruments which the Fund may use may be based on indices of U.S. or
foreign equity or debt securities. These Derivative Instruments may be
used, for example, to preserve a return or spread, to lock in unrealized
market value gains or losses, to facilitate or substitute for the sale or
purchase of securities, or to alter the exposure of a particular investment
or portion of a Fund's portfolio to fluctuations in interest rates.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments 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 not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities, currency and interest rate markets, which requires
different skills than predicting changes in the prices of individual
securities. There can be no assurance that any particular strategy will
succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs, and may result in certain
tax consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value unless
the option is closed out in an offsetting transaction.
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 and the Fund would experience losses to the extent of premiums
paid for them.
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 put or call
options that are traded on a national exchange in an amount exceeding 5% of
its net assets.
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 price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write options on securities only if it covers the
transaction through: an offsetting option with respect to the security
underlying the option it has written, exercisable by it at a more favorable
price; ownership of (in the case of a call) or a short position in (in the
case of a put) the underlying security; or segregation of cash or certain
other assets sufficient to cover its exposure.
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.
Futures strategies also can be used to manage the average duration of
the Fund's fixed income portfolio. If Dreyfus wishes to shorten the average
duration of the Fund's fixed income portfolio, the Fund may sell an interest
rate futures contract or a call option thereon, or purchase a put option on
that futures contract. If Dreyfus wishes to lengthen the average duration
of the Fund's fixed income portfolio, the Fund may buy an interest rate
futures contract or a call option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts or options on
futures contracts on an exchange regulated by the CFTC, in each case other
than for bona fide hedging purposes (as defined by the CFTC), the aggregate
initial margin and premiums required to establish those positions (excluding
the amount by which options are "in-the-money" at the time of purchase) will
not exceed 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into. This policy does not limit to 5% the percentage of
the Fund's assets that are at risk in futures contracts and options on
futures contracts for hedging purposes.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, each Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve a
Fund's investment objective by investing all of the Fund's net investable
assets in another investment company having the same investment objective
and substantially the same investment policies and restrictions as those
applicable to the Fund. Shareholders of a Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made
only if the Company's Board of Directors determines it to be in the best
interest of a Fund and its shareholders. In making that determination, the
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 Funds believe that the Company's Board
of Directors will not approve an arrangement that is likely to result in
higher costs, no assurance is given that costs will be materially reduced if
this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by each Fund.
A Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of a Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of a Fund, whichever is less. Each
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowings, and (b) a Fund
may issue multiple classes of shares. The purchase or sale of futures
contracts and related options shall not be considered to involve the
borrowing of money or issuance of securities.
3. Purchase with respect to 75% of a Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of a Fund's total assets would be invested in the securities of that
issuer, or (b) a Fund would hold more than 10% of the outstanding voting
securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contacts and other
similar instruments.
Nonfundamental. Each Fund has adopted the following additional non-
fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law and
regulatory policy.
Each Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
1. No Fund shall sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities
sold short, and provided that transactions in futures contracts and options
are not deemed to constitute selling short.
2. No Fund shall purchase securities on margin, except that a Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.
3. No Fund shall purchase oil, gas or mineral leases.
4. Each Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of such
Fund's investment in such securities would exceed 5% of such Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. No Fund will invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess
of seven days and other securities which are not readily marketable. For
purposes of this limitation, illiquid securities shall not include Section
4(2) Paper and securities which may be resold under Rule 144A under the
Securities Act of 1933, provided that the Board of Directors, or its
delegate, determines that such securities are liquid based upon the trading
markets for the specific security.
7. No Fund may invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. No Fund shall purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. No Fund will purchase warrants if at the time of such purchase:
(a) more than 5% of the value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would be
invested in warrants that are not listed on the New York or American Stock
Exchange (for purposes of this undertaking, warrants acquired by a Fund in
units or attached to securities will be deemed to have no value).
10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to a Fund's transactions in futures
contracts and related options.
As an operating policy, each Fund will not invest more than 25% of the
value of its total assets at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board of Directors.
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.
If a Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position
and needs.
MANAGEMENT OF THE FUNDS
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Funds, and in
providing services to the Funds as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or a Fund. If Mellon Bank or Dreyfus were prohibited from
serving a Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Funds. The Board approves all significant agreements between the
Company, on behalf of the Funds, and those companies that furnish services
to the Funds. 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 Funds
The Company has a Board composed of nine 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") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board 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
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.), a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources) a temporary placement agency. 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: 55 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.; Chairman of the
Board, Davidson Cotton Company. Age: 64 years old. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 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. Age: 77 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Director of the Company; President & CEO, The
Palladium Company; President & CEO, Himmel and Company, Inc.; CEO,
American Food Management; former Director, The Boston Company, Inc.
("TBC"), an affiliate of Dreyfus, and Boston Safe Deposit and Trust
Company. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman and CEO LDG
Reinsurance Corporation, Vice Chairman, HCCH. Age 52 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. Age: 67 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 Health Care, Inc.; Director, Massachusetts Electric
Company; Director, the Hyams Foundation, Inc. Age: 49 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. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
________________________________
* "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: 39 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: 42 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. Age: 30 years old.
#JOHN P. COVINO. Vice President and Assistant Treasurer of the Company.
Vice President and Treasury Group Manager of Treasury Servicing and
Administration of Funds Distributor, Inc. From December 1995 to
November 1998, he was employed by Fidelity Investments where he held
multiple positions in their Institutional Brokerage Group. Prior to
joining Fidelity, he was employed by SunGard Brokerage Systems where
he was responsible for the technology and development of the accounting
product group. Age: 35 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor, Inc. From 1988 to August 1994, he was Manager of
High Performance Fabrics Division of Springs Industries, Inc. Age: 37
years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, Mr. Kelley was
Assistant Counsel at Forum Financial Group. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 26 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. 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. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was a Second
Vice President with Chase Manhattan Bank. Age: 30 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. Age: 44 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: 37 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: 37 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor, Inc. From June
1994 to January 1996, she was Manager of SEC Registration at Scudder,
Stevens & Clark, Inc. Age: 32 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 Company 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. Effective July 1, 1998,
the Dreyfus/Laurel Funds pay each Director/Trustee who is not an "interested
person" of the Company (as defined in the 1940 Act) $40,000 per annum, plus
$5,000 per joint Dreyfus/Laurel Funds Board meeting attended, $2,000 for
separate committee meetings attended which are not held in conjunction with
a regularly scheduled Board meeting and $500 for Board meetings and separate
committee meetings attended that are conducted by telephone. The
Dreyfus/Laurel Funds also reimburse each Director/Trustee who is not an
"interested person" of the Company (as defined in the 1940 Act) for travel
and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000
fee will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High
Yield Strategies Fund. The compensation structure described in this
paragraph is referred to hereinafter as the "Current Compensation
Structure."
In addition, the Company currently has three Emeritus Board members who
are entitled to receive an annual retainer and a per meeting fee of one-half
the amount paid to them as Board members pursuant to the Current
Compensation Structure.
Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Company (as
defined in the 1940 Act) $27,000 per annum (and an additional $25,000 for
the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel Funds)
and $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750
per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimbursed each such Director/Trustee for travel and out-of-pocket expenses
(the "Former Compensation Structure").
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1998, and
from all other funds in the Dreyfus Family of Funds for which such person
was a Board member (the number of which is set forth in parenthesis next to
each Board member's total compensation)* during the year ended December 31,
1998, pursuant to the Former Compensation Structure for the period from
November 1, 1997 through June 30, 1998 and the Current Compensation
Structure for the period from July 1, 1998 through October 31, 1998, were as
follows:
Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member
Joseph S. DiMartino** $17,710.00 $619,660 (187)
James M. Fitzgibbons $17,710.00 $60,010 (31)
J. Tomlinson Fort*** None None (31)
Arthur L. Goeschel $18,376.67 $61,010 (31)
Kenneth A. Himmel $14,793.34 $50,260 (31)
Stephen J. Lockwood $15,043.34 $51,010 (31)
John J. Sciullo $17,710.00 $59,010 (31)
Roslyn M. Watson $18,376.67 $61,010 (31)
Benaree Pratt Wiley**** $12,194.38 $49,628 (31)
____________________________
# 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 $5,313.37 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October
31, 1998, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Company was $17,710. For the
year ended December 31, 1998, the aggregate amount of fees received by Mr.
Fort for serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Company) and Dreyfus High Yield Strategies Fund (for which
payment is made directly by the fund) was $59,010. In addition, Dreyfus
reimbursed Mr. Fort a total of $733.11 for expenses attributable to the
Company's Board meetings which is not included in the $5,313.37 amount in
note # above.
****Payments to Ms. Wiley were for the period from April 23, 1998 (the date
she was elected as a Board member) through October 31, 1998.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of Balanced Fund outstanding as of July 28,
1999.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of Limited Term Income Fund outstanding as
of July 28, 1999.
Principal Shareholders. As of July 28, 1999, the following
shareholders(s) owned beneficially or of record 5% or more of Class A shares
of the Balanced Fund: State of Wyoming Trustee, State of Wyoming Public
Employees, Deferred Compensation Plan, C/O Great West Life Recordkeeper ,
8515 East Orchard Road #2T2, Englewood, CO. 80111-5022, ___% and Prudential
Securities Inc., FBO PMFS Recordkeeper For DC Clients Trustee, Sutliff
Chevrolet 401K, Edison, NJ 08837, ____%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class B shares of the Balanced Fund: MLPF & S For
The Sole Benefit of It's Customers, 4800 Deer Lake Drive East, Jacksonville,
FL 32246-6484, _____%.
As of July 28, 1999, the following shareholders(s) owned beneficially
or of record 5% or more of Class C shares of the Balanced Fund: MLPF & S
For The Sole Benefit of It's Customers, 4800 Deer Lake Drive East,
Jacksonville, FL 32246-6484, ____%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class R shares of the Balanced Fund: Boston Safe
Deposit & Trust Co.; Trustee As Agent - Omnibus Account, 1 Cabot Road,
Medford, MA 02155-5141, ____%; MAC & Co. BRCF8539242, Mutual Funds
Operations, P.O. Box 3198, Pittsburgh, PA 15230-3198, _____%; First Union
National Bank Trustee, FBO Buckeye Pipeline Company, 1525 W. WT. Harris
Blvd. # 1151, Charlotte, NC 28262-8522, _____%; and MAC & Co.,
A/CHMWF1731802, P.O. Box 3198, Pittsburgh, PA 15230-3198, _____%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class A shares of the Limited Term Income Fund:
MLPF & S For The Sole Benefit of It's Customers, 4800 Deer Lake Drive East,
Jacksonville, FL 32246-6484, _____%; PaineWebber For The Benefit of Amore
Family LTD Partnership, 125 Stillwater Court, Marco Island, FL 34145-4221,
_____%; and NFSC FEBO #C1B - 310808, Local 803 Health and Welfare Fund, 91-
01 80th Street, Woodhaven, NY 11421, _____%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class B shares of the Limited Term Income Fund:
MLPF & S For The Sole Benefit of It's Customers, 4800 Deer Lake Drive East,
Jacksonville, FL 32246-6484, _____%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class C shares of the Limited Term Income Fund:
Summit Financial Services (FBO) Forest Green Park Cemetery, One Bethlehem
Plaza, Bethlehem, PA 18018, ______%; PaineWebber For The Benefit of John D.
Neil and Josephine R. Neil JTWROS, 5840 McLain Road, Jackson, MI 49201-8929,
_____%; MLPF & S For The Sole Benefit of It's Customers, 4800 Deer Lake
Drive East, Jacksonville, FL 32246-6484, _____%; and Interstate/Johnson Lane
FBO 201-10246-15 Interstate Tower, P.O. Box 1220, Charlotte, NC 28201-1220,
_____%.
As of July 28, 1999 the following shareholder(s) owned beneficially of
record 5% or more of Class R shares of the Limited Term Income Fund: MAC &
CO. A/C #042-441, P.O. Box 3198, Pittsburgh, PA 15230-3198, _____% and MAC &
Co. A/C LTDF 1747222, P.O. Box 3198, Pittsburgh, PA 15230-3198, _____%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in each 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 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Funds pursuant to an Investment Management Agreement with the Company on
behalf of each Funds dated April 4, 1994 (the "Management Agreement"),
transferred to Dreyfus as of October 17, 1994, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. 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
Funds. As investment manager, Dreyfus manages the Funds by making
investment decisions based on each Fund's investment objective, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.
The Management Agreement will continue from year to year with respect
to each Fund provided that a majority of the Directors who are not
"interested persons" of the Company and either a majority of all Directors
or a majority (as defined in the 1940 Act) of the shareholders of the
respective Fund approve its continuance. The Management Agreement was last
approved by the Board of Directors on February 4, 1999 to continue until
April 4, 2000. The Company may terminate the Management Agreement with
respect to each Fund upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the respective Fund's outstanding voting
securities on 60 days' written notice to Dreyfus. Dreyfus may terminate the
Management Agreement upon 60 days' written notice to the Company. The
Management Agreement will terminate immediately and automatically upon its
assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Diane P. Durnin, Vice President-Product
Development; Patrice M. Kozlowski, Vice President-Corporate Communications;
Mary Beth Leibig, Vice President-Human Resources; Andrew S. Wasser, Vice-
President-Information Systems; Theodore A. Schachar, Vice President; Wendy
Strutt, Vice President; Richard Terres, Vice President; William H. Maresca,
Controller; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott,
Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"),
Dreyfus employees must preclear personal transactions in securities not
exempt under the Policy. In addition, Dreyfus employees must report their
personal securities transactions and holdings, which are reviewed for
compliance with the Policy. In that regard, Dreyfus portfolio managers and
other investment personnel also are subject to the oversight of Mellon's
Investment Ethics Committee. Dreyfus portfolio managers and other
investment personnel who comply with the Policy's preclearance and
disclosure procedures, and the requirements of the Committee, may be
permitted to purchase, sell or hold securities which also may be or are held
in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, Balanced Fund has agreed to
pay Dreyfus a monthly fee at the annual rate of 1.00% of the value of
Balanced Fund's average daily net assets and Limited Term Income Fund has
agreed to pay Dreyfus a monthly fee at the annual rate of 0.60% of the value
of Limited Term Income Fund's average daily net assets. Dreyfus pays all of
the Funds' 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 each Fund's allocable share of such
fees and expenses. From time to time, Dreyfus may voluntarily waive a
portion of the investment management fees payable by the Funds, which would
have the effect of lowering the expense ratio of the Funds and increasing
return to investors. Expenses attributable to the Funds are charged against
the respective 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.
For the last three years, each Fund had the following management fees:
For the Fiscal Year Ended October 31,
1998 1997 1996
Balanced Fund $2,497,384 $1,690,361 $1,888,750
Limited Term Income Fund $ 309,714 $ 301,794 $ 351,360
The Distributor. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109,
serves as each 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 a 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 sub-administrator for the Funds and as distributor
for the other funds in the Dreyfus Family of Funds.
For the fiscal year ended October 31, 1998, the Distributor retained no
sales loads on Balanced Fund's and Limited Term Income Fund's Class A
shares. For the fiscal year ended October 31, 1998, the Distributor
retained $62,048 and $22,162 from the contingent deferred sales charge
("CDSC") on Class B shares for Balanced Fund and Limited Term Income Fund,
respectively. For the same period, the Distributor retained $1,394 and
$1,047 from the CDSC on Class C shares of Balanced Fund and Limited Term
Income Fund, respectively.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. The Limited Term Income Fund offers Class A, Class B, Class C
and Class R shares. The Balanced Fund offers Class A, Class B, Class C,
Class R and Class T shares.
When purchasing Fund shares, you must specify which Class is being
purchased. The decision as to which Class of shares is most beneficial to
you depends on the amount and the intended length of your investment. You
should consider whether, during the anticipated life of your investment in a
Fund, the accumulated distribution fee, service fee and CDSC, if any, on
Class B or Class C shares would be less than the accumulated distribution
fee and initial sales charge on Class A shares or the accumulated
distribution fee, service fee and initial sales charge on Class T shares
purchased at the same time, and to what extent, if any, such differential
would be offset by the return on Class A shares and Class T shares,
respectively. You may also want to consider whether, during the anticipated
life of your investment in the Fund, the accumulated distribution fee,
service fee, and initial sales charge on Class T shares would be less than
the accumulated distribution fee and higher initial sales charge on Class A
shares purchased at the same time, and to what extent, if any, such
differential could be offset by the return of Class A. Additionally,
investors qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time might consider
purchasing Class A shares because the accumulated continuing distribution
and service fees on Class B or Class C shares and the accumulated
distribution fee, service fee and initial sales charge on Class T shares may
exceed the accumulated distribution fee and initial sales charge on Class A
shares during the life of the investment. Finally, you should consider the
effect of the CDSC period and any conversion rights of the Classes in the
context of your own investment time frame. For example, while Class C
shares have a shorter CDSC period than Class B shares, Class C shares do not
have a conversion feature and, therefore, are subject to ongoing
distribution and service fees. Thus, Class B shares may be more attractive
than Class C shares to investors with longer term investment outlooks.
Generally, Class A shares will be most appropriate for investors who invest
$1,000,000 or more in Fund shares, and Class A and Class T shares will not
be appropriate for investors who invest less than $50,000 in the case of
Balanced Fund and $100,000 in the case of Limited Term Income Fund, in Fund
shares. Each Fund reserves the right to reject any purchase order.
Class A, Class B, Class C and Class T shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus
or any of its affiliates or subsidiaries, directors of Dreyfus, Board
members of a fund advised by Dreyfus, including members of the Company's
Board, or the spouse or minor child of any of the foregoing may purchase
Class A shares directly through the Distributor. Subsequent purchases may
be sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates)
acting on behalf of customers having a qualified trust or investment account
or relationship at such institution, or to customers who have received and
hold shares of a Fund distributed to them by virtue of such an account or
relationship. In addition, holders of Restricted shares of a Fund who have
held their shares since April 4, 1994, may continue to purchase Class R
shares of that Fund whether or not they would otherwise be eligible to do
so. Class R shares may be purchased for a retirement plan only by a
custodian, trustee, investment manager or other entity authorized to act on
behalf of such a plan. Institutions effecting transactions in Class R
shares for the accounts of their clients may charge their clients direct
fees in connection with such transactions.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum on subsequent purchases except the no minimum on Education
IRAs does not apply until after the first year. The initial investment must
be accompanied by the respective Fund's Account Application. Each Fund
reserves the right to offer 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
such Fund. Each Fund reserves the right to vary further the initial and
subsequent investment minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in a Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value."
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so
that they will be received by the Distributor or its designee before the
close of its business day. For certain institutions that have entered into
agreements with the Distributor, payment for the purchase of Fund shares may
be transmitted, and must be received by the Transfer Agent, within three
business days after the order is placed. If such payment is not received
within three business days after the order is placed, the order may be
canceled and the institution could be held liable for resulting fees and/or
losses.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the respective Fund's Prospectus, and, to the extent permitted
by applicable regulatory authority, may charge their clients direct fees
which would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $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 a Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
respective Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to a Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares of
Balanced Fund is the NAV per share of that Class, plus, except for
shareholders beneficially owning Class A shares of Balanced Fund on November
30, 1996, a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
For shareholders who opened Balanced Fund accounts after December 19,
1994, and who beneficially owned Class A shares of Balanced Fund on November
30, 1996, the public offering price for Class A shares of Balanced Fund is
the NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 4.50 4.25
$50,000 to less than $100,000 4.00 3.75
$100,000 to less than $250,000 3.00 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Holders of Class A accounts of Balanced Fund as of December 19, 1994
may continue to purchase Class A shares of Balanced Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to any applicable front-end sales load.
The public offering price of Class A shares of Limited Term Income Fund
is the NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $100,000 3.00 2.75
$100,000 to less than $250,000 2.75 2.50
$250,000 to less than $500,000 2.25 2.00
$500,000 to less than $1,000,000 2.00 1.75
Holders of Class A accounts of Limited Term Income Fund as of December
19, 1994 may continue to purchase Class A shares of the Fund at NAV.
However, investments by such holders in other funds advised by Dreyfus will
be subject to any applicable front-end sales load.
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of a Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
Class T Shares (Balanced Fund only). The public offering price for
Class T shares is the NAV per share of that Class plus a sales load as shown
below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 4.50 4.00
$50,000 to less than $100,000 4.00 3.50
$100,000 to less than $250,000 3.00 2.50
$250,000 to less than $500,000 2.00 1.75
$500,000 to less than $1,000,000 1.50 1.25
$1,000,000 or more -0- -0-
There is no initial sales charge on purchases of $1,000,000 or more of
Class T shares. However, if you purchase Class T shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class T shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class T shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class T shares.
Because the expenses associated with Class A shares will be lower than those
associated with Class T shares, purchasers investing $1,000,000 or more in
the Fund will generally find it beneficial to purchase Class A shares rather
than Class T shares.
Dealer Reallowance -- Class A and Class T Shares. The Dealer
Reallowance provided with respect to Class A and Class T shares may be
changed from time to time but will remain the same for all dealers. The
Distributor, at its own expense, may provide additional promotional
incentives to dealers that sell shares of funds advised by Dreyfus which are
sold with a sales load, such as Class A and Class T shares. In some
instances, these incentives may be offered only to certain dealers who have
sold or may sell significant amounts of such shares.
Sales Loads -- Class A and Class T Shares. The scale of sales loads
applies to purchases of Class A and Class T shares made by any "purchaser,"
which term includes an individual and/or spouse purchasing securities for
his, her or their own account or for the account of any minor children, or a
trustee or other fiduciary purchasing securities for a single trust estate
or a single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under Section
401 of the Code) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457
of the Code); or an organized group which has been in existence for more
than six months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares for each Fund aggregating less than $50,000 with respect to
Balanced Fund and less than $100,000 with respect to Limited Term Income
Fund subject to the schedule of sales charges set forth in each Fund's
Prospectus at a price based upon the NAV of a Class A share for each Fund at
the close of business on October 31, 1998:
For Balanced Fund
NAV per share $14.88
Per Share Sales Charge - 5.75%* of offering price
(6.10% of NAV per share) $ .91
Per Share Offering Price to Public $15.79
_______________
* Class A shares purchased by shareholders beneficially owning Class A
shares on November 30, 1996, but who opened their accounts after December
19, 1994, are subject to a different sales load schedule as described above.
For Limited Term Income Fund
NAV per share $11.31
Per Share Sales Charge - 3.00% of offering price
(3.10% of NAV per share) $ .35
Per Share Offering Price to Public $11.66
Set forth below is an example of the method of computing the offering
price of the Balanced Fund's Class T shares. The example assumes a purchase
of Class T shares of the Balanced Fund aggregating less than $50,000
subject to the schedule of sales charges set forth in the Fund's Prospectus
at a price based upon the initial offering price of $12.50:
NAV per share $12.50
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .59
Per Share Offering Price to Public $13.09
Right of Accumulation -- Class A and Class T Shares. Reduced sales
loads apply to any purchase of Class A and Class T shares, shares of other
funds in the Dreyfus Premier Family of Funds, shares of certain other funds
advised by Dreyfus which are sold with a sales load and shares acquired by a
previous exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined above, where the
aggregate investment, including such purchase, is $50,000 or more in the
case of Balanced Fund and $100,000 or more in the case of Limited Term
Income Fund. If, for example, you previously purchased and still hold Class
A or Class T shares of Balanced Fund, or shares of any other Eligible Fund
or combination thereof, with an aggregate current market value of $40,000
and subsequently purchase Class A or Class T shares of Balanced Fund or
shares of an Eligible Fund having a current value of $20,000, the sales load
applicable to the subsequent purchase would be reduced to 4.50% of the
offering price in the case of Class A shares or 4.00% of the offering price
in the case of Class T shares. Class A shares purchased by shareholders
beneficially owning Balanced Fund shares on November 30, 1996, but who
opened their Fund accounts after December 19, 1994, are subject to a
different sales load schedule, as described above. Similarly, if you
previously purchased and still hold Class A shares of Limited Term Income
Fund or shares of any other Eligible Fund or combination thereof, with an
aggregate market value of $80,000 and subsequently purchase Class A shares
of Limited Term Income Fund or shares of an Eligible Fund having a current
value of $40,000, the sales load applicable to the subsequent purchase would
be reduced to 2.75% of the offering price. All present holdings of Eligible
Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in each Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class R Shares. The public offering price for Class R shares is the
NAV per share of that Class.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the 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 that is an Automated Clearing House ("ACH")
member may be so designated. 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 the Transfer Agent and the NYSE are open for business will
be credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New
York time, on any business day the Transfer Agent and the NYSE are open for
business, or orders made on Saturday, Sunday or any Fund holiday (e.g., when
the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order.
To qualify to use the TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to,
the same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Shares -
TeleTransfer Privilege." Each Fund may modify or terminate this Privilege
at any time or charge a service fee upon notice to shareholders. No such
fee currently is contemplated by either Fund.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, a Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the applicable 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 NAVs of the
shares purchased and securities exchanged. Securities accepted by a Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to a Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual 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--Class A Shares. With respect to the Class A shares
of each Fund, the Company has adopted a Distribution Plan pursuant to the
Rule (the "Class A Plan"), whereby Class A shares of a Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A Plan allows the Distributor to make payments from the
Rule 12b-1 fees it collects from a Fund to compensate Agents that have
entered into Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Funds and/or shareholder services to the Agent's
clients that own Class A shares of the Funds. The Company's Board of
Directors believes that there is a reasonable likelihood that the Class A
Plan will benefit each Fund and the holders of its Class A shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Class A Plan without approval of the holders of
the Fund's Class A shares, and that other material amendments of the Class A
Plan must be approved by the vote of a majority of the Directors and of the
Directors who are not "interested persons" (as defined in the 1940 Act) of
the Company or the Distributor and who do not have any direct or indirect
financial interest in the operation of the Class A Plan, cast in person at a
meeting called for the purpose of considering such amendments. The Class A
Plan is subject to annual approval by the entire Board of Directors and by
the Directors who are neither interested persons nor have any direct or
indirect financial interest in the operation of the Class A Plan, by vote
cast in person at a meeting called for the purpose of voting on the Class A
Plan. The Class A Plan was so approved by the Directors with respect to
each Fund's Class A shares at a meeting held on February 4, 1999. The Class
A Plan is terminable, as to a Fund's Class A shares, at any time by vote of
a majority of the Directors who are not interested persons and have no
direct or indirect financial interest in the operation of the Class A Plan
or by vote of the holders of a majority of the outstanding shares of such
class of the Fund.
Distribution and Service Plans -- Class B, Class C and Class T Shares.
In addition to the above described current Class A Plan for Class A shares,
the Board of Directors has adopted a Service Plan with respect to Class B
and Class C shares of each Fund and Class T shares of Balanced Fund (the
"Service Plan") under the Rule pursuant to which each Fund pays the
Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B, Class C and
Class T shares for the provision of certain services to the holders of Class
B, Class C and Class T shares, respectively. The services provided may
include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding a Fund and providing reports and
other information, and providing services related to the maintenance of such
shareholder accounts. With regard to such services, each Agent is required
to disclose to its clients any compensation payable to it by a Fund and any
other compensation payable by its clients in connection with the investment
of their assets in Class B, Class C and Class T shares. The Distributor may
pay one or more Agents in respect of services for these Classes of shares.
The Distributor determines the amounts, if any, to be paid to Agents under
the Service Plan and the basis on which such payments are made. With
respect to Class B and Class C shares of each Fund, the Company's Board of
Directors has also adopted a Distribution Plan pursuant to the Rule (the
"Class B and Class C Plan") and a separate Distribution Plan pursuant to the
Rule with respect to Class T shares of Balanced Fund (the "Class T Plan").
Pursuant to the Class B and Class C Plan, the Balanced Fund pays the
Distributor for distributing the Balanced Fund's Class B and Class C shares
at an aggregate annual rate of 0.75% of the value of the average daily net
assets of Class B and Class C shares of Balanced Fund. Pursuant to the
Class T Plan, the Balanced Fund pays the Distributor for distributing the
Balanced Fund's Class T shares at an annual rate of 0.25% of the value of
the average daily net assets of Class T shares. The Distributor may pay one
or more Agents in respect of advertising, marketing and other distribution
services for Class T shares, and determines the amounts, if any, to be paid
to Agents and the basis on which such payments are made. Pursuant to the
Class B and Class C Plan, the Limited Term Income Fund pays the Distributor
for distributing the Limited Term Income Fund's Class B and Class C shares
at an aggregate annual rate of 0.50% of the value of the average daily net
assets of Class B and Class C shares of Limited Term Income Fund. The
Company's Board of Directors believes that there is a reasonable likelihood
that the Service Plan, the Class B and Class C Plan and the Class T Plan
(each a "Plan" and collectively the "Plans") will benefit the Funds and the
holders of Class B and Class C shares of the Funds and Class T shares of
Balanced Fund.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B, Class C
or Class T shares may bear pursuant to the Plan without the approval of the
holders of such Classes and that other material amendments of the Plan must
be approved by the Board of Directors and by the Directors who are not
interested persons of the Company and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. Each Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. The Service with respect to Class B
and Class C shares and the Class B and Class C Plan were so approved by the
Directors at a meeting held on February 4, 1999. The Service Plan with
respect to Class T shares and the Class T Plan with respect to the Balanced
Fund were initially approved by the Directors at a meeting held on July 29,
1999. Each Plan may be terminated at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or in any agreements entered
into in connection with the Plan or by vote of the holders of a majority of
Class B, Class C and Class T shares, as applicable.
An Agent entitled to receive compensation for selling and servicing a
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan described above are payable
without regard to actual expenses incurred. Each Fund and the Distributor
may suspend or reduce payments under any of the plans at any time, and
payments are subject to the continuation of the Fund's plans and the
Agreements described above. From time to time, the Agents, the Distributor
and each Fund may voluntarily agree to reduce the maximum fees payable under
the plans.
For the fiscal year ended October 31, 1998, Balanced Fund paid the
Distributor and Dreyfus Service Corporation $16,123 and $45,548,
respectively, pursuant to the Class A Plan. For the fiscal year ended
October 31, 1998, Balanced Fund paid the Distributor $331,614 and $36,555
pursuant to the Class B and Class C Plan with respect to Class B and Class C
shares, respectively, and paid the Distributor and Dreyfus Service
Corporation $58,883 and $51,655, respectively, pursuant to the Service Plan
with respect to Class B shares and $2,162 and $10,023, respectively,
pursuant to the Service Plan with respect to Class C shares. The Class T
Plan and the Service Plan with respect to Class T shares of the Balanced
Fund were not in effect during the fiscal year ended October 31, 1998, and
accordingly, no fees were paid pursuant to those plans with respect to Class
T shares during that period.
For the fiscal year ended October 31, 1998, Limited Term Income Fund
paid the Distributor and Dreyfus Service Corporation $7,222 and $2,549,
respectively, pursuant to the Class A Plan. For the fiscal year ended
October 31, 1998, Limited Term Income Fund paid the Distributor $8,882 and
$2,967, pursuant to the Class B and Class C Plan with respect to Class B and
Class C shares, respectively, and paid the Distributor and Dreyfus Service
Corporation $443 and $3,998, respectively, pursuant to the Service Plan with
respect to Class B shares and $1,392 and $91, respectively, pursuant to the
Service Plan with respect to Class C shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Funds impose no charges (other than any applicable CDSC) when
shares are redeemed. Agents or other institutions may charge their clients
a fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the
redemption request. The value of the shares redeemed may be more or less
than their original cost, depending upon the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or if you have checked the appropriate
box and supplied the necessary information on the Account Application or
have filed a Shareholder Services Form with the Transfer Agent, through the
TeleTransfer Privilege. If you are a client of a Selected Dealer, you may
redeem Fund shares through the Selected Dealer. Other redemption procedures
may be in effect for clients of certain Agents and institutions. Each Fund
makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. Each Fund
reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. Each Fund may modify or terminate
any redemption privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated. Shares held under
Keogh Plans, IRAs, or other retirement plans, and shares for which
certificates have been issued, are not eligible for the TeleTransfer
Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TeleTransfer
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus Touchr automated
telephone system) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. Each Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Funds nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a TeleTransfer redemption or an exchange of Fund shares. In such
cases, you should consider using the other redemption procedures described
herein. Use of these other redemption procedures may result in your
redemption request being processed at a later time than it would have been
if TeleTransfer redemption had been used. During the delay, the Fund's NAV
may fluctuate.
Redemption Through a Selected Dealer. Customers of 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 NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A, Class B or Class T shares you have redeemed, within
45 days of redemption, at the then-prevailing NAV without a sales load, or
reinstate your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A or Class T shares
if such shares were subject to a CDSC, your account will be credited with an
amount equal to the CDSC previously paid upon redemption of the shares
reinvested. The Reinvestment Privilege may be exercised only once.
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two days
after receipt of the redemption request. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a wire
redemption will be effected as a TeleTransfer transaction through the ACH
system unless more prompt transmittal specifically is requested. Holders of
jointly registered Fund or bank accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account only up to $250,000 within any
30-day period. See "Purchase of Shares-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 NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash
all redemption requests by any shareholder of record of a 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 each Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets a Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of a Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect a Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of a Fund's performance, a CDSC may be
applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years in the case of Balanced Fund and five
years in the case of Limited Term Income Fund; then of amounts representing
the cost of shares purchased six years prior to redemption in the case of
Balanced Fund and five years prior to the redemption in the case of Limited
Term Income Fund; and finally, of amounts representing the cost of shares
held for the longest period of time within the applicable six-year period in
the case of Balanced Fund and five-year period in the case of Limited Term
Income Fund.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (3% in the case of Limited Term Income
Fund) (the applicable rate in the second year after purchase) for a total
CDSC of $9.60 ($7.20 in the case of Limited Term Income Fund).
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of a Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1% in the
case of Balanced Fund and 0.75% in the case of Limited Term Income Fund
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC. The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with a Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described below. If the Company's Board determines to discontinue the
waiver of the CDSC, the disclosure herein will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Prospectus of each Fund or this Statement of Additional Information at the
time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Shares of any Class of a Fund may be exchanged for
shares of the same Class of another fund in the Dreyfus Premier Family of
Funds or shares of certain other funds advised or administered by Dreyfus.
Shares of the same Class of such other funds purchased by exchange will be
purchased on the basis of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
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. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr automated telephone system) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class of certain other funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to
the schedule the investor has selected. This Privilege is available only
for existing accounts. With respect to Class R shares held by a Retirement
Plan, exchanges may be made only between the investor's Retirement Plan
account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV as described
above under "Fund Exchanges." Enrollment in or modification or cancellation
of this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs 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.
The right to exercise this Privilege may be modified or canceled by
each Fund or the Transfer Agent. You may modify or cancel your exercise of
this Privilege at any time by mailing written notification to the applicable
Fund at P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund may
charge a service fee for the use of this Privilege. No such fee currently
is contemplated. For more information concerning this Privilege and the
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
eligible to participate in this Privilege, or to obtain a Dreyfus Auto-
Exchange Authorization Form, please call toll free 1-800-554-4611.
Fund Exchanges and the 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. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Funds reserve the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to the
applicable Fund at P.O. Box 6587, Providence, Rhode Island 02940-6587 and
the notification will be effective three business days following receipt.
Each Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. Automatic Withdrawal may be terminated at any time by the
investor, a Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan. The Automatic Withdrawal
Plan may be ended at any time by the shareholder, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A or Class T
shares to which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A or Class T shares where the sales load is imposed
concurrently with withdrawals of Class A or Class T shares generally are
undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from a Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and other distributions, if any, from a Fund to a designated
bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to the applicable Fund at
P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new fund
after cancellation, you must submit a new Dividend Options Form. Enrollment
in or cancellation of these privileges is effective three business days
following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. Each Fund may modify
or terminate these privileges at any time or charge a service fee. No such
fee currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as the
Funds, may be appropriate for you. To enroll in Dreyfus Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the respective Fund may terminate your participation upon 30 days'
notice to you.
Letter of Intent-Class A and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of
Eligible Fund shares purchased in a 13-month period pursuant to the terms
and conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter
of Intent) in any Eligible Fund that may be used toward "Right of
Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales load will be
applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
or Class T shares, as applicable, of the applicable Fund held in escrow to
realize the difference. Signing a Letter of Intent does not bind you to
purchase, or a Fund to sell, the full amount indicated at the sales load in
effect at the time of signing, but you must complete the intended purchase
to obtain the reduced sales load. At the time you purchase Class A or Class
T shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the then-
current NAV plus the applicable sales load in effect at the time such Letter
of Intent was executed.
Retirement Plans. Each Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
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.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Funds are intended to be long-term investment vehicles and are 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 a Fund's performance and its shareholders. Accordingly, if a
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 a 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, a Fund may refuse or restrict
purchase or exchange requests by any person or group if, in the judgment of
the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or
could otherwise be adversely affected or if the Fund receives or anticipates
receiving simultaneous orders that may significantly affect the Fund (e.g.,
amounts equal to 1% or more of the Fund's total assets). If an exchange
request is refused, a Fund will take no other action with respect to the
shares until it receives further instructions from the investor. A 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. A 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, a 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 NAV
but the purchase order would be effective only at the NAV 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 each Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Balanced Fund's equity
securities are valued at the last sale price on the securities exchange or
national securities market on which such securities primarily are traded.
Equity securities not listed on an exchange or national securities market,
or equity 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. Where market quotations are not readily
available, the Balanced Fund's equity investments are valued based on fair
value as determined in good faith by the Company's Board. Debt securities
(excluding short-term investments) are valued by an independent pricing
service approved by the Company's Board (the "Service"). Securities valued
by the Service for which quoted bid prices in the judgment of the Service
are readily available and are representative of the bid side of the market
are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by
the Service based upon its evaluation of the market for such securities).
Other debt securities valued by the Service are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Investments traded in foreign currencies are translated to U.S. dollars at
the prevailing rates of exchange. If the Fund has to obtain prices as of
the close of trading on various exchanges throughout the world, the
calculation of NAV may not take place contemporaneously with the
determination of prices of certain of the Fund's securities. Short-term
investments not valued by the Service are carried at amortized cost, which
approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV
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 of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors 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 of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Distributions and
Taxes."
General. Balanced Fund declares and pays dividends from its net
investment income, if any, four times yearly. Limited Term Income Fund declares
daily and pays monthly (on the first business day of the following month)
dividends from its net investment income, if any. Each Fund distributes net
realized capital and foreign currency gains, if any once a year, but may
make distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the 1940
Act. All expenses are accrued daily and deducted before declaration of
dividends to investors. The Funds will not make distributions from net
realized capital gains unless all capital loss carryovers, if any, have been
utilized or have expired. Shares begin accruing dividends on the day
following the date of purchase. Each Fund's earnings for Saturdays, Sundays
and holidays are declared as dividends on the next business day. If you
redeem all shares in your account at any time during the month, all
dividends to which you are entitled will be paid to you along with the
proceeds of the redemption. Investors other than qualified retirement plans
may choose whether to receive dividends and other distributions in cash, to
receive dividends in cash and reinvest other distributions in additional
Fund shares at NAV, or to reinvest both dividends and other distributions in
additional Fund shares at NAV; dividends and other distributions paid to
qualified retirement plans are reinvested automatically in additional Fund
shares at NAV. Dividends paid by each Class are calculated at the same time
and in the same manner and are in the same amount, except that the expenses
attributable solely to a particular Class are borne exclusively by that
Class. Class B and Class C shares will receive lower per share dividends
than Class T shares, which will in turn receive lower per share dividends
than Class A shares, which will in turn receive lower per share dividends
than Class R shares, because of the higher expenses borne by the relevant
Classes.
It is expected that each Fund will continue to qualify for treatment as
a regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve a Fund of any liability for federal income tax to
the extent its earnings and realized gains are distributed in accordance
with applicable provisions of the Code. To qualify for treatment as a RIC
under the Code, a 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. The term "regulated investment company" does not imply
the supervision of management or investment practices or policies by any
government agency. The Fund will be subject to a non-deductible 4% excise
tax ("Excised Tax") to the extent it fails to distribute substantially all
of its taxable investment income and capital gains. If the Fund failed to
qualify for treatment as a RIC for any taxable year, (1) it would be taxed
at corporate rates on the full amount of its taxable income for that year
without being able to deduct the distributions it makes to its shareholders
and (2) the shareholders would treat all those distributions, including
distributions of net capital gain (the excess of net long-term capital gain
over net short-term capital loss), as dividends (that is, ordinary income)
to the extent of the Fund's earnings and profits. In addition, the Fund
could be required to recognize unrealized gains, pay substantial taxes and
interest and make substantial distributions before requalifying for RIC
treatment.
Distributions. If you elect to receive other dividends and
distributions in cash, and your distribution check is returned to a Fund as
undeliverable or remains uncashed for six months, the Fund reserves the
right to reinvest that distribution and all future distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distribution or redemptions check.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains, net realized gains
from certain foreign currency transactions and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to those shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and
whether the distributions are received in cash or reinvested in additional
Fund shares.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the foreign investor claims the benefit of a lower rate specified in
a tax treaty. Capital gain distributors paid by the Fund to a non-resident
foreign investor, as well as the proceeds of any redemptions by such an
investor, regardless of the extent to which gain or loss may be realized,
generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions paid during
the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A and Class T shares if a shareholder redeems those shares
or exchanges them for shares of another fund advised or administered by
Dreyfus, within 90 days of purchase, and (1) in the case of a redemption,
the shareholder acquires other fund Class A or Class T shares through
exercise of the Reinvestment Privilege (2) or, in the case of an exchange,
the other fund reduces or eliminates its otherwise applicable sales load.
In these cases, the amount of the sales load charged on the purchase of the
original Class A or Class T shares, up to the amount of the reduction of the
sales load pursuant to the Reinvestment Privilege or on the exchange, as the
case may be, is not included in the tax basis of those shares for purposes
of computing gain or loss and instead is added to the tax basis of the
acquired shares.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
Internal Revenue Service ("IRS") distributions paid to such plans.
Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be
taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to 10%
of the taxable portion of the distribution. The administrator, trustee or
custodian of a retirement plan will be responsible for reporting
distributions from the plan to the IRS. Moreover, certain contributions to
a qualified retirement plan in excess of the amounts permitted by law may be
subject to an excise tax. If a distributee of an "eligible rollover
distribution" from a qualified retirement plan does not elect to have the
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the distribution is subject to 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholders if such
shareholder fails to furnish a TIN to the Fund and certify that it is
correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income. A TIN is either the
Social Security number, IRS individual taxpayer identification number or
employer identification number of the record owner of an account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax imposed on the record owner and may be claimed as a credit on the his or
her federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such a distribution would be a
return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives any capital gain distributions 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 those distributions.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by a Fund and
received by the shareholders on December 31 if the distributions are paid by
a Fund during the following January. Accordingly, those distributions will
be taxed to shareholders for the year in which that December 31 falls.
Interest received by the Fund may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
Foreign Currency, Hedging Transactions. Gains from the sale or other
disposition of foreign currencies (except certain gains therefrom that may
be excluded by future regulations), and gain from options, futures and
forward contracts derived by the Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gain or
loss from the disposition of foreign currencies and certain foreign currency
denominated instruments (including debt instruments and certain financial
forward, futures 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 otherwise would 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 a Fund on
the exercise of lapse of, or closing transactions respecting, certain
options, futures and forward contracts ("Section 1256 contracts") will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any Section 1256 contracts remaining unexercised at the end of a Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss
to the Fund characterized in the same manner.
Offsetting positions held by a Fund involving certain contracts or
options may constitute "straddles," which are defined to include "offsetting
positions" in actively traded personal property. Under Section 1092 of the
Code, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on
the offsetting position(s) of the straddle. In addition, these rules may
postpone the recognition of loss that otherwise would be recognized under
the mark-to-market rules discussed above. The regulations under Section
1092 also provide certain "wash sale" rules, which apply to transactions
where a position is sold at a loss and a new offsetting position is acquired
within a prescribed period, and "short sale" rules applicable to straddles.
If the Fund makes certain elections (including an election as to straddles
that include a position in one or more Section 1256 Contracts (so-called
"mixed straddles"), the amount, character, and timing of recognition of
gains and losses from the affected straddle positions would be determined
under rules that vary according to the elections made. Because only a few
of the regulations implementing the straddle rules have been promulgated,
the tax consequences to the Fund of straddle transactions are not entirely
clear.
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 would be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and could
need to distribute that income to satisfy the Distribution Requirement and
avoid imposition of the 4% excise tax referred to in the Fund's Prospectus
under "Dividends, Other Distributions and Taxes." In that case, the Fund
may have to dispose of securities it might otherwise have continued to hold
in order to generate cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the
Fund may be subject to the tax laws thereof. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes 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 a Fund is "effectively connected" with a U.S. trade
or business carried on by the shareholder, as discussed below. Special U.S.
federal income tax rules that differ from those described below may apply to
certain foreign persons who invest in the Fund, such as a foreign
shareholder entitled to claim the benefits of an applicable tax treaty.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a
Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to a U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain generally will not be subject to U.S. federal income tax unless
the foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable year.
In the case of certain foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of each
Fund by Dreyfus. Debt securities purchased and sold by each Fund are
generally traded on a net basis (i.e., without commission) through dealers
acting for their own account and not as brokers, or otherwise involve
transactions directly with the issuer of the instrument. This means that a
dealer (the securities firm or bank dealing with a Fund) makes a market for
securities by offering to buy at one price and sell at a slightly higher
price. The difference between the prices is known as a spread. Other
portfolio transactions may be executed through brokers acting as agent.
Each Fund will pay a spread or commission in connection with such
transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to each Fund and at
spreads and commission rates, if any, which are reasonable in relation to
the benefits received. Dreyfus also places transactions for other accounts
that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of a Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 under the 1940 Act.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.
Brokers or dealers may be selected who provide brokerage and/or
research services to a Fund and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include advice
concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to a Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Funds,
investment decisions for the Funds are made independently from decisions
made for these other accounts. It sometimes happens that the same security
is held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as a particular Fund is
concerned. In other cases, however, the ability of a Fund to participate in
volume transactions will produce better executions for the Fund. While the
Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to a Fund outweighs any disadvantages that may be said to exist from
exposure to simultaneous transactions.
For the fiscal years ended October 31, 1998, 1997 and 1996, Balanced
Fund paid brokerage commissions amounting to $213,688, $171,266 and
$152,452, respectively. For the fiscal years ended October 31, 1998, 1997
and 1996, Balanced Fund paid brokerage concessions amounting to $14,229,
$32,249 and $113,445, respectively.
For the fiscal years ended October 31, 1998, 1997 and 1996, Limited
Term Income Fund did not pay any brokerage commission. Limited Term Income
Fund typically does not pay a stated brokerage fee on transactions.
The aggregate amount of transactions during the fiscal year ended
October 31, 1998 in securities effected on an agency basis through a broker
dealer for research services, and the commissions and concessions related to
such transactions were as follows:
Transaction Commission and
Amounts Concessions
Balanced Fund $____________ $____________
Limited Term Income $____________ $____________
Fund
Portfolio Turnover. While securities are purchased for Balanced Fund
on the basis of potential for growth and high current income and Limited
Term Income Fund for high current income and not for short-term trading
profits, in the past the portfolio turnover rate of the Limited Term Income
Fund has exceeded 100% and, for each Fund, may exceed 100% in the future. A
portfolio turnover rate of 100% would occur, for example, if all the
securities held by a Fund were replaced once in a period of one year. In
past years Limited Term Income Fund's rate of portfolio turnover exceeded
that of certain other mutual funds with a similar investment objective. A
higher rate of portfolio turnover (100% or greater) involves correspondingly
greater brokerage commissions and other expenses that must be borne directly
by a 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 a Funds' shareholder,
are taxable to them as ordinary income. Nevertheless, security transactions
will be based only upon investment considerations and will not be limited by
any other considerations when Dreyfus deems it appropriate to make changes
in a Fund's assets. The portfolio turnover rate for each Fund is calculated
by dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases and sales of securities whose maturities
at the time of acquisition were one year or less) by the monthly average
value of securities in the Fund during the year. Portfolio turnover may vary
from year to year as well as within a year. The portfolio turnover rates
for the last two years of each Fund were:
Fiscal Year Ended October 31,
1998 1997
Limited Term Income Fund 149.08% 129.94%
Balanced Fund 69.71% 99.88%
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of Balanced Fund
for the periods noted were:
Average Annual Total Return for the
Periods Ended April 30, 1999
1 Year 5 Years Since Inception
Class A shares 11.74% 17.96% 18.12% (4/14/94)
Class B shares 13.70% - 21.12% (12/19/94)
Class C shares 16.72% - 21.43% (12/19/94)
Class R shares 18.92% 19.67% 17.16% (9/15/93)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase
and the assessment of the maximum CDSC.
No performance information is provided for Class T shares of the
Balanced Fund since they were not offered as of April 30, 1999.
Average annual total returns (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of Limited Term
Income Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended April 30, 1999
1 Year 5 Years Since Inception
Class A shares 2.28% 5.97% 5.81% (4/7/94)
Class B shares 1.91% - 6.81% (12/19/94)
Class C shares 4.35% - 6.66% (12/19/94)
Class R shares 5.73% 6.89% 7.05% (7/11/91)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase
and the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price
in the case of Class A and Class T) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result. The average
annual total return figures for a Class calculated in accordance with such
formula assume that, in the case of Class A or Class T, the maximum sales
load has been deducted from the hypothetical initial investment at the time
of purchase or, in the case of Class B or Class C, the maximum applicable
CDSC has been paid upon redemption at the end of the period.
The total return of Class R shares of the Balanced Fund for the period
September 15, 1993 (commencement of operations) to April 30, 1999 was
143.55%. The total return of Class A shares of the Balanced Fund for the
period April 14, 1994 (inception date of Class A) to April 30, 1999 was
131.91%. Based on NAV per share, the total return for Class A was 145.98%
for the same period. The total return of Class B and Class C shares of the
Balanced Fund for the period from December 19, 1994 (inception date of Class
B and Class C) through April 30, 1999 was 130.56% and 133.15%, respectively.
Without giving effect to the applicable CDSC, the total return for Class B
and Class C shares was 132.56% and 133.15%, respectively, for the same
period. The total return of Class R shares of the Limited Term Income Fund
for the period July 11, 1991 (commencement of operations) to April 30, 1999
was 70.19%. The total return for Class A shares of the Limited Term Income
Fund for the period April 7, 1994 (inception date of Class A) to April 30,
1999 was 33.14%. Based on NAV per share, the total return for Class A was
37.20% for the same period. The total return for Class B and Class C shares
of the Limited Term Income Fund for the period from December 19, 1994
(inception date of Class B and Class C) through April 30, 1999 was 33.26%
and 32.48%, respectively. Without giving effect to the applicable CDSC, the
total return for Class B and Class C shares of the Limited Term Income Fund
was 34.26% and 32.48%, respectively, for the same period.
Total return is calculated by subtracting the amount of a Fund's NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of a stated period from the NAV per share at the end of the period
(after giving effect to the reinvestment of dividends and other
distributions during the period and any applicable CDSC), and dividing the
result by the NAV (maximum offering price in the case of Class A and Class
T) per share at the beginning of the period. Total return also may be
calculated based on the NAV per share at the beginning of the period instead
of the maximum offering price per share at the beginning of the period for
Class A or Class T shares or without giving effect to any applicable CDSC at
the end of the period for Class B or C shares. In such cases, the
calculation would not reflect the deduction of the sales load with respect
to Class A or Class T shares or any applicable CDSC with respect to Class B
or C shares, which, if reflected would reduce the performance quoted.
Dreyfus Premier Limited Term Income Fund's current yield for the 30-day
period ended April 30, 1999 was 5.07%, 4.72%, 4.70% and 5.48% for its Class
A, Class B Class C and Class R shares, respectively. Current yield is
computed pursuant to a formula which operates, with respect to each Class,
as follows: the amount of the Fund's expenses with respect to such Class
accrued for the 30-day period (net of reimbursements) is subtracted from the
amount of the dividends and interest earned (computed in accordance with
regulatory requirements) by the Fund with respect to such Class during the
period. That result is then divided by the product of: (a) the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and (b) the maximum offering price per share in the case
of Class A or the net asset value per share in the case of Class B, Class C
and Class R on the last day of the period less any undistributed earned
income per share reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and the sum is raided to the
6th power, after which 1 is subtracted. The current yield is then arrived
at by multiplying the result by 2.
Performance information for the Funds may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Lehman Brothers Aggregate Bond Index; (ii) the S&P 500, the Dow Jones
Industrial Average, or other appropriate unmanaged domestic or foreign
indices of performance of various types of investments so that investors may
compare the Fund's results with those of indices widely regarded by
investors as representative of the securities markets in general; (iii)
other groups of mutual funds tracked by Lipper Analytical Services, a widely
used independent research firm which ranks mutual funds by overall
performance, investment objectives and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall
performance or other criteria; (iv) the Consumer Price Index (a measure of
inflation) to assess the real rate of return from an investment in the Fund;
and (v) products managed by a universe of money managers with similar
country allocation and performance objectives. Unmanaged indices may assume
the reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses. From time to time,
advertising materials for the Fund may refer to Morningstar ratings and
related analyses supporting the rating.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market shares,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
From time to time, advertising materials may refer to studies performed
by The Dreyfus Corporation or its affiliates, such as "The Dreyfus Tax
Informed Investing Study" or "The Dreyfus Gender Investment Comparison Study
(1996 & 1997)" or other such studies.
INFORMATION ABOUT THE FUNDS/COMPANY
The following information supplements and should be read in conjunction
with the section in each 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.
Each Fund is one of nineteen portfolios of the Company. 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 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.
Each 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 each Fund, the handling of certain communications
between shareholders and each 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 each Fund's
investments. Under a custody agreement with the Company, Mellon Bank holds
each 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 a Fund or which securities are to
be purchased or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectuses and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as each Fund's independent auditors for the year ending
October 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.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in each Fund's Annual
Report to shareholders. The financial statements for the six-month period
ended April 30, 1999, which are unaudited, are included in the Fund's Semi-
Annual Report to shareholders. Copies of each Fund's Annual Report and Semi-
Annual Report accompanies this Statement of Additional Information. The
financial statements included in the Annual Reports, and the Independent
Auditors' Reports thereon contained therein, and Semi-Annual Report, and
related notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
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.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Credit Rating Co. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered
BBB sufficient for prudent investment. Considerable variability in risk
BBB- during economic cycles.
BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
DREYFUS PREMIER MIDCAP STOCK FUND
CLASS A, CLASS B, CLASS C, CLASS R AND CLASS T SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 16, 1999
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Premier Midcap Stock Fund (the "Fund"), dated August 16, 1999,
as it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end management
investment company (the "Company"), known as a mutual fund. To obtain a
copy of the Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144, or call one of the following
numbers:
Call Toll Free 1-800-554-4611
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-17
Management Arrangements B-24
Purchase of Shares B-26
Distribution and Service Plans B-34
Redemption of Shares B-37
Shareholder Services B-42
Additional Information About Purchases, Exchanges and Redemptions B-49
Determination of Net Asset Value B-50
Dividends, Other Distributions and Taxes B-51
Portfolio Transactions B-58
Performance Information B-60
Information About the Fund/Company B-62
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors B-63
Financial Statements B-64
Appendix B-65
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.
Prior to January 16, 1998, the Fund's name was Dreyfus Disciplined Midcap
Stock Fund and prior to October 17, 1994, the Fund's name was Laurel Midcap
Stock 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.
The Fund seeks investment returns that exceed those of the Standard &
Poor's 400 MidCap Indexr ("S&P 400"). The S&P 400 is composed of 400
domestic common stocks chosen by Standard & Poor's Rating Services, a
division of McGraw-Hill Companies, Inc. ("Standard & Poor's") for market
size, liquidity and industry group representation. It is a market-weighted
index (stock price times shares outstanding), with each stock affecting the
S&P 400 in proportion to its market value. The inclusion of a stock in the
S&P 400 does not imply that Standard & Poor's believes the stock to be an
attractive or appropriate investment, nor is Standard & Poor's in any way
affiliated with the Fund. The S&P 400 was created by Standard & Poor's to
capture the performance of the stocks that fall in the medium capitalization
range. The medium capitalization range of stocks was defined, at the
original time of screening, as between $200 million and $5 billion in market
value. Any medium-capitalization stocks already included in the Standard &
Poor's 500 Composite Stock Price Indexr ("S&P 500") were excluded from
candidacy for the S&P 400. After removal of the 500 stocks, the S&P 400
candidate population was reduced to 1,200 stocks. Standard & Poor's then
subjected this smaller population to a variety of screens and eventually the
sample size was reduced to the final 400 stocks. Standard & Poor's screened
the candidate population using the following criteria: level of trading
activity, or liquidity; market value; industry group representation; and the
level of controlling interest. A limited percentage of the S&P 400 may
include Canadian securities. No other foreign securities are eligible for
inclusion.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
American Depository Receipts ("ADRs"). The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market. Investment in
securities of foreign issuers presents certain risks. See "Foreign
Securities."
Corporate Obligations. The Fund may invest in corporate obligations
rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's or if unrated, of comparable quality as determined by
Dreyfus. Securities rated BBB by Standard & Poor's or Baa by Moody's are
considered by those rating agencies to be "investment grade" securities,
although Moody's considers securities rated Baa to have speculative
characteristics. Further, while bonds rated BBB by Standard & Poor's
exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and principal for debt in this category than debt in higher rated
categories. The Fund will dispose in a prudent and orderly fashion of bonds
whose ratings drop below these minimum ratings.
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. Treasury to lend to such 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.
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. This technique
offers a method of earning income on idle cash. 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, including interest, 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.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's, Prime-1 by Moody's, F-1 by Fitch IBCA, Inc. or, Duff-1 by
Duff & Phelps Credit Rating Co.
Bank Instruments. 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 of foreign banks, domestic
savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs"),
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are U.S. dollar-
denominated time deposits in a foreign branch of a U.S. bank or a foreign
bank. Yankee CDs are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States. The
Fund may also invest in Eurodollar bonds and notes which 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."
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in foreign currencies and obligations of foreign
branches of domestic banks and domestic branches of foreign banks.
Investment in such foreign currencies securities and obligations presents
certain risks, including those resulting from fluctuations in currency
exchange rates, revaluation of currencies, adverse political and economic
developments, the possible imposition of currency exchange blockages or
other foreign governmental laws or restrictions, reduced availability of
public information concerning issuers, and the fact that foreign issuers are
not generally subject to uniform accounting, auditing and financial
reporting standards or to other regulatory practices and requirements
comparable to those applicable to domestic issuers. Moreover, securities of
many foreign issuers may be less liquid and their prices more volatile than
those of comparable domestic issuers. In addition, with respect to certain
foreign countries, there is the possibility of expropriation, confiscatory
taxation and limitations on the use or removal of funds or other assets of
the Fund, including withholding of dividends. Foreign securities may be
subject to foreign government taxes that would reduce the yield on such
securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holder.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
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. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
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.
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 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
("NAV").
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 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.
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 loss if the institution to which it has lent its
securities fails financially or 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. The Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. 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.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
including financial futures contracts (such as index futures contracts) and
options (such as options on U.S. and foreign securities or indices of such
securities). The index Derivative Instruments which the Fund may use may be
based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or
spread or to facilitate or substitute for the sale or purchase of
securities.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments 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 not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities.
There can be no assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs, and may result in certain
tax consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value unless
the option is closed out in an offsetting transaction.
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 and the Fund would experience losses to the extent of premiums
paid for them.
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 put or call
options that are traded on a national exchange in an amount exceeding 5% of
its net assets.
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 price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write options on securities only if it covers the
transaction through: an offsetting option with respect to the security
underlying the option it has written, exercisable by it at a more favorable
price; ownership of (in the case of a call) or a short position in (in the
case of a put) the underlying security; or segregation of cash or certain
other assets sufficient to cover its exposure.
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.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5%, the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts for hedging purposes.
The Fund will not enter into futures contracts to the extent that its
outstanding obligations under these contracts would exceed 25% of the Fund's
total assets.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in such securities would exceed 5% of the Fund's
total assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) Paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
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.
If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains
an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company'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 nine 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") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board 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
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.) a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources) a temporary placement agency. 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: 55 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. Chairman of the
Board, Davidson Cotton Company. Age: 64 years old. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 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. Age: 77 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Director of the Company; President & CEO, The
Palladium Company; President & CEO, Himmel and Company, Inc.; CEO,
American Food Management; former Director, The Boston Company, Inc.
("TBC"), an affiliate of Dreyfus, and Boston Safe Deposit and Trust
Company. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 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. Age: 67 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 Health Care, Inc.; Director, Massachusetts Electric
Company; Director, the Hyams Foundation, Inc. Age: 49 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. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
________________________________
* "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: 39
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: 42 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. Age: 30 years old.
#JOHN P. COVINO. Vice President and Assistant Treasurer of the Company.
Vice President and Treasury Group Manager of Treasury Servicing and
Administration of Funds Distributor, Inc. From December 1995 to
November 1998, he was employed by Fidelity Investments where he held
multiple positions in their Institutional Brokerage Group. Prior to
joining Fidelity, he was employed by SunGard Brokerage Systems where
he was responsible for the technology and development of the accounting
product group. Age: 35 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor, Inc. From 1988 to August 1994, he was Manager of
High Performance Fabrics Division of Springs Industries, Inc. Age: 37
years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, Mr. Kelley was
Assistant Counsel at Forum Financial Group. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. 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. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was a Second
Vice President with Chase Manhattan Bank. Age: 30 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. Age: 44 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: 37 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: 37 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor, Inc. From June
1994 to January 1996, she was Manager of SEC Registration at Scudder,
Stevens & Clark, Inc. Age: 32 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 Company 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. Effective July 1, 1998,
the Dreyfus/Laurel Funds pay each Director/Trustee who is not an "interested
person" of the Company (as defined in the 1940 Act) $40,000 per annum, plus
$5,000 per joint Dreyfus/Laurel Funds Board meeting attended, $2,000 for
separate committee meetings attended which are not held in conjunction with
a regularly scheduled Board meeting and $500 for Board meetings and separate
committee meetings attended that are conducted by telephone. The
Dreyfus/Laurel Funds also reimburse each Director/Trustee who is not an
"interested person" of the Company (as defined in the 1940 Act) for travel
and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000
fee will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High
Yield Strategies Fund. The compensation structure described in this
paragraph is referred to hereinafter as the "Current Compensation
Structure."
In addition, the Company currently has three Emeritus Board members who
are entitled to receive an annual retainer and a per meeting fee of one-half
the amount paid to them as Board members pursuant to the Current
Compensation Structure.
Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Company (as
defined in the 1940 Act) $27,000 per annum (and an additional $25,000 for
the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel Funds)
and $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750
per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimbursed each such Director/Trustee for travel and out-of-pocket expenses
(the "Former Compensation Structure").
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1998, and
from all funds in the Dreyfus Family of Funds for which such person was a
Board member (the number of which is set forth in parenthesis next to each
Board member's total compensation)* during the year ended December 31, 1998,
pursuant to the Former Compensation Structure for the period from November
1, 1997 through June 30, 1998 and the Current Compensation Structure for the
period from July 1, 1998 through October 31, 1998, were as follows:
Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member
Joseph S. DiMartino** $17,710.00 $619,660 (187)
James M. Fitzgibbons $17,710.00 $ 60,010 (31)
J. Tomlinson Fort*** none none (31)
Arthur L. Goeschel $18,376.67 $ 61,010 (31)
Kenneth A. Himmel $14,793.34 $ 50,260 (31)
Stephen J. Lockwood $15,043.34 $ 51,010 (31)
John J. Sciullo $17,710.00 $ 59,010 (31)
Roslyn M. Watson $18,376.67 $ 61,010 (31)
Benaree Pratt Wiley**** $12,194.38 $ 49,628 (31)
____________________________
# 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 $5,313.37 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Company and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal year
ended October 31, 1998, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Company
was $17,710. For the year ended December 31, 1998, the aggregate amount
of fees received by Mr. Fort for serving as a Board member of all funds in
the Dreyfus/Laurel Funds (including the Company) and Dreyfus High Yield
Strategies Fund (for which payment is made directly by the fund) was
$59,010. In addition, Dreyfus reimbursed Mr. Fort a total of $733.11 for
expenses attributable to the Company's Board meetings which is not
included in the $5,313.37 amount in note # above.
**** Payments to Ms. Wiley were for the period from April 23, 1998 (the
date she was elected as a Board member) through October 31, 1998.
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 July 28,
1999.
Principal Shareholders:
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class A of the Fund: Charles Schwab & Co. Inc.,
Reinvest Account, 101 Montgomery Street, San Francisco, CA 94104-4122; ____%
and Boston Safe Deposit & Trust Co., Trustee, As Agent-Omnibus Account, 1
Cabot Road, Medford, MA 02155-5144; ____%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class B of the Fund: MLPF & S for the Sole Benefit
of its' Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-6484;
_____%.
As of July 28, 1999, the following shareholder(s) owned beneficially or
of record 5% or more of Class C of the Fund: MLPF & S for the Sole Benefit
of its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-6484;
____%.
As of July 28, 1999, the following shareholder(s) owned of record 5% or
more of Class R of the Fund: Boston Safe Deposit & Trust Co. Trustee, As
Agent-Omnibus Account, 1 Cabot Road, Medford, MA 02155-5141; ____%and Mcwood
& Co., First Citizens Bank and Trust, P.O. Box 29255, Raleigh, NC 27626;
____%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
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 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994, subject to the overall authority of the Company's Board of
Directors in accordance with Maryland law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus manages
the Fund by making investment decisions based on the Fund's investment
objective, policies and restrictions. The Management Agreement is subject
to review and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. 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 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Diane P. Durnin, Vice President-Product
Development; Patrice M. Kozlowski, Vice President-Corporate Communications;
Mary Beth Leibig, Vice President-Human Resources; Andrew S. Wasser, Vice-
President-Information Systems; Theodore A. Schachar, Vice President; Wendy
Strutt, Vice President; Richard Terres, Vice President; William H. Maresca,
Controller; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott,
Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"),
Dreyfus employees must preclear personal transactions in securities not
exempt under the Policy. In addition, Dreyfus employees must report their
personal securities transactions and holdings, which are reviewed for
compliance with the Policy. In that regard, Dreyfus portfolio managers and
other investment personnel also are subject to the oversight of Mellon's
Investment Ethics Committee. Dreyfus portfolio managers and other
investment personnel who comply with the Policy's preclearance and
disclosure procedures, and the requirements of the Committee, may be
permitted to purchase, sell or hold securities which also may be or are held
in fund(s) they manage or for which they otherwise provide investment
advice.
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
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. 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.
For the last three years, the Fund had the following expenses:
For the Fiscal Year Ended October 31,
1998 1997 1996
Management fees $783,685 $318,694 $159,095
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 sub-administrator for the Fund and as distributor
for the other funds in the Dreyfus Family of Funds.
For the fiscal year ended October 31, 1998, the Distributor retained no
sales loads on the Fund's Class A shares. For the period January 16, 1998
(inception date of Class B and Class C shares) through October 31, 1998, the
Distributor retained $15,793 and $765 from the contingent deferred sales
charge ("CDSC"), on the Fund's Class B and Class C shares, respectively.
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. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most
beneficial to you depends on the amount and the intended length of your
investment. You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee, service fee
and CDSC, if any, on Class B or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares or
the accumulated distribution fee, service fee and initial sales charge on
Class T shares, purchased at the same time, and to what extent, if any, such
differential would be offset by the return on Class A shares and Class T
shares, respectively. You may also want to consider whether, during the
anticipated life of your investment in the Fund, the accumulated
distribution fee, service fee, and initial sales charge on Class T shares
would be less than the accumulated distribution fee and higher initial sales
charge on Class A shares purchased at the same time, and to what extent, if
any, such differential could be offset by the return of Class A.
Additionally, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution and service fees on Class B or Class C shares and the
accumulated distribution fee, service fee and initial sales charge on Class
T shares may exceed the accumulated distribution fee and initial sales
charge on Class A shares during the life of the investment. Finally, you
should consider the effect of the CDSC period and any conversion rights of
the Classes in the context of your own investment time frame. For example,
while Class C shares have a shorter CDSC period than Class B shares, Class C
shares do not have a conversion feature and, therefore, are subject to
ongoing distribution and service fees. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares will be most appropriate for investors
who invest $1,000,000 or more in Fund shares, and Class A and Class T shares
will not be appropriate for investors who invest less than $50,000 in Fund
shares. The Fund reserves the right to reject any purchase order.
Class A, Class B, Class C and Class T shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus
or any of its affiliates or subsidiaries, directors of Dreyfus, Board
members of a fund advised by Dreyfus, including members of the Company's
Board, or the spouse or minor child of any of the foregoing may purchase
Class A shares directly through the Distributor. In addition, holders of
Investor shares of the Fund as of January 15, 1998 may continue to purchase
Class A shares of the Fund at NAV. Subsequent purchases may be sent
directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates),
acting on behalf of customers having a qualified trust or investment account
or relationship at such institution, or to customers who have received and
hold shares of the Fund distributed to them by virtue of such an account or
relationship. In addition, holders of Restricted shares of the Fund as of
January 15, 1998 may continue to purchase Class R shares of the Fund whether
or not they would otherwise be eligible to do so. Class R shares may be
purchased for a retirement plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such a plan.
Institutions effecting transactions in Class R shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum on subsequent purchases except the no minimum on Education
IRAs does not apply until after the first year. The initial investment must
be accompanied by the Fund's Account Application. The Fund reserves the
right to offer Fund shares without regard to minimum purchase requirements
to employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value."
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined NAV. It is
the dealers' responsibility to transmit orders so that they will be received
by the Distributor or its designee before the close of its business day.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received 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.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the Fund's Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $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.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares is the
NAV of that Class, plus, except for shareholders owning Investor shares of
the Fund on January 15, 1998, a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Holders of Investor shares of the Fund as of January 15, 1998 may
continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to any applicable front-end sales load. Omnibus accounts will be
eligible to purchase Class A shares without a front-end sales load only on
behalf of their customers who held Investor shares of the Fund through such
omnibus account on January 15, 1998.
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
Class T Shares. The public offering price for Class T shares is the
NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 4.50 4.00
$50,000 to less than $100,000 4.00 3.50
$100,000 to less than $250,000 3.00 2.50
$250,000 to less than $500,000 2.00 1.75
$500,000 to less than $1,000,000 1.50 1.25
$1,000,000 or more -0- -0-
There is no initial sales charge on purchases of $1,000,000 or more of
Class T shares. However, if you purchase Class T shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class T shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class T shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class T shares.
Because the expenses associated with Class A shares will be lower than those
associated with Class T shares, purchasers investing $1,000,000 or more in
the Fund will generally find it beneficial to purchase Class A shares rather
than Class T shares.
Dealer Reallowance -- Class A and Class T Shares. The dealer
reallowance provided with respect to Class A and Class T shares may be
changed from time to time but will remain the same for all dealers. The
Distributor, at its own expense, may provide additional promotional
incentives to dealers that sell shares of funds advised by Dreyfus which are
sold with a sales load, such as Class A and Class T shares. In some
instances, these incentives may be offered only to certain dealers who have
sold or may sell significant amounts of such shares.
Sales Loads -- Class A and Class T Shares. The scale of sales loads
applies to purchases of Class A and Class T shares made by any "purchaser,"
which term includes an individual and/or spouse purchasing securities for
his, her or their own account or for the account of any minor children, or a
trustee or other fiduciary purchasing securities for a single trust estate
or a single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under Section
401 of the Code) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457
of the Code); or an organized group which has been in existence for more
than six months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the NAV of a Class A share at the close of business on October 31, 1998:
NAV per share $14.24
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ .87
Per Share Offering Price to Public $15.11
Set forth below is an example of the method of computing the offering
price of the Fund's Class T shares. The example assumes a purchase of Class
T shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the initial offering price of $12.50:
NAV per share $12.50
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .59
Per Share Offering Price to Public $13.09
Right of Accumulation-Class A and Class T Shares. Reduced sales loads
apply to any purchase of Class A and Class T shares, shares of other funds
in the Dreyfus Premier Family of Funds, shares of certain other funds
advised by Dreyfus which are sold with a sales load and shares acquired by a
previous exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined above, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you previously purchased and still hold Class A or Class T shares
of the Fund, or shares of any other Eligible Fund or combination thereof,
with an aggregate current market value of $40,000 and subsequently purchase
Class A or Class T shares of the Fund or shares of an Eligible Fund having a
current value of $20,000, the sales load applicable to the subsequent
purchase would be reduced to 4.50% of the offering price in the case of
Class A shares or 4.00% of the offering price in the case of Class T shares.
All present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the sales
load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in the Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class R Shares. The public offering price for Class R shares is the
NAV per share of that Class.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the 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 that is an Automated Clearing House ("ACH")
member may be so designated. 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 the Transfer Agent and the NYSE are open for business will
be credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New
York time, on any business day the Transfer Agent and the NYSE are open for
business, or orders made on Saturday, Sunday or any Fund holiday (e.g., when
the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order.
To qualify to use the TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to,
the same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Shares -
TeleTransfer Privilege." The Fund may modify or terminate this Privilege at
any time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
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 NAVs 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 1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual 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--Class A Shares. The Company has adopted a
Distribution Plan pursuant to the Rule with respect to the Class A shares of
the Fund (the "Class A Plan"), whereby Class A shares of the Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A 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 Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Class A shares of the Fund. The Company's Board of
Directors believes that there is a reasonable likelihood that the Class A
Plan will benefit the Fund and the holders of Class A shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without approval of the holders of
Class A shares, and that other material amendments of the Class A Plan must
be approved by the vote of a majority of the Directors and of the Directors
who are not "interested persons" (as defined in the 1940 Act) of the Company
or the Distributor and who do not have any direct or indirect financial
interest in the operation of the Class A Plan, cast in person at a meeting
called for the purpose of considering such amendments. The Class A Plan is
subject to annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct or indirect
financial interest in the operation of the Class A Plan, by vote cast in
person at a meeting called for the purpose of voting on the Class A Plan.
The Class A Plan was so approved by the Directors at a meeting held on
February 4, 1999. The Class A Plan is terminable, as to the Fund's Class A
shares, at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B, Class C and Class T Shares.
In addition to the above described current Class A Plan for Class A shares,
the Board of Directors has adopted a Service Plan (the "Service Plan") under
the Rule for Class B, Class C and Class T shares, pursuant to which the Fund
pays the Distributor and Dreyfus Service Corporation a fee at the annual
rate of 0.25% of the value of the average daily net assets of Class B, Class
C and Class T shares for the provision of certain services to the holders of
Class B, Class C and Class T shares, respectively. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and providing services related to the maintenance of such
shareholder accounts. With regard to such services, each Agent is required
to disclose to its clients any compensation payable to it by the Fund and
any other compensation payable by its clients in connection with the
investment of their assets in Class B, Class C and Class T shares. The
Distributor may pay one or more Agents in respect of services for these
Classes of shares. The Distributor determines the amounts, if any, to be
paid to Agents under the Service Plan and the basis on which such payments
are made. The Company's Board of Directors has also adopted a Distribution
Plan pursuant to the Rule with respect to Class B and Class C shares (the
"Class B and Class C Plan") and a separate Distribution Plan pursuant to the
Rule with respect to Class T shares (the "Class T Plan"). Pursuant to the
Class B and Class C Plan, the Fund pays the Distributor for distributing the
Fund's Class B and Class C shares at an aggregate annual rate of 0.75% of
the value of the average daily net assets of Class B and Class C shares,
respectively. Pursuant to the Class T Plan, the Fund pays the Distributor
for distributing the Fund's Class T shares at an annual rate of 0.25% of the
value of the average daily net assets of Class T shares. The Distributor
may pay one or more Agents in respect of advertising, marketing and other
distribution services for Class T shares, and determines the amounts, if
any, to be paid to Agents and the basis on which such payments are made.
The Company's Board of Directors believes that there is a reasonable
likelihood that the Service Plan, the Class B and Class C Plan and the Class
T Plan (each a "Plan" and collectively, the "Plans") will benefit the Fund
and the holders of Class B, Class C and Class T shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B, Class C
or Class T shares may bear pursuant to the Plan without the approval of the
holders of such Classes and that other material amendments of the Plan must
be approved by the Board of Directors and by the Directors who are not
interested persons of the Company and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. Each Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. The Service Plan with respect to
Class B and Class C shares and the Class B and Class C Plan were so approved
by the Directors at a meeting held on February 4, 1999. The Service Plan
with respect to Class T shares and the Class T Plan were initially approved
by the Directors at a meeting held on July 29, 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B, Class C or
Class T shares, as applicable.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan are payable without regard to
actual expenses incurred. The Fund and the Distributor may suspend or
reduce payments under any of the plans at any time, and payments are subject
to the continuation of the Fund's plans and the Agreements described above.
From time to time, the Agents, the Distributor and the Fund may voluntarily
agree to reduce the maximum fees payable under the plans.
For the fiscal year ended October 31, 1998, the Fund paid the
Distributor and Dreyfus Service Corporation $10,877 and $22,334,
respectively, pursuant to the Class A Plan. For the fiscal year ended
October 31, 1998, the Fund paid the Distributor $51,095 and $10,843,
pursuant to the Class B and Class C Plan with respect to Class B and Class C
shares, respectively, and paid the Distributor and Dreyfus Service
Corporation $3,008 and $14,024, respectively, pursuant to the Service Plan
with respect to Class B shares and $0 and $3,614, respectively, pursuant to
the Service Plan with respect to Class C shares. The Class T Plan and the
Service Plan with respect to Class T shares were not in effect during the
fiscal year ended October 31, 1998, and accordingly, no fees were paid
pursuant to those plans with respect to Class T shares during that period.
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."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege, which is granted automatically unless you specifically refuse it
by checking the applicable "No" box on the Account Application. The
Telephone Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form or by oral request from any of
the authorized signatories on the account by calling 1-800-554-4611. You
also may redeem shares through the Wire Redemption Privilege or the
TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you are a client of
certain Agents ("Selected Dealers"), you can also redeem Fund shares through
the Selected Dealer. Other redemption procedures may be in effect for
clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs, or other
retirement plans, and shares for which certificates have been issued, are
not eligible for the Wire Redemption, Telephone Redemption or TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
The Dreyfus Touchr automated telephone system) from any person representing
himself or herself to be you, or a representative of your Agent, and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of 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 NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A, Class B or Class T shares you have redeemed, within
45 days of redemption, at the then-prevailing NAV without a sales load, or
reinstate your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A or Class T shares
if such shares were subject to a CDSC, your account will be credited with an
amount equal to the CDSC previously paid upon redemption of the shares
reinvested. The Reinvestment Privilege may be exercised only once.
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 by the Transfer Agent of 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. Holders of jointly registered Fund or bank accounts may
have redemption proceeds of only up to $250,000 wired within any 30-day
period. Fees ordinarily are imposed by such bank and usually are borne by
the investor. Immediate notification by the correspondent bank to the
investor's bank is necessary to avoid a delay in crediting the funds to the
investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two days
after receipt of the redemption request. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a wire
redemption will be effected as a TeleTransfer transaction through the ACH
system unless more prompt transmittal specifically is requested. Holders of
jointly registered Fund or bank accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account only up to $250,000 within any
30-day period. See "Purchase of Shares-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 NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
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 NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect the Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years; then of amounts representing the cost
of shares purchased six years prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1%
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC. The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described below. If the Company's Board determines to discontinue the
waiver of the CDSC, the disclosure herein will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Prospectus or this Statement of Additional Information at the time of the
purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
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. Shares of any Class of the Fund may be exchanged for
shares of the same Class of another fund in the Dreyfus Premier Family of
Funds or shares of certain other funds advised or administered by Dreyfus.
Shares of other funds purchased by exchange will be purchased on the basis
of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
You also may exchange your Fund shares that are subject to a CDSC for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can
be made into certain other funds managed or administered by Dreyfus. No
CDSC is charged when an investor exchanges into an Exchange Account;
however, the applicable CDSC will be imposed when shares are redeemed from
an Exchange Account or other applicable Fund account. Upon redemption, the
applicable CDSC will be calculated without regard to the time such shares
were held in an Exchange Account. See "Redemption of Shares." Redemption
proceeds for Exchange Account shares are paid by Federal wire or check only.
Exchange Account shares also are eligible for the Auto-Exchange Privilege,
Dividend Sweep and the Automatic Withdrawal Plan.
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. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr automated telephone system) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class of certain other funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to
the schedule the investor has selected. This Privilege is available only
for existing accounts. With respect to Class R shares held by a Retirement
Plan, exchanges may be made only between the investor's Retirement Plan
account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV as described
above under "Fund Exchanges." Enrollment in or modification or cancellation
of this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs 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.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier
Midcap Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. The
Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. For more information concerning this Privilege
and the funds in the Dreyfus Premier Family of Funds or the Dreyfus Family
of Funds eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-554-4611.
Fund Exchanges and the 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. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to Dreyfus
Premier Midcap Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-
6587 and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or
charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. 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.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A or Class T
shares to which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A or Class T shares where the sales load is imposed
concurrently with withdrawals of Class A or Class T shares generally are
undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from the Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Midcap
Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select
a new fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dreyfus Dividend Sweep. The Fund
may modify or terminate these privileges at any time or charge a service
fee. No such fee currently is contemplated. Shares held under Keogh Plans,
IRAs or other retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you
may have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the ACH system at each pay period. To
establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. Your employer
must complete the reverse side of the form and return it to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. You
may obtain the necessary authorization form by calling 1-800-554-4611. You
may change the amount of purchase or cancel the authorization only by
written notification to your employer. It is the sole responsibility of
your employer, not the Distributor, your Agent, Dreyfus, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for this Privilege.
Dreyfus Step Program. Holders of the Fund's Investor shares prior to
January 16, 1998 who had enrolled in Dreyfus Step Program may continue to
purchase shares of the same class (currently designated Class A shares)
without regard to the Fund's minimum initial investment requirements through
Dreyfus-Automatic Asset Builderr, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. Participation in this Program
may be terminated by the shareholder 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 reserves the right to
redeem your account if you have terminated your participation in the Program
and your account's NAV is $500 or less. See "Account Policies-General
Policies" in the Fund's Prospectus. The Fund may modify or terminate this
Program at any time. The Dreyfus Step Program is not available to open new
accounts in any Class of the Fund.
Letter of Intent-Class A and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of
Eligible Fund shares purchased in a 13-month period pursuant to the terms
and conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter
of Intent) in any Eligible Fund that may be used toward "Right of
Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales load will be
applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
or Class T shares, as applicable, of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or
the Fund to sell, the full amount indicated at the sales load in effect at
the time of signing, but you must complete the intended purchase to obtain
the reduced sales load. At the time you purchase Class A or Class T shares,
you must indicate your intention to do so under a Letter of Intent.
Purchases pursuant to a Letter of Intent will be made at the then-current
NAV plus the applicable sales load in effect at the time such Letter of
Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
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.
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
anticipates receiving simultaneous orders that may significantly affect the
Fund (e.g., amounts equal to 1% or more of the Fund's total assets). If an
exchange request is refused, the Fund will take no other action with respect
to the shares until it receives further instructions from the investor. The
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount
of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy
on excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to non-IRA plan accounts.
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 NAV
but the purchase order would be effective only at the NAV 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. The 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. Where market
quotations are not readily available, the Fund's investments are valued
based on fair value as determined in good faith by the Company's Board.
Debt 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. 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 NAV 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, are
accrued daily and taken into account for the purpose of determining the NAV
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 of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors 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 of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and
Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income and distributes net realized capital gains, if any, once a
year, but it may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. The Fund will not make
distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Investors other
than qualified retirement plans may choose whether to receive dividends and
other distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both
dividends and other distributions in additional Fund shares at NAV;
dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Dividends and other distributions paid by each Class are calculated at the
same time and in the same manner and will be in the same amount, except that
the expenses attributable solely to a particular Class are borne exclusively
by that Class. Class B and Class C shares will receive lower per share
dividends than Class T shares, which will in turn receive lower per share
dividends than Class A shares, which will in turn receive lower per share
dividends than Class R shares, because of the higher expenses borne by the
respective Classes.
It is expected that the Fund will continue qualify for treatment as a
regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve the Fund of any liability for federal income tax
to the extent its earnings and realized gains are distributed in accordance
with applicable provisions of the Code. 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) (the "Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
(the "Income Requirement"), and (3) must meet certain asset diversification
and other requirements. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency. If the Fund failed to qualify for treatment as a RIC
for any taxable year, (1) it would be taxed at corporate rates on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (2) the shareholders would
treat all those distributions, including distributions of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
as dividends (that is, ordinary income) to the extent of the Fund's earnings
and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment.
The Fund will be subject to a non-deductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute substantially all of its taxable
investment income and capital gains.
Distributions. If you elect to receive dividends and other
distributions in cash, and your distribution check is returned to the Fund
as undeliverable or remains uncashed for six months, the Fund reserves the
right to reinvest that distribution and all future distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains, net realized gains
from certain foreign currencies transactions and all or a portion of any
gains realized from the sale or other disposition of certain market discount
bonds (collectively, "dividend distributions") will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to those shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and
whether the distributions are received in cash or reinvested in additional
Fund shares.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions paid during
the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A and Class T shares if a shareholder redeems those shares
or exchanges them for shares of another fund advised or administered by
Dreyfus, within 90 days of purchase, and (1) in the case of a redemption,
the shareholder acquires other fund Class A or Class T shares through
exercise of the Reinvestment Privilege or, (2) in the case of an exchange,
the other fund reduces or eliminates its otherwise applicable sales load.
In these cases, the amount of the sales load charged on the purchase of the
original Class A or Class T shares, up to the amount of the reduction of the
sales load pursuant to the Reinvestment Privilege or on the exchange, as the
case may be, is not included in the tax basis of those shares for purposes
of computing gain or loss and instead is added to the tax basis of the
acquired shares.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
Internal Revenue Service ("IRS") distributions paid to such plans.
Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be
taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to
10% of the taxable portion of the distribution. The administrator, trustee
or custodian of a qualified retirement plan will be responsible for
reporting distributions from the plan to the IRS. Moreover, certain
contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not
elect to have the distribution paid directly from the plan to an eligible
retirement plan in a "direct rollover," the distribution is subject to 20%
income tax withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if the
shareholder fails to certify furnish a TIN to the Fund and certify that it
is correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income. A TIN is either the
Social Security number, IRS individual taxpayer identification number or
employer identification number of the record owner of an account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax imposed on the record owner and may be claimed as a credit on his or her
federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such a distribution would be a
return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives any capital gain distributions 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 those capital gain
distributions.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
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 total return on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign
investors. If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, it
will be eligible to, and may, file an election ("Election") with the IRS
that would enable its shareholders, in effect, to receive the benefit of the
foreign tax credit with respect to any foreign taxes it paid. Pursuant to
the Election, the Fund would treat those taxes as dividends paid to its
shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him or her, his or her proportionate share of
those taxes, (2) treat his or her share of those taxes and of any dividend
paid by the Fund that represents income from foreign or U.S. possession
sources as his or her own income from those sources and (3) either deduct
the taxes deemed paid by him or her in computing his or her taxable income
or, alternatively, use the foregoing information in calculating the foreign
tax credit against his or her federal income tax. No deduction for foreign
taxes may be claimed by a shareholder who does not itemize deductions.
Generally, a credit for foreign taxes may not exceed portion of the
shareholder's federal income tax attributable to his total foreign source
taxable income; however, pursuant to the Taxpayer Relief Act of 1997 (the
"Tax Act"), individuals who have no more than $300 ($600 for married persons
filing jointly) of creditable foreign taxes included on Forms 1099 and all
of whose foreign source income is "qualified passive income" may elect each
year to be exempt from the extremely complicated foreign tax credit
limitation and will be able to claim a foreign tax credit without having to
file the detailed Form 1116 that otherwise is required. The Fund will
report to its shareholders shortly after each taxable year their respective
shares of its income from sources within foreign countries and U.S.
possessions and foreign taxes it paid if it makes the Election.
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 that it
distributes 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 -- which likely would have to be distributed by the Fund to
satisfy the Distribution Requirement and avoid imposition of the Excise Tax
- -- even if those earnings and gain were not distributed to the Fund by 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 (and under regulations proposed in 1992 that provided a similar
election with respect to the stock of certain PFICs).
Foreign Currency 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
on the exercise or lapse of, or closing transactions respecting, certain
options, futures and forward contracts ("Section 1256 Contracts") will 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 same manner.
Offsetting positions held by the Fund involving certain options,
futures or forward contracts may constitute "straddles", which are defined
to include "offsetting positions" in actively traded personal property.
Under Section 1092 of the Code, any loss from the disposition of a position
in a straddle generally may be deducted only to the extent the loss exceeds
the unrealized gain on the offsetting position(s) of the straddle. In
addition, these rules may postpone the recognition of loss that otherwise
would be recognized under the mark-to-market rules discussed above. The
regulations under Section 1092 also provide certain " "wash sale" rules,
which apply to transactions where a position is sold at a loss and a new
offsetting position is acquired within a prescribed period, and "short sale"
rules applicable to straddles. If the Fund makes certain elections
(including an election as to straddles that include a position in one or
more Section 1256 Contracts (so-called "mixed straddles"), the amount,
character, and timing of recognition of gains and losses from the affected
straddle positions would be determined under rules that vary according to
the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
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. The foregoing will not apply, however, to any
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end
of that year and the Fund holds the appreciated financial position unhedged
for 60 days after that closing (i.e., at no time during that 60-day period
is the Fund's risk of loss regarding that position reduced by reason of
certain specified transactions with respect to substantially similar or
related property, such as having an option to sell, being contractually
obligated to sell, making a short sale, or granting an option to buy
substantially identical stock or securities).
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 would be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and would
need to distribute that income to satisfy the Distribution Requirement and
avoid the Excise Tax. In that case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the
Fund may be subject to the tax laws thereof. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes 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 below. Special
U.S. federal income tax rules that differ from those described below may
apply to certain foreign persons who invest in the Fund, such as a foreign
shareholder entitled to claim the benefits of an applicable tax treaty.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain generally will not be subject to U.S. federal income tax unless
the foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable year.
In the case of certain foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commission 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.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the qualify of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.
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 Dreyfus in carrying out its obligations to the
Fund. The receipt of such research services does not reduce the normal
independent research activities of Dreyfus; however, it enables Dreyfus to
avoid the additional expenses which might otherwise be incurred if Dreyfus
were to attempt to develop comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions amounting to $174,939, $63,701 and $37,784,
respectively.
The aggregate amount of transactions during the fiscal year ended
October 31, 1998 in securities effected on an agency basis through a broker
dealer for research services was $4,363,625, and the commissions and
concessions related to such transactions was $7,682.
Portfolio Turnover. While securities are purchased for the Fund on the
basis of potential for capital appreciation and not for short-term trading
profits, the Fund's portfolio turnover rate may exceed 100%. A portfolio
turnover rate of 100% would occur, for example, if all the securities held
by the Fund were replaced once in a period of one year. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions
and other expenses that must be borne directly by the Fund and, thus,
indirectly by its shareholders. In addition, a higher rate of portfolio
turnover may result in the realization of larger amounts of short-term
and/or long-term capital gains that, when distributed to the Fund's
shareholders, are taxable to them at the then current rate. Nevertheless,
securities transactions for the Fund will be based only upon investment
considerations and will not be limited by any other considerations when
Dreyfus deems its appropriate to make changes in the Fund's assets. 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. The portfolio turnover rates for the
fiscal years ended October 31, 1998 and 1997 were 78.02% and 81.87%,
respectively.
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 returns (expressed as a percentage) for Class A,
Class B, Class C and Class R shares of the Fund for the periods noted were:
Average Annual Total Return
for the Periods Ended April 30, 1999
1 Year 5 Years Since Inception
Class A shares (10.99)% 17.29% 16.99% (4/6/94)
Class B shares (10.00)% - 4.23% (1/16/98)
Class C shares (7.18)% - 7.38% (1/16/98)
Class R shares (5.34)% 19.00% 17.25% (11/12/93)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase,
although no sales load was applicable to Class A shares or its predecessor
class until January 16, 1998, and the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price
in the case of Class A and Class T) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result. The average
annual total return figures for a Class calculated in accordance with such
formula assume that, in the case of Class A or Class T, the maximum sales
load has been deducted from the hypothetical initial investment at the time
of purchase or, in the case of Class B or Class C, the maximum applicable
CDSC has been paid upon redemption at the end of the period.
The Fund's total return for Class R shares (formerly called Restricted
Shares) for the period from November 12, 1993 (the Fund's inception date) to
April 30, 1999 was 138.46%. The Fund's total return for Class A shares
(formerly called Investor shares) for the period from April 6, 1994
(inception date of Class A shares) to April 30, 1999 was 121.60% (assuming
deduction of the maximum sales load from the hypothetical initial investment
at the time of purchase, although no sales load was applicable to Class A
shares or its predecessor class until January 16, 1998). Without giving
effect to the applicable front-end sales load, the total return for Class A
was 135.11% for this period. The Fund's total return for Class B and Class
C shares for the period from January 16, 1998 (inception date of Class B and
Class C shares) to April 30, 1999 was 5.49% and 9.62%, respectively
(assuming deduction of the maximum CDSC to each hypothetical investment).
Without giving effect to the applicable CDSC, the total return for Class B
and Class C shares was 9.49% and 9.62%, respectively, for the same period.
Total return is calculated by subtracting the amount of the Fund's NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of a stated period from the NAV per share at the end of the period
(after giving effect to the reinvestment of dividends and other
distributions during the period and any applicable CDSC), and dividing the
result by the NAV (maximum offering price in the case of Class A and Class
T) per share at the beginning of the period. Total return also may be
calculated based on the NAV per share at the beginning of the period instead
of the maximum offering price per share at the beginning of the period for
Class A or Class T shares or without giving effect to any applicable CDSC at
the end of the period for Class B or Class C shares. In such cases, the
calculation would not reflect the deduction of the sales load with respect
to Class A or Class T shares or any applicable CDSC with respect to Class B
or C shares, which, if reflected would reduce the performance quoted.
No performance information is provided for Class T shares since they
were not offered as of April 30, 1999.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
S&P 500, the Standard & Poor, 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; (ii) 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; (iii) the
Consumer Price Index (a measure of inflation) to assess the real rate of
return from an investment in the Fund or the Fund's performance against
inflation to the performance of other instruments against inflation; and
(iv) products managed by a universe of money managers with similar country
allocation and performance objectives. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses. From time to time,
advertising materials for the Fund may refer to Morningstar ratings and
related analyses supporting the rating.
From time to time, advertising material for the Fund may include: (i)
biographical information relating to its portfolio manager and may refer to,
or include commentary by the Fund's portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors
(ii) information concerning retirement and investing for retirement,
including 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; (iii) the approximate number of then current Fund
shareholders; (iv) references to the Fund's quantitative, disciplined
approach to stock market investing and the number of stocks analyzed by
Dreyfus; and (v) Lipper or Morningstar ratings and related analysis
supporting the ratings. 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 may refer to studies performed
by The Dreyfus Corporation or its affiliates, such as "The Dreyfus Tax
Informed Investing Study" or "The Dreyfus Gender Investment Comparison Study
(1996 & 1997)" or other such studies.
INFORMATION ABOUT THE FUND/COMPANY
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 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 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 Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 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.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. The financial statements for the six-month period ended April
30, 1999, which are unaudited, are included in the Fund's Semi-Annual Report
to Shareholders. Copies of the Annual Report and Semi-Annual Report
accompany this Statement of Additional Information. The financial
statements included in the Annual Report, and the Independent Auditors'
Report thereon contained therein, and the Semi-Annual Report, and related
notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
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.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `BB' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and High internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Credit Rating Co. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
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").
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").
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").
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").
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").
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.
A(17)Articles of Amendment dated March 25, 1998. Incorporated by reference to
Post-Effective Amendment No. 62 to the Registrant's Registration Statement
on Form N-1A.
A(18)Articles of Amendment dated July 30, 1998. Incorporated by reference to
Post-Effective Amendement No. 67.
B Bylaws. Incorporated by reference to Pre-Effective Amendment No. 53
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) 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(3) Amended Exhibit A to Investment Management Agreement between Mellon Bank,
N.A. and the Registrant. Incorporated by reference to Post-Effective
Amendement No. 67.
D(4) Sub-Investment Advisory Agreement between The Dreyfus Corporation and Fayez
Sarofim & Co. with respect to Dreyfus Tax-Smart Growth Fund. Incorporated
by reference to Post-Effective Amendment No. 67.
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 and Premier Mutual Fund
Services, Inc. and the Registrant. Incorporated by reference to Post-
Effective Amendment No. 67.
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. Incorporated by reference to Post-Effective Amendment
No. 67.
H Not Applicable.
I(1) Opinion of counsel. Incorporated by reference to the Registration
Statement and to Post-Effective Amendment No. 32 and Post-Effective
Amendment No. 56 and Post-Effective Amendment No. 67.
I(2) Consent of Counsel. Filed herewith.
J Consent of KPMG LLP. Filed herewith.
K Letter of Investment Intent. Incorporated by reference to the Registration
Statement.
M(1) 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.
M(2) Restated Distribution Plan for Dreyfus Disciplined Stock Fund Incorporated
by reference to Post-Effective Amendment No. 61 to the Registrant's
Registration Statement ("Post-Effective Amendment No. 61").
M(3) Form of Distribution and Service Plans (relating to Class B Shares and
Class C Shares). Incorporated by reference to Post-Effective Amendment No.
32.
M(4) Distribution Plan for Dreyfus Tax-Smart Growth Fund and Dreyfus Disciplined
Smallcap Stock Fund. Incorporated by reference to Post-Effective Amendment
No. 67.
N Rule 18f-3 Plans. Incorporated by reference to Post-Effective Amendment
No. 61.
Other Exhibits
(1) Powers of Attorney of the Directors dated June 15, 1998. Incorporated by
reference to Post-Effective Amendment No. 65. Powers of Attorney of the
Directors dated June 1, 1999. Filed herewith.
(2) Power of Attorney of Marie E. Connolly dated July 6, 1998. Incorporated by
reference to Post-Effective Amendment No. 65.
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);
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 Investment Advisors, Inc., another wholly-owned
subsidiary, provides investment management services to various pension plans,
institutions and individuals.
<TABLE>
<CAPTION>
ITEM 26. Business and Other Connections of Investment Adviser (continued)
Officers and Directors of Investment Adviser
<S> <C> <C> <C>
Name and Position
With Dreyfus Other Businesses Position Held Dates
Christopher M. Condron Franklin Portfolio Associates, LLC* Director 1/97 - Present
Chairman of the Board and
Chief Executive Officer
TBCAM Holdings, Inc.* Director 10/97 - Present
President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Director 1/98 - Present
Asset Management, LLC* Chairman 1/98 - 6/98
President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Pareto Partners Partner Representative 11/95 - 5/97
271 Regent Street
London, England W1R 8PP
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Certus Asset Advisors Corp.** Director 6/95 -Present
Mellon Capital Management Director 5/95 -Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 -1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc.* Director 5/95 - Present
President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - 3/98
Mellon Bank Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Christopher M. Condron The Boston Company, Inc.* Vice Chairman 1/94 - Present
Chairman and Chief Director 5/93 - Present
Executive Officer
(Continued) Laurel Capital Advisors, LLP+ Exec. Committee 1/98 - 8/98
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Director 5/93 -Present
Company*
The Boston Company Financial President 6/89 - Present
Strategies, Inc. * Director 6/89 - Present
Mandell L. Berman Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
Burton C. Borgelt DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Bank Corporation+ Director 6/91 - Present
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Inc. Director 2/81 - Present
570 West College Avenue
York, PA
Quill Corporation Director 3/93 - Present
Lincolnshire, IL
Stephen E. Canter Dreyfus Investment Chairman of the Board 1/97 - Present
President, Chief Operating Advisors, Inc.++ Director 5/95 - Present
Officer, Chief Investment President 5/95 - Present
Officer, and Director
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - Present
Member
Mellon Equity Associates, LLP+ Executive Committee 1/99 - Present
Member
Franklin Portfolio Associates, LLC* Director 2/99 - Present
Franklin Portfolio Holdings, Inc.* Director 2/99 - Present
The Boston Company Asset Director 2/99 - Present
Management, LLC*
TBCAM Holdings, Inc.* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Stephen E. Canter Founders Asset Management, LLC Member, Board of 12/97 - Present
President, Chief Operating 2930 East Third Ave. Managers
Officer, Chief Investment Denver, CO 80206 Acting Chief Executive 7/98 - 12/98
Officer, and Director Officer
(Continued)
The Dreyfus Trust Company+++ Director 6/ 95 - Present
Thomas F. Eggers Dreyfus Service Corporation++ Executive Vice President 4/96 - Present
Vice Chairman - Institutional Director 9/96 - Present
and Director
Founders Asset Management, LLC Member, Board of 2/99 - Present
2930 East Third Avenue Managers
Denver, CO 80206
Steven G. Elliott Mellon Bank Corporation+ Senior Vice Chairman 1/99 - Present
Director Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
Treasurer 1/90 - 5/98
Mellon Bank, N.A.+ Senior Vice Chairman 3/98 - Present
Vice Chairman 6/92 - 3/98
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Corporation Controller 10/90 - 2/99
500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Financial Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+ Chairman 7/89 - 11/97
President 4/88 - 11/97
Chief Executive Officer 4/88 - 11/97
Mellon International Investment Director 9/89 - 8/97
Corporation+
Steven G. Elliott Mellon Financial Services Treasurer 12/87 - Present
Director (Continued) Corporation # 5+
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
Lawrence S. Kash Dreyfus Investment Director 4/97 - Present
Vice Chairman Advisors, Inc.++
And Director
Dreyfus Brokerage Services, Inc. Chairman 11/97 - Present
401 North Maple Ave. Chief Executive Officer 11/97 - Present
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - 2/99
President 9/96 - 3/99
Dreyfus Precious Metals, Inc.++ + Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - Present
Organization, Inc.++ President 1/97 - Present
Seven Six Seven Agency, Inc. ++ Director 1/97 - Present
Dreyfus Insurance Agency of Chairman 5/97 - Present
Massachusetts, Inc.++++ President 5/97 - Present
Director 5/97 - Present
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - Present
Corporation++ President 5/97 - Present
Director 12/94 - Present
Founders Asset Management, LLC Member, Board of 12/97 - Present
2930 East Third Avenue Managers
Denver, CO. 80206
The Boston Company Advisors, Chairman 12/95 - Present
Inc. Chief Executive Officer 12/95 - Present
Wilmington, DE President 12/95 - Present
The Boston Company, Inc.* Director 5/93 - Present
President 5/93 - Present
Mellon Bank, N.A.+ Executive Vice President 6/92 - Present
Laurel Capital Advisors, LLP+ Chairman 1/98 - 8/98
Executive Committee 1/98 - 8/98
Member
Chief Executive Officer 1/98 - 8/98
President 1/98 - 8/98
Lawrence S. Kash Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Vice Chairman Chairman 9/93 - 1/98
And Director (Continued) President and CEO 12/91 - 1/98
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Martin G. McGuinn Mellon Bank Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 3/98
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
Mellon Financial Vice President 9/86 - 10/97
Corporation (MD)
Rockville, Maryland
J. David Officer Dreyfus Service Corporation++ Executive Vice President 5/98 - Present
Vice Chairman Director 3/99 - Present
And Director
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
North Miami Beach, FL 33180
Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - Present
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - Present
Services, Inc.* Director 8/96 - Present
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
J. David Officer Mellon Trust of New York Director 6/96 - Present
Vice Chairman and 1301 Avenue of the Americas
Director (Continued) New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon Bank, N.A.+ Executive Vice President 2/94 - Present
Mellon United National Bank Director 3/98 - Present
1399 SW 1st Ave., Suite 400
Miami, Florida
Boston Group Holdings, Inc.* Director 12/97 - Present
Dreyfus Financial Services Corp. + Director 9/96 - Present
Dreyfus Investment Services Director 4/96 - Present
Corporation+
Richard W. Sabo Founders Asset Management LLC President 12/98 - Present
Director 2930 East Third Avenue Chief Executive Officer 12/98 - Present
Denver, CO. 80206
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
Richard F. Syron American Stock Exchange Chairman 4/94 - Present
Director 86 Trinity Place Chief Executive Officer 4/94 - Present
New York, NY 10006
Ronald P. O'Hanley Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Vice Chairman
TBCAM Holdings, Inc.* Chairman 6/98 - Present
Director 10/97 - Present
The Boston Company Asset Chairman 6/98 - Present
Management, LLC* Director 1/98 - 6/98
The Boston Company Asset Director 2/97 - 12/97
Management, Inc. *
Boston Safe Advisors, Inc.* Chairman 6/97 - Present
Director 2/97 - Present
Pareto Partners Partner Representative 5/97 - Present
271 Regent Street
London, England W1R 8PP
Mellon Capital Management Director 5/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon Equity Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon-France Corporation+ Director 3/97 - Present
Ronald P. O'Hanley Laurel Capital Advisors+ Trustee 3/97 - Present
Vice Chairman (Continued)
Mark N. Jacobs Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - Present
Organization, Inc.++
William H. Maresca The Dreyfus Trust Company+++ Director 3/97 - Present
Controller
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Dreyfus Consumer Credit Corp. ++ Treasurer 10/98 -Present
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, DE 19808
The TruePenny Corporation++ Vice President 10/98 - Present
Dreyfus Precious Metals, Inc. +++ Treasurer 10/98 - 12/98
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Corporation++ Vice President 10/98 - Present
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Assistant Treasurer 3/93 - Present
Organization, Inc.++
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
William T. Sandalls, Jr. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - Present
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97-12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
William T. Sandalls, Jr. Dreyfus-Lincoln, Inc. Director 12/96 - Present
Executive Vice President 4500 New Linden Hill Road President 1/97 - Present
(Continued) Wilmington, DE 19808
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
Dreyfus Partnership President 1/97 - 6/97
Management, Inc.++ Director 1/96 - 6/97
Dreyfus Service Organization, Director 1/96 - 6/97
Inc.++ Executive Vice President 1/96 - 6/97
Treasurer 10/96- Present
Dreyfus Insurance Agency of Director 5/97 - Present
Massachusetts, Inc.++++ Treasurer 5/97- Present
Executive Vice President 5/97 - Present
Diane P. Durnin Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and Advertising
Development Division
Patrice M. Kozlowski None
Vice President - Corporate
Communications
Mary Beth Leibig None
Vice President -
Human Resources
Theodore A. Schachar Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
Dreyfus Investment Advisors, Inc.++ Vice President - Tax 10/96 - Present
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Inc.++ Vice President - Tax 10/96 - Present
Wendy Strutt None
Vice President
Richard Terres None
Vice President
Andrew S. Wasser Mellon Bank Corporation+ Vice President 1/95 - Present
Vice-President -
Information Systems
James Bitetto The TruePenny Corporation++ Secretary 9/98 - Present
Assistant Secretary
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
Steven F. Newman Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
_______________________________
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ 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 53 State Street, Boston, Massachusetts 02109.
</TABLE>
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 Funds
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Debt and Equity Funds
28) Dreyfus Index Funds, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Preferred Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Funds, Inc.
35) Dreyfus Investment Grade Bond Funds, Inc.
36) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds Trust
38) The Dreyfus/Laurel Tax-Free Municipal Funds
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus MidCap Index Fund
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Insured Tax Exempt Bond Fund
54) Dreyfus New York Municipal Cash Management
55) Dreyfus New York Tax Exempt Bond Fund, Inc.
56) Dreyfus New York Tax Exempt Intermediate Bond Fund
57) Dreyfus New York Tax Exempt Money Market Fund
58) Dreyfus U.S. Treasury Intermediate Term Fund
59) Dreyfus U.S. Treasury Long Term Fund
60) Dreyfus 100% U.S. Treasury Money Market Fund
61) Dreyfus U.S. Treasury Short Term Fund
62) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
63) Dreyfus Pennsylvania Municipal Money Market Fund
64) Dreyfus Premier California Municipal Bond Fund
65) Dreyfus Premier Equity Funds, Inc.
66) Dreyfus Premier International Funds, Inc.
67) Dreyfus Premier GNMA Fund
68) Dreyfus Premier Worldwide Growth Fund, Inc.
69) Dreyfus Premier Municipal Bond Fund
70) Dreyfus Premier New York Municipal Bond Fund
71) Dreyfus Premier State Municipal Bond Fund
72) Dreyfus Premier Value Fund
73) Dreyfus Short-Intermediate Government Fund
74) Dreyfus Short-Intermediate Municipal Bond Fund
75) The Dreyfus Socially Responsible Growth Fund, Inc.
76) Dreyfus Stock Index Fund, Inc.
77) Dreyfus Tax Exempt Cash Management
78) The Dreyfus Third Century Fund, Inc.
79) Dreyfus Treasury Cash Management
80) Dreyfus Treasury Prime Cash Management
81) Dreyfus Variable Investment Fund
82) Dreyfus Worldwide Dollar Money Market Fund, Inc.
83) Founders Funds, Inc.
84) General California Municipal Bond Fund, Inc.
85) General California Municipal Money Market Fund
86) General Government Securities Money Market Fund, Inc.
87) General Money Market Fund, Inc.
88) General Municipal Bond Fund, Inc.
89) General Municipal Money Market Funds, Inc.
90) General New York Municipal Bond Fund, Inc.
91) General New York Municipal Money Market Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Chief Treasurer
Compliance Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Jean M. O'Leary+ Assistant Vice President, None
Assistant Secretary and
Assistant Clerk
William J. Nutt+ Chairman of the Board None
Stephanie D. Pierce++ Vice President Vice President,
Assistant Secretary
and Assistant
Treasurer
Patrick W. McKeon+ Vice President None
Joseph A. Vignone+ Vice President 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
Item 29. Management Services
_______ ___________________
Not Applicable
Item 30. Undertakings
_______ ____________
None
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York on the
16th day of June, 1999.
The Dreyfus/Laurel Funds, Inc.
BY: /s/Marie E. Connolly*
------------------------------
MARIE E. CONNOLLY, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
__________________________ ___________________ __________
/s/Marie E. Connolly* President, Treasurer 6/16/99
__________________________
Marie E. Connolly
/s/Joseph S. DiMartino* Director 6/16/99
__________________________
Joseph S. DiMartino
/s/James M. Fitzgibbons* Director 6/16/99
__________________________
James M. Fitzgibbons
/s/J. Tomlinson Fort* Director 6/16/99
__________________________
J. Tomlinson Fort
/s/Arthur L. Goeschel* Director 6/16/99
__________________________
Arthur L. Goeschel
/s/Kenneth A. Himmel* Director 6/16/99
__________________________
Kenneth A. Himmel
/s/Stephen J. Lockwood* Director 6/16/99
__________________________
Stephen J. Lockwood
/s/John Sciullo* Director 6/16/99
__________________________
John Sciullo
/s/Roslyn M. Watson* Director 6/16/99
- --------------------------
Roslyn M. Watson
/s/Benaree Pratt Wiley* Director 6/16/99
- --------------------------
Benaree Pratt Wiley
*BY:
Stephanie D. Pierce,
---------------------
Attorney-in-Fact
Independent Auditors' Consent
To the Board of Directors and Shareholders of
The Dreyfus/Laurel Funds, Inc.:
We consent to the use of our report dated December 15, 1998, with respect
to the four Funds listed below of the The Dreyfus/Laurel Funds, Inc.,
incorporated herein by reference and to the references to our Firm under
the headings "Financial Highlights" in the Prospectus and "Transfer and
Dividend Disbursing Agent, Custodian, Counsel and Independent Auditors" in
the Statement of Additional Information.
Funds
Dreyfus Premier Balanced Fund
Dreyfus Premier Small Company Stock Fund
Dreyfus Premier Large Company Stock Fund
Dreyfus Premier Midcap Stock Fund
/s/KPMG LLP
New York, New York
June 16, 1999
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Margaret W. Chambers,
Marie E. Connolly, Douglas C. Conroy, Frederick C. Dey, Christopher J.
Kelley, Kathleen K. Morrisey, Stephanie Pierce, Elba Vasquez, and Karen
Jacoppo-Wood, and each of them, with full power to act without the other,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her, and in his or her name,
place and stead, in any and all capacities (until revoked in writing) to
sign any and all amendments to the Registration Statement of each Fund
enumerated on Exhibit A hereto (including post-effective amendments and
amendments thereto), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
June 1, 1999
/s/ Joseph S. DiMartino
June 1, 1999
/s/ James M. Fitzgibbons
June 1, 1999
/s/ J. Tomlinson Fort
June 1, 1999
/s/ Arthur L. Goeschel
June 1, 1999
/s/ Kenneth A. Himmel
June 1, 1999
/s/ Stephen J. Lockwood
June 1, 1999
/s/ John J. Sciullo
June 1, 1999
/s/ Roslyn Watson
June 1, 1999
/s/ Benaree Pratt Wiley
EXHIBIT A
The Dreyfus/Laurel Funds, Inc.
The Dreyfus/Laurel Funds Trust
The Dreyfus/Laurel Tax-Free Municipal Funds
Dreyfus High Yield Strategies Fund
