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. 70 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 70 [ X ]
(Check appropriate box or boxes.)
THE DREYFUS/LAUREL FUNDS, INC.
___________________________________________________
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
The Dreyfus/Laurel Funds, Inc.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
on March 1, 1999 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
The following post-effective amendment to the Registrant's Registration
Statement on Form N-1A relates only to Dreyfus Disciplined Stock Fund and
Dreyfus Disciplined Smallcap 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 BALANCED FUND
DREYFUS PREMIER LIMITED TERM INCOME FUND
DREYFUS PREMIER SMALL COMPANY STOCK FUND
DREYFUS PREMIER MIDCAP STOCK FUND
DREYFUS PREMIER LARGE COMPANY STOCK FUND
DREYFUS PREMIER SMALL CAP VALUE FUND
DREYFUS PREMIER TAX MANAGED GROWTH FUND
DREYFUS TAX SMART GROWTH FUND
Dreyfus
Disciplined Smallcap
Stock Fund
Investing in small-cap stocks for investment returns that surpass the Standard
& Poor's SmallCap 600((reg.tm)) Index
PROSPECTUS March 1, 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>
Contents
THE FUND
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2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
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8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
16 Instructions for IRAs
FOR MORE INFORMATION
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Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus Disciplined Smallcap Stock Fund
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Ticker Symbol: DDSSX
GOAL/APPROACH
The fund seeks total investment returns (consisting of capital appreciation and
income) that surpass the Standard & Poor's SmallCap 600((reg.tm)) Index. This
objective may be changed without shareholder approval. To pursue its goal, the
fund invests in a blended portfolio of growth and value stocks of
small-capitalization companies chosen through a disciplined process that
combines computer modeling techniques, fundamental analysis and risk management
In selecting securities, Dreyfus uses a computer model to identify and rank
stocks within an industry, based on:
* 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
Dreyfus then uses fundamental analysis to select the most attractive of the
top-ranked securities and to determine those issues that should be sold. Dreyfus
uses information technology as well as Wall Street sources and company
management to stay abreast of current developments.
Dreyfus manages risk by diversifying across companies and industries, limiting
the potential adverse impact from any one stock or industry. The fund is
structured so that its sector weightings and risk characteristics are similar to
those of the S&P SmallCap 600.
Concepts to understand
SMALL-CAPITALIZATION COMPANIES: new and often entrepreneurial companies.
Small-cap companies tend to grow faster than larger-cap companies and typically
use any profits for expansion rather than for paying dividends. They are also
more volatile than larger companies and fail more often. The fund generally
invests in companies having market capitalizations from $100 million to $2
billion.
S&P SMALLCAP 600: an unmanaged index consisting of the stocks of 600 publicly
traded U.S. companies chosen for market size, liquidity and industry-group
representation. The stocks comprising the S&P SmallCap 600 have market
capitalizations ranging from $50 million to $2 billion.
<PAGE 2>
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 companies carry
additional risks because their earnings are less predictable, their share prices
more volatile and their securities less liquid than those of large, established
companies. Some of the fund's investments will rise and fall based on investor
perception rather than economics.
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.
At times, the fund may engage in short-term trading, which could produce higher
brokerage costs and taxable distributions.
Under adverse market conditions, the fund could invest some or all of its assets
in money market securities. Although the fund would do this only in seeking to
avoid losses, it could reduce the benefit from any upswing in the market.
Other potential risks
The fund may invest in options, futures and foreign currencies to hedge the
fund's portfolio and also 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 is not an index fund. The fund may hold securities not listed in the
S&P SmallCap 600 and may hold fewer securities than the index, either of which
could cause the fund to underperform the index.
<PAGE 3>
PAST PERFORMANCE
Since the fund has less than one calendar year of performance, past performance
information is not included in this section of the prospectus.
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.
<PAGE 4>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load).
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Fee table
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT
Maximum redemption 1.00%
FOR REDEMPTIONS OR EXCHANGES OF SHARES
MADE WITHIN SIX MONTHS OF THEIR ISSUANCE
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ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management 1.25%
Rule 12b-1 0.25%
Other expenses 0.00%
BASED ON ESTIMATED AMOUNTS
FOR THE CURRENT FISCAL YEAR
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TOTAL 1.50%
Expense example
1 Year 3 Years
-------------------------------------------------------
$153 $474
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
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 to Mellon Bank, N.A. and its affiliates for
shareholder service and to the fund's distributor for shareholder service and
promotional expenses. Because this fee is paid out of the fund's assets on an
ongoing basis, over time it will increase the cost of your investment and may
cost you more than paying other types of sales charges.
The Fund
<PAGE 5>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $121 billion in more than 163
mutual fund portfolios. 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 $350 billion of assets under management and $1.7 trillion
of assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, the firm
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
Gene F. Cervi, CFA, has been employed by Dreyfus as the fund's portfolio manager
since its inception. Mr. Cervi is also Director of Investment Research for
Laurel Capital Advisors, an affiliate of Dreyfus, and a Vice President of Mellon
Bank, which he joined in 1982.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
<PAGE 6>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the one-month period indicated.
These financial highlights have been independently audited by KPMG LLP, whose
report, along with the fund's financial statements, is included in the annual
report.
PERIOD ENDED
OCTOBER 31,
1998(1)
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PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Net realized and unrealized gain (loss) on investments .56
Net asset value, end of period 13.06
Total return (%)(2) 4.48(3)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 13.13(3)
Ratio of net investment (loss) to average net assets (%) (.02)(3)
Portfolio turnover rate (%) 2.58(3)
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Net assets, end of period ($ x 1,000) 5,429
(1) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) EXCLUSIVE OF REDEMPTION FEE.
(3) NOT ANNUALIZED.
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are generally 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.
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Minimum investments
Initial Additional
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REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 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
TRADITIONAL IRA: an individual retirement account. Your contributions may or may
not be deductible depending on your circumstances. Assets grow tax-deferred;
withdrawals and distributions are taxable in the year made.
SPOUSAL IRA: an IRA funded by a working spouse in the name of a nonworking
spouse.
ROTH IRA: an IRA with non-deductible contributions, and tax-free growth of
assets and distributions to pay retirement expenses, provided certain conditions
are met.
EDUCATION IRA: an IRA with nondeductible contributions, and tax-free growth of
assets and distributions, if used to pay certain educational expenses.
FOR MORE COMPLETE IRA INFORMATION, CONSULT DREYFUS OR YOUR TAX PROFESSIONAL.
<PAGE 8>
Selling shares
YOU MAY SELL SHARES AT ANY TIME. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
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.
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
* if you are selling or exchanging shares within six
months of their issuance, the fund may deduct a 1% redemption fee (not
charged on shares sold through the Automatic Withdrawal Plan or Dreyfus
Auto-Exchange Privilege, or on shares acquired through dividend reinvestment
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Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
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CHECK NO MINIMUM $150,000 PER DAY
WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
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
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
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).
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
and distributes any net capital gains that it has realized once a year. 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:
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Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
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INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
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 right can provide a guide for your 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
<PAGE 11>
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
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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).
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For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
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For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Our experienced financial consultants can help you make informed choices and
provide you with personalized attention in handling account transactions. The
Financial Centers also offer informative seminars and events. To find the
Financial Center nearest you, call 1-800-499-3327.
<PAGE 12>
Exchange privilege
YOU CAN EXCHANGE $500 OR MORE (no minimum for retirement accounts) from one
Dreyfus fund into another. You can request your exchange in writing or by phone.
Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). Other than the redemption fee described under "Account Policies --
Selling Shares," there is currently no fee for exchanges, although you may be
charged a sales load when exchanging into any fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
The Dreyfus Touch((reg.tm))
FOR 24-HOUR AUTOMATED ACCOUNT ACCESS, use Dreyfus Touch. With a touch-tone
phone, you can easily manage your Dreyfus accounts, obtain information on other
Dreyfus mutual funds and get current stock market quotes.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:
* for traditional, rollover, Roth and Education IRAs, call 1-800-645-6561
* for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
Your Investment
<PAGE 13>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
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: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit and Trust Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "4000" before your account number.
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.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 14>
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 "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
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
<PAGE 15>
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
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 (see "To Open an Account" at left).
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but insert "4000" before your account number.
TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).
Automatically
WITHOUT ANY INITIAL INVESTMENT Call us
to request a Dreyfus Step Program form. Complete and return the form along with
your application.
ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
All contributions will count as current year.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 16>
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number
* the 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.
Mail in your request (see "To Open an Account" at left).
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS TRUST CO., CUSTODIAN
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. 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
<PAGE 17>
For More Information
Dreyfus Disciplined Smallcap 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 period.
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 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation 041P0399
<PAGE>
Dreyfus
Disciplined
Stock Fund
Investing in large-cap stocks for investment returns that exceed the S&P
500((reg.tm))
PROSPECTUS March 1, 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>
Contents
THE FUND
- ----------------------------------------------------
2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
- --------------------------------------------------------------------
8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
16 Instructions for IRAs
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus Disciplined Stock Fund
- -------------------------------
Ticker Symbol: DDSTX
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's((reg.tm)) 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 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 500 are primary goals of the process.
Dreyfus uses a computer model to identify and rank stocks within an industry,
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
Then 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 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.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks. The model screens 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. Dreyfus also
maintains the flexibility to adapt the screening criteria to changes in market
conditions.
S&P 500: an unmanaged index of 500 common stocks chosen to reflect the
industries of the U.S. economy. The S&P 500 is often considered a proxy for the
stock market in general.
<PAGE 2>
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 is
expected to hold 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.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the fund may sometimes outperform other types of
funds (such as those emphasizing only growth stocks or value stocks) and
sometimes underperform them. By investing in growth and value stocks, the fund
could be affected less by the underperformance of either style, although this
may also result in more modest gains during certain periods than those for funds
that utilize only one investment style.
Other potential risks
Growth companies are expected to increase their earnings at a certain rate. When
these expectations are not met, investors can punish the stocks inordinately --
even if earnings showed an absolute increase. In addition, growth stocks
typically lack the dividend yield that can cushion stock prices in market
downturns.
Value companies are subject to the risk that their intrinsic value may never be
realized by the market, or that their prices may go down. While the fund's
investments in value stocks may limit the downside risk of the fund over time,
the fund may produce more modest gains than riskier stock funds as a trade-off
for this potentially lower risk.
The Fund
<PAGE 3>
PAST PERFORMANCE
The two tables below show the fund's annual returns and its long-term
performance. The first table shows you how the fund's performance has varied
from year to year. The second compares the fund's performance over time to that
of the S&P 500, a widely recognized unmanaged index of stock performance. Both
tables assume reinvestment of dividends and distributions. As with all mutual
funds, the past is not a prediction of the future.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
34.32 0.23 33.64 7.58 11.83 -1.03 36.86 24.88 31.94 26.62
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q4 '98 +22.56%
WORST QUARTER: Q3 '90 -13.11%
--------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FUND 26.62% 23.09% 19.85%
S&P 500 28.60% 24.05% 19.19%
</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.
<PAGE 4>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load).
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT NONE
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.90%
Rule 12b-1 fee 0.10%
Other expenses 0.00%
--------------------------------------------------------
TOTAL 1.00%
--------------------------------------------------------
Expense example
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$102 $318 $552 $1,225
</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. The figures
shown would be the same whether you sold your shares at the end of a period or
kept them. Because actual return and expenses will be different, the example is
for comparison only.
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 to Mellon Bank, N.A. and its affiliates for
shareholder service and to the fund's distributor for shareholder service and
promotional expenses. Because this fee is paid out of the fund's assets on an
ongoing basis, over time it will increase the cost of your investment and may
cost you more than paying other types of sales charges.
The Fund
<PAGE 5>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $121 billion in more than 160
mutual fund portfolios. 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 $350 billion of assets under management and $1.7 trillion
of assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.
Bert Mullins has managed the fund since its inception and has been employed by
Dreyfus as 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.
On December 1, 1997, a class action lawsuit was filed in the U.S. District Court
for the Southern District of New York. The lawsuit asserts that the adoption of
the fund's Rule 12b-1 plan with respect to certain fund shares violated federal
securities laws and common law. The lawsuit seeks unspecified damages against
the fund, The Dreyfus/Laurel Funds, Inc., its directors, Dreyfus, Mellon Bank,
N.A., Mellon Bank Corporation and the fund's portfolio manager. The fund is
defending the action vigorously.
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.
<PAGE 6>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance 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 have been independently audited by
KPMG LLP, whose report, along with the fund's financial statements, is included
in the annual report.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 32.78 26.65 22.09 18.54 18.69
Investment operations:
Investment income -- net 0.20 0.25 0.28 0.30 0.26
Net realized and unrealized
gain (loss) on investments 5.31 7.92 5.13 4.02 0.25
Total from investment operations 5.55 8.17 5.41 4.32 0.51
Distributions:
Dividends from investment
income -- net (0.24) (0.26) (0.29) (0.30) (0.26)
Dividends from net realized
gain on investments (3.37) (1.78) (0.56) (0.47) (0.40)
Total distributions (3.65) (2.04) (0.85) (0.77) (0.66)
Net asset value, end of period 34.68 32.78 26.65 22.09 18.54
Total return (%) 18.37 32.32 25.14 24.33 2.82
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to
average net assets (%) 0.99 0.90 0.90 0.90 0.90
Ratio of net investment income
to average net assets (%) 0.61 0.87 1.23 1.61 1.54
Portfolio turnover rate (%) 54.45 68.87 64.47 60.00 106.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
($ x 1,000) 2,436,164 1,482,176 807,680 382,646 239,069
FINANCIAL HIGHLIGHTS FOR YEARS ENDED PRIOR TO DECEMBER 15, 1997, DO NOT REFLECT
THE FUND'S RULE 12B-1 FEE OF 0.10%, WHICH WAS IMPLEMENTED ON THAT DATE.
</TABLE>
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are generally valued based on market
value or, where market quotations are not readily available, based on fair value
as determined in good faith by the fund's board.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 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
TRADITIONAL IRA: an individual retirement account. Your contributions may or may
not be deductible depending on your circumstances. Assets grow tax-deferred;
withdrawals and distributions are taxable in the year made.
SPOUSAL IRA: an IRA funded by a working spouse in the name of a nonworking
spouse.
ROTH IRA: an IRA with non-deductible contributions, and tax-free growth of
assets and distributions to pay retirement expenses, provided certain conditions
are met.
EDUCATION IRA: an IRA with nondeductible contributions, and tax-free growth of
assets and distributions, if used to pay certain educational expenses.
FOR MORE COMPLETE IRA INFORMATION, CONSULT DREYFUS OR YOUR TAX PROFESSIONAL.
<PAGE 8>
Selling shares
YOU MAY SELL SHARES AT ANY TIME. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
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.
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.
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $150,000 PER DAY
WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
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
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
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).
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
quarterly and distributes any net capital gains that it has realized once a
year. 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%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except in 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 right also can provide a guide for your 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
<PAGE 11>
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
--------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
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.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Our experienced financial consultants can help you make informed choices and
provide you with personalized attention in handling account transactions. The
Financial Centers also offer informative seminars and events. To find the
Financial Center nearest you, call 1-800-499-3327.
<PAGE 12>
Exchange privilege
YOU CAN EXCHANGE $500 OR MORE (no minimum for retirement accounts) from one
Dreyfus fund into another. You can request your exchange in writing or by phone.
Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will 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 one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
The Dreyfus Touch((reg.tm))
FOR 24-HOUR AUTOMATED ACCOUNT ACCESS, use Dreyfus Touch. With a touch-tone
phone, you can easily manage your Dreyfus accounts, obtain information on other
Dreyfus mutual funds and get current stock market quotes.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:
* for traditional, rollover, Roth and Education IRAs, call 1-800-645-6561
* for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
Your Investment
<PAGE 13>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
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: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to The Boston Safe Deposit & Trust Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "4050" before your account number.
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.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 14>
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 "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
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
<PAGE 15>
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
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 (see "To Open an Account" at left).
By Telephone
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but insert "4050" before your account number.
TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).
Automatically
WITHOUT ANY INITIAL INVESTMENT Call us
to request a Dreyfus Step Program form. Complete and return the form along with
your application.
ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
All contributions will count as current year.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 16>
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number
* the 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.
Mail in your request (see "To Open an Account" at left).
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS TRUST CO., CUSTODIAN
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. 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
<PAGE 17>
For More Information
Dreyfus Disciplined 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 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation 728P0399
<PAGE>
___________________________________________________________________________
DREYFUS DISCIPLINED STOCK FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 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 Disciplined Stock Fund (the "Fund"), dated March 1, 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 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Fund B-2
Management of the Fund B-16
Management Arrangements B-22
Purchase of Fund Shares B-24
Distribution Plan B-27
Redemption of Fund Shares B-29
Shareholder Services B-33
Additional Information About Purchases, Exchanges and Redemptions B-38
Determination of Net Asset Value B-39
Dividends, Other Distributions and Taxes B-40
Portfolio Transactions B-46
Performance Information B-48
Information About the Fund/Company B-50
Transfer and Dividend Disbursing Agent, Custodian, Counsel and
Independent Auditors B-51
Financial Statements B-51
Appendix B-52
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. and the
Fund's name was the Laurel Stock Fund. The Company is an open-end
management investment company comprised of separate portfolios, including
the Fund, each of which is treated as a separate fund. The Fund is
diversified, which means that, with respect to 75% of its total assets, the
Fund will not invest more than 5% of its assets in the securities of any
single issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
The Fund seeks investment returns (consisting of capital appreciation
and income) that are consistently superior to the Standard & Poor's 500
Composite Stock Price Indexr ("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
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.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (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 lead 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 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.
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 and
the possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions, reduced availability of public
information concerning issuers, and the fact that foreign issuers are not
generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to
those applicable to domestic issuers. Moreover, securities of many foreign
issuers may be less liquid and their prices more volatile than those of
comparable domestic issuers. In addition, with respect to certain foreign
countries, there is the possibility of expropriation, confiscatory taxation
and limitations on the use or removal of funds or other assets of the Fund,
including withholding of dividends. Foreign securities may be subject to
foreign government taxes that would reduce the 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 ("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.
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.
Money Market Instruments. The Fund may invest in money market
instruments, including U.S. Government securities, repurchase agreements,
bank obligations and commercial paper, to meet liquidity needs in amounts
not generally expected to exceed 20%.
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 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 will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability 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 and 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.
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 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
transactions 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 has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts 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 shares of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward investing contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
Non-fundamental. 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 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 a director of 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., a provider of various outservicing functions
for small and medium sized companies; and Career Blazers Inc.
(formerly, Staffing Resources), a temporary placement agency. Mr.
DiMartino is a Board member of 99 funds in the Dreyfus Family of Funds.
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: 70 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. and
Boston Safe Deposit and Trust Company. Age: 52 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 Community Health Plan, 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, an
affiliate of Dreyfus. Age: 52 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: 41 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: 29 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. From October 1992 to March
1994, Mr. Kelley was employed by Putnam Investments in legal and
compliance capacities. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Management 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. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 34 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. From December
1989 through November, 1996, he was employed by GE Investments where he
held various financial, business development and compliance positions.
He also served as Treasurer of the GE Funds and as Director of GE
Investment Services. Age: 37 years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President, Client Development Manager
of Funds Distributor, Inc. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, NA. 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. From September 1983 to May 1994, he was Senior
Vice President & Manager of Client Services and Director of Internal
Audit at TBC. 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: 36 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.
_________________________
# 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 is
a Board member for 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 From the
Aggregate Compensation Company and Fund Complex
Name of Board Member From the Company# Paid to Board Member****
Joseph S. DiMartino* $17,710.00 $619,660
James M. Fitzgibbons $17,710.00 $60,010
J. Tomlinson Fort** none none
Arthur L. Goeschel $18,376.67 $61,010
Kenneth A. Himmel $14,793.34 $50,260
Stephen J. Lockwood $15,043.33 $51,010
John J. Sciullo $17,710.00 $59,010
Roslyn M. Watson $18,376.67 $61,010
Benaree Pratt Wiley*** $12,194.38 $49,628
_________________________
# 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.
* 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 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 noted in # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the
date she was elected a Board member) through October 31, 1998.
**** The Dreyfus Family of Funds consists of 163 mutual fund
portfolios.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the Fund's total shares outstanding as of February 1, 1999.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Fund shares: Boston Safe Deposit & Trust Co. as
Agent-Omnibus Account, 1 Cabot Road, Medford, MA 02155-5141: 10.30%.
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 sixty (60) days' written notice to Dreyfus. Dreyfus may terminate the
Management Agreement upon sixty (60) days' written notice to the Company.
The Management Agreement will terminate immediately and automatically upon
its assignment.
The following persons are officers and/or directors of Dreyfus:
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; J. David Officer,
Vice Chairman and a director; Ronald P. O'Hanley III, Vice Chairman; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of .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. In
addition, the Fund is subject to a distribution plan under which the Fund
spends annually up to .10% of its average daily net assets for distribution
and shareholder servicing activities. See "Distribution Plan." Expenses
attributable to the Fund are charged against the Fund's assets; other
expenses of the Company are allocated among its funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each fund.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Years Ended October 31,
1998 1997 1996
Management fees $18,808,035 $10,968,128 $5,407,843
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.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions For Regular Accounts" and
"Instructions for IRAs."
General. The Fund reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a client of
an Agent which maintains an omnibus account in the Fund and has made an
aggregate minimum initial purchase for its customers of $2,500. Subsequent
investments must be at least $100. However, the minimum initial investment
is $750 for Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and rollover
IRAs) and 403(b)(7) Plans with only one participant and $500 for Dreyfus-
sponsored Education IRAs, with no minimum for subsequent purchases. The
initial investment must be accompanied by the Account Application. For full-
time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, Board members of a fund advised by
Dreyfus, including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000.
For full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited
into their Fund accounts, the minimum initial investment is $50. The Fund
reserves the right to offer Fund shares without regard to minimum purchase
requirements to employees participating in certain qualified or non-
qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to
the Fund. The Fund reserves the right to vary further the initial and
subsequent investment minimum requirements at any time.
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 also are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builderr, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant
to the Dreyfus Step Program described under "Shareholder Services." These
services enable you to make regularly scheduled investments and may provide
you with a convenient way to invest for long-term financial goals. You
should be aware, however, that periodic investment plans do not guarantee a
profit and will not protect an investor against loss in a declining market.
Management understands that some Agents may impose certain conditions
on their clients which are different from those described in the Fund's
Prospectus and, 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 Plan. Each Agent has
agreed to transmit to its clients a schedule of such fees. You should
consult your Agent in this regard.
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 is computed by dividing the value of the Fund's
net assets (i.e., the value of its assets less liabilities) by the total
number of Fund shares outstanding. 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 NAV determined as of the
close of trading on the floor of the NYSE on that day. Otherwise, Fund
shares will be purchased at the NAV 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 NAV determined as of the close of
trading on the floor of the NYSE on that day. Otherwise, the orders will be
based on the next determined NAV. It is the dealers' responsibility to
transmit orders so that they will be received by the Distributor or its
designee before the close of its business day. For certain institutions
that have entered into agreements with the Distributor, payment for the
purchase of Fund shares may be transmitted, and must be received by the
Transfer Agent, within three business days after the order is placed. If
such payment is not received within three business days after the order is
placed, the order may be canceled and the institution could be held liable
for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to 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.
Dreyfus TeleTransfer Privilege. You may purchase shares by telephone
through the Dreyfus TeleTransfer Privilege if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between the bank account designated
in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an Automated
Clearing House ("ACH") member may be so designated. Dreyfus TeleTransfer
purchase orders may be made at any time. Purchase orders received by 4:00
p.m. New York time, on any business day that 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 Dreyfus TeleTransfer
Privilege, the initial payment for purchase of Fund shares must be drawn on,
and redemption proceeds paid to, the same bank and account as are designated
on the Account Application or Shareholder Services Form on file. If the
proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Fund Shares - Dreyfus TeleTransfer Privilege." 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 NAV of the
shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Expenses."
Fund shares are subject to fees for distribution and shareholder
services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule.
Current Distribution Plan. Effective December 15, 1997, Fund shares
became subject to a Distribution Plan (the "Current Plan") adopted pursuant
to the Rule. The Current Plan allows the Fund to spend annually up to 0.10%
of its average daily net assets to compensate Mellon Bank and its affiliates
(including but not limited to Dreyfus and Dreyfus Service Corporation) for
shareholder servicing activities and the Distributor for shareholder
servicing activities and expenses primarily intended to result in the sale
of Fund shares. The Current Plan allows the Distributor to make payments
from the Rule 12b-1 fees it collects from the Fund to compensate Agents that
have entered into Selling Agreements ("Agreements") with the Distributor for
distribution related services and/or shareholder services. Under the
Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Fund shares. The fees are payable pursuant to the Current
Plan without regard to expenses incurred.
The Fund and the Distributor may suspend or reduce payments under the
Plan at any time, and payments are subject to the continuation of the Fund's
Plan and the Agreements described above. Potential investors should read
the Fund's Prospectus and this Statement of Additional Information in light
of the terms governing Agreements with their Agents.
The Current Plan provides that a report of the amounts expended under
the Current Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Current Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Plan without approval of the Fund's
shareholders, and that other material amendments of the Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" of the Company or Dreyfus (as defined in the
1940 Act) and who do not have any direct or indirect financial interest in
the operation of the Current Plan, cast in person at a meeting called for
the purpose of considering such amendments. The Current Plan is subject to
annual approval by the entire Board of Directors and by the Directors who
are neither interested persons nor have any direct or indirect financial
interest in the operation of the Current Plan, by vote cast in person at a
meeting called for the purpose of voting on the Current Plan. The Current
Plan was so approved by the Directors at a meeting held on February 4, 1999.
The Current Plan is terminable at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Current Plan or by vote of the
holders of a majority of the outstanding shares of the Fund.
Prior Plan. Prior to December 15, 1997, the Fund consisted of "Retail"
and "Institutional" classes of shares and Institutional shares were subject
to a distribution plan adopted pursuant to the Rule (the "Prior Plan").
Under the Prior Plan, the Fund was authorized to spend up to 0.25% of its
average daily net assets attributable to Institutional shares to compensate
Dreyfus Service Corporation for shareholder servicing activities and the
Distributor for shareholder servicing activities and expenses primarily
intended to result in the sale of Institutional shares. On December 2,
1997, shareholders of the Fund's Retail Class voted to approve the Current
Plan. Effective December 15, 1997, the Prior Plan was terminated, the
Fund's "Institutional" and "Retail" designations were eliminated, and the
Fund became a single class fund without any separate class designation,
subject to the Current Plan.
For the period from November 1, 1997 through December 14, 1997, the
Fund paid the Distributor and Dreyfus Service Corporation $790 and $79,665,
respectively, pursuant to the Prior Plan with respect to the Fund's then-
existing Institutional shares. For the period from December 15, 1997
through October 31, 1998, the Fund paid the Distributor and Dreyfus Service
Corporation $61,222 and $1,770,455, respectively, pursuant to the Current
Plan.
On December 1, 1997, a class action lawsuit was filed in the United
States District Court for the Southern District of New York by two persons
who claim to be holders of the Fund's former Retail shares and who purport
to act on behalf of themselves and other similarly situated shareholders
(the "Action"). The defendants in the Action are the Company, its
Directors, the Fund, Dreyfus, Mellon Bank, Mellon and the Fund's portfolio
manager. The amended complaint in the Action asserts that the adoption of
the Current Plan with respect to the Fund's Retail shares was in violation
of the 1940 Act and common law, and that the Fund violated the Securities
Exchange Act of 1934 in failing to disclose the potential implementation of
a 12b-1 plan with respect to the Fund's Retail shares prior to the
implementation of the Current Plan. The Action seeks unspecified damages.
The Company is defending the Action vigorously.
REDEMPTION OF FUND 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. The Fund imposes no charges 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 1-800-645-6561. You
also may redeem shares through the Wire Redemption Privilege or the Dreyfus
TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you are a client of
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 Dreyfus
TeleTransfer Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes 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 pm., 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 NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor will accept orders from Selected Dealers
with which it has sales agreements for the repurchase of Fund shares held by
shareholders. Repurchase orders received by dealers by the close of trading
on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee prior to the close of its business day (normally
5:15 p.m., New York time) are effected at the price determined as of the
close of trading on the floor of the NYSE on that day. Otherwise, the Fund
shares will be redeemed at the next determined NAV. It is the
responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the
order. This repurchase arrangement is discretionary and may be withdrawn at
any time.
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."
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily
two days after receipt of the redemption request. Holders of jointly
registered Fund or bank accounts may redeem through the Dreyfus TeleTransfer
Privilege for transfer to their bank account only up to $250,000 within any
30-day period. Investors should be aware that if they have selected the
Dreyfus TeleTransfer Privilege, any request for a wire redemption will be
effected as a Dreyfus TeleTransfer transaction through the ACH system unless
more prompt transmittal specifically is requested. See "Purchase of Fund
Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the 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.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Fund shares may be exchanged for shares of certain
other funds advised or administered by Dreyfus. Shares of such other funds
purchased by exchange will be purchased on the basis of relative 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.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number. 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 1-800-645-6561, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-645-6561. 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 Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
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
another fund in 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 Fund shares held by a
Retirement Plan, exchanges may be made only between the investor's
Retirement Plan account in one fund and such investor's Retirement Plan
account in another fund. Shares will be exchanged on the basis of relative
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 Dreyfus Auto-Exchange transaction. Shares held under IRA
and other retirement plans are eligible for this Privilege. Exchanges of
IRA shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to
all other retirement accounts, exchanges may be made only among those
accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to the Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may
charge a service fee for the use of this Privilege. No such fee currently
is contemplated. For more information concerning this Privilege and the
funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of 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 1-800-645-6561. 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 1-800-645-
6561. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to the
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671
and the notification will be effective three business days following
receipt. The 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
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-
800-645-6561. 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.
Dreyfus 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 certain other funds in the Dreyfus Family
of Funds of which the investor is a shareholder. Shares of the other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative 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 distributions are being
swept, without giving effect to any reduced loads, the difference will
be deducted.
D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You
may cancel these Privileges by mailing written notification to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To
select a new fund after cancellation, you must submit a new Dreyfus Dividend
Options Form. Enrollment in or cancellation of these privileges is
effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for Dreyfus Dividend
Sweep. The Fund may modify or terminate these privileges at any time or
charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for
Dreyfus Dividend Sweep.
Dreyfus Step Program. Dreyfus Step Program enables you to purchase
Fund shares without regard to the Fund's minimum initial investment
requirements through Dreyfus-Automatic Asset Builderr, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a
Dreyfus Step Program account, you must supply the necessary information on
the Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing participation in Dreyfus-Automatic Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). The Fund
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. Investors who wish to
purchase Fund shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs (including regular
IRAs and spousal IRA's for a non-working spouse), Roth IRAs, SEP-IRAs and
IRA "Rollover Accounts."
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 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you
may have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the ACH system at each pay period. To
establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. Your employer
must complete the reverse side of the form and return it to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. You may
obtain the necessary authorization form by calling 1-800-645-6561. You may
change the amount of purchase or cancel the authorization only by written
notification to your employer. It is the sole responsibility of your
employer, not the Distributor, 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.
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, and Rollover
IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call 1-800-
358-5566; for IRAs and IRA "Rollover Accounts," please cal 1-800-645-6561;
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
and fees pursuant to the Current Plan, 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
its 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 quarterly 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.
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 substantially all of its taxable
investment income and capital gains.
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 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.
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.
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 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)
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 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.
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 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
portion of 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 its income from
sources within foreign countries and U.S. possessions and foreign taxes it
paid if it makes the Election.
Foreign Currency, Futures, Forwards and Hedging Transactions. Gains
from the sale or other disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gains and
losses from the disposition of foreign currencies and certain foreign
currency denominated instruments (including debt instruments and financial
forward and futures and option) may be treated as ordinary income or loss
under Section 988 of the Code. In addition, all or a portion of any gain
realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as
capital gain may be treated as ordinary income. "Conversion transactions"
are defined to include certain forward, futures, option and straddle
investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund
on the exercise or lapse of, or closing transactions respecting, certain
options, futures and forward contracts ("Section 1256 Contracts") 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.
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 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.
Passive Foreign Investment Companies The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a
foreign corporation which, on any day during its taxable year, more than 50%
of the total voting power of all voting stock therein or the total value of
all stock therein is owned, directly, indirectly, or constructively, by
"U.S. shareholders", defined as U.S. persons that individually own,
directly, indirectly, or constructively, at least 10% of that voting power)
as to which the Fund is a U.S. shareholder -- that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or
(2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, the Fund will
be subject to federal income tax on a portion of any "excess distribution"
received on the stock of a PFIC or of any gain on disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a dividend to its shareholders. The balance
of the PFIC income will be included in the Fund's investment company taxable
income and, accordingly, will not be taxable to it to the extent that 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.
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 commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 under the 1940 Act.
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 Dreyfus in carrying out its obligation 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 it were to attempt
to develop comparable information through its own staff.
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, 1996, 1997 and 1998, the Fund paid brokerage commissions of $200,780,
$232,780 and $481,959, respectively to affiliates of Dreyfus or Mellon Bank.
The amounts paid to affiliated brokerage firms during the fiscal years ended
October 31, 1996, 1997 and 1998, were approximately 18%, 12% and 17%,
respectively of the aggregate brokerage commissions paid by the Fund, for
transactions involving approximately 21%, 14% and 25%, respectively of the
aggregate dollar volume of transactions for which the Fund paid brokerage
commissions. The difference in these percentages was due to the lower
commissions paid to affiliates of Dreyfus.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
The brokerage commissions paid by the Fund for fiscal years ended
October 31, 1998, 1997 and 1996 were $2,861,837, $1,995,335, and $1,132,421,
respectively. The principal reason for the increase in the Fund's brokerage
commissions for the most recent fiscal year was an increase in assets. The
Fund did not pay any brokerage concessions for the fiscal years ended
October 31, 1998 and 1997.
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
capital gains that, when distributed to the Fund's shareholders, are taxable
to them as ordinary income. Nevertheless, securities transactions for the
Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus deems it appropriate to
make changes in the Fund's assets. 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 last two fiscal years were:
Fiscal Year Ended October 31,
1998 1997
54.45% 64%
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the Fund's NAV
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 dividing the result by the NAV
per share at the beginning of the period.
Average annual total return (expressed as a percentage) for shares of
the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year 5 Years 10 Years
18.37%% 20.17% 18.36%
The Fund's total return for the period from December 31, 1987 (the
Fund's inception date) to October 31, 1998 was 498.08%.
Effective December 15, 1997, the Fund's "Institutional" and "Retail"
designations were eliminated and the Fund became a single class fund without
any separate class designation.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the 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, Inc., a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or
other criteria; (iv) the Consumer Price Index (a measure of inflation) to
assess the real rate of return from an investment in the Fund; and (v)
products managed by a universe of money managers with similar country
allocation and performance objectives. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses. From time to time,
advertising materials for the Fund may refer to 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.
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 are of one class and have equal rights as to dividends and in
liquidation. Fund shares have no preemptive or subscription rights and are
freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain 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, New York 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 financial highlights and the
Independent Auditors Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual
Report, and the Independent Auditors' Report thereon contained therein, and
related notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF STANDARD & POOR'S, MOODY'S, FITCH AND DUFF RATINGS
Standard & Poor's (S&P)
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
S&P's letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign designation, which is used to show relative standing within
the major rating categories, except in the AAA (Prime Grade) category.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Issues assigned an A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
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.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in the categories below B. The modifier 1 indicates a ranking for the
security in the higher end of a rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end
of a rating category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
Fitch IBCA, Inc. ("Fitch")
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for
timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than
issues rated `F-1+'.
Duff & Phelps Credit Rating Co. ("Duff")
Commercial Paper Ratings
The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors which are supported by ample
asset protection. Risk factors are minor.
DREYFUS DISCIPLINED SMALLCAP STOCK FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1999
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of Dreyfus Disciplined Smallcap Stock Fund (the "Fund"), dated
March 1, 1999, as it may be revised from time to time. The Fund is a
separate, diversified portfolio of The Dreyfus/Laurel Funds, Inc. (the
"Company"), an open-end management investment company, known as a mutual
fund. To obtain a copy of the Fund's Prospectus, please write to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call one of
the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Fund B-2
Management of the Fund B-19
Management Arrangements B-25
Purchase of Shares B-27
Distribution Plan B-30
Redemption of Shares B-31
Shareholder Services B-34
Additional Information About Purchases, Exchanges
and Redemptions B-40
Determination of Net Asset Value B-41
Dividends, Other Distributions and Taxes B-42
Portfolio Transactions B-48
Performance Information B-50
Information About The Fund/Company B-51
Transfer And Dividend Disbursing Agent, Custodian,
Counsel And Independent Auditors B-52
Financial Statements B-52
Appendix B-53
DESCRIPTION OF THE FUND
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company
is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund.
The Fund is diversified, which means that, with respect to 75% of its total
assets, the Fund will not invest more than 5% of its assets in the
securities of any single issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities 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.
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.
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.
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 and
the possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions, reduced availability of public
information concerning issuers, and the fact that foreign issuers are not
generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to
those applicable to domestic issuers. Moreover, securities of many foreign
issuers may be less liquid and their prices more volatile than those of
comparable domestic issuers. In addition, with respect to certain foreign
countries, there is the possibility of expropriation, confiscatory taxation
and limitations on the use or removal of funds or other assets of the Fund,
including withholding of dividends. Foreign securities may be subject to
foreign government taxes that would reduce the return on such securities.
American Depository Receipts and New York Shares. The Fund may invest in
U.S. dollar-denominated ADRs and "New York Shares." American Depository
Receipts ("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."
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 an
Exchange 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.
Initial Public Offerings ("IPOs"). The Fund may invest in an IPO, a
corporation's first offering of stock to the public. Shares are given a
market value reflecting expectations for the corporation's future growth.
Special rules of the National Association of Securities Dealers, Inc. apply
to the distribution of IPOs. Corporations offering IPOs generally have a
limited operating history and may involve greater risk.
Other Investment Companies. The Fund may invest in securities issued by
other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended ("1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in the
Fund's prospectus, the Fund also may engage in the investment techniques
described below. 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), forward currency contracts and interest rate, equity index and
currency swaps, caps, collars and floors. The index Derivative Instruments
the Fund may use may be based on indices of U.S. or foreign equity or debt
securities. These Derivative Instruments may be used, for example, to
preserve a return or spread, to lock in unrealized market value gains or
losses, to facilitate or substitute for the sale or purchase of securities,
to manage the duration of securities, to alter the exposure of a particular
investment or portion of the Fund's portfolio to fluctuations in interest
rates or currency rates, to uncap a capped security or to convert a fixed
rate security into a variable rate security or a variable rate security into
a fixed rate security.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments 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 and
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 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.
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 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 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.
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 a
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 on a principal basis, no fees or commissions are
involved. When the Fund enters into a forward contract, it relies on the
counterparty to make or take delivery of the underlying currency at the
maturity of the contract. Failure by the counterparty to do so would result
in the loss of any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets generally
do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by negotiating
directly with the counterparty. Thus, there can be no assurance that the
Fund will in fact be able to close out a forward contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the
counterparty, the Fund might be unable to close out a forward contract at
any time prior to maturity. In either event, the Fund would continue to be
subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that are
the subject of the hedge or to maintain cash or securities in a segregated
account.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value
of such securities measured in the foreign currency will change after the
forward contract has been established. Thus, the Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest
rate and currency swaps, caps, collars and floors, may be individually
negotiated and structured to include exposure to a variety of different
types of investments or market factors. Swaps involve two parties
exchanging a series of cash flows at specified intervals. In the case of an
interest rate swap, the parties exchange interest payments based on an
agreed upon principal amount (referred to as the "notional principal
amount"). Under the most basic scenario, Party A would pay a fixed rate on
the notional principal amount to Party B, which would pay a floating rate on
the same notional principal amount to Party A. Depending on their
structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors.
Swap agreements can take many different forms and are known by a variety of
names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a swap
agreement on a net basis (that is, the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount
of the two payments), the Fund will maintain cash or liquid assets with a
daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis or writes a cap, collar or floor, it
will maintain cash or liquid assets with a value equal to the full amount of
the Fund's accrued obligations under the agreement.
The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that
determine the amounts of payments due to and from the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declines, the value of a swap agreement would likely decline, potentially
resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with
banks and recognized securities dealers believed by Dreyfus to present
minimal credit risks. If there is a default by the other party to such a
transaction, the Fund will have to rely on its contractual remedies (which
may be limited by bankruptcy, insolvency or similar laws) pursuant to the
agreement relating to the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments. See "Illiquid
Investments."
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 risks will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following fundamental limitations have been adopted
by the Fund. The Fund may not change any of these fundamental investment
limitations without the consent of: (a) 67% or more of the shares present at
a meeting of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause 25% or more of the value
of the Fund's total assets at the time of such purchase to be invested in
the securities of one or more issuers conducting their principal activities
in the same industry. (For purposes of this limitation, U.S. Government
securities and state or municipal governments and their political
subdivisions are not considered members of any industry.)
2. Borrow money or issue senior securities as defined in the 1940
Act, except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowing, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
options, forward contacts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not be considered
to involve the borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans.
For purposes of this limitation debt instruments and repurchase agreements
shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
the real estate business or invest or deal in real estate or interests
therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities, except that the Fund may enter into
options, forward contracts, and futures contracts, including those related
to indices, and options on futures contracts or indices.
The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a
single, open-end management investment company with substantially the same
investment objective, policies, and limitations as the Fund.
Non-fundamental. The Fund has adopted the following additional
non-fundamental investment restrictions. These non-fundamental restrictions
may be changed without shareholder approval, in compliance with applicable
law and regulatory policy.
1. The Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days, and other securities that are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include commercial paper issued pursuant to Section 4(2) of the Securities
Act of 1933, as amended, and securities that may be resold under Rule 144A
under that Act, provided that the Board of Directors, or its delegate,
determines that such securities are liquid, based upon the trading markets
for the specific security.
2. The Fund will not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
3. The Fund will not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
4. The Fund will not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities
sold short, and provided that transactions in futures contracts and options
are not deemed to constitute selling short.
5. The Fund will not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
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 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 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., a provider of various outsourcing functions
for small and medium sized companies; and Career Blazers, Inc.
(formerly, Staffing Resources, Inc.), a temporary placement agency.
Mr. DiMartino is a Board member of 99 funds in the Dreyfus Family of
Funds. 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/and until May 1,
1998 Partner), Reed, Smith, Shaw & McClay (law firm). Age: 70 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, 1995-1997. 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 and CEO, Himmel & Co., Inc., CEO, American
Food Management; former Director, The Boston Company, Inc. ("TBC") and
Boston Safe Deposit and Trust Company. Age: 52 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: 51 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 Community Health Plan, 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, an
affiliate of Dreyfus. Age: 52 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: 41 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: 29 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. From October 1992 to March
1994, Mr. Kelley was employed by Putnam Investments in legal and
compliance capacities. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Manager of Treasury Services Administrator 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. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 34 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and a director of
Strategic Client Initiatives of Funds Distributor, Inc. From December
1989 through November, 1996, he was employed by GE Investments where he
held various financial, business development and compliance positions.
He also served as Treasurer of the GE Funds and as Director of GE
Investment Services. Age: 37 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. From September 1983 to May 1994, he was Senior
Vice President & Manager of Client Services and Director of Internal
Audit at TBC. 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: 36 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.
___________________________
# Officer also serves as an officer for other investment companies advised
by Dreyfus, including The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-
Free Municipal Funds and the Dreyfus High Yield Strategies Fund.
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 amount 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 is
a Board member for 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 July 1, 1998
through October 31, 1998, were as follows:
Total Compensation
From the Company
Aggregate and Fund Complex
Name of Board Compensation Paid to Board
Member From the Company# Member****
Joseph S. DiMartino* $17,710.00 $619,660
James M. Fitzgibbons $17,710.00 $ 60,010
J. Tomlinson Fort** none none
Arthur L. Goeschel $18,376.67 $ 61,010
Kenneth A. Himmel $14,793.34 $ 50,260
Stephen J. Lockwood $15,043.34 $ 51,010
John J. Sciullo $17,710.00 $ 59,010
Roslyn M. Watson $18,376.67 $ 61,010
Benaree Pratt Wiley*** $12,194.38 $ 49,628
____________________________
# 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.
* 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. 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) 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 a Board member) through October 31, 1998.
****The Dreyfus Family of Funds consists of 163 mutual fund portfolios.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of February 1,
1999.
As of February 1, 1999 the following shareholder(s) owned beneficially
or of record 5% or more of the Fund: MBCIC, C/O Mellon Bank, 919 N. Market
Street, Wilmington, DE 19801-30231, 42.95%; Boston & Company A/C10520856022,
P.O. Box 3198, Pittsburgh, PA 15230-3198, 6.68%; and Boston & Company
A/C10520263005, P.O. Box 3198, Pittsburgh, PA 15230-3198, 5.11%.
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 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 and made applicable to the Fund on July 30, 1998, 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 was approved with respect to the Fund
to continue until April 4, 2000. Thereafter, the Management Agreement will
be subject to review and approval at least annually by the Board of
Directors. The Management Agreement will continue from year to year
provided that a majority of the Directors who are not interested persons (as
defined in the 1940 Act) of the Company or Dreyfus and either a majority of
all Directors or a majority (as defined in the 1940 Act) of the shareholders
of the Fund approve its continuance. The Company may terminate the
Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities
on sixty (60) days' written notice to Dreyfus. Dreyfus may terminate the
Management Agreement upon sixty (60) days' written notice to the Company.
The Management Agreement will terminate immediately and automatically upon
its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of Dreyfus:
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; J. David Officer,
Vice Chairman and a director; Ronald P. O'Hanley III, Vice Chairman; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Patrice M. Kozlowski, Vice President-
Corporate Communications; Mary Beth Leibig, Vice President-Human Resources;
Andrew S. Wasser, Vice President-Information Systems; Theodore 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 N. Sabo and
Richard F. Syron, directors.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.25% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
Directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee by an
amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering
the expense ratio of the Fund and increasing return to investors. In
addition, the Fund is subject to a distribution plan under which the Fund
spends annually up to .25% of its average daily net assets for distribution
and shareholder servicing activities. See "Distribution Plan." Expenses
attributable to the Fund are charged against the Fund's assets; other
expenses of the Company are allocated among its funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each fund.
For the period September 30, 1998 (commencement of operations) through
October 31, 1998, the Fund paid Dreyfus $5,340 pursuant to the terms of the
Management Agreement.
The Distributor. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109,
serves as the Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. Dreyfus may pay the Distributor for
shareholder services from Dreyfus' own assets, including past profits but
not including the management fee paid by the Fund. The Distributor may use
part or all of such payments to pay certain banks, securities brokers or
dealers and other financial institutions ("Agents") for these services. The
Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. The Fund reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a client of
an Agent that maintains an omnibus account in the Fund and has made an
aggregate minimum initial purchase for its customers of $2,500. Subsequent
investments must be at least $100. However, the minimum initial investment
is $750 for Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and rollover
IRAs) and 403(b)(7) Plans with only one participant and $500 for Dreyfus-
sponsored Education IRAs, with no minimum for subsequent purchases. The
initial investment must be accompanied by the Account Application. For full-
time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, Board members of a fund advised by
Dreyfus, including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000.
For full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited
into their Fund accounts, the minimum initial investment is $50. The Fund
reserves the right to offer Fund shares without regard to minimum purchase
requirements to employees participating in certain qualified or non-
qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to
the Fund. The Fund reserves the right to vary further the initial and
subsequent investment minimum requirements at any time.
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 also are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builderr, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant
to the Dreyfus Step Program described under "Shareholder Services." These
services enable you to make regularly scheduled investments and may provide
you with a convenient way to invest for long-term financial goals. You
should be aware, however, that periodic investment plans do not guarantee a
profit and will not protect an investor against loss in a declining market.
Management understands that some Agents may impose certain conditions
on their clients which are different from those described in the Fund's
Prospectus and, to the extent permitted by applicable regulatory authority,
may charge their clients direct fees. Each Agent has agreed to transmit to
its clients a schedule of such fees. You should consult your Agent in this
regard. See "Distribution Plan."
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 is computed by dividing the value of the Fund's
net assets (i.e., the value of its assets less liabilities) by the total
number of the Fund shares 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 NAV determined as of the
close of trading on the floor of the NYSE on that day. Otherwise, Fund
shares will be purchased at the NAV 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 NAV determined as of the close of
trading on the floor of the NYSE on that day. Otherwise, the orders will be
based on the next determined NAV. It is the dealers' responsibility to
transmit orders so that they will be received by the Distributor or its
designee before the close of its business day. For certain institutions
that have entered into agreements with the Distributor, payment for the
purchase of Fund shares may be transmitted, and must be received by the
Transfer Agent, within three business days after the order is placed. If
such payment is not received within three business days after the order is
placed, the order may be canceled and the institution could be held liable
for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of
250 employees eligible for participation in such plans or programs or (ii)
such plan's or program's aggregate investment in the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Shares of funds in
the Dreyfus Family of Funds then held by Eligible Benefit Plans will be
aggregated to determine the fee payable. The Distributor reserves the right
to cease paying these fees at any time. The Distributor will pay such fees
from its own funds, other than amounts received from the Fund, including
past profits or any other source available to it.
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.
Dreyfus TeleTransfer Privilege. You may purchase shares by telephone
through the Dreyfus TeleTransfer Privilege if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between the bank account designated
in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an Automated
Clearing House ("ACH") member may be so designated. Dreyfus TeleTransfer
purchase orders may be made at any time. Purchase orders received by 4:00
p.m. New York time, on any business day that 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 Dreyfus TeleTransfer
Privilege, the initial payment for purchase of Fund shares must be drawn on,
and redemption proceeds paid to, the same bank and account as are designated
on the Account Application or Shareholder Services Form on file. If the
proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares - Dreyfus TeleTransfer Privilege." 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 NAV of the
shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Expenses."
Fund shares are subject to fees for distribution and shareholder
services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule.
Distribution Plan. Fund shares are subject to a Distribution Plan (the
"Plan") adopted pursuant to the Rule. The Plan allows the Fund to spend
annually up to 0.25% of its average daily net assets to compensate Mellon
Bank and its affiliates (including but not limited to Dreyfus and Dreyfus
Service Corporation) for shareholder servicing activities and the
Distributor for shareholder servicing activities and expenses primarily
intended to result in the sale of Fund shares. The Plan allows the
Distributor to make payments from the Rule 12b-1 fees it collects from the
Fund to compensate Agents that have entered into Agreements with the
Distributor for distribution related services and/or shareholder services.
Under the Agreements, the Agents are obligated to provide distribution
related services with regard to the Fund and/or shareholder services to the
Agent's clients that own Fund shares. The fees are payable pursuant to the
Plan without regard to expenses incurred.
The Fund and the Distributor may suspend or reduce payments under the
Plan at any time, and payments are subject to the continuation of the Fund's
Plan and the Agreements described above. Potential investors should read
the Fund's Prospectus in light of the terms governing Agreements with their
Agents.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to
the Company's Directors for their review at least quarterly. In addition,
the Plan provides that it may not be amended to increase materially the
costs which the Fund may bear for distribution pursuant to the Plan without
approval of the Fund's shareholders, and that other material amendments of
the Plan must be approved by the vote of a majority of the Directors and of
the Directors who are not "interested persons" of the Company or Dreyfus (as
defined in the 1940 Act) and who do not have any direct or indirect
financial interest in the operation of the Plan, cast in person at a meeting
called for the purpose of considering such amendments. The Plan was
approved by the entire Board of Directors and by the Directors who were
neither "interested persons" of the Company nor Dreyfus (as defined in the
1940 Act) and who did not have any direct or indirect financial interest in
the operation of the Plan at a meeting held on February 4, 1999. The Plan
is subject to annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct or indirect
financial interest in the operation of the Plan, by vote cast in person at a
meeting called for the purpose of voting on the Plan. The Plan is
terminable at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or by vote of the holders of a majority (as defined in
the 1940 Act) of the outstanding shares of the Fund.
For the period September 30, 1998 (commencement of operations) through
October 31, 1998, the Fund paid the Distributor and Dreyfus Service
Corporation $6 and $1,062, respectively, pursuant to the Plan.
REDEMPTION 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."
Redemption Fee. The Fund will deduct a redemption fee equal to 1% of
the NAV of Fund shares redeemed (including redemptions through the use of
the Fund exchange service) less than 6 months following the issuance of such
shares. The redemption fee will be deducted from the redemption proceeds
and retained by the Fund.
No redemption fee will be charged on the redemption or exchange of
shares (1) through the Fund's Automatic Withdrawal Plan or Dreyfus Auto-
Exchange Privilege, (2) through accounts that are reflected on the records
of the Transfer Agent as omnibus accounts approved by Dreyfus Service
Corporation, (3) through accounts established by Agents approved by Dreyfus
Service Corporation that utilize the National Securities Clearing
Corporation's networking system, or (4) acquired through the reinvestment of
dividends or capital gain distributions. The redemption fee may be waived,
modified or terminated at any time.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege, which is granted automatically unless you specifically refuse it
by checking the applicable "No" box on the Account Application. The
Telephone Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form or by oral request from any of
the authorized signatories on the account by calling 1-800-645-6561. You
also may redeem shares through the Wire Redemption Privilege or the Dreyfus
TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you are a client of
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 Dreyfus
TeleTransfer Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes 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 each day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor will accept orders from Selected Dealers
with which it has sales agreements for the repurchase of Fund shares held by
shareholders. Repurchase orders received by dealers by the close of trading
on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee prior to the close of its business day (normally
5:15 p.m., New York time) are effected at the price determined as of the
close of trading on the floor of the NYSE on that day. Otherwise, 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.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption
request in proper form. Redemption proceeds ($1,000 minimum) will be
transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder Services
Form, or a correspondent bank if the investor's bank is not a member of the
Federal Reserve System. Fees ordinarily are imposed by such bank and
usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contracting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds (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. Holders of jointly
registered Fund or bank accounts may redeem through the Dreyfus TeleTransfer
Privilege for transfer to their bank account not more than $250,000 within
any 30-day period. Investors should be aware that if they have selected the
Dreyfus TeleTransfer Privilege, any request for a wire redemption will be
effected as a Dreyfus TeleTransfer transaction through the ACH system unless
more prompt transmittal specifically is requested. See "Purchase of
Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the 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.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Fund shares may be exchanged for shares of certain
other funds advised or administered by Dreyfus. Shares of such other funds
purchased by exchange will be purchased on the basis of relative 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.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number. 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 1-800-645-6561, or by
oral request from any of the authorized signatories on the account also by
calling 1-800-645-6561. 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 Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a new account by exchange the 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
another fund in the Dreyfus Family of Funds of which the investor is a
shareholder. This Privilege is available only for existing accounts. 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. 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 Dreyfus Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and
from regular accounts to IRA accounts, but not from IRA accounts to regular
accounts. With respect to all other retirement accounts, exchanges may be
made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to the Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may
charge a service fee for the use of this Privilege. No such fee currently
is contemplated. For more information concerning this Privilege and the
funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for federal income tax
purposes as a sale of 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 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builder (registered trademark). 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 1-800-645-
6561. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to the
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671
and the notification will be effective three business days following
receipt. The 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
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-
800-645-6561. 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.
Dreyfus 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 certain other funds in the Dreyfus Family
of Funds of which the investor is a shareholder. Shares of the other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative 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 distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You
may cancel these Privileges by mailing written notification to Dreyfus
Family Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To
select a new fund after cancellation, you must submit a new Dreyfus Dividend
Options Form. Enrollment in or cancellation of these privileges is
effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for Dreyfus Dividend
Sweep. The Fund may modify or terminate these privileges at any time or
charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for
Dreyfus Dividend Sweep.
Dreyfus Step Program. Dreyfus Step Program enables you to purchase
Fund shares without regard to the Fund's minimum initial investment
requirements through Dreyfus-Automatic Asset Builderr, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a
Dreyfus Step Program account, you must supply the necessary information on
the Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing participation in Dreyfus-Automatic Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). The Fund
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 Polices" in the Fund's Prospectus. The Fund may
modify or terminate this Program at any time. Investors who wish to
purchase Fund shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs ( including
regular IRAs and spousal IRAs for a non-working spouse), Roth IRAs, SEP-IRAs
and IRA "Rollover Accounts."
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 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you
may have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the ACH system at each pay period. To
establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. Your employer
must complete the reverse side of the form and return it to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. You may
obtain the necessary authorization form by calling 1-800-645-6561. You may
change the amount of purchase or cancel the authorization only by written
notification to your employer. It is the sole responsibility of your
employer, not the Distributor, 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.
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, and Rollover
IRAs) 401(k) Salary Reduction Plan 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 cal 1-800-645-6561;
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 and
fees pursuant to the Plan, 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 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.
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."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
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 Internal Revenue Code of 1986, as amended 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.
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 the 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. 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 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 distributions or redemptions 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 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.
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 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.
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.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the net asset value of
the shares below the cost of his or her investment. Such a 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 a year if the distributions
are paid by the Fund during the following January. Accordingly, those
distributions will be taxed to shareholders for the year in which that
December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
federal alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that
would reduce the yield and/or 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.
Foreign Currency, Futures, Forwards and Hedging Transactions. Gains
from the sale or other disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gains and
losses from the disposition of foreign currencies and certain foreign-
currency-denominated instruments (including debt instruments and financial
forward and futures contracts and options) may be treated as ordinary income
or loss under Section 988 of the Code. In addition, all or a portion of any
gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as
capital gain may be treated as ordinary income. "Conversion transactions"
are defined to include certain option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund
on the exercise or lapse of, or closing transactions respecting certain
options, future 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, future
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 included 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.
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 such 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.
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 its activities in
states and localities in which it is deemed to be conducting business, it
may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes 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 the rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder certifies his or her foreign status to the Fund.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). 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. 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 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 to avoid the
additional expenses which might otherwise be incurred if it were to attempt
to develop comparable information through its 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. It is
the present opinion of the Directors that the desirability of retaining the
Dreyfus as investment manager to the Fund outweighs any disadvantages that
may be said to exist from exposure to simultaneous transactions.
Portfolio Turnover. 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 profile 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. In periods in
which extraordinary market conditions prevail, Dreyfus will not be deterred
from changing the Fund's investment strategy as rapidly as needed, in which
case higher turnover rates can be anticipated. The portfolio turnover rate
for the period September 30, 1998 (commencement of operations) through
October 31, 1998 was 2.58%.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
The aggregate total return (expressed as a percentage) for the Fund for
the period September 30, 1998, (commencement of operations) through October
31, 1998, was 3.48% (assuming the deduction of the 1% redemption fee). The
aggregate total return for the Fund was 4.48% (without reflecting the
deduction of the 1% redemption fee) for this period.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the Fund's net
asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period), and
dividing the result by the net asset value per share at the beginning of the
period.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Standard & Poor's Smallcap 600 Index, the Standard & Poor's 500 Composite
Stock Price Index, the Russell 2000 Value Index, the Russell 2000 Growth
Index, or the Russell 2000 Stock Index; (ii) the Dow Jones Industrial
Average; (iii) 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; (iv) 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; (v) the Consumer Price Index (a measure of inflation) to
assess the real rate of return from an investment in the Fund; and (vi)
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 materials for the Fund may refer to, or
include commentary by, the Fund's primary portfolio manager relating to his
or her investment strategy, the asset growth of the Fund, current or past
business, political, economic or financial conditions and other matters of
general interest to investors. From time to time, advertising materials for
the Fund may refer to the Fund's quantitative disciplined approach to stock
market investing and the number of stocks analyzed by Dreyfus.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
INFORMATION ABOUT THE FUND/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 are of one class and have equal rights as to dividends and in
liquidation. Fund shares have no preemptive or subscription rights and are
freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain 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, New York 10017, was appointed by
the Directors to serve as the Fund's independent auditors for the period
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 period ended October 31, 1998,
including notes to the financial statements and financial highlights and the
Independent Auditors Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual
Report, and the Independent Auditors' Report thereon contained therein, and
related notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF STANDARD & 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.
S&P's letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign designation, which is used to show relative standing within
the major rating categories, except in the AAA (Prime Grade) category.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Issues assigned an A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
Moody's Investors Service, Inc. ("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.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in the categories below B. The modifier 1 indicates a ranking for the
security in the higher end of a rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end
of a rating category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
Fitch IBCA, Inc, ("Fitch IBCA")
Short-Term Ratings
Fitch IBCA's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes.
Although the credit analysis is similar to Fitch IBCA's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for
timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than
issues rated `F-1+'.
Duff & Phelps Credit Rating Co. ("Duff")
Commercial Paper Ratings
The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors which are supported by ample
asset protection. Risk factors are minor.
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 Application.
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(3) 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 Financial Data Schedule.
O 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.
(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 Mellon Preferred Director 3/96 - 11/96
Chairman of the Board and Capital Corporation*
Chief Executive Officer
TBCAM Holdings, Inc.* President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Chairman 1/98 - 6/98
Asset Management, LLC* President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Chief Executive Officer 4/95 - 4/97
Pareto Partners Partner Representative 11/95 - 5/97
271 Regent Street
London, England W1R 8PP
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Franklin Portfolio
Associates Trust* Trustee 9/95 - 1/97
Certus Asset Advisors Corp.**
Director 6/95 - Present
The Boston Company of Director 6/95 - 4/96
Southern California Chief Executive Officer 6/95 - 4/96
Los Angeles, CA
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
Access Capital Strategies Corp. Director 5/95 - 1/97
124 Mount Auburn Street
Suite 200 North
Cambridge, MA 02138
Mellon Bank, N.A. + Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - Present
Christopher M. Condron Mellon Bank Corporation+ Chief Operating Officer 1/99 - Present
Chairman and Chief President 1/99 - Present
Executive Director 1/98 - Present
Officer (Continued) Vice Chairman 11/94 - 1/99
The Boston Company Financial Director 4/94- 8/96
Services, Inc.* President 4/94 - 8/96
The Boston Company, Inc.* Vice Chairman 1/94 - Present
Director 5/93 - Present
Laurel Capital Advisors, LLP+ Exec. Committee 1/98 - Present
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Chairman 3/93 - 2/96
Company of CA Chief Executive Officer 6/93 - 2/96
Los Angeles, CA Director 6/89 - 2/96
MY, Inc.* President 9/91 - 3/96
Director 9/91 - 3/96
Reco, Inc.* President 8/91 - 11/96
Director 8/91 - 11/96
Boston Safe Deposit and Trust Director 6/89 - 2/96
Company of NY
New York, NY
Boston Safe Deposit and Trust President 9/89 - 6/96
Company* Director 5/93 -Present
The Boston Company Financial President 6/89 - Present
Strategies, Inc. * Director 6/89 - Present
The Boston Company Financial President 6/89 - 1/97
Strategies Group, Inc. * Director 6/89- 1/97
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 Chief Executive Officer 2/81 - 12/96
York, PA Chairman 3/89 - 1/96
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
Founders Asset Management, LLC Acting Chief Executive 7/98 - 12/98
2930 East Third Ave. Officer
Denver, CO 80206
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
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 - Present
500 Grant Street Director 9/88 - Present
Pittsburgh, PA 15258 Vice President 9/88 - Present
Treasurer 9/88 - Present
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+
Mellon Financial Services Treasurer 12/87 - Present
Corporation # 5+
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 - Present
President 9/96 - Present
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
Executive Vice President 12/94 - 1/97
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 - Present
President 2/97 - Present
Chief Executive Officer 2/97 - Present
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - Present
Corporation++ President 5/97 - Present
Director 12/94 - Present
The Boston Company Advisors* Chairman 8/93 - 11/95
The Boston Company Advisors, Chairman 12/95 - Present
Inc. Chief Executive Officer 12/95 - Present
Wilmington, DE President 12/95 - Present
Cornice Acquisition Board of Managers 12/97 - Present
Company, LLC
Denver, CO
The Boston Company, Inc.* Director 5/93 - Present
President 5/93 - Present
Mellon Bank, N.A.+ Executive Vice President 2/92 - Present
Laurel Capital Advisors, LLP+ President 12/91 - Present
Executive Committee 12/91 - Present
Member
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
Martin G. McGuinn Mellon Bank, N. A. + Chairman 3/98 - Present
Director (Continued) Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
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
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
Company* President 7/96 - Present
Executive Vice President 7/96 - 1/99
1/91 - 7/96
Mellon Trust of New York Director
1301 Avenue of the Americas 6/96 - Present
New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
J. David Officer Mellon Bank, N.A.+ Executive Vice President 2/94 - Present
Vice Chairman and
Director (Continued) 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
Laurel Capital Advisors+ Trustee 3/97 - Present
Ronald P. O'Hanley McKinsey & Company, Inc. Partner 8/86 - 2/97
Vice Chairman (Continued) Boston, MA
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
Lion Management, Inc.++ Director 1/88 - 10/96
Vice President 1/88 - 10/96
Secretary 1/88 - 10/96
The Dreyfus Consumer Credit Secretary 4/83 - 3/96
Corporation++
Dreyfus Service Director 3/97 - Present
Organization, Inc.++ Assistant Secretary 4/83 -3/96
Major Trading Corporation++ Assistant Secretary 5/81 - 8/96
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
William T. Sandalls, Jr. Dreyfus Service Corporation++ Director 1/96 - Present
Executive Vice President Treasurer 1/96 - 2/97
(Continued) 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
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
Wilmington, DE 19808
Dreyfus Acquisition Corporation++ Director VP and CFO 1/96 - 8/96
Vice President 1/96 - 8/96
Chief Financial Officer 1/96 - 8/96
Lion Management, Inc.++ Director 1/96 - 10/96
President 1/96 - 10/96
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
Major Trading Corporation++ Director 1/96 - 8/96
Treasurer 1/96 - 8/96
The Dreyfus Trust Company+++ Director 1/96 - 4/97
Treasurer 1/96 - 4/97
Chief Financial Officer 1/96 - 4/97
Dreyfus Personal Director 1/96 - 4/97
Management, Inc.++ Treasurer 1/96 - 4/97
Patrice M. Kozlowski None
Vice President - Corporate
Communications
Mary Beth Leibig None
Vice President -
Human Resources
Andrew S. Wasser Mellon Bank Corporation+ Vice President 1/95 - Present
Vice President -
Information Systems
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
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
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
</TABLE>
(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
Michael S. Petrucelli++ Senior Vice President Vice President,
Assistant Treasurer
and Secretary
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 certifies that it meets all of
the requirements for effectivess of this Registration Statement under Rule
485(b) under the Securities Act and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York on the 26th day
of February, 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 2/26/99
__________________________
Marie E. Connolly
/s/Joseph S. DiMartino* Director 2/26/99
__________________________
Joseph S. DiMartino
/s/James M. Fitzgibbons* Director 2/26/99
__________________________
James M. Fitzgibbons
/s/Kenneth A. Himmel* Director 2/26/99
__________________________
Kenneth A. Himmel
/s/Stephen J. Lockwood* Director 2/26/99
- --------------------------
Stephen J. Lockwood
/s/Roslyn M. Watson* Director 2/26/99
- --------------------------
Roslyn M. Watson
/s/J. Tomlinson Fort* Director 2/26/99
__________________________
J. Tomlinson Fort
/s/Arthur L. Goeschel* Director 2/26/99
__________________________
Arthur L. Goeschel
/s/John Sciullo* Director 2/26/99
__________________________
John Sciullo
/s/Benaree Pratt Wiley* Director 2/26/99
- --------------------------
Benaree Pratt Wiley
*BY: /s/ Michael S. Petrucelli
---------------------
Michael S. Petrucelli
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 reports dated December 15, 1998, with respect
to the two Funds listed below of 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 Disciplined Smallcap Stock Fund
Dreyfus Disciplined Stock Fund
KPMG LLP
New York, New York
February 26, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000819940
<NAME> THE DREYFUS/LAUREL FUNDS, INC.
<SERIES>
<NUMBER> 45
<NAME> DREYFUS DISCIPLINED SMALLCAP STOCK FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
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