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. 69 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 69 [ 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.
----
Dreyfus
Bond Market Index Fund
Investing in bonds to match the total return of the Lehman Brothers Aggregate
Bond 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
- ----------------------------------------------------
1 Goal/Approach
2 Main Risks
3 Past Performance
4 Expenses
5 Management
6 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
- -------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT PERFORMANCE
AND HOLDINGS CAN BE FOUND IN THE CURRENT ANNUAL/ SEMIANNUAL REPORT (SEE 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 Bond Market Index Fund
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Ticker Symbols: BASIC shares DBIRX
Investor shares DBMIX
GOAL/APPROACH
The fund seeks to match the total return of the Lehman Brothers Aggregate Bond
Index. Total return includes price movements as well as interest income. This
objective may be changed without shareholder approval. To pursue its goal, the
fund invests at least 80% of total assets in securities that are included in the
index. To maintain liquidity, the fund may invest up to 20% of its assets in
various short-term fixed-income securities and money market instruments.
As the fund grows, it expects to have a correlation between its performance and
that of the index of at least .95 before expenses. A correlation of 1.00 would
mean that the fund and the index were perfectly correlated.
The Lehman Brothers Aggregate Bond Index is a broad-based, unmanaged index that
covers the U.S. investment grade fixed-rate bond market and is comprised of U.S.
government, corporate, mortgage-backed and asset-backed securities. Most of the
bonds in the index are issued by the U.S. Treasury and other U.S. government and
agency issuers. Lehman Brothers is not affiliated with this fund, and it does
not sell or endorse the fund, nor does it guarantee the performance of the fund
or the index.
Concepts to understand
INDEX FUNDS: mutual funds that are designed to meet the performance of an
underlying benchmark index. To replicate index performance, the manager uses a
passive management approach and purchases a representative sample of the bonds
comprising the benchmark index. Because the fund has expenses, performance will
tend to be slightly lower than that of the target benchmark.
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. Bonds rated BBB or Baa and above are considered investment
grade.
The Fund
<PAGE 1>
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices, and therefore in the fund's share price
as well. As a result, the value of your investment in the fund could go up and
down, which means that you could lose money.
Because the fund uses an indexing strategy, it does not attempt to manage market
volatility, use defensive strategies or reduce the effects of any long-term
periods of poor performance among bonds.
The correlation between fund and index performance may be affected by the fund's
expenses and use of sampling techniques, changes in securities markets, changes
in the composition of the index and the timing of purchases and redemptions of
fund shares.
Other risk factors that could have an effect on the fund's performance include:
(pound) a decline in the credit quality of a bond, or the perception of a
decline, could cause its value to fall, potentially lowering the fund's
share price
(pound) if the loans underlying the fund's mortgage-and asset-related securities
are paid off earlier or later than expected, which could occur because
of movements in market interest rates, the fund's share price or yield
could be hurt
(pound) general downturns in the economy could cause the value of asset-backed
securities to fall, and the risk that any recovery on repossessed
collateral might be inadequate is greater than for mortgage-backed
securities
Other potential risks
While some of the fund's securities may carry guarantees of the U.S. government
or its agencies, these guarantees do not apply to shares of the fund itself.
To the extent that the fund invests in securities not included in the index to
maintain liquidity, it will not achieve its goal of replicating the total return
of the index.
<PAGE 2>
PAST PERFORMANCE
The two tables below show the fund's annual returns and its long-term
performance. The first table shows you how the performance of the fund's BASIC
shares has varied from year to year. The second table compares performance over
time to that of the Lehman Brothers Aggregate Bond Index*, a broad-based,
unmanaged, market-weighted index covering the U.S. investment grade fixed-rate
bond market. Both tables assume reinvestment of dividends and distributions. As
with all mutual funds, the past is not a prediction of the future.
* PRIOR TO NOVEMBER 14, 1997, THE FUND USED A DIFFERENT BENCHMARK INDEX WHICH
DID NOT INCLUDE CERTAIN MORTGAGE- AND ASSET-BACKED SECURITIES.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
BASIC SHARES -3.45 18.52 2.20 9.42 8.93
94 95 96 97 98
BEST QUARTER: Q2 '95 +6.30%
WORST QUARTER: Q1 '94 -2.71%
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<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/98
Inception Since
date 1 Year 5 Years Inception
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BASIC SHARES 11/30/93 8.93% 6.87% 6.78%
INVESTOR SHARES 4/28/94 8.56% -- 7.88%
LEHMAN BROTHERS
AGGREGATE BOND INDEX 8.69% 7.27% 7.27%*
* BASED ON THE LIFE OF BASIC SHARES. FOR COMPARATIVE PURPOSES, THE VALUE OF THE
INDEX ON 11/30/93 IS USED AS THE BEGINNING VALUE.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund
<PAGE 3>
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
BASIC Investor
shares shares
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SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT NONE NONE
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ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.15% 0.15%
12b-1 fee none 0.25%
Other expenses 0.00% 0.00%
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TOTAL 0.15% 0.40%
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<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BASIC SHARES $15 $48 $85 $192
INVESTOR SHARES $40 $128 $224 $505
</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, 12b-1 fees and extraordinary
expenses.
12B-1 FEE: the fee paid to Dreyfus Service Corporation, an affiliate of The
Dreyfus Corporation, 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.
<PAGE 4>
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.
Dreyfus manages the fund by making investment decisions based on the fund's
investment objective, policies and restrictions in seeking to match the total
return of the Lehman Brothers Aggregate Bond Index.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund
<PAGE 5>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class 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,
BASIC SHARES 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 10.00 9.80 9.94 9.15 10.00
Investment operations:
Investment income -- net .61 .60 .59 .58 .49(2)
Net realized and unrealized
gain (loss) on investments .32 .20 (.14) .79 (.85)
Total from investment operations .93 .80 .45 1.37 (.36)
Distributions:
Dividends from investment
income -- net (.61) (.60) (.59) (.58) (.49)
Dividends from net realized gain
on investments (.05) -- -- -- --
Total distributions (.66) (.60) (.59) (.58) (.49)
Net asset value, end of period 10.27 10.00 9.80 9.94 9.15
Total return (%) 9.69 8.46 4.69 15.41 (3.68)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .15 .35 .40 .40 .40(3,4)
Ratio of net investment income
to average net assets (%) 6.06 6.12 6.02 6.10 5.05(3)
Portfolio turnover rate (%) 43.39 48.86 42.65 40.16 188.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 55,852 33,234 32,986 6,824 4,464
(1) FOR THE PERIOD FROM NOVEMBER 30, 1993 (COMMENCEMENT OF OPERATIONS) THROUGH OCTOBER 31, 1994.
(2) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT
ADVISER FOR THE PERIOD ENDED OCTOBER 31, 1994 WAS $0.39 PER SHARE.
(3) ANNUALIZED.
(4) ANNUALIZED EXPENSE RATIO BEFORE REIMBURSEMENT OF EXPENSES BY INVESTMENT
MANAGER FOR THE PERIOD ENDED OCTOBER 31, 1994 WAS 1.41%.
</TABLE>
<TABLE>
<CAPTION>
<PAGE 6>
YEAR ENDED OCTOBER 31,
INVESTOR SHARES 1998 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 9.99 9.78 9.93 9.15 9.44
Investment operations:
Investment income -- net .59 .57 .57 .55 .24
Net realized and unrealized
gain (loss) on investments .32 .21 (.15) .78 (.28)
Total from investment operations .91 .78 .42 1.33 (.04)
Distributions:
Dividends from investment
income -- net (.59) (.57) (.57) (.55) (.25)
Dividends from net realized gain
on investments (.05) -- -- -- --
Total distributions (.64) (.57) (.57) (.55) (.25)
Net asset value, end of period 10.26 9.99 9.78 9.93 9.15
Total return (%) 9.43 8.29 4.36 15.01 (.46)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .40 .60 .65 .65 .65(2)
Ratio of net investment income
to average net assets (%) 5.79 5.82 5.80 5.77 4.81(2)
Portfolio turnover rate (%) 43.39 48.86 42.65 40.16 188.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,552 120 80 207 38
(1) FOR THE PERIOD FROM APRIL 28, 1994 (COMMENCEMENT OF OPERATIONS) THROUGH OCTOBER 31, 1994.
(2) ANNUALIZED.
</TABLE>
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
THE FUND OFFERS TWO SHARE CLASSES -- BASIC shares and Investor shares. Both
shares are offered to any investor. The classes differ in their expenses,
minimum purchase and account balance requirements, and the services they offer
to shareholders. YOU PAY NO SALES CHARGES to invest in this fund. Your price for
fund shares is the net asset value per share (NAV) for the class of shares you
purchase, 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.
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Minimum investments
Initial Additional
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BASIC SHARES
Regular accounts $10,000 $1,000*; $500 FOR
TELETRANSFER
INVESTMENTS
Traditional IRAs, $5,000 $1,000**
Spousal IRAs, Roth IRAs
Education IRAs N/A N/A
Dreyfus automatic $100 $100
investment plans
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INVESTOR SHARES
Regular accounts $2,500((+)) $100; $500 FOR
TELETRANSFER
INVESTMENTS
Traditional IRAs, $750 NO MINIMUM
Spousal IRAs, Roth IRAs
Education IRAs $500 NO MINIMUM
AFTER THE FIRST YEA
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.
* $100 FOR SHAREHOLDERS WHO HAVE HELD BASIC SHARES
SINCE AUGUST 14, 1997.
** NO MINIMUM FOR SHAREHOLDERS WHO HAVE HELD BASIC
SHARES IN SUCH ACCOUNTS SINCE AUGUST 14, 1997.
((+)) $1,000 FOR CLIENTS OF CERTAIN AGENTS AND CERTAIN
OTHER PURCHASES.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
When calculating its NAV, the fund's bonds are generally valued by an
independent pricing service approved by the fund's board. Certain securities are
valued at the last sale price or at fair value as determined by procedures
established by the board.
<PAGE 8>
YOUR ORDER WILL BE PRICED at the next NAV calculated after your order is
accepted by the fund's transfer agent or other entity authorized to accept
orders on behalf of the fund.
Selling shares
YOU MAY SELL SHARES AT ANY TIME. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that 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.
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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:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 $5,000* IN THE BASIC SHARE CLASS, OR BELOW $500 IN
THE INVESTOR SHARE CLASS, the fund may ask you to increase your balance. If it
is still below the minimum balance amount 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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of
1% of the fund's total assets
(pound) change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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).
* BELOW $500 FOR HOLDERS OF BASIC SHARES SINCE AUGUST 14, 1997.
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
once a month, 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.
EACH SHARE CLASS WILL GENERATE a different dividend because each has different
expenses.
FUND DIVIDENDS AND OTHER DISTRIBUTIONS are taxable to most investors (unless
your investment is in an IRA or other tax-advantaged account). The tax status of
any distribution is the same regardless of how long you have been in the fund
and whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
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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.
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 up to 12 months after buying them. "Long-term capital gains"
applies to shares sold 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 from one Dreyfus fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). 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:
(pound) for traditional, rollover, Roth and Education IRAs, call 1-800-645-6561
(pound) 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# 011-001234
* DDA# 044210
* the fund name and the share class
* 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# 011-001234
* DDA# 044210
* the fund name and the share class
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but before your account number insert "4450" for
BASIC shares OR "4460" for Investor shares.
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 (Investor shares only) 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 and the share class
* 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 share
class 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# 011-001234
* DDA# 044210
* the fund name and the share class
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but before your account number insert "4450" for
BASIC shares OR "4460" for Investor shares.
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 (Investor shares only) 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 and the share class
* 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 Bond Market Index 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 310/710P0399
<PAGE>
Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Seeking a high level of current income and a stable $1.00 share price
PROSPECTUS March 1, 1999
(reg.tm)
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>
<PAGE>
The Funds
Contents
The Funds
- --------------------------------------------------------------------------------
Introduction 1
Dreyfus Institutional Prime 2
Money Market Fund
Dreyfus Institutional Government 4
Money Market Fund
Dreyfus Institutional U.S. Treasury 6
Money Market Fund
Management 8
Financial Highlights 9
Your Investment
- --------------------------------------------------------------------------------
Account Policies 11
Distributions and Taxes 13
Services for Fund Investors 13
Instructions for Accounts 14
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON EACH FUND'S RECENT PERFORMANCE AND HOLDINGS CAN BE FOUND IN ITS
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Series of The Dreyfus/Laurel Funds, Inc.
The three funds described in this prospectus are money market funds. They seek
to maintain a stable share price (although they cannot guarantee that they will
always do so) and are designed to offer a high level of current investment
income and high liquidity.
The main differences among these funds are the securities in which they invest.
The Dreyfus Institutional Prime Money Market Fund invests in a range of
high-quality money market instruments. The Dreyfus Institutional Government
Money Market Fund invests primarily in money market instruments issued or
guaranteed by the U.S. government and its agencies and instrumentalities. The
Dreyfus Institutional U.S. Treasury Money Market Fund maintains an even higher
quality standard by investing exclusively in U.S. Treasury obligations and
repurchase agreements secured by such obligations.
Introduction
<PAGE 1>
Dreyfus Institutional Prime Money Market Fund
- -----------------------
Ticker Symbol: DPMXX
GOAL/APPROACH
The fund seeks a high level of current income consistent with stability of
principal. This objective may be changed without shareholder approval. As a
money market fund, the fund is subject to maturity, quality and diversification
requirements designed to help it maintain a stable share price.
The fund invests in a diversified portfolio of high-quality, short-term debt
securities, including:
* securities issued or guaranteed by the U.S. government or its agencies
and instrumentalities, including mortgage-related securities
* certificates of deposit, time deposits, bankers' acceptances and other
short-term securities issued by domestic or foreign banks or their
subsidiaries or branches
* repurchase agreements
* domestic and dollar-denominated foreign commercial paper, and other
short-term corporate obligations, including those with floating or variable
rates of interest
Concepts to understand
MONEY MARKET FUND: a specific type of mutual fund that seeks to maintain a $1.00
price per share. Money market funds are subject to strict federal requirements
and must:
* maintain an average dollar-weighted portfolio maturity of 90 days or
less
* buy individual securities that have remaining maturities of 13 months or
less
* invest only in high-quality, dollar-denominated obligations
REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.
MAIN RISKS
The fund's yield will vary as the short-term securities in its portfolio mature
and the proceeds are reinvested in securities with different interest rates.
Over time, the real value of the fund's yield may be substantially eroded by
inflation.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of an investment at $1.00 per share, it is possible to lose
money by investing in the fund.
While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:
* interest rates could rise sharply, causing the fund's share price to
drop
* any of the fund's holdings could have its credit rating downgraded or
could default
* adverse developments could occur in the banking industry, which issues
or guarantees many of the securities the fund typically owns
* adverse economic, political or other developments could affect foreign
issuers of money market securities
Concepts to understand
CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.
An issuer with the highest credit rating has a very strong degree of certainty
(or safety) with respect to making all payments. An issuer with the
second-highest credit rating has a strong capacity to make all payments, but the
degree of safety is somewhat less.
Generally, the fund is required to invest at least 95% of its assets in the
securities of issuers with the highest credit rating, with the remainder
invested in securities with the second-highest credit rating, or the unrated
equivalent as determined by Dreyfus.
<PAGE 2>
PAST PERFORMANCE
The two tables below show the fund's annual returns and long-term performance.
The first table shows how the fund's performance has varied from year to year.
The second averages the fund's performance over time. 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 (%)
9.37 8.30 6.10 3.76 3.01 4.05 5.84 5.27 5.47 5.38
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q2 '89 +2.41%
WORST QUARTER: Q2 '93 +0.72%
The fund's 7-day yield on 12/31/98 was 4.88%. For the fund's current yield, call
toll-free 1-800-645-6561.
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
5.38% 5.20% 5.64%
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives an investor 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. An investor could lose money in this fund, but also has the
potential to make money.
EXPENSES
Fund investors pay certain fees and expenses in connection with the fund, which
are described in the table below. Shareholder transaction fees are paid from an
investor's 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) or Rule 12b-1 distribution fees.
- --------------------------------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES NONE
% OF TRANSACTION AMOUNT
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.15%
Shareholder services fee 0.15%
Other expenses 0.00%
- --------------------------------------------------------------------------------
TOTAL 0.30%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$31 $97 $169 $381
</TABLE>
This example shows what an investor 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 the investor sold their 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 (shareholder services
fee in the case of this fund) and extraordinary expenses.
SHAREHOLDER SERVICES FEE: the fee paid to certain banks, brokers or dealers and
other financial institutions for shareholder services. This fee is paid out of
the fund's assets on an ongoing basis and over time it will increase the cost of
a shareholder's investment in the fund.
Dreyfus Institutional Prime Money Market Fund
<PAGE 3>
Dreyfus Institutional Government Money Market Fund
- ----------------------
Ticker Symbol: DIGXX
GOAL/APPROACH
The fund seeks a high level of current income consistent with stability of
principal and conservative investment risk. This objective may be changed
without shareholder approval. As a money market fund, the fund is subject to
maturity, quality and diversification requirements designed to help it maintain
a stable share price.
Under normal market conditions, the fund will invest at least 65% of its total
assets in money market instruments issued or guaranteed by the U.S. government
and its agencies and instrumentalities. The fund may also invest in repurchase
agreements.
Concepts to understand
MONEY MARKET FUND: a specific type of mutual fund that seeks to maintain a $1.00
price per share. Money market funds are subject to strict federal requirements
and must:
* maintain an average dollar-weighted portfolio maturity of 90 days or
less
* buy individual securities that have remaining maturities of 13 months or
less
* invest only in high-quality, dollar-denominated obligations
REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.
MAIN RISKS
The fund's yield will vary as the short-term securities in its portfolio mature
and the proceeds are reinvested in securities with different interest rates.
Over time the real value of the fund's yield may be substantially eroded by
inflation.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of an investment at $1.00 per share, it is possible to lose
money by investing in the fund.
While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:
* interest rates could rise sharply, causing the fund's share price to
drop
* any of the fund's holdings could have its credit rating downgraded or
could default (in the case of U.S. government securities, this risk is
considered remote)
Concepts to understand
CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.
An issuer with the highest credit rating has a very strong degree of certainty
(or safety) with respect to making all payments. An issuer with the
second-highest credit rating has a strong capacity to make all payments, but the
degree of safety is somewhat less.
Generally, the fund is required to invest at least 95% of its assets in the
securities of issuers with the highest credit rating, with the remainder
invested in securities with the second-highest credit rating, or the unrated
equivalent as determined by Dreyfus.
<PAGE 4>
PAST PERFORMANCE
The two tables below show the fund's annual returns and long-term performance.
The first table shows how the fund's performance has varied from year to year.
The second averages the fund's performance over time. 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 (%)
9.12 8.12 5.89 3.61 2.94 4.01 5.76 5.18 5.32 5.25
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q2 '89 +2.30%
WORST QUARTER: Q2 '93 +0.72%
The fund's 7-day yield on 12/31/98 was 4.66%. For the fund's current yield, call
toll-free 1-800-645-6561.
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
5.25% 5.10% 5.51%
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives an investor 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. An investor could lose money in this fund, but also has the
potential to make money.
EXPENSES
Fund investors pay certain fees and expenses in connection with the fund, which
are described in the table below. Shareholder transaction fees are paid from an
investor's 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) or Rule 12b-1 distribution fees.
- --------------------------------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES NONE
% OF TRANSACTION AMOUNT
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.15%
Shareholder services fee 0.15%
Other expenses 0.00%
- --------------------------------------------------------------------------------
TOTAL 0.30%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$31 $97 $169 $381
</TABLE>
This example shows what an investor 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 the investor sold their 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 (shareholder services
fee in the case of this fund) and extraordinary expenses.
SHAREHOLDER SERVICES FEE: the fee paid to certain banks, brokers or dealers and
other financial institutions for shareholder services. This fee is paid out of
the fund's assets on an ongoing basis and over time it will increase the cost of
a shareholder's investment in the fund.
Dreyfus Institutional Government Money Market Fund
<PAGE 5>
Dreyfus Institutional U.S. Treasury Money Market Fund
- ---------------------
Ticker Symbol: DITXX
GOAL/APPROACH
The fund seeks a high level of current income consistent with stability of
principal and conservative investment risk. This objective may be changed
without shareholder approval. As a money market fund, the fund is subject to
maturity, quality and diversification requirements designed to help it maintain
a stable share price.
To pursue its goal, the fund invests exclusively in direct obligations of the
U.S. Treasury and in repurchase agreements secured by these obligations.
Concepts to understand
MONEY MARKET FUND: a specific type of mutual fund that seeks to maintain a $1.00
price per share. Money market funds are subject to strict federal requirements
and must:
* maintain an average dollar-weighted portfolio maturity of 90 days or
less
* buy individual securities that have remaining maturities of 13 months or
less
* invest only in high-quality, dollar-denominated obligations
REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.
MAIN RISKS
The fund's yield will vary as the short-term securities in its portfolio mature
and the proceeds are reinvested in securities with different interest rates.
Over time the real value of the fund's yield may be substantially eroded by
inflation.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:
* interest rates could rise sharply, causing the fund's share price to
drop
* a counterparty in a repurchase agreement could fail to honor the terms
of its agreement
Concepts to understand
U.S. TREASURY OBLIGATIONS: bills, notes and bonds issued by the U.S. Treasury
and backed by the full faith and credit of the U.S. government.
Treasury obligations are generally considered to be among the highest-quality
investments available. By investing in these obligations, the fund seeks to add
an incremental degree of safety to its portfolio. The fund's yield may be
somewhat lower than those of money market funds that do not limit their
investments to the extent that this fund does, in exchange for the higher level
of credit quality that Treasury obligations offer.
<PAGE 6>
PAST PERFORMANCE
The two tables below show the fund's annual returns and long-term performance.
The first table shows how the fund's performance has varied from year to year.
The second averages the fund's performance over time. 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 (%)
9.10 8.09 5.95 3.55 2.89 3.90 5.67 5.08 5.21 5.12
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q2 '89 +2.31%
WORST QUARTER: Q1 '94 +0.71%
The fund's 7-day yield on 12/31/98 was 4.41%. For the fund's current yield, call
toll-free 1-800-645-6561.
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
5.12% 4.99% 5.44%
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives an investor 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. An investor could lose money in this fund, but also has the
potential to make money.
EXPENSES
Fund investors pay certain fees and expenses in connection with the fund, which
are described in the table below. Shareholder transaction fees are paid from an
investor's 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) or Rule 12b-1 distribution fees.
- --------------------------------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES NONE
% OF TRANSACTION AMOUNT
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.15%
Shareholder services fee 0.15%
Other expenses 0.00%
- --------------------------------------------------------------------------------
TOTAL 0.30%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$31 $97 $169 $381
</TABLE>
This example shows what an investor 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 the investor sold their 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 (shareholder services
fee in the case of this fund) and extraordinary expenses.
SHAREHOLDER SERVICES FEE: the fee paid to certain banks, brokers or dealers and
other financial institutions for shareholder services. This fee is paid out of
the fund's assets on an ongoing basis and over time it will increase the cost of
a shareholder's investment in the fund.
Dreyfus Institutional U.S. Treasury Money Market Fund
<PAGE 7>
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.
Management philosophy
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.
Concepts to understand
YEAR 2000 ISSUES: each 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 a fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of a fund's investments and its share price.
<PAGE 8>
FINANCIAL HIGHLIGHTS
The following tables describe each fund's performance for the fiscal periods
indicated. "Total return" shows how much an investment in a fund would have
increased (or decreased) during each period, assuming reinvestment of all
dividends and distributions. These financial highlights have been independently
audited by KPMG LLP, whose report, along with each fund's financial statements,
is included in the fund's annual report.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations: Investment income -- net .053 .053 .052 .056 .035
Distributions: Dividends from investment income -- net (.053) (.053) (.052) (.056) (.035)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 5.47 5.42 5.33 5.77 3.67
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .30 .30 .30 .30 .29
Ratio of net investment income to average net assets (%) 5.34 5.27 5.25 5.61 3.58
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 479,866 533,154 575,700 773,602 681,781
YEAR ENDED OCTOBER 31,
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations: Investment income -- net .052 .052 .051 .056 .036
Distributions: Dividends from investment income -- net (.052) (.052) (.051) (.056) (.036)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 5.36 5.28 5.25 5.71 3.63
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .30 .30 .30 .30 .30
Ratio of net investment income to average net assets (%) 5.22 5.14 5.14 5.55 3.60
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 343,988 191,853 295,434 515,812 470,007
The Funds
<PAGE 9>
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED OCTOBER 31,
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations: Investment income -- net .051 .050 .051 .054 .035(1)
Distributions: Dividends from investment income -- net (.051) (.050) (.051) (.054) (.035)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 5.22 5.16 5.17 5.57 3.55
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .30 .30 .30 .30 .30(2)
Ratio of net investment income to average net assets (%) 5.10 5.04 5.06 5.44 3.55
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 645,297 776,726 666,360 767,948 586,778
(1) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT MANAGER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $.0350
PER SHARE.
(2) ANNUALIZED EXPENSE RATIO BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT MANAGER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS
..31%.
</TABLE>
<PAGE 10>
Your Investment
ACCOUNT POLICIES
Buying shares
INVESTORS PAY NO SALES CHARGES to invest in these funds. The price for fund
shares is the net asset value per share (NAV) for the shares purchased. For the
Dreyfus Institutional Government Money Market Fund and the Dreyfus Institutional
U.S. Treasury Money Market Fund, the NAV generally is calculated at 3 p.m.,
Eastern time, every day the New York Stock Exchange ("NYSE") is open. The NAV of
the Dreyfus Institutional Prime Money Market Fund generally is calculated at 5
p.m., Eastern time, every day the NYSE is open. Orders (except through
TeleTransfer) will be priced at the NAV next calculated after they are accepted
by a fund's transfer agent or other entity authorized to accept orders on behalf
of the funds. Each fund's investments are valued based on amortized cost.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000,000 NO MINIMUM; $500 FOR
TELETRANSFER INVESTMENTS
DREYFUS AUTOMATIC N/A $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
Investors may be charged a fee for any check that does not clear. Maximum
TeleTransfer purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
AMORTIZED COST: the value of a fund's portfolio securities, which does not take
into account unrealized gains and losses. As a result, portfolio securities are
valued at their acquisition cost, adjusted over time based on the discounts or
premiums reflected in their purchase price. This method of valuation is designed
for each fund to be able to price its shares at $1.00 per share.
Selling shares
INVESTORS MAY SELL SHARES AT ANY TIME. Shares will be sold at the next NAV
calculated after a sale order is accepted by a fund's transfer agent or other
entity authorized to accept orders on behalf of the funds. Any certificates
representing fund shares being sold must be returned with the redemption
request. Orders will be processed promptly and investors will generally receive
the proceeds within a week.
BEFORE SELLING RECENTLY PURCHASED SHARES, investors should note that if a fund
has not yet collected payment for the shares being sold, 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 11>
ACCOUNT POLICIES (CONTINUED)
General policies
For the Dreyfus Institutional Prime Money Market Fund, shares for which the
purchase order (except through TeleTransfer) is received by the transfer agent
or other authorized entity in proper form by 5 p.m., Eastern time, will receive
the dividend declared that day if federal funds are received by 6 p.m., Eastern
time. For the Dreyfus Institutional Government Money Market Fund and the Dreyfus
Institutional U.S. Treasury Money Market Fund, shares begin accruing dividends
on the day the purchase order (except through TeleTransfer) is effected if the
instructions to purchase shares and payment are received by the transfer agent
or other authorized entity before 3 p.m., Eastern time. The proceeds of a
redemption requested to be made by wire ordinarily will be sent on the day the
request is effective and the shares will not receive the dividend declared that
day.
IF AN INVESTOR'S ACCOUNT FALLS BELOW $10,000*, the fund may ask that the balance
be increased. If it is still below $10,000* after 45 days, the fund may close
the account and send the investor the proceeds.
* $500 OR LESS IF AN INVESTOR HAS BEEN A FUND SHAREHOLDER SINCE SEPTEMBER 14,
1995.
UNLESS AN INVESTOR DECLINES TELEPHONE PRIVILEGES on the application, the
investor may be responsible for any fraudulent telephone order as long as
Dreyfus takes reasonable measures to verify the order.
EACH FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request
* change or discontinue its exchange privilege
* 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)
Each fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount the investor is redeeming
is large enough to affect fund operations (for example, if it represents more
than 1% of the fund's assets).
Third-party investments
Investments made through a third party (rather than directly with Dreyfus), may
be subject to policies and fees 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. Investors should consult a representative of the plan
or financial institution if in doubt.
<PAGE 12>
DISTRIBUTIONS AND TAXES
EACH FUND USUALLY PAYS its shareholders dividends from its net investment income
once a month and distributes any net capital gains that it has realized once a
year. Dividends and distributions will be reinvested in additional shares of the
fund unless the investor instructs the fund otherwise. There are no fees or
sales charges on reinvestments.
DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most shareholders as ordinary income
(unless an investment is in an IRA or other tax-advantaged account). The tax
status of any distribution is the same regardless of how long an investor has
been in the fund and whether distributions are reinvested or taken in cash. The
tax status of dividends and distributions will be detailed in annual tax
statements from the fund. In general, distributions are taxable at the federal
level as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, an investor should always consult a
tax professional about federal, state and local tax consequences.
SERVICES FOR FUND INVESTORS
Exchange privilege
INVESTORS CAN EXCHANGE $500 OR MORE from one Dreyfus fund into certain others
(no minimum for retirement accounts). Investors can request an exchange in
writing or by phone. Be sure to read the current prospectus for any fund into
which you are exchanging. Any new account established through an exchange will
have the same privileges as an original account (as long as they are available).
There is currently no fee for exchanges, although an investor may be charged a
sales load when exchanging into any fund that has one.
Dreyfus Auto-Exchange privilege
DREYFUS AUTO-EXCHANGE PRIVILEGE ENABLES an investor to invest regularly (on a
semi-monthly, quarterly or annual basis), in exchange for shares of a fund, in
shares of certain other Dreyfus funds. There is currently no fee for this
privilege.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN A BANK ACCOUNT and a Dreyfus fund account with a phone
call, an investor can use the Dreyfus TeleTransfer privilege. Investors can set
up TeleTransfer on an account by providing bank account information and
following the instructions on the application.
Other automatic services
CERTAIN OTHER SERVICES FOR BUYING AND SELLING shares automatically are offered
by the funds. See the Statement of Additional Information (SAI) for further
information.
Your Investment
<PAGE 13>
INSTRUCTIONS FOR ACCOUNTS
(Different instructions apply for IRA rollover accounts. See the SAI or call
1-800-645-6561)
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 & Trust Co., with these instructions:
* Dreyfus Institutional Prime
Money Market Fund ABA# 011001234 DDA# 044288
* Dreyfus Institutional Government
Money Market Fund ABA# 011001234 DDA# 044288
* Dreyfus Institutional U.S. Treasury
Money Market Fund ABA# 011001234 DDA# 044288
* 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 & Trust Co.,
with these instructions:
* Dreyfus Institutional Prime Money Market Fund ABA# 011001234 DDA# 044288
* Dreyfus Institutional Government Money Market Fund ABA# 011001234 DDA# 044288
* Dreyfus Institutional U.S. Treasury Money Market Fund ABA# 011001234 DDA#
044288
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but before your account number insert
appropriate number as shown below.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 11)
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.
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 $10,000 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
Electronic check numbers
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND:
"4640"
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND:
"4610"
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND:
"4670"
<PAGE 14>
NOTES
Your Investment
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on these funds is available free upon request, including the
following:
Annual/Semiannual Report
Describes a 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 a 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
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation
LFISTP0399
<PAGE>
Dreyfus Money Market Reserves
Dreyfus U.S. Treasury Reserves
Dreyfus Municipal Reserves
Seeking taxable or federally tax-exempt current income and a stable $1.00 share
price
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 FUNDS
- ------------------------------------------------------
1 Introduction
2 Dreyfus Money Market Reserves
6 Dreyfus U.S. Treasury Reserves
10 Dreyfus Municipal Reserves
14 Management
16 Financial Highlights
YOUR INVESTMENT
- --------------------------------------------------------------------
22 Account Policies
25 Distributions and Taxes
26 Services for Fund Investors
28 Instructions for Regular Accounts
30 Instructions for IRAs
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
Back Cover
Each fund's investment approach, risks, performance, expenses and related
information
Information for managing your fund account
Where to learn more about these and other Dreyfus funds
<PAGE>
The Funds
Dreyfus Money Market Reserves
Dreyfus U.S. Treasury Reserves
Dreyfus Municipal Reserves
Series of The Dreyfus/Laurel Funds, Inc.
The three funds described in this prospectus are money market funds. They seek
to maintain a stable share price (although they cannot guarantee that they will
always do so) and are designed to offer current investment income and high
liquidity.
The main differences among these funds are the securities in which they invest.
Dreyfus Money Market Reserves invests in a range of high-quality money market
instruments. Dreyfus U.S. Treasury Reserves maintains an even higher quality
standard by investing exclusively in U.S. Treasury obligations and repurchase
agreements secured by such obligations. Dreyfus Municipal Reserves invests in
municipal obligations from around the country, allowing the fund's dividends to
be free from federal income tax in most cases.
INFORMATION ON EACH FUND'S RECENT PERFORMANCE CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Introduction
<PAGE 1>
Dreyfus Money Market Reserves
---------------------------------
Ticker Symbols: Class R shares DPOXX
Investor shares DPIXX
GOAL/APPROACH
The fund seeks a high level of current income consistent with stability of
principal. This objective may be changed without shareholder approval. As a
money market fund, the fund is subject to maturity, quality and diversification
requirements designed to help it maintain a stable share price.
The fund invests in a diversified portfolio of high-quality, short-term debt
securities, including:
(pound) securities issued or guaranteed by the U.S.
government or its agencies, including mortgage-related securities
(pound) certificates of deposit, time deposits, bankers'
acceptances and other short-term securities issued by domestic or
foreign banks or their subsidiaries or branches
(pound) repurchase agreements
(pound) domestic and dollar-denominated foreign commercial
paper, and other short-term corporate obligations, including those with
floating or variable rates of interest
Concepts to understand
MONEY MARKET FUND: a specific type of fund that seeks to maintain a $1.00 price
per share. Money market funds are subject to strict federal requirements and
must:
(pound) maintain an average dollar-weighted portfolio maturity of 90 days or
less
(pound) buy individual securities that have remaining maturities of 13 months
or less
(pound) invest only in high-quality, dollar-denominated obligations
REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.
<PAGE 2>
MAIN RISKS
The fund's yield will vary as the short-term securities in its portfolio mature
and the proceeds are reinvested in securities with different interest rates.
Over time, the real value of the fund's yields may be substantially eroded by
inflation.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:
(pound) interest rates could rise sharply, causing the
fund's share price to drop
(pound) adverse developments could occur in the banking
industry, which issues or guarantees many of the securities the fund
typically owns
(pound) any of the fund's holdings could have its credit
rating downgraded or could default
(pound) adverse economic, political or other developments
could affect foreign issuers of money market securities
Concepts to understand
CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.
An issuer with the highest credit rating has a very strong degree of certainty
(or safety) with respect to making all payments. An issuer with the
second-highest credit rating has a strong capacity to make all payments, but the
degree of safety is somewhat less.
Generally, the fund is required to invest at least 95% of its assets in the
securities of issuers with the highest credit rating, with the remainder
invested in securities with the second-highest credit rating, or the unrated
equivalent as determined by Dreyfus.
Dreyfus Money Market Reserves
<PAGE 3>
DREYFUS MONEY MARKET RESERVES (CONTINUED)
PAST PERFORMANCE
The two tables below show the fund's annual returns and long-term performance.
The first table shows you how the performance of the fund's Class R shares has
varied from year to year. The second averages the performance of each share
class over time. 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 (%)
CLASS R SHARES 8.36 8.30 5.92 3.59 2.82 3.89 5.65 5.09 5.30 5.28
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q3 '89 +2.30%
WORST QUARTER: Q3 '93 +0.68%
The fund's 7-day yield on 12/31/98 was 4.94% for Class R shares and 4.73% for
Investor shares. For the fund's current yield, call toll-free 1-800-645-6561.
--------------------------------------------------------
<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/98
Inception Since
date 1 Year 5 Years 10 Years inception
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS R
SHARES (11/18/87) 5.28% 5.04% 5.40% --
INVESTOR
SHARES (4/6/94) 5.07% -- -- 4.94%
What this fund is --
and isn't
</TABLE>
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
Class R Investor
shares shares
--------------------------------------------------------
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT NONE NONE
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.50% 0.50%
Rule 12b-1 fee none 0.20%
Other expenses none none
--------------------------------------------------------
TOTAL 0.50% 0.70%
--------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS R SHARES $51 $160 $280 $628
INVESTOR SHARES $72 $224 $390 $871
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 Dreyfus Service Corporation 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.
Dreyfus Money Market Reserves
<PAGE 5>
Dreyfus U.S. Treasury Reserves
---------------------------------
Ticker Symbols: Class R shares DUTXX
Investor shares DUIXX
GOAL/APPROACH
The fund seeks a high level of current income consistent with stability of
principal. This objective may be changed without shareholder approval. As a
money market fund, the fund is subject to maturity, quality and diversification
requirements designed to help it maintain a stable share price.
To pursue its goal, the fund invests exclusively in direct obligations of the
U.S. Treasury and in repurchase agreements secured by these obligations.
Concepts to understand
MONEY MARKET FUND: a specific type of fund that seeks to maintain a $1.00 price
per share. Money market funds are subject to strict federal requirements and
must:
(pound) maintain an average dollar-weighted portfolio maturity of 90 days or
less
(pound) buy individual securities that have remaining maturities of 13 months
or less
(pound) invest only in high-quality, dollar-denominated obligations
REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.
<PAGE 6>
MAIN RISKS
The fund's yield will vary as the short-term securities in its portfolio mature
and the proceeds are reinvested in securities with different interest rates.
Over time, the real value of the fund's yields may be substantially eroded by
inflation.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:
(pound) interest rates could rise sharply, causing the
fund's share price to drop
(pound) a counterparty in a repurchase agreement could fail
to honor the terms of its agreement
Concepts to understand
U.S. TREASURY OBLIGATIONS: bills, notes and bonds issued by the U.S. Treasury
and backed by the full faith and credit of the U.S. government.
Treasury obligations are generally considered to be among the highest-quality
investments available. By investing in these obligations, the fund seeks to add
an incremental degree of safety to its portfolio. The fund's yields may be
somewhat lower than those of money market funds that do not limit their
investments to the extent that this fund does, in exchange for the higher level
of credit quality that Treasury obligations offer.
Dreyfus U.S. Treasury Reserves
<PAGE 7>
DREYFUS U.S. TREASURY RESERVES (CONTINUED)
PAST PERFORMANCE
The two tables below show the fund's annual returns and long-term performance.
The first table shows you how the performance of the fund's Class R shares has
varied from year to year. The second averages the performance of each share
class over time. 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 (%)
CLASS R SHARES 3.43 2.74 3.70 5.32 4.89 5.15 5.04
92 93 94 95 96 97 98
BEST QUARTER: Q2 '95 +1.37%
WORST QUARTER: Q2 '93 +0.67%
The fund's 7-day yield on 12/31/98 was 4.44% for Class R shares and 4.23% for
Investor shares. For the fund's current yield, call toll-free 1-800-645-6561.
--------------------------------------------------------
Average annual total return AS OF 12/31/98
</TABLE>
<TABLE>
<CAPTION>
Inception Since
date 1 Year 5 Years inception
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS R SHARES (2/4/91) 5.04% 4.82% 4.47%
INVESTOR SHARES (4/18/94) 4.83% -- 4.74%
</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 8>
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
Class R Investor
shares shares
--------------------------------------------------------
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT NONE NONE
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.50% 0.50%
Rule 12b-1 fee none 0.20%
Other expenses none none
--------------------------------------------------------
TOTAL 0.50% 0.70%
--------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS R SHARES $51 $160 $280 $628
INVESTOR SHARES $72 $224 $390 $871
</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 Dreyfus Service Corporation 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.
Dreyfus U.S. Treasury Reserves
<PAGE 9>
Dreyfus Municipal Reserves
----------------------------------
Ticker Symbols: Class R shares
DTMXX
Investor shares DLTXX
GOAL/APPROACH
The fund seeks income, consistent with stability of principal, that is exempt
from federal income tax. This objective may be changed without shareholder
approval. As a money market fund, the fund is subject to maturity, quality and
diversification requirements designed to help it maintain a stable share price.
To pursue its goal, the fund invests at least 80% of total assets in tax-exempt
municipal obligations, including short-term municipal debt securities. Among
these are municipal notes, short-term municipal bonds, tax-exempt commercial
paper and municipal leases. The fund reserves the right to invest up to 20% of
total assets in taxable money market securities, such as U.S. government
obligations, U.S. and foreign bank and corporate obligations and commercial
paper.
Concepts to understand
MONEY MARKET FUND: a specific type of fund that seeks to maintain a $1.00 price
per share. Money market funds are subject to strict federal requirements and
must:
(pound) maintain an average dollar-weighted portfolio maturity of 90 days or
less
(pound) buy individual securities that have remaining maturities of 13 months
or less
(pound) invest only in high-quality, dollar-denominated obligations
<PAGE 10>
MAIN RISKS
The fund's yield will vary as the short-term securities in its portfolio mature
and the proceeds are reinvested in securities with different interest rates.
Over time, the real value of the fund's yields may be substantially eroded by
inflation.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:
(pound) interest rates could rise sharply, causing the
fund's share price to drop
(pound) any of the fund's holdings could have its credit
rating downgraded or could default
To the extent that the fund invests in municipal leases, it takes on additional
risks. Because municipal leases generally are backed by revenues from a
particular source or that depend on future appropriations by municipalities and
are not obligations of their issuers, they are less secure than most municipal
obligations.
Concepts to understand
CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.
An issuer with the highest credit rating has a very strong degree of certainty
(or safety) with respect to making all payments. An issuer with the
second-highest credit rating has a strong capacity to make all payments, but the
degree of safety is somewhat less.
Generally, the fund is required to invest at least 95% of its assets in the
securities of issuers with the highest credit rating, with the remainder
invested in securities with the second-highest credit rating, or the unrated
equivalent as determined by Dreyfus.
Dreyfus Municipal Reserves
<PAGE 11>
DREYFUS MUNICIPAL RESERVES (CONTINUED)
PAST PERFORMANCE
The two tables below show the fund's annual returns and long-term performance.
The first table shows you how the performance of the fund's Class R shares has
varied from year to year. The second averages the performance of each share
class over time. 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 (%)
CLASS R SHARES 6.12 5.79 4.31 2.66 2.09 2.50 3.52 3.16 3.24 3.07
89 90 91 92 93 94 95 96 97 98
BEST QUARTER: Q2 '89 +1.62%
WORST QUARTER: Q1 '93 +0.49%
The fund's 7-day yield on 12/31/98 was 3.10% for Class R shares and 2.89% for
Investor shares. For the fund's current yield, call toll-free 1-800-645-6561.
--------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
Inception Since
date 1 Year 5 Years 10 Years inception
---------------------------------------------------------------------------------------
CLASS R
<S> <C> <C> <C> <C> <C>
SHARES (12/10/87) 3.07% 3.10% 3.64% --
INVESTOR
SHARES (4/20/94) 2.87% -- -- 2.96%
</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 12>
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
Class R Investor
shares shares
--------------------------------------------------------
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT NONE NONE
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.50% 0.50%
Rule 12b-1 fee none 0.20%
Other expenses none none
--------------------------------------------------------
TOTAL 0.50% 0.70%
--------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS R SHARES $51 $160 $280 $628
INVESTOR SHARES $72 $224 $390 $871
</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 Dreyfus Service Corporation 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.
Dreyfus Municipal Reserves
<PAGE 13>
MANAGEMENT
The investment adviser for each 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.
Concepts to understand
YEAR 2000 ISSUES: each 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 a fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of a fund's investments and its yield and share price.
<PAGE 14>
Management philosophy
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.
Dreyfus manages each fund by making investment decisions based on the fund's
investment objective, policies and restrictions.
Management
<PAGE 15>
FINANCIAL HIGHLIGHTS
Dreyfus Money Market Reserves
The following two tables describe 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,
CLASS R SHARES 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .052 .051 .050 .053 .034(1)
Distributions:
Dividends from
investment income -- net (.052) (.051) (.050) (.053) (.034)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 5.34 5.25 5.16 5.44 3.52
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to
average net assets (%) .50 .50 .50 .50 .51(2)
Ratio of net investment income to
average net assets (%) 5.21 5.13 5.01 5.40 3.51
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 249,415 232,032 170,409 139,787 124,754
(1) NET INVESTMENT INCOME BEFORE EXPENSES REIMBURSED BY THE INVESTMENT ADVISER
FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $.0331.
(2) ANNUALIZED EXPENSE RATIO BEFORE EXPENSES REIMBURSED BY THE INVESTMENT
ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS 0.64%.
</TABLE>
<PAGE 16>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
INVESTOR SHARES 1998 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .050 .049 .048 .052 .021
Distributions:
Dividends from
investment income -- net (.050) (.049) (.048) (.052) (.021)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 5.13 5.04 4.94 5.28 2.14(2)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .70 .70 .70 .70 .71(3)
Ratio of net investment income
to average net assets (%) 5.01 4.95 4.84 5.25 3.31(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 301,473 204,851 144,168 161,819 3,611
(1) THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 6, 1994.
(2) NOT ANNUALIZED.
(3) ANNUALIZED.
Financial Highlights
<PAGE 17>
</TABLE>
FINANCIAL HIGHLIGHTS
Dreyfus U.S. Treasury Reserves
The following two tables describe 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,
CLASS R SHARES 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .050 .050 .048 .051 .033(1)
Distributions:
Dividends from investment
income -- net (.050) (.050) (.048) (.051) (.033)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 5.16 5.10 4.94 5.23 3.37
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average
net assets (%) .50 .50 .50 .50 .50(2)
Ratio of net investment income
to average net assets (%) 5.03 4.98 4.79 5.14 3.62
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 614,053 522,178 464,303 399,873 228,797
(1) NET INVESTMENT INCOME BEFORE EXPENSES REIMBURSED BY THE INVESTMENT ADVISER
FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $0.0323.
(2) ANNUALIZED EXPENSE RATIO BEFORE EXPENSES REIMBURSED BY THE INVESTMENT
ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS 0.59%.
</TABLE>
<TABLE>
<CAPTION>
<PAGE 18>
YEAR ENDED OCTOBER 31,
INVESTOR SHARES 1998 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .048 .048 .046 .049 .020
Distributions:
Dividends from investment
income -- net (.048) (.048) (.046) (.049) (.020)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 4.95 4.89 4.74 5.02 1.96(2)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .70 .70 .70 .70 .70(3)
Ratio of net investment income
to average net assets (%) 4.85 4.81 4.64 4.92 3.42(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 115,622 112,900 21,826 21,386 1,324
(1) THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 18, 1994.
(2) NOT ANNUALIZED.
(3) ANNUALIZED.
Financial Highlights
<PAGE 19>
</TABLE>
FINANCIAL HIGHLIGHTS
Dreyfus Municipal Reserves
The following two tables describe 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,
CLASS R SHARES 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .031 .032 .031 .034 .023(1)
Distributions:
Dividends from investment
income -- net (.031) (.031) (.031) (.034) (.023)
Dividends from net realized
gain on investments (.000)(2) (.001) -- -- --
Total distributions (.031) (.032) (.031) (.034) (.023)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 3.21 3.21 3.17 3.48 2.29
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .50 .52 .50 .50 .51(3)
Ratio of net investment income
to average net assets (%) 3.11 3.10 3.11 3.41 2.30
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 227,639 194,158 221,178 205,373 205,105
(1) NET INVESTMENT INCOME BEFORE EXPENSES REIMBURSED BY THE INVESTMENT ADVISER
FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $.0218.
(2) AMOUNT REPRESENTS LESS THAN $.001 PER SHARE.
(3) ANNUALIZED OPERATING EXPENSE RATIO BEFORE EXPENSES REIMBURSED BY THE
INVESTMENT ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS .61%
</TABLE>
<TABLE>
<CAPTION>
<PAGE 20>
YEAR ENDED OCTOBER 31,
INVESTOR SHARES 1998 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .029 .030 .029 .032 .012
Distributions:
Dividends from investment
income -- net (.029) (.029) (.029) (.032) (.012)
Dividends from net realized
gain on investments (.000)(2) (.001) -- -- --
Total distributions (.029) (.030) (.029) (.032) (.012)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 3.00 3.00 2.96 3.28 1.23(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to
average net assets (%) .70 .72 .70 .70 .70(4)
Ratio of net investment income
to average net assets (%) 2.90 2.92 2.92 3.33 2.11(4)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 27,301 19,486 14,074 17,764 1,161
(1) THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 20, 1994.
(2) AMOUNT REPRESENTS LESS THAN $.001 PER SHARE.
(3) NOT ANNUALIZED.
(4) ANNUALIZED.
Financial Highlights
</TABLE>
<PAGE 21>
Your Investment
ACCOUNT POLICIES
Buying shares
EACH FUND OFFERS TWO SHARE CLASSES -- Class R shares and Investor shares. Class
R shares are sold primarily to financial service providers acting on behalf of
customers having a qualified trust or investment account or relationship at such
institution, or to customers who hold shares of the fund distributed to them by
such account or relationship. Investor shares are offered primarily to investors
who have certain accounts with financial institutions that have entered selling
agreements with the fund's distributor. YOU PAY NO SALES CHARGES to invest in
these funds. Your price for fund shares is the net asset value per share (NAV)
for the class of shares you purchase, which is generally calculated twice a day,
at 12 noon and 4 p.m. Eastern time, every day the New York Stock 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. Each fund's
investments are valued based on amortized cost.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
REGULAR ACCOUNTS $100,000 NO MINIMUM;
$500 FOR
TELETRANSFER
INVESTMENTS
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. Dreyfus Municipal Reserves
is not recommended for IRAs or other retirement plans.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
AMORTIZED COST: the value of a fund's portfolio securities, which does not take
into account unrealized gains or losses. As a result, portfolio securities are
valued at their acquisition cost, adjusted over time based on the discounts or
premiums reflected in their purchase price. This method of valuation is designed
for a fund to be able to price its shares at $1.00 per share.
<PAGE 22>
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 OR WRITING A CHECK FOR 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:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 23>
ACCOUNT POLICIES (CONTINUED)
General policies
IF YOUR ACCOUNT FALLS BELOW $10,000*, the fund may ask you to increase your
balance. If it is still below $10,000* 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.
EACH FUND RESERVES THE RIGHT TO:
(pound) refuse any purchase or exchange request
(pound) change or discontinue its exchange privilege
(pound) change its minimum investment amounts
(pound) 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)
Each 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).
* BELOW $500 IF YOU WERE A FUND SHAREHOLDER SINCE AUGUST 31, 1995.
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 24>
DISTRIBUTIONS AND TAXES
EACH FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
once a month and distributes any net capital gains that it has realized once a
year. Your dividends and distributions will be reinvested in additional shares
of your fund unless you instruct the fund otherwise. There are no fees or sales
charges on reinvestments.
EACH SHARE CLASS WILL GENERATE a different dividend because each has different
expenses.
DIVIDENDS AND OTHER DISTRIBUTIONS PAID by Dreyfus U.S. Treasury Reserves and
Dreyfus Money Market Reserves are taxable to U.S. shareholders as ordinary
income (unless your investment is in an IRA or other tax-advantaged account).
BY INVESTING IN MUNICIPAL OBLIGATIONS, Dreyfus Municipal Reserves generally pays
dividends that are exempt from federal income tax. The fund may invest some of
its assets in securities that generate income that is not exempt from federal
income tax. Income exempt from federal income tax may be subject to state and
local taxes. The fund's income also may be subject to the alternative minimum
tax.
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. 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.
Concepts to understand
DIVIDENDS: income or interest paid by the investments in a fund's portfolio, net
of expenses, passed on to fund shareholders.
Your Investment
<PAGE 25>
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 26>
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $500 or more.
These checks are free; however, a fee will be charged if you request a stop
payment or if the transfer agent cannot honor a redemption check due to
insufficient funds or another valid reason. Please do not postdate your checks
or use them to close your account.
Exchange privilege
YOU CAN EXCHANGE $500 OR MORE from one Dreyfus fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). 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:
(pound) for traditional, rollover, Roth and Education IRAs, call 1-800-645-6561
(pound) for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
<PAGE 27>
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
* Dreyfus Money Market Reserves
DDA# 043435
* Dreyfus U.S. Treasury Reserves
DDA# 043435
* Dreyfus Municipal Reserves
DDA# 043508
* share class
* 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
* Dreyfus Money Market Reserves
DDA# 043435
* Dreyfus U.S. Treasury Reserves
DDA# 043435
* Dreyfus Municipal Reserves
DDA# 043508
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but before your account number insert the
appropriate number as shown at right.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us 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 28>
TO SELL SHARES
Write a redemption check OR letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name and share class
* 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
Electronic check numbers
DREYFUS MONEY MARKET RESERVES
"4800" -- Class R shares
"4790" -- Investor shares
DREYFUS U.S. TREASURY RESERVES
"4890" -- Class R shares
"4900" -- Investor shares
DREYFUS MUNICIPAL RESERVES
"4850" -- Class R shares
"4860" -- Investor shares
Your Investment
<PAGE 29>
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
* Dreyfus Money Market Reserves
DDA# 043435
* Dreyfus U.S. Treasury Reserves
DDA# 043435
* Dreyfus Municipal Reserves
DDA# 043508
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but before your account number insert the
appropriate number as shown at right.
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
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 30>
TO SELL SHARES
Write a redemption check* OR write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required. Mail in your
request (see "To Open an Account" at left).
*A redemption check written for a qualified distribution is not subject to
TEFRA.
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 FAMILY OF FUNDS
Electronic check numbers
DREYFUS MONEY MARKET RESERVES
"4800" -- Class R shares
"4790" -- Investor shares
DREYFUS U.S. TREASURY RESERVES
"4890" -- Class R shares
"4900" -- Investor shares
DREYFUS MUNICIPAL RESERVES
"4850" -- Class R shares
"4860" -- Investor shares
Your Investment
<PAGE 31>
NOTES
<PAGE 32>
<PAGE 33>
For More Information
Dreyfus Money Market Reserves
Dreyfus U.S. Treasury Reserves
Dreyfus Municipal Reserves
Series of The Dreyfus/Laurel Funds, Inc.
-----------------------------
SEC file number: 811-5270
More information on these funds is available free upon
request, including the following:
Annual/Semiannual Report
Describes a 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 a 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 LMMKTP0399
<PAGE>
Dreyfus
BASIC S&P 500
Stock Index Fund
Investing in equity securities to match the total return of the S&P 500((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
- ----------------------------------------------------
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 BASIC S&P 500 Stock Index Fund
-----------------------------
Ticker Symbol: DSPIX
GOAL/APPROACH
The fund seeks to match the total return of the Standard & Poor's 500 Composite
Stock Price Index. This objective can be changed without shareholder approval.
To pursue this goal, the fund normally invests at least 95% of total assets in
common stocks included in the index.
The fund attempts to have a correlation between its performance and that of the
index of at least .95, before expenses. A correlation of 1.00 would mean that
the fund and the index were perfectly correlated.
The fund generally invests in all 500 stocks in the S&P 500((reg.tm)) in
proportion to their weighting in the index. The S&P 500((reg.tm)) is an
unmanaged index of 500 common stocks chosen to reflect the industries of the
U.S. economy and is often considered a proxy for the stock market in general.
Each stock is weighted by its market capitalization, which means larger
companies have greater representation in the index than smaller ones. The fund
may also use options and futures as a substitute for the sale or purchase of
securities.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
INDEX FUNDS: mutual funds that are designed to meet the performance of an
underlying benchmark index.
To replicate index performance, the manager uses a passive management approach
and purchases all or a representative sample of the stocks comprising the
benchmark index. Because the fund has expenses, performance will tend to be
slightly lower than that of the target benchmark.
<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.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the fund's performance may sometimes be lower or
higher than that of other types of funds.
The fund uses an indexing strategy. It does not attempt to manage market
volatility, use defensive strategies or reduce the effects of any long-term
periods of poor stock performance.
The correlation between fund and index performance may be affected by the fund's
expenses, changes in securities markets, changes in the composition of the index
and the timing of purchases and redemptions of fund shares.
The fund may invest in futures and options, which could carry additional risks
such as losses due to unanticipated market price movements, and could also
reduce the opportunity for gain.
Concepts to understand
"Standard & Poor's((reg.tm))," "S&P((reg.tm))," "Standard & Poor's 500" and "S&P
500" are trademarks of The McGraw-Hill Companies, Inc., and have been licensed
for use by the fund. The fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's, and Standard & Poor's makes no representation regarding the
advisability of investing in the fund.
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((reg.tm)), 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 (%)
.83 36.82 22.76 33.02 28.38
94 95 96 97 98
BEST QUARTER: Q4 '98 +21.32%
WORST QUARTER: Q3 '98 -9.99%
--------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
Inception
1 Year 5 Years (9/30/93)
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
FUND 28.38% 23.66% 23.02%
S&P 500 28.60% 24.05% 23.32%
</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) or Rule 12b-1 distribution fees.
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT NONE
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.20%
Other expenses 0.00%
-------------------------------------------------------
TOTAL 0.20%
--------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$20 $64 $113 $255
</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 and extraordinary expenses.
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.
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.
Dreyfus manages the fund by making investment decisions based on the fund's
investment objective, policies and restrictions in seeking to match the
performance of the S&P 500((reg.tm)) index.
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 19.73 15.38 12.75 10.42 10.23
Investment operations:
Investment income -- net .31 .30 .29 .26 .21(1)
Net realized and unrealized gain (loss)
on investments 3.89 4.52 2.69 2.37 .14
Total from investment operations 4.20 4.82 2.98 2.63 .35
Distributions:
Dividends from investment
income -- net (.31) (.28) (.30) (.26) (.16)
Dividends from net realized gains
on investments (.28) (.19) (.05) (.04) (.00)(2)
Total distributions (.59) (.47) (.35) (.30) (.16)
Net asset value, end of period 23.34 19.73 15.38 12.75 10.42
Total return (%) 21.68 31.87 23.78 25.75 3.50
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .20 .20 .20 .37 .40(3)
Ratio of net investment income
to average net assets (%) 1.45 1.72 2.16 2.36 2.38
Portfolio turnover rate (%) 16.76 3.75 4.75 1.03 13.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,133,147 803,142 449,123 204,278 123,994
(1) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT
ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $0.21.
(2) AMOUNT REPRESENTS LESS THAN $0.01.
(3) ANNUALIZED EXPENSE RATIO BEFORE VOLUNTARY REIMBURSEMENT OF EXPENSES BY THE
INVESTMENT ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS 0.45%.
</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 $10,000 $1,000*
$500 FOR
TELETRANSFER
INVESTMENTS
TRADITIONAL IRAS $5,000 $1,000**
SPOUSAL IRAS $5,000 $1,000**
ROTH IRAS $5,000 $1,000**
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.
* $100 FOR INVESTORS WHO HAVE HELD SHARES SINCE
SEPTEMBER 14, 1995.
** NO MINIMUM FOR INVESTORS WHO HAVE HELD SHARES SINCE
SEPTEMBER 14, 1995.
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.
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:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 $5,000*, the fund may ask you to increase your
balance. If it is still below $5,000* 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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of
1% of the fund's total assets
(pound) change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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).
* BELOW $500 IF YOU HAVE BEEN A FUND SHAREHOLDER SINCE SEPTEMBER 14, 1995.
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 for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability.
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 from one Dreyfus fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). 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:
(pound) for traditional, rollover, Roth and Education IRAs, call
1-800-645-6561
(pound) 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# 044288
* 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# 044288
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "4110" 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.
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# 044288
* the fund name
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but insert "4110" 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
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 BASIC S&P 500 Stock Index 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 713P0399
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
Investing in bonds for investment returns that exceed the Lehman Brothers
Aggregate Bond 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
- ----------------------------------------------------
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 Intermediate Bond Fund
--------------------------------------------------------
Ticker Symbols: Investor shares DDIBX
Restricted shares DDIRX
GOAL/APPROACH
The fund seeks to outperform the Lehman Brothers Aggregate Bond Index while
maintaining a similar risk level. This objective may be changed without
shareholder approval. To pursue its goal, the fund actively manages bond market
and maturity exposure and invests at least 65% of total assets in debt
securities, such as:
(pound) U.S. government and agency bonds
(pound) corporate bonds
(pound) mortgage-related securities
(pound) foreign corporate and government bonds (up to
20% of total assets)
The fund's investments in debt securities must be investment grade (or deemed of
comparable quality by Dreyfus). Generally, the average maturity of the fund's
portfolio is between 3 and 10 years. The fund may invest in individual debt
securities with remaining maturities between 1 and 30 years.
The manager uses a disciplined process to select securities and manage risk. The
manager chooses securities based on yield, credit quality, the level of interest
rates and inflation, general economic and financial trends, and its outlook for
the securities markets. Securities selected must fit within management's
predetermined targeted positions for quality, duration, coupon, maturity and
sector. The process includes computer modeling and scenario testing of possible
changes in market conditions. The manager will use other techniques in an
attempt to manage market risk and maturity.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
AVERAGE MATURITY: an average of the stated maturities of the bonds held in the
fund, based on their dollar-weighted proportions in the fund.
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for defaulted debt. Bonds rated BBB or Baa
and above are considered investment grade.
<PAGE 2>
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices, and therefore in the fund's share price
as well. As a result, the value of your investment in the fund could go up and
down, which means that you could lose money. To the extent that the fund
maintains a longer maturity than short-term funds, its share price will react
more strongly to interest rate movements. Other risk factors that could have an
effect on the fund's performance include:
(pound) if an issuer fails to make timely interest or
principal payments or there is a decline in the bond's
credit quality, or perception of a decline, the bond's
value could fall, potentially lowering the share price
(pound) if the loans underlying the fund's
mortgage-related securities are paid off earlier or
later than expected, which could occur because of
movements in market interest rates, the fund's share
price or yield could be hurt
(pound) the price and yield of foreign debt securities
could be affected by such factors as political and
economic instability, changes in currency exchange rates
and less liquid markets for such securities
While some of the fund's securities may carry guarantees of the U.S. government
or its agencies, these guarantees do not apply to shares of the fund itself.
Under adverse market conditions, the fund could invest some or all of its assets
in money market instruments. Although the fund would do so only in seeking to
avoid losses, it could reduce the fund's total return.
Other potential risks
The fund may invest in certain derivatives, including futures, options, and some
mortgage-related securities. Derivatives can be illiquid and highly sensitive to
changes in their underlying security, interest rate or index, and as a result
can be highly volatile. The value and interest rates of some derivatives, such
as inverse floaters, may be inversely related to their underlying instrument. A
small investment in certain derivatives could have a potentially large impact on
the fund.
At times, the fund may engage in short-term trading. This could increase the
fund's transaction costs and taxable distributions, lowering its after-tax
performance accordingly.
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 performance of the fund's
Investor shares has varied from year to year. The second compares the
performance of each share class over time to that of the Lehman Brothers
Aggregate Bond Index, a broad-based, unmanaged, market-weighted index covering
the U.S. investment grade fixed-rate bond market. 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 (%)
INVESTOR SHARES
2.35 8.97 8.35
96 97 98
BEST QUARTER: Q3 '98 +4.13%
WORST QUARTER: Q1 '96 -2.25%
--------------------------------------------------------
<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/98
Inception
1 Year (11/1/95)
----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTOR SHARES 8.35% 6.95%
RESTRICTED SHARES 8.46% 7.17%
LEHMAN BROTHERS
AGGREGATE
BOND INDEX 8.69% 7.86%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 10/31/95 IS USED AS THE
BEGINNING VALUE ON 11/1/95.
</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
Investor Restricted
shares shares
--------------------------------------------------------
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT NONE NONE
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.55% 0.55%
Rule 12b-1 fee 0.25% none
Other expenses 0.00% 0.00%
--------------------------------------------------------
TOTAL 0.80% 0.55%
--------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTOR SHARES $82 $255 $444 $990
RESTRICTED SHARES $56 $176 $307 $689
</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 Dreyfus Service Corporation, an affiliate of The
Dreyfus Corporation, for shareholder service and to the fund's distributor for
shareholder service and promotional expenses. For Investor shares, the fee is
paid out of the fund's assets on an ongoing basis; over time this 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.
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.
Daniel J. Fasciano, portfolio manager of Dreyfus and Senior Portfolio Manager of
Boston Safe Deposit and Trust Company, an affiliate of Dreyfus, has managed the
fund since June 1998 and has been a portfolio manager of Dreyfus since October
1995. Mr. Fasciano joined Boston Safe Deposit and Trust Company in 1990.
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>
INVESTOR SHARES RESTRICTED SHARES
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1998 1997 1996* 1998 1997 1996*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value,
beginning of period 12.52 12.29 12.50 12.52 12.29 12.50
Investment operations:
Investment income -- net .72 .74 .71 .76 .77 .74
Net realized and
unrealized gain (loss)
on investments .35 .23 (.21) .32 .23 (.21)
Total from
investment operations 1.07 .97 .50 1.08 1.00 .53
Distributions:
Dividends from
investment income -- net (.72) (.74) (.71) (.75) (.77) (.74)
Net asset value, end of period 12.87 12.52 12.29 12.85 12.52 12.29
Total return (%) 8.80 8.21 4.18 8.90 8.49 4.45
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to
average net assets (%) .80 .80 .79 .55 .55 .55
Ratio of net investment income
to average net assets (%) 5.68 6.01 5.61 5.95 6.31 6.29
Portfolio turnover rate (%) 106.93 143.91 198.16 106.93 143.91 198.16
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
($ x 1,000) 1,438 317 126 169,585 108,688 58,466
* FROM NOVEMBER 1, 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996.
</TABLE>
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
THE FUND OFFERS TWO SHARE CLASSES -- Investor shares and Restricted shares.
Investor shares are offered to any investor. Restricted shares are sold
primarily to financial service providers acting on behalf of customers having a
qualified trust or investment account or relationship at such institution or to
customers who hold shares of the fund distributed to them by such account or
relationship. YOU PAY NO SALES CHARGES to invest in this fund. Your price for
fund shares is the net asset value per share (NAV) for the class of shares you
purchase, 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.
--------------------------------------------------------
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
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
When calculating its NAV, the fund's bonds are generally valued by an
independent pricing service approved by the fund's board. Certain securities are
valued at the last sale price or at fair value as determined by procedures
established by the board.
<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:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of
1% of the fund's total assets
(pound) change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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
once a month 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.
EACH SHARE CLASS WILL GENERATE a different dividend because each has different
expenses.
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 for tax-advantaged accounts, any sale or exchange of fund shares,
including through the checkwriting privilege, may generate a tax liability.
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.
--------------------------------------------------------
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>
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $500 or more.
These checks are free; however, a fee will be charged if you request a stop
payment or if the transfer agent cannot honor a redemption check due to
insufficient funds or another valid reason. Please do not postdate your checks
or use them to close your account.
Exchange privilege
YOU CAN EXCHANGE $500 OR MORE from one Dreyfus fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). 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:
(pound) for traditional, rollover, Roth and Education IRAs, call 1-800-645-6561
(pound) for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
<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# 011-001234
* DDA# 044210
* the fund name and share class
* 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# 011-001234
* DDA# 044210
* the fund name and share class
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but before your account number insert "4970" for
Investor shares OR "4980" for Restricted shares.
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 (Investor shares only) 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 redemption check OR 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# 011-001234
* DDA# 044210
* the fund name and share class
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but before your account number insert "4970" for
Investor shares OR "4980" for Restricted shares.
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 (Investor shares only) 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 redemption check* OR write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required. Mail in your
request (see "To Open an Account" at left).
*A redemption check written for a qualified distribution is not subject to
TEFRA.
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 Intermediate Bond 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 302/702P0399
<PAGE>
Dreyfus Premier Balanced Fund
Investing in stocks and bonds for total return
PROSPECTUS March 1, 1999
[insert Exhibit A]
(reg.tm)
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.
As with all mutual funds, the Securities and Exchange Commission doesn't
guarantee that the information in this prospectus is accurate or complete, nor
has it approved or disapproved these securities. It is a criminal offense to
state otherwise.
<PAGE>
The Fund
Dreyfus Premier Balanced Fund
---------------------------------
Ticker Symbols CLASS A: PRBAX
CLASS B: PRBBX
CLASS C: DPBCX
CLASS R: PDBLX
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
Instructions for IRAs 11
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks to outperform a hybrid index, 60% of which is the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500") and 40% of which is the
Lehman Brothers Intermediate Government/Corporate Bond Index ("Intermediate
Index"). This objective may be changed without shareholder approval. To pursue
its goal, the fund invests in a diversified mix of stocks and investment grade
bonds of both U.S. and foreign issuers.
The fund's normal asset allocation is around 60% stocks and 40% bonds. However,
the fund is permitted to invest up to 75%, and as little as 40%, of its assets
in stocks, and up to 60%, and as little as 25%, of its assets in bonds.
In allocating assets between stocks and bonds, the portfolio managers assess the
relative return and risks of each asset class using a model which analyzes
several factors, including interest rate adjusted price/ earnings ratio, the
valuation and volatility levels of stocks relative to bonds, and other economic
factors, such as interest rates.
In selecting stocks, Dreyfus uses a valuation model to identify and rank stocks
within an industry or sector based on:
(pound) VALUE, or how a stock is priced relative to its perceived intrinsic
worth
(pound) GROWTH, in this case the sustainability or growth of earnings
(pound) FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities. Then Dreyfus manages risk by diversifying across
companies and industries and by maintaining risk characteristics, such as
growth, size, quality and yield, that are similar to those of the S&P 500.
In choosing bonds, the portfolio managers review economic, market and other
factors, leading to valuations by sector, maturity and quality. The fund's bond
component consists primarily of domestic and foreign bonds issued by
corporations or governments and rated investment grade or considered to be of
comparable quality by Dreyfus. The fund's dollar-weighted average maturity
normally will not exceed 10 years.
<PAGE>
MAIN RISKS
Because stocks and bonds fluctuate in price, the value of your investment will
go up and down, and you could lose money. The stock and bond markets can perform
differently from each other, so the fund will be affected by its asset
allocation. If the fund favors an asset class during a period when that class
underperforms, performance may be hurt.
The fund is exposed to risks of both growth and value companies. Value stocks
may never reach what the manager believes is their full market value and, even
though they are undervalued, may decline in price. Prices of growth stocks are
based in part on future expectations, which means they can fall sharply if the
prospects for a stock, industry or the economy in general are below the market's
expectations.
Prices of bonds tend to move inversely with changes in interest rates. Bond
prices also may be hurt by a decline in or the perception of a decline in the
financial condition of the issuer, which could potentially lower the fund's
share price.
In general, the risks of foreign stocks and bonds are greater than the risks of
their U.S. counterparts because of less liquidity, changes in currency exchange
rates, a lack of adequate company information and political instability.
Other potential risks
The fund may at times invest some of its assets in options and futures to hedge
its portfolio and to increase returns. These practices may lower returns or
increase volatility. The fund may also engage in short-term trading. This could
increase the fund's transaction costs and taxable distributions, lowering its
after-tax performance accordingly.
PAST PERFORMANCE
The first table below shows how the performance of the fund's Class R shares has
varied from year to year. The second table compares the performance of each of
the fund's share classes over time to that of the indices described below. These
returns reflect any applicable sales loads. Both tables assume the 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 (%)
-1.31 29.63 18.18 24.90 22.58
94 95 96 97 98
BEST QUARTER: Q4 '98 +14.53%
WORST QUARTER: Q1 '94 -4.24%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
Inception date 1 Year 5 Years Life of class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (4/14/94) 15.21% -- 18.70%
CLASS B (12/19/94) 17.35% -- 22.07%
CLASS C (12/19/94) 20.37% -- 22.42%
CLASS R (9/15/93) 22.58% 18.28% 17.55%
S&P 500 28.60% 24.05% 22.74%*
HYBRID INDEX 20.54% 17.12% 16.23%*
INTERMEDIATE INDEX 8.44% 6.60% 6.30%*
</TABLE>
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDICES
ON 8/31/93 IS USED AS THE BEGINNING VALUE ON 9/15/93.
Concepts to understand
S&P 500: a widely recognized unmanaged index of stock market performance.
INTERMEDIATE INDEX: a widely accepted unmanaged index of government and
corporate bond market performance composed of U.S. government, Treasury and
agency securities, fixed-income securities and nonconvertible investment grade
corporate debt, with an average maturity of 1-10 years.
HYBRID INDEX: an unmanaged index composed of 60% S&P 500 and 40% Intermediate
Index.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results. An investment in this fund is not a bank deposit. It is not
insured or guaranteed by the FDIC or any other government agency. It is not a
complete investment program. You could lose money in this fund, but you also
have the potential to make money.
The Fund 1
<PAGE>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
Fee table
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.00 1.00 1.00 1.00
Rule 12b-1 fee .25 1.00 1.00 NONE
Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.25 2.00 2.00 1.00
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $695 $949 $1,222 $1,999
CLASS B
WITH REDEMPTION $603 $927 $1,278 $1,956**
WITHOUT REDEMPTION $203 $627 $1,078 $1,956**
CLASS C
WITH REDEMPTION $303 $627 $1,078 $2,327
WITHOUT REDEMPTION $203 $627 $1,078 $2,327
CLASS R $102 $318 $552 $1,225
</TABLE>
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for promotional expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
2
<PAGE>
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 $117 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.
Management philosophy
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.
Portfolio managers
The asset allocation and equity portion of the fund are managed by Ron Gala. Mr.
Gala has managed the fund since its inception and has been employed by Dreyfus
as a portfolio manager since October 1994. Mr. Gala is a Senior Vice President
and portfolio manager at Mellon Bank and has been employed there since 1982.
The bond portion is managed by Laurie Carroll. Ms. Carroll has managed the fund
since its inception and has been employed by Dreyfus as a portfolio manager
since October 1994. Ms. Carroll is a Senior Vice President and portfolio manager
at Mellon Bank. Ms. Carroll has been employed by Mellon Bank since 1986.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund 3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class 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,
CLASS A 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 15.17 13.71 11.91 10.08 9.73
Investment operations: Investment income -- net .33 .34 .31 .28 .11
Net realized and unrealized gain (loss)
on investments 1.81 2.77 1.88 1.82 .34
Total from investment operations 2.14 3.11 2.19 2.10 .45
Distributions: Dividends from investment income -- net (.37) (.28) (.31) (.27) (.10)
Dividends from net realized gain on investments (2.06) (1.37) (.08) -- --
Total distributions (2.43) (1.65) (.39) (.27) (.10)
Net asset value, end of period 14.88 15.17 13.71 11.91 10.08
Total return (%) (2) 16.06 25.24 18.71 21.17 4.68(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.25 1.25 1.25 .71(3)
Ratio of net investment income to average net assets (%) 2.44 2.21 2.39 2.65 1.09(3)
Portfolio turnover rate (%) 69.71 98.88 85.21 53.20 83.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 40,780 14,687 6,275 1,650 1,798
(1) THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 14, 1994. ON OCTOBER 17, 1994, INVESTOR SHARES WERE REDESIGNATED AS CLASS A
SHARES.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS B 1998 1997 1996 1995(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 15.12 13.68 11.89 9.76
Investment operations: Investment income -- net .24 .23 .21 .14
Net realized and unrealized gain (loss) on investments 1.79 2.77 1.87 2.11
Total from investment operations 2.03 3.00 2.08 2.25
Distributions: Dividends from investment income -- net (.26) (.19) (.21) (.12)
Dividends from net realized gain on investments (2.06) (1.37) (.08) --
Total distributions (2.32) (1.56) (.29) (.12)
Net asset value, end of period 14.83 15.12 13.68 11.89
Total return (%) (2) 15.20 24.27 17.76 23.19(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.00 2.00 2.00 1.73(3)
Ratio of net investment income to average net assets (%) 1.70 1.47 1.65 2.16(3)
Portfolio turnover rate (%) 69.71 98.88 85.21 53.20
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 62,324 28,940 9,141 3,118
(1) THE FUND COMMENCED SELLING CLASS B SHARES ON DECEMBER 19, 1994.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS C 1998 1997 1996 1995(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 15.16 13.70 11.90 9.76
Investment operations: Investment income -- net .22 .24 .25 .11
Net realized and unrealized gain (loss) on investments 1.81 2.78 1.84 2.15
Total from investment operations 2.03 3.02 2.09 2.26
Distributions: Dividends from investment income -- net (.26) (.19) (.21) (.12)
Dividends from net realized gain on investments (2.06) (1.37) (.08) --
Total distributions (2.32) (1.56) (.29) (.12)
Net asset value, end of period 14.87 15.16 13.70 11.90
Total return (%) (2) 15.24 24.41 17.83 23.29(3)
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.00 2.00 2.00 1.73(3)
Ratio of net investment income to average net assets (%) 1.69 1.47 1.62 2.16(3)
Portfolio turnover rate (%) 69.71 98.88 85.21 53.20
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 8,004 2,017 237 6
(1) THE FUND COMMENCED SELLING CLASS C SHARES ON DECEMBER 19, 1994.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS R 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 15.18 13.72 11.92 10.09 10.18
Investment operations: Investment income -- net .38 .36 .34 .31 .20(2)
Net realized and unrealized gain (loss) on investments 1.79 2.79 1.88 1.81 (.13)
Total from investment operations 2.17 3.15 2.22 2.12 .07
Distributions: Dividends from investment income -- net (.41) (.32) (.34) (.29) (.16)
Dividends from net realized gain on investments (2.06) (1.37) (.08) -- --
Total distributions (2.47) (1.69) (.42) (.29) (.16)
Net asset value, end of period 14.88 15.18 13.72 11.92 10.09
Total return (%) 16.37 25.56 18.99 21.46 .68
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.00 1.00 1.00 1.00 1.04(3)
Ratio of net investment income to average net assets (%) 2.71 2.44 2.68 2.89 2.23
Portfolio turnover rate (%) 69.71 98.88 85.21 53.20 83.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 207,132 148,605 129,744 97,881 75,720
(1) ON APRIL 14, 1994, THE FUND COMMENCED SELLING INVESTOR SHARES. THOSE SHARES
OUTSTANDING PRIOR TO APRIL 14, 1994 WERE DESIGNATED AS TRUST SHARES. ON
OCTOBER 17, 1994, TRUST SHARES WERE REDESIGNATED AS CLASS R SHARES.
(2) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT
ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $.2031.
(3) EXPENSE RATIO BEFORE VOLUNTARY REIMBURSEMENT OF EXPENSES BY THE INVESTMENT
ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS 1.09%.
</TABLE>
The Fund 5
<PAGE>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
(pound) CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
(pound) CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer-term investment horizon
(pound) CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter-term investment horizon
(pound) CLASS R shares are designed for eligible institu-
tions on behalf of their clients. Individuals may not purchase these shares
directly.
Your financial representative can help you choose the share class that is
appropriate for you.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay, or may qualify for a reduced sales charge to buy or sell shares. Consult
your financial representative or the SAI to see if this may apply to you.
Shareholders holding Class A shares since December 19, 1994 are not subject to
any front-end sales loads. Shareholders owning Class A shares since November 30,
1996 are subject to reduced loads. See the SAI.
- --------------------------------------------------------------------------------
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------
Up to $49,999 5.75% 6.10%
$50,000 -- $99,999 4.50% 4.70%
$100,000 -- $249,999 3.50% 3.60%
$250,000 -- $499,999 2.50% 2.60%
$500,000 -- $999,999 2.00% 2.00%
$1 million or more* 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).
Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Reduced Class A sales charge
LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B or C shares in
this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
6
<PAGE>
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are valued based on market value or, where market quotations are not readily
available, based on fair value as determined in good faith by the fund's board.
ORDERS TO BUY AND SELL SHARES RECEIVED BY DEALERS by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B, C and
R are offered at NAV, but Classes B and C are subject to higher annual
distribution fees and may be subject to a sales charge upon redemption.
Selling shares
YOU MAY SELL SHARES AT ANY TIME through your financial representative, or you
can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the SAI for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 7
<PAGE>
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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of 1% of the fund's
total assets
(pound) change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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).
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS quarterly dividends from its net
investment income, and distributes any net capital gains that it has realized
once a year. Each share class will generate a different dividend because each
has different expenses. Your distributions will be reinvested in the fund unless
you instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are taxable at the federal level as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above can provide a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
or exchanged up to 12 months after buying them. "Long-term capital gains"
applies to shares sold or exchanged after 12 months.
8
<PAGE>
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 9
<PAGE>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional
Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4130" for
Class A, "4140" for Class B, "4150" for Class C, or "4160" for Class R.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
10
<PAGE>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4130" for
Class A, "4140" for Class B, "4150" for Class C, or "4160" for Class R.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials. All contributions
will count as current year.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427 Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 11
<PAGE>
[Application p 1 here]
<PAGE>
[Application p 2 here]
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Balanced Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation
342P0399
<X>
<PAGE>
Dreyfus Premier Limited Term Income Fund
Investing in fixed-income securities for high current income
PROSPECTUS March 1, 1999
(reg.tm)
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Limited Term Income Fund
---------------------------------
Ticker Symbols CLASS A: DPIAX
CLASS B: DPIBX
CLASS C: DPICX
CLASS R: PLTIX
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
Instructions for IRAs 11
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND' S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks to provide shareholders with as high a level of current income as
is consistent with safety of principal and maintenance of liquidity. This
objective may be changed without shareholder approval. To pursue its goal, the
fund normally invests at least 65% of total assets in various types of U.S. and
foreign investment grade bonds or their unrated equivalent as determined by
Dreyfus. The fund' s portfolio may include government bonds, mortgage-backed
securities and corporate debt.
To select securities for the fund, the portfolio manager conducts extensive
research into the credit history and current financial strength of investment
grade bond issuers. The portfolio manager also examines such factors as maturity
of the securities, the long-term outlook for the industry in which an issuer
operates, the economy and the bond market.
Although the portfolio manager may invest in individual bonds with different
remaining maturities, the fund' s dollar-weighted average maturity will be no
more than 10 years. Investors generally consider such a maturity to be
intermediate.
Concepts to understand
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for defaulted debt. Bonds rated BBB or Baa
and above are considered investment grade.
MATURITY: length of time between the date on which a bond is issued and the date
the principal amount must be paid. Bonds with a longer maturity tend to offer
higher yields, but generally fluctuate more in price than shorter-term
counterparts.
<PAGE>
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices, and therefore in the fund's share price
as well. As a result, the value of your investment in the fund could go up and
down, which means you could lose money. To the extent that the fund maintains a
longer maturity than short-term funds, its share price will react more strongly
to interest rate movements.
Other risk factors could have an effect on the fund's performance:
(pound)if an issuer fails to make timely interest or principal payments or
there is a decline in the credit quality of a bond, or the perception of a
decline, the bond' s value could fall, potentially lowering the fund's share
price
(pound)while some of the fund's securities may carry guarantees by the U.S.
government or its agencies, these guarantees do not apply to shares of the fund
itself
(pound) if the loans underlying the fund's mortgage-related securities are paid
off earlier or later than expected, which could occur because of movements in
market interest rates, the fund's share price or yield could be hurt
(pound)foreign securities carry additional risks beyond comparable types of
securities from the United States, meaning that the price and yield of any
foreign debt security the fund may own could be affected by such factors as
political and economic instability, changes in currency exchange rates and less
liquid markets for such securities
Other potential risks
At times, the fund may engage in short-term trading. This could increase the
fund's transaction costs and taxable distributions, lowering its after-tax
performance accordingly.
PAST PERFORMANCE
The first table shows how the performance of the fund's Class R shares has
varied from year to year. The second table compares the performance of each of
the fund's share classes over time to that of the Lehman Brothers Aggregate Bond
Index, a widely recognized unmanaged index of bond performance. These returns
reflect any applicable sales loads. Both tables assume the 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 (%)
CLASS R SHARES 6.18 8.00 -1.85 14.66 3.18 9.08 7.92
92 93 94 95 96 97 98
BEST QUARTER: Q2 '95 +4.92%
WORST QUARTER: Q1 '94 -1.93%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
Since
Inception date 1 Year 5 Years inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (4/7/94) 4.42% -- 6.39%
CLASS B (12/19/94) 4.16% -- 7.63%
CLASS C (12/19/94) 6.34% -- 7.46%
CLASS R (7/11/91) 7.92% 6.45% 7.46%
LEHMAN BROTHERS
AGGREGATE BOND INDEX 8.69% 7.27% 8.62%*
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON
6/30/91 IS USED AS THE BEGINNING VALUE ON 7/11/91.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
<PAGE>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
Fee table
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 3.00 NONE NONE NONE
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 3.00 .75 NONE
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees .60 .60 .60 .60
Rule 12b-1 fee .25 .75 .75 NONE
Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL .85 1.35 1.35 .60
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
</TABLE>
Expense example
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $384 $563 $757 $1,318
CLASS B
WITH REDEMPTION $437 $628 $839 $1,362**
WITHOUT REDEMPTION $137 $428 $739 $1,362**
CLASS C
WITH REDEMPTION $212 $428 $739 $1,624
WITHOUT REDEMPTION $137 $428 $739 $1,624
CLASS R $61 $192 $335 $750
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for promotional expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
2
<PAGE>
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.
Management philosophy
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.
Portfolio manager
The fund is managed by Laurie Carroll. Ms. Carroll has managed the fund since
its inception and has been employed by Dreyfus as a portfolio manager since
October 1994. Ms. Carroll is a Senior Vice President and portfolio manager at
Mellon Bank. Ms. Carroll has been employed by Mellon Bank since 1986.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund 3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class 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,
CLASS A 1998 1997 1996 1995 1994(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 10.96 10.78 10.84 10.22 10.49
Investment operations: Investment income -- net .58 .62 .58 .56 .28
Net realized and unrealized gain (loss) on investments .35 .19 (.07) .62 (.27)
Total from investment operations .93 .81 .51 1.18 .01
Distributions: Dividends from investment income -- net (.58) (.63) (.57) (.56) (.28)
Net asset value, end of period 11.31 10.96 10.78 10.84 10.22
Total return (%) (2) 8.73 7.80 4.85 11.83 .11
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .85 .85 .85 .85 .83(3)
Ratio of net investment income to average net assets (%) 5.20 5.80 5.38 5.33 4.47(3)
Portfolio turnover rate (%) 149.08 129.94 153.63 73.00 117.00
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 5,349 1,169 1,001 1,150 932
(1) FROM APRIL 7, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1994.
(2) EXCLUSIVE OF SALES CHARGE.
(3) ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS B 1998 1997 1996 1995(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 11.00 10.78 10.84 10.15
Investment operations: Investment income -- net .52 .56 .52 .47
Net realized and unrealized gain (loss) on investments .35 .23 (.07) .69
Total from investment operations .87 .79 .45 1.16
Distributions: Dividends from investment income -- net (.52) (.57) (.51) (.47)
Net asset value, end of period 11.35 11.00 10.78 10.84
Total return (%)(2) 8.14 7.56 4.33 11.32
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.35 1.35 1.35 1.35(3)
Ratio of net investment income to average net assets (%) 4.49 5.06 4.86 4.85(3)
Portfolio turnover rate (%) 149.08 129.94 153.63 73.00
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 5,391 542 143 78
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) EXCLUSIVE OF SALES CHARGE.
(3) ANNUALIZED.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS C 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 10.84 10.73 10.84 10.15
Investment operations: Investment income (loss) -- net .52 (1.98) 3.05 .48
Net realized and unrealized gain (loss) on investments .35 2.65 (2.65) .69
Total from investment operations .87 .67 .40 1.17
Distributions: Dividends from investment income -- net (.51) (.56) (.51) (.48)
Net asset value, end of period 11.20 10.84 10.73 10.84
Total return (%)(2) 8.25 6.49 3.83 11.32
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.35 1.35 1.41 --
Ratio of net investment income to average net assets (%) 4.61 4.98 5.50 --
Portfolio turnover rate (%) 149.08 129.94 153.63 73.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,076 349 -- --
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) EXCLUSIVE OF SALES CHARGE.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS R 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 10.96 10.78 10.84 10.22 11.07
Investment operations: Investment income -- net .61 .65 .60 .58 .49(1)
Net realized and unrealized gain (loss) on investments .35 .19 (.06) .62 (.75)
Total from investment operations .96 .84 .54 1.20 (.26)
Distributions: Dividends from investment income -- net (.61) (.66) (.60) (.58) (.53)
Dividends from net realized gain on investments -- -- -- -- (.06)
Total distributions (.61) (.66) (.60) (.58) (.59)
Net asset value, end of period 11.31 10.96 10.78 10.84 10.22
Total return (%) 9.02 8.09 5.12 12.11 (2.46)
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets (%) .60 .60 .60 .60 .60(2)
Ratio of net investment income to average net assets (%) 5.51 6.06 5.62 5.58 4.70
Portfolio turnover rate (%) 149.08 129.94 153.63 73.00 117.00
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 41,988 47,532 49, 664 69,924 82,406
(1) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER.
(2) EXPENSE RATIO BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER.
</TABLE>
The Fund 5
<PAGE>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
(pound)CLASS A shares may be appropriate for investors who prefer to pay the
fund' s sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
(pound)CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer-term investment horizon
(pound)CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter-term investment horizon
(pound) CLASS R shares are designed for eligible institu-
tions on behalf of their clients. Individuals may not purchase these shares
directly.
Your financial representative can help you choose the share class that is
appropriate for you.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders holding Class A shares
of the fund since December 19, 1994, may continue to purchase Class A shares
without a front-end sales load.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- -------------------------------------------------------------------------------
<S> <C> <C>
Less than $100,000 3.00% 3.10%
$100,000 -- $249,999 2.75% 2.80%
$250,000 -- $499,999 2.25% 2.30%
$500,000 -- $999,999 2.00% 2.00%
$1 million or more* 0.00% 0.00%
</TABLE>
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).
Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 3.00%
2 -- 4 years 2.00%
4 -- 5 years 1.00%
5 -- 6 years 0.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 0.75% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 0.75% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 0.75% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Reduced Class A sales charge
LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B or C shares in
this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
6
<PAGE>
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. 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.
ORDERS TO BUY AND SELL SHARES RECEIVED BY DEALERS by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5: 15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B, C and
R are offered at NAV, but Classes B and C are subject to higher annual
distribution fees and may be subject to a sales charge upon redemption.
Selling shares
YOU MAY SELL SHARES AT ANY TIME through your financial representative, or you
can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the SAI for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 7
<PAGE>
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:
(pound) 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)
(pound)refuse any purchase or exchange request in excess of 1% of the fund's
total assets
(pound)change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound)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).
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS monthly dividends from its net
investment income, and distributes any net capital gains that it has realized
once a year. Each share class will generate a different dividend because each
has different expenses. Your distributions will be reinvested in additional
shares of the fund unless you instruct the fund otherwise. There are no fees or
sales charges on reinvestments.
FUND DIVIDENDS AND OTHER DISTRIBUTIONS ARE TAXABLE to most investors (unless
your investment is in an IRA or other tax-advantaged account). The tax status of
any distribution is the same regardless of how long you have been in the fund
and whether you reinvest your distributions or take them in cash. In general,
distributions are taxable at the federal level as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above can provide a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
or exchanged up to 12 months after buying them. "Long-term capital gains"
applies to shares sold or exchanged after 12 months.
8
<PAGE>
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 9
<PAGE>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4240" for
Class A, "4250" for Class B, "4260" for Class C, or "4270" for Class R.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
10
<PAGE>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 0011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4240" for
Class A, "4250" for Class B, "4260" for Class C, or "4270" for Class R.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials. All contributions
will count as current year.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427
Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 11
<PAGE>
[Application p 1 here]
<PAGE>
[Application p 2 here]
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Limited Term Income Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation
345P0399
<X>
<PAGE>
Dreyfus Premier Small Company Stock Fund
Investing in small cap stocks for investment returns that exceed the Russell
2500(tm) Stock Index
PROSPECTUS March 1, 1999
(reg.tm)
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Small Company Stock Fund
---------------------------------
Ticker Symbols CLASS A: DPSAX
CLASS B: DPSBX
CLASS C: DPSCX
CLASS R: DPSRX
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
Instructions for IRAs 11
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Russell 2500(tm) Stock Index
(Russell 2500). This objective may be changed without shareholder approval. To
pursue its goal, the fund normally invests at least 65% of total assets in a
blended portfolio of growth and value stocks of small and mid-size domestic
companies, whose market values generally range between $100 million and $3
billion. Stocks are chosen through a disciplined process combining computer
modelling techniques, fundamental analysis and risk management. Consistency of
returns and stability of the fund's share price compared to the Russell 2500 are
primary goals of the investment process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
(pound) VALUE, or how a stock is priced relative to its perceived intrinsic
worth
(pound) GROWTH, in this case the sustainability or growth of earnings
(pound) FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Then 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 Russell 2500.
Concepts to understand
SMALL COMPANIES: new and often entrepreneurial companies. Small companies tend
to grow faster than large-cap companies, but are also more volatile and have a
higher failure rate.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks. Dreyfus reviews each of the screens on a regular basis and
maintains the flexibility to adapt the screening criteria to changes in market
conditions.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Small and mid-size companies carry additional risks because their operating
histories may be more limited and their earnings are less predictable, their
share prices more volatile and their securities less liquid than larger, more
established companies. Some of the fund's investments will rise and fall based
on investor perception rather than economics.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile similar to the Russell 2500, the fund holds
fewer securities than the index. Owning fewer securities and the ability to
purchase companies not listed in the index can cause the fund to underperform
the index.
By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
Other potential risks
The fund may invest in initial public offerings, options, futures and foreign
currencies to hedge the fund's portfolio or to increase returns. There is the
risk that such practices may reduce returns or increase volatility.
The fund may invest in securities of foreign issuers, which carry additional
risks such as less liquidity, changes in currency exchange rates, a lack of
adequate company information and political instability.
PAST PERFORMANCE
The first table below shows how the performance of the fund's Class A shares has
varied from year to year. Sales loads are not reflected; if they were, returns
would be less than shown. The second table compares the performance of each of
the fund's share classes over time to that of the Russell 2500, a widely
recognized unmanaged index of small-cap stock performance. These returns reflect
any applicable sales loads. Both tables assume the reinvestment of dividends 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 (%)
40.11 21.94 21.72 6.09
95 96 97 98
BEST QUARTER: Q4 '98 +16.29%
WORST QUARTER: Q3 '98 -21.81%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
Inception date 1 Year Life of class
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A (9/2/94) -11.50% 14.77%
CLASS B (12/19/94) -10.58% 17.94%
CLASS C (12/19/94) -7.73% 18.26%
CLASS R (9/2/94) -5.85% 16.61%
RUSSELL 2500 0.38% 15.91%*
</TABLE>
* BASED ON THE LIFE OF CLASS A AND CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE
OF THE INDEX ON 8/31/94 IS USED AS THE BEGINNING VALUE ON 9/2/94.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund
<PAGE 1>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
Fee table
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.25 1.25 1.25 1.25
Rule 12b-1 fee .25 1.00 1.00 NONE
Other expenses .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.50 2.25 2.25 1.25
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
</TABLE>
Expense example
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $719 $1,022 $1,346 $2,263
CLASS B
WITH REDEMPTION $628 $1,003 $1,405 $2,223**
WITHOUT REDEMPTION $228 $703 $1,205 $2,223**
CLASS C
WITH REDEMPTION $328 $703 $1,205 $2,585
WITHOUT REDEMPTION $228 $703 $1,205 $2,585
CLASS R $127 $397 $686 $1,511
</TABLE>
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for promotional expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
<PAGE 2>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $117 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.
Management philosophy
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.
Portfolio managers
The fund is co-managed by James C. Wadsworth and Anthony J. Galise. Mr.
Wadsworth has been employed by Dreyfus as a portfolio manager since October 1994
and is also Chief Investment Officer at Laurel Capital Advisors, an affiliate of
Dreyfus. He is also Chief Equity Officer and Senior Vice President of Mellon
Private Asset Management. He has been employed by Mellon Bank since 1977. Mr.
Galise has been employed by Dreyfus as a portfolio manager since April 1996. He
is also a portfolio manager at Laurel Capital Advisors and a Vice President and
Portfolio Manager at Mellon Bank. He joined Mellon in 1993 with over 20 years of
equity investment experience.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund
<PAGE 3>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class 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,
CLASS A 1998 1997 1996 1995 1994(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 18.89 15.13 13.09 10.07 10.00
Investment operations: Investment income (loss) -- net (.02) (.04) (.02) .02 .01
Net realized and unrealized gain
(loss) on investments (2.78) 4.52 2.48 3.03 .06
Total from investment operations (2.80) 4.48 2.46 3.05 .07
Distributions: Dividends from investment income -- net -- -- -- (.03) --
Dividends from net realized gain on investments (.91) (.72) (.42) -- --
Total distributions (.91) (.72) (.42) (.03) --
Net asset value, end of period 15.18 18.89 15.13 13.09 10.07
Total return (%)(2) (15.42) 30.73 19.22 30.31 .70(3)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.50 1.50 1.50 1.50 .25(3)
Ratio of net investment income (loss) to average net assets (%) (.32) (.35) (.16) .10 .14(3)
Portfolio turnover rate (%) 47.44 39.18 49.03 56.00 8.00(3)
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 13,462 9,190 3,884 1,359 60
(1) FROM SEPTEMBER 2, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS B 1998 1997 1996 1995(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 18.51 14.95 13.05 9.49
Investment operations: Investment income (loss) -- net (.11) (.03) (.07) (.03)
Net realized and unrealized gain (loss) on investments (2.74) 4.31 2.39 3.59
Total from investment operations (2.85) 4.28 2.32 3.56
Distributions: Dividends from net realized gain on investments (.91) (.72) (.42) --
Net asset value, end of period 14.75 18.51 14.95 13.05
Total return (%)(2) (16.10) 29.72 18.17 37.51(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.25 2.25 2.24 1.95(3)
Ratio of net investment income (loss) to average net assets (%) (1.07) (1.02) (.93) (.56)(3)
Portfolio turnover rate (%) 47.44 39.18 49.03 56.00(3)
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 25,183 19,257 4,633 1,025
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<PAGE 4>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS C 1998 1997 1996 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 18.52 14.95 13.04 9.49
Investment operations: Investment income (loss) -- net (.14) .01 (.09) (.01)
Net realized and unrealized gain (loss) on investments (2.72) 4.28 2.42 3.56
Total from investment operations (2.86) 4.29 2.33 3.55
Distributions: Dividends from net realized gain on investments (.91) (.72) (.42) --
Net asset value, end of period 14.75 18.52 14.95 13.04
Total return (%)(2) (16.08) 29.79 18.27 37.41(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.25 2.25 2.25 1.14(3)
Ratio of net investment income (loss) to average net assets (%) (1.08) (1.01) (.93) (.33)(3)
Portfolio turnover rate (%) 47.44 39.18 49.03 56.00(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 4,323 3,647 514 147
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS R 1998 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 18.96 15.15 13.10 10.07 10.00
Investment operations: Investment income (loss) -- net (.01) -- .01 .04 .02
Net realized and unrealized gain
(loss) on investments (2.77) 4.53 2.48 3.04 .05
Total from investment operations (2.78) 4.53 2.49 3.08 .07
Distributions: Dividends from investment income -- net -- -- (.02) (.05) --
Dividends from net realized gain on investments (.91) (.72) (.42) -- --
Total distributions (.91) (.72) (.44) (.05) --
Net asset value, end of period 15.27 18.96 15.15 13.10 10.07
Total return (%) (15.31) 31.04 19.43 30.70 .70(2)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.25 1.25 1.25 .21(2)
Ratio of net investment income (loss) to average net assets (%) (.07) .02 .09 .35 .18(2)
Portfolio turnover rate (%) 47.44 39.18 49.03 56.00 8.00(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 238,953 244,292 112,209 44,091 10,747
(1) FROM SEPTEMBER 2, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994.
(2) NOT ANNUALIZED.
</TABLE>
The Fund
<PAGE 5>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
(pound) CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and/or have a longer-term investment horizon
(pound) CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
(pound) CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
(pound) CLASS R shares are designed for eligible institutions on behalf of
their clients. Individuals may not purchase these shares directly.
Your financial representative can help you choose the share class that is
appropriate for you.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay, or may qualify for a reduced, sales charge to buy or sell shares. Consult
your financial representative or the SAI to see if this may apply to you.
Shareholders holding Class A shares since December 19, 1994 are not subject to
any front-end sales loads. Shareholders holding Class A shares since November
30, 1996 are subject to reduced loads.
- --------------------------------------------------------------------------------
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------
Up to $49,999 5.75% 6.10%
$50,000 -- $99,999 4.50% 4.70%
$100,000 -- $249,999 3.50% 3.60%
$250,000 -- $499,999 2.50% 2.60%
$500,000 -- $999,999 2.00% 2.00%
$1 million or more* 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).
Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Reduced Class A sales charge
LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B or C shares in
this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
<PAGE 6>
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are valued based on market value or, where market quotations are not readily
available, based on fair value as determined in good faith by the fund's board.
ORDERS TO BUY AND SELL SHARES RECEIVED BY DEALERS by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B, C and
R are offered at NAV, but Classes B and C are subject to higher annual
distribution fees and may be subject to a sales charge upon redemption.
Selling shares
YOU MAY SELL SHARES AT ANY TIME through your financial representative, or you
can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the Statement of
Additional Information for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 7>
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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of 1% of the fund's
total assets
(pound) change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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).
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income and distributes any net capital gains that it has realized once a year.
Each share class will generate a different dividend because each has different
expenses. Your distributions will be reinvested in additional shares of the fund
unless you instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are taxable at the federal level as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above can provide a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
or exchanged up to 12 months after buying them. "Long-term capital gains"
applies to shares sold or exchanged after 12 months.
<PAGE 8>
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment
<PAGE 9>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional
Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4410" for
Class A, "4420" for Class B, "4430" for Class C, or "4960" for Class R.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
<PAGE 10>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Depost & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4410" for
Class A, "4420" for Class B, "4430" for Class C, or "4960" for Class R.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials. All contributions
will count as current year.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427 Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment
<PAGE 11>
NOTES
<PAGE>
[Application p 1 here]
<PAGE>
[Application p 2 here]
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Small Company Stock Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation
385P0399
<X>
<PAGE>
Dreyfus Premier Midcap Stock Fund
Investing in midcap stocks for investment returns that exceed the S&P 400
PROSPECTUS March 1, 1999
(reg.tm)
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Midcap Stock Fund
----------------------------------
Ticker Symbols CLASS A: DPMAX
CLASS B: DMSBX
CLASS C: N/A
CLASS R: DDMRX
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
Instructions for IRAs 11
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND' S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's 400 Midcap
Index((reg.tm) ) (S& P 400) . This objective may be changed without shareholder
approval. To pursue its goal, the fund invests at least 65% of total assets in a
blended portfolio of growth and value stocks of medium- size companies, those
whose market values range between $200 million and $5 billion. Stocks are chosen
through a disciplined process combining computer modelling techniques,
fundamental analysis and risk management. Consistency of returns and stability
of the fund' s share price compared to the S&P 400 are primary goals of the
process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector based on:
(pound)VALUE, or how a stock is priced relative to its perceived intrinsic
worth
(pound) GROWTH, in this case the sustainability or growth of earnings
(pound) FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Then 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 400.
Concepts to understand
MIDCAP COMPANIES: established companies that may not be well known. Midcap
companies have the potential to grow faster than large-cap companies, but may
lack the resources to weather economic shifts, and are more volatile than large
companies.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks. Dreyfus reviews each of the screens on a regular basis.
Dreyfus also maintains the flexibility to adapt the screening criteria to
changes in market conditions.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Midsize companies carry additional risks because their earnings tend to be less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies. Some of the fund's investments will
rise and fall based on investor perception rather than economics.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile very similar to the S&P 400, the fund holds
fewer securities than the index. Owning fewer securities and the ability to
purchase companies not listed in the index can cause the fund to underperform
the index.
By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
Other potential risks
The fund may invest in options and futures 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.
PAST PERFORMANCE
The first table shows how the performance of the fund's Class R shares has
varied from year to year. The second table compares the performance of Class A
and R shares over time to that of the S&P 400, a widely recognized unmanaged
index of midcap stock performance. These returns reflect any applicable sales
loads. Both tables assume the reinvestment of dividends 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 (%)
CLASS R SHARES -6.71 38.00 26.70 36.10 8.90
94 95 96 97 98
BEST QUARTER: Q4 '98 +22.30%
WORST QUARTER: Q3 '98 -16.74%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
Since
Inception date 1 Year 5 Years inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (4/6/94) 2.40% -- 18.92%
CLASS R (11/12/93) 8.90% 19.31% 19.00%
S&P 400 19.11% 18.84% 18.71%**
* SINCE CLASS B AND C SHARES HAVE LESS THAN ONE CALENDAR YEAR OF PERFORMANCE,
PERFORMANCE INFORMATION IS NOT INCLUDED IN THIS SECTION. PERFORMANCE FOR
CLASS B AND C SHARES WILL VARY FROM THE PERFORMANCE OF THE FUND'S OTHER
SHARE CLASSES DUE TO DIFFERENCES IN CHARGES AND EXPENSES.
** BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX
ON 10/31/93 IS USED AS THE BEGINNING VALUE ON 11/12/93.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
<PAGE>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
Fee table
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.10 1.10 1.10 1.10
Rule 12b-1 fee .25 1.00 1.00 NONE
Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.35 2.10 2.10 1.10
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $705 $978 $1,272 $2,105
CLASS B
WITH REDEMPTION $613 $958 $1,329 $2,064**
WITHOUT REDEMPTION $213 $658 $1,129 $2,064**
CLASS C
WITH REDEMPTION $313 $658 $1,129 $2,431
WITHOUT REDEMPTION $213 $658 $1,129 $2,431
CLASS R $112 $350 $606 $1,340
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for promotional expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
2
<PAGE>
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.
Management philosophy
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.
Portfolio manager
John O' Toole has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Mr. O'Toole is a senior vice
president and a portfolio manager for Mellon Equity Associates. He has been
employed by Mellon Bank since 1979.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund 3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class 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,
CLASS A 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 17.02 14.36 11.92 9.75 10.00
Investment operations: Investment income (loss) -- net (.01) .02 .04 .09 .05
Net realized and unrealized gain (loss) on investments (.29) 4.79 2.98 2.17 (.26)
Total from investment operations (.30) 4.81 3.02 2.26 (.21)
Distributions: Dividends from investment income -- net (.01) (.01) (.05) (.09) (.04)
Dividends from net realized gain on investments (2.47) (2.14) (.53) -- --
Total distributions (2.48) (2.15) (.58) (.09) (.04)
Net asset value, end of period 14.24 17.02 14.36 11.92 9.75
Total return (%)(2) (2.16) 38.40 26.29 23.39 (2.06)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.35 1.35 1.35 1.35 .80(3)
Ratio of net investment income (loss) to average net assets (%) (.19) .16 .28 .86 .42(3)
Portfolio turnover rate (%) 78.02 81.87 90.93 71.00 83.00(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 38,267 6,847 3,205 1,417 54
(1) FOR THE PERIOD FROM APRIL 6, 1994 (COMMENCEMENT OF OPERATIONS) THROUGH OCTOBER 31, 1994.
(2) EXCLUSIVE OF SALES CHARGE.(
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
CLASS B 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 14.65
Investment operations: Investment income (loss) -- net (.06)
Net realized and unrealized gain (loss) on investments (.43)
Total from investment operations (.49)
Net asset value, end of period 14.16
Total return (%)(2) (3.41)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.66(3)
Ratio of net investment income (loss) to average net assets (%) (.77)(3)
Portfolio turnover rate (%) 78.02(3)
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 16,867
(1) FOR THE PERIOD FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING)
THROUGH OCTOBER 31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
CLASS C 1998(1)
- --------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 14.65
Investment operations: Investment income (loss) -- net (.06)
Net realized and unrealized gain (loss) on investments (.42)
Total from investment operations (.48)
Net asset value, end of period 14.17
Total return (%)(2) (3.28)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.66(3)
Ratio of net investment income (loss) to average net assets (%) (.77)(3)
Portfolio turnover rate (%) 78.02(3)
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 3,485
(1) FOR THE PERIOD FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING)
THROUGH OCTOBER 31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS R 1998 1997 1996 1995 1994(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 17.03 14.36 11.92 9.76 10.00
Investment operations: Investment income -- net .01 .05 .07 .12 .09(2)
Net realized and unrealized gain (loss)
on investments (.26) 4.80 2.98 2.16 (.27)
Total from investment operations (.25) 4.85 3.05 2.28 (.18)
Distributions: Dividends from investment income -- net (.03) (.04) (.08) (.12) (.06)
Dividends from net realized gain on investments (2.47) (2.14) (.53) -- --
Total distributions (2.50) (2.18) (.61) (.12) (.06)
Net asset value, end of period 14.28 17.03 14.36 11.92 9.76
Total return (%) (1.88) 38.88 26.61 23.57 (1.77)(3)
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.10 1.10 1.10 1.10 1.13(3,4)
Ratio of net investment income to average net assets (%) .05 .42 .57 1.11 .95(3)
Portfolio turnover rate (%) 78.02 81.87 90.93 71.00 83.00(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 53,888 31,769 15,644 12,129 18,169
(1) FOR THE PERIOD FROM NOVEMBER 12, 1993 (COMMENCEMENT OF OPERATIONS) THROUGH OCTOBER 31, 1994.
(2) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER WAS $0.06.
(3) NOT ANNUALIZED.
(4) ANNUALIZED EXPENSE RATIO BEFORE VOLUNTARY REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER WAS 1.48%.
</TABLE>
The Fund 5
<PAGE>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
(pound)CLASS A shares may be appropriate for investors who prefer to pay the
fund' s sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
(pound)CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer-term investment horizon
(pound)CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter-term investment horizon
(pound) CLASS R shares are designed for eligible institu-
tions on behalf of their clients. Individuals may not purchase these shares
directly.
Your financial representative can help you choose the share class that is
appropriate for you.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders holding Class A shares
since January 15, 1998 are not subject to any front-end sales loads.
- --------------------------------------------------------------------------------
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------
Up to $49,999 5.75% 6.10%
$50,000 -- $99,999 4.50% 4.70%
$100,000 -- $249,999 3.50% 3.60%
$250,000 -- $499,999 2.50% 2.60%
$500,000 -- $999,999 2.00% 2.00%
$1 million or more* 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).
Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Reduced Class A sales charge
LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B or C shares in
this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
6
<PAGE>
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are valued based on market value or, where market quotations are not readily
available, based on fair value as determined in good faith by the fund's board.
ORDERS TO BUY AND SELL SHARES RECEIVED BY DEALERS by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5: 15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B, C and
R are offered at NAV, but Classes B and C are subject to higher annual
distribution fees and may be subject to a sales charge upon redemption.
Selling shares
YOU MAY SELL SHARES AT ANY TIME through your financial representative, or you
can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult your financial
representative or the SAI for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 7
<PAGE>
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:
(pound) 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)
(pound)refuse any purchase or exchange request in excess of 1% of the fund's
total assets
(pound)change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound)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).
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income and distributes any net capital gains that it has realized once a year.
Each share class will generate a different dividend because each has different
expenses. Your distributions will be reinvested in additional shares of the fund
unless you instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
FUND DIVIDENDS AND OTHER DISTRIBUTIONS ARE TAXABLE to most investors (unless
your investment is in an IRA or other tax-advantaged account). The tax status of
any distribution is the same regardless of how long you have been in the fund
and whether you reinvest your distributions or take them in cash. In general,
distributions are taxable at the federal level as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above can provide a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
or exchanged up to 12 months after buying them. "Long-term capital gains"
applies to shares sold or exchanged after 12 months.
8
<PAGE>
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 9
<PAGE>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4040" for
Class A, "4700" for Class B, "4710" for Class C, or "4030" for Class R.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
WIRE Call us or your financial representative to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be wired
to your bank.
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
CHECK Call us or your financial representative to request your transaction. A
check will be sent to the address of record.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
10
<PAGE>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4040" for
Class A, "4700" for Class B, "4710" for Class C, or "4030" for Class R.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials. All contributions
will count as current year.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427 Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 11
<PAGE>
NOTES
<PAGE>
[Application p 1 here]
<PAGE>
[Application p 2 here]
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Midcap Stock Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation
330/730P0399
<PAGE>
Dreyfus Premier Large Company Stock Fund
Investing in large-cap stocks for investment returns that exceed the S&P
500((reg.tm))
PROSPECTUS March 1, 1999
(reg.tm)
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Large Company Stock Fund
---------------------------------
Ticker Symbols CLASS A: DRDEX
CLASS B: N/A
CLASS C: N/A
CLASS R: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
Instructions for IRAs 11
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's((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 investment process. Consistency of returns and stability of the
fund's share price compared to the S&P 500 are primary goals of the process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
(pound) VALUE, or how a stock is priced relative to its perceived intrinsic
worth
(pound) GROWTH, in this case the sustainability or growth of earnings
(pound) FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Then 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.
Concepts to understand
S&P 500: an unmanaged index of 500 common stocks chosen to reflect the
industries of the U.S. economy.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks, screening each stock for relative attractiveness within
its economic sector and industry. To ensure that the model remains effective,
Dreyfus reviews each of the screens on a regular basis, and maintains the
flexibility to adapt the screening criteria to changes in market conditions.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile very similar to the S&P 500, the fund holds
fewer securities than the index. Owning fewer securities and the ability to
purchase companies not listed in the index can cause the fund to underperform
the index.
By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
PAST PERFORMANCE
The first table below shows how the performance of the fund's Class R shares has
varied from year to year. The second table compares the performance of Class A
and R shares over time to that of the S&P 500, a widely recognized unmanaged
index of stock performance. These returns reflect any applicable sales loads.
Both tables assume the reinvestment of dividends and distributions. As with all
mutual funds, the past is not a prediction of the future. Since Class B and C
shares have less than one calendar year of performance, past performance
information is not included in this section of the prospectus for those classes.
Performance for Class B and C shares will vary from the performance of the
fund's other share classes due to differences in charges and expenses.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
35.77 22.51 34.93 26.46
95 96 97 98
BEST QUARTER: Q4 '98 +22.70%
WORST QUARTER: Q3 '98 -12.28%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
Since
Inception date 1 Year inception
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A (9/2/94) 18.99% 24.87%
CLASS R (9/2/94) 26.46% 26.27%
S&P 500 28.74% 27.12%*
</TABLE>
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 8/31/94 IS USED AS THE
BEGINNING VALUE ON 9/2/94.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund
<PAGE 1>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
Fee table
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees .90 .90 .90 .90
Rule 12b-1 fee .25 1.00 1.00 NONE
Other expenses .00 .00 .00 .00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.15 1.90 1.90 .90
</TABLE>
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
Expense example
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $685 $919 $1,172 $1,892
CLASS B
WITH REDEMPTION $593 $897 $1,226 $1,848**
WITHOUT REDEMPTION $193 $597 $1,026 $1,848**
CLASS C
WITH REDEMPTION $293 $597 $1,026 $2,222
WITHOUT REDEMPTION $193 $597 $1,026 $2,222
CLASS R $92 $287 $498 $1,108
</TABLE>
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for promotional expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
<PAGE 2>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $117 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.
Management philosophy
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.
Portfolio manager
Bert Mullins has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Mr. Mullins has been employed
as a portfolio manager by Laurel Capital Advisors, an affiliate of Dreyfus,
since October 1990. He is also a Vice President, portfolio manager and Senior
Securities Analyst for Mellon Bank, N.A.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund
<PAGE 3>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class 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 figures 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,
CLASS A 1998 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 18.23 14.49 12.00 9.95 10.00
Investment operations: Investment income -- net .07 .20 .27 .22 .03
Net realized and unrealized gain (loss)
on investments 3.39 4.26 2.54 2.05 (.08)
Total from investment operations 3.46 4.46 2.81 2.27 (.05)
Distributions: Dividends from investment income -- net (.15) (.20) (.20) (.22) --
Dividends from net realized gain on investments (1.09) (.52) (.12) -- --
Total distributions (1.24) (.72) (.32) (.22) --
Net asset value, end of period 20.45 18.23 14.49 12.00 9.95
Total return (%)(2) 19.85 32.01 23.87 23.20 (.50)(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.15 1.15 1.15 1.15 .19(3)
Ratio of net investment income to average net assets (%) .52 1.23 1.81 2.32 .44(3)
Portfolio turnover rate (%) 81.27 37.17 44.33 37.57 5.00(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 25,421 6,456 4,599 1,714 1
(1) FROM SEPTEMBER 2, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994.
(2) EXCLUSIVE OF SALES LOAD.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
CLASS B 1998(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 17.93
Investment operations: Investment income (loss) -- net (.02)
Net realized and unrealized gain (loss) on investments 2.48
Total from investment operations 2.46
Distributions: Dividends from investment income -- net (.01)
Net asset value, end of period 20.38
Total return (%)(2) 13.76(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.51(3)
Ratio of net investment income (loss) to average net assets (%) (.24)(3)
Portfolio turnover rate (%) 81.27(3)
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 14,410
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1998.
(2) EXCLUSIVE OF SALES LOAD.
(3) NOT ANNUALIZED.
</TABLE>
<PAGE 4>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
CLASS C 1998(1)
- --------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 17.93
Investment operations: Investment income (loss) -- net (.02)
Net realized and unrealized gain (loss) on investments 2.48
Total from investment operations 2.46
Distributions: Dividends from investment income -- net (.01)
Net asset value, end of period 20.38
Total return (%)(2) 13.70(3)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.51(3)
Ratio of net investment income (loss) to average net assets (%) (.24)(3)
Portfolio turnover rate (%) 81.27(3)
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 3,154
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1998.
(2) EXCLUSIVE OF SALES LOAD.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS R 1998 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 18.23 14.49 12.00 9.95 10.00
Investment operations: Investment income -- net .17 .23 .21 .28 .05
Net realized and unrealized gain
(loss) on investments 3.33 4.27 2.63 2.02 (.10)
Total from investment operations 3.50 4.50 2.84 2.30 (.05)
Distributions: Dividends from investment income -- net (.20) (.24) (.23) (.25) --
Dividends from net realized gain on investments (1.09) (.52) (.12) -- --
Total distributions (1.29) (.76) (.35) (.25) --
Net asset value, end of period 20.44 18.23 14.49 12.00 9.95
Total return (%) 20.10 32.25 24.18 23.48 (.50)(2)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .90 .90 .90 .90 .15(2)
Ratio of net investment income to average net assets (%) .85 1.46 2.06 2.57 .48(2)
Portfolio turnover rate (%) 81.27 37.17 44.33 37.57 5.00(2)
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 29,933 28,224 13,387 4,509 5,005
(1) FROM SEPTEMBER 2, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994.
(2) NOT ANNUALIZED.
</TABLE>
The Fund
<PAGE 5>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
(pound) CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and/or have a longer-term investment horizon
(pound) CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
(pound) CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
(pound) CLASS R shares are designed for eligible institutions on behalf of
their clients. Individuals may not purchase these shares directly.
This share class is not available for new accounts.
Your financial representative can help you choose the share class that is
appropriate for you.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders holding Class A shares
since January 15, 1998 are not subject to any front-end sales loads.
- --------------------------------------------------------------------------------
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------
Up to $49,999 5.75% 6.10%
$50,000 -- $99,999 4.50% 4.70%
$100,000 -- $249,999 3.50% 3.60%
$250,000 -- $499,999 2.50% 2.60%
$500,000 -- $999,999 2.00% 2.00%
$1 million or more* 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).
Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Reduced Class A sales charge
LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B or C shares in
this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
<PAGE 6>
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are valued based on market value or, where market quotations are not readily
available, based on fair value as determined in good faith by the fund's board.
ORDERS TO BUY AND SELL SHARES RECEIVED BY DEALERS by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B, C and
R are offered at NAV, but Classes B and C are subject to higher annual
distribution fees and may be subject to a sales charge upon redemption.
Selling shares
YOU MAY SELL SHARES AT ANY TIME through your financial representative, or you
can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the Statement of
Additional Information for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 7>
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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of 1% of the fund's
total assets
(pound) change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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).
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS quarterly dividends from its net
investment income and distributes any net capital gains that it has realized
once a year. Each share class will generate a different dividend because each
has different expenses. Your distributions will be reinvested in the fund unless
you instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are taxable at the federal level as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above can provide a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
or exchanged up to 12 months after buying them. "Long-term capital gains"
applies to shares sold or exchanged after 12 months.
<PAGE 8>
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment
<PAGE 9>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional
Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4070" for
Class A, "4680" for Class B, "4690" for Class C, or "4910" for Class R.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
WIRE Call us or your financial representative to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be wired
to your bank.
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
CHECK Call us or your financial representative to request your transaction. A
check will be sent to the address of record.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
<PAGE 10>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4070" for
Class A, "4680" for Class B, "4690" for Class C, or "4910" for Class R.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials. All contributions
will count as current year.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427 Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment
<PAGE 11>
[Application p 1 here]
<PAGE>
[Application p 2 here]
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Large Company Stock Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation
318/718P0399
<X>
<PAGE>
Dreyfus Premier Small Cap Value Fund
Investing in small-cap value stocks for investment returns that exceed the
Russell 2000((reg.tm)) Value Index
PROSPECTUS March 1, 1999
(reg.tm)
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Small Cap Value Fund
-----------------------------
Ticker Symbols CLASS A: N/A
CLASS B: N/A
CLASS C: N/A
CLASS R: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
Instructions for IRAs 11
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Russell 2000((reg.tm)) Value
Index. This objective may be changed without shareholder approval. To pursue its
goal, the fund normally invests at least 80% of total assets in stocks of small-
and mid-capitalization companies (those whose market value is between $100
million and $3 billion) that are publicly traded in the United States. Dreyfus
uses a disciplined process that combines computer modeling techniques,
fundamental analysis and risk management to select undervalued stocks for the
fund.
Dreyfus uses a computer model to identify and rank undervalued stocks.
Undervalued stocks are normally characterized by relatively low
price-to-earnings and low price-to-book ratios. The model analyzes how a stock
is priced relative to its perceived intrinsic value.
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Then the portfolio is constructed so that its sector weightings and risk
characteristics are similar to those of the Russell 2000 Value Index.
Concepts to understand
SMALL COMPANIES: new and often entrepreneurial companies. Small companies tend
to grow faster than large-cap companies, but are also more volatile and have a
higher failure rate.
COMPUTER MODEL: evaluates and ranks a universe of over 2,000 stocks. Dreyfus
reviews each of the screens on a regular basis and maintains the flexibility to
adapt the screening criteria to changes in market conditions.
RUSSELL 2000 VALUE INDEX: an unmanaged index of small-cap value stock
performance.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Small and mid-size companies carry additional risks because their operating
histories may be more limited, their earnings less predictable, their share
prices more volatile and their securities less liquid than larger, more
established companies. Some of the fund's investments will rise and fall based
on investor perception rather than economics.
The fund's investments in value stocks are subject to the risk that their
intrinsic values may never be realized by the market, or their prices may go
down. While the fund's investments in value stocks may limit the overall
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.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile similar to the Russell 2000 Value Index, the
fund holds fewer securities than the index. Owning fewer securities and the
ability to purchase companies not listed in the index can cause the fund to
underperform the index.
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 some assets in options and futures. These practices are used
to hedge the fund's portfolio or to increase returns. There is the risk that
such practices may reduce returns or increase volatility.
At times, the fund may engage in short-term trading, which could produce higher
brokerage costs and taxable distributions.
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.
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.
The Fund 1
<PAGE>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
Fee table
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.25 1.25 1.25 1.25
Rule 12b-1 fee .25 1.00 1.00 NONE
Other expenses .00 .00 .00 .00
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.50 2.25 2.25 1.25
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
</TABLE>
Expense example
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $719 $1,022 $1,346 $2,263
CLASS B
WITH REDEMPTION $628 $1,003 $1,405 $2,223**
WITHOUT REDEMPTION $228 $703 $1,205 $2,223**
CLASS C
WITH REDEMPTION $328 $703 $1,205 $2,585
WITHOUT REDEMPTION $228 $703 $1,205 $2,585
CLASS R $127 $397 $686 $1,511
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for promotional expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
2
<PAGE>
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 $117 billion in more than 160
mutual fund portfolios. Dreyfus is the mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $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
man-ager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.
Management philosophy
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.
Portfolio manager
William Rydell has managed the fund since its inception. He is a portfolio
manager for Dreyfus and is also President and Chief Executive Officer of Mellon
Equity Associates, LLP. He has been with Mellon Bank since 1973.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund 3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class for the fiscal
period indicated. "Total return" shows how much your investment in the fund
would have increased (or decreased) during the 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>
PERIOD ENDED
OCTOBER 31,
CLASS A 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Investment operations: Investment income (loss) -- net .03
Net realized and unrealized gain (loss) on investments (2.08)
Total from investment operations (2.05)
Net asset value, end of period 10.45
Total return (%)(2) (16.40)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .88(3)
Ratio of net investment income (loss) to average net assets (%) .24(3)
Portfolio turnover rate (%) 19.72(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 3,169
(1) FOR THE PERIOD FROM APRIL 1, 1998 THROUGH OCTOBER 31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
CLASS B 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Investment operations: Investment income (loss) -- net (.02)
Net realized and unrealized gain (loss) on investments (2.07)
Total from investment operations (2.09)
Net asset value, end of period 10.41
Total return (%)(2) (16.72)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.32(3)
Ratio of net investment income (loss) to average net assets (%) (.20)(3)
Portfolio turnover rate (%) 19.72(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 639
(1) FOR THE PERIOD FROM APRIL 1, 1998 THROUGH OCTOBER 31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
CLASS C 1998(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Investment operations: Investment income (loss) -- net (.02)
Net realized and unrealized gain (loss) on investments (2.07)
Total from investment operations (2.09)
Net asset value, end of period 10.41
Total return (%)(2) (16.72)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.32(3)
Ratio of net investment income (loss) to average net assets (%) (.19)(3)
Portfolio turnover rate (%) 19.72(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 621
(1) FOR THE PERIOD FROM APRIL 1, 1998 THROUGH OCTOBER 31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
CLASS R 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Investment operations: Investment income (loss) -- net .04
Net realized and unrealized gain (loss) on investments (2.07)
Total from investment operations (2.03)
Net asset value, end of period 10.47
Total return (%) (16.24)(2)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .73(2)
Ratio of net investment income (loss) to average net assets (%) .38(2)
Portfolio turnover rate (%) 19.72(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 420
(1) FOR THE PERIOD FROM APRIL 1, 1998 THROUGH OCTOBER 31, 1998.
(2) NOT ANNUALIZED.
</TABLE>
The Fund 5
<PAGE>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
(pound) CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
(pound) CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer-term investment horizon
(pound) CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter-term investment horizon
(pound) CLASS R shares are designed for eligible institu-
tions on behalf of their clients. Individuals may not purchase these shares
directly.
Your financial representative can help you choose the share class that is
appropriate for you.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you.
- --------------------------------------------------------------------------------
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------
Up to $49,999 5.75% 6.10%
$50,000 -- $99,999 4.50% 4.70%
$100,000 -- $249,999 3.50% 3.60%
$250,000 -- $499,999 2.50% 2.60%
$500,000 -- $999,999 2.00% 2.00%
$1 million or more* 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).
Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Reduced Class A sales charge
LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B or C shares in
this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
6
<PAGE>
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the NAV next
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are valued based on market value or, where market quotations are not readily
available, based on fair value as determined in good faith by the fund's board.
ORDERS TO BUY AND SELL SHARES RECEIVED BY DEALERS by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B, C and
R are offered at NAV, but Classes B and C are subject to higher annual
distribution fees and may be subject to a sales charge upon redemption.
Selling shares
YOU MAY SELL SHARES AT ANY TIME through your financial representative, or you
can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the Statement of
Additional Information for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 7
<PAGE>
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 30 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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of 1% of the fund's
total assets
(pound) change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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).
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income and distributes any net capital gains that it has realized, once a year.
Each share class will generate a different dividend because each has different
expenses. Your distributions will be reinvested in the fund unless you instruct
the fund otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are taxable at the federal level as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above can provide a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
or exchanged up to 12 months after buying them. "Long-term capital gains"
applies to shares sold or exchanged after 12 months.
8
<PAGE>
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 9
<PAGE>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4620" for
Class A, "4630" for Class B, "4650" for Class C, or "4660" for Class R.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
10
<PAGE>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4620" for
Class A, "4630" for Class B, "4650" for Class C, or "4660" for Class R.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials. All contributions
will count as current year.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427 Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 11
<PAGE>
[Application p 1 here]
<PAGE>
[Application p 2 here]
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Small Cap Value Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation
148P0399
<X>
<PAGE>
Dreyfus Premier Tax Managed Growth Fund
Investing in large-cap stocks for long-term capital appreciation while
minimizing taxable gains and income
PROSPECTUS March 1, 1999
(reg.tm)
[insert exhibit A here]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Tax Managed Growth Fund
---------------------------------
Ticker Symbols CLASS A: DTMGX
CLASS B: DPTMX
CLASS C: DPTAX
CLASS T: N/A
Contents
The Fund
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Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
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Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
Instructions for IRAs 11
For More Information
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INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks long-term capital appreciation consistent with minimizing
realized capital gains and taxable current income. This objective may be changed
without shareholder approval. To pursue its goal, the fund normally invests at
least 80% of its net assets in common stocks and employs a tax-managed strategy.
The fund focuses on "blue chip" companies with market capitalizations of more
than $5 billion.
In choosing stocks, the fund first identifies economic sectors that it
believes will expand over the next three to five years or longer. Using
fundamental analysis, the fund then seeks companies within these sectors that
have demonstrated sustained patterns of profitability, strong balance sheets, an
expanding global presence and the potential to achieve predictable,
above-average earnings growth. The fund is also alert to companies which it
considers undervalued in terms of current earnings, assets or growth prospects.
The fund attempts to enhance after-tax returns by minimizing its annual taxable
distributions to shareholders. To do so, the fund employs a "buy and hold"
investment strategy and normally seeks to keep the annual portfolio turnover
rate below 15%. The fund also emphasizes investments in equities of high qual-
ity companies, generally with relatively low yields. The fund may sell
underperforming securities to realize capital losses to offset capital gains,
and invest in companies that use share-repurchase programs to return excess cash
to shareholders.
Concepts to understand
TAX-MANAGED STRATEGY: an approach to managing a fund that seeks to reduce
current tax liabilities. The fund seeks to minimize taxable distributions,
particularly short-term capital gains and current income, which are taxed at a
higher rate than long-term capital gains. For example, when selling securities,
the fund generally will select those shares bought at the highest price to
minimize capital gains. When this would produce short-term capital gains,
however, the fund may sell those highest-cost shares with a long-term holding
period.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the fund's performance may sometimes be lower or
higher than that of other types of funds (such as those emphasizing smaller
companies). Moreover, since the fund holds large positions in a relatively small
number of stocks, it can be volatile when the large-capitalization sector of the
market is out of favor with investors.
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.
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 up to 10% of its assets in foreign securities which involve
additional risks compared to U.S. securities. These include less liquidity,
political and economic instability, a lack of adequate company information and
changes in currency exchange rates.
The fund may invest in derivatives and write (i.e. sell) covered call option
contracts. These practices can be used to hedge the fund's portfolio and also to
increase returns. They may sometimes reduce returns or increase volatility.
PAST PERFORMANCE
The first table below shows the performance of the fund's Class A shares for
calendar year 1998. Sales loads are not reflected; if they were, returns would
be less than shown. The second table compares the performance of each of the
fund's share classes over time to that of the S&P 500((reg.tm)), a widely
recognized unmanaged index of stock performance. These returns reflect any
applicable sales loads. Both tables assume the 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 (%)
29.14
98
BEST QUARTER: Q4 '98 +20.53%
WORST QUARTER: Q3 '98 -9.73%
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<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/98
Inception date 1 Year Life of class
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (11/4/97) 21.69% 20.44%
CLASS B (11/4/97) 24.22% 22.45%
CLASS C (11/4/97) 27.14% 25.71%
CLASS T (11/4/97) 23.03% 21.49%
S&P 500((reg.tm)) 28.60% 30.86%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 10/31/97 IS USED AS THE
BEGINNING VALUE ON 11/4/97.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
<PAGE>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
Fee table
CLASS A CLASS B CLASS C CLASS T
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<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE*
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ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.10 1.10 1.10 1.10
Rule 12b-1 fee .25 1.00 1.00 .50
Other expenses .00 .00 .00 .00
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TOTAL 1.35 2.10 2.10 1.60
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
CLASS A $705 $978 $1,272 $2,105
CLASS B
WITH REDEMPTION $613 $958 $1,329 $2,064**
WITHOUT REDEMPTION $213 $658 $1,129 $2,064**
CLASS C
WITH REDEMPTION $313 $658 $1,129 $2,431
WITHOUT REDEMPTION $213 $658 $1,129 $2,431
CLASS T $605 $932 $1,282 $2,265
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for promotional expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
2
<PAGE>
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 $117 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.
Dreyfus has engaged Fayez Sarofim & Co., located at Two Houston Center, Suite
2907, Houston, Texas 77010, to serve as the fund's sub-investment adviser.
Sarofim, subject to Dreyfus' supervision and approval, provides investment
advisory assistance and research and the day-to-day management of the fund's
investments. As of December 31, 1998, Sarofim managed approximately $6.1 billion
in assets for 5 other registered investment companies and provided investment
advisory services to discretionary accounts having aggregate assets of
approximately $49 billion.
Management philosophy
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, the firm
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
Portfolio manager
Fayez Sarofim, president and chairman of Sarofim, is the fund's primary
portfolio manager. Mr. Sarofim founded Fayez Sarofim & Co. in 1958.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund 3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class for the fiscal
period indicated. "Total return" shows how much your investment in the fund
would have increased (or decreased) during the period, assuming you had
reinvested all dividends and distributions. These financial highlights have been
independently audited by KPMG LLP, whose report, along with the fund's financial
statements, is included in the annual report.
<TABLE>
<CAPTION>
PERIOD ENDED OCTOBER 31,
CLASS A 1998(1)
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<S> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Investment operations: Investment income (loss) -- net .05
Net realized and unrealized gain (loss) on investments 2.23
Total from investment operations 2.28
Distributions: Dividends from investment income -- net (.01)
Net asset value, end of period 14.77
Total return (%)(2) 18.26(3)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.34(3)
Ratio of net investment income (loss) to average net assets (%) .52(3)
Portfolio turnover rate (%) .05(3)
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Net assets, end of period ($ x 1,000) 30,428
(1) FROM NOVEMBER 4, 1997 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
PERIOD ENDED OCTOBER 31,
CLASS B 1998(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Investment operations: Investment income (loss) -- net (.02)
Net realized and unrealized gain (loss) on investments 2.19
Total from investment operations 2.17
Distributions: Dividends from investment income -- net --
Net asset value, end of period 14.67
Total return (%)(2) 17.36(3)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.09(3)
Ratio of net investment income (loss) to average net assets (%) (.27)(3)
Portfolio turnover rate (%) .05(3)
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Net assets, end of period ($ x 1,000) 72,347
(1) FROM NOVEMBER 4, 1997 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
4
<PAGE>
PERIOD ENDED OCTOBER 31,
CLASS C 1998(1)
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PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Investment operations: Investment income (loss) -- net (.02)
Net realized and unrealized gain (loss) on investments 2.18
Total from investment operations 2.16
Distributions: Dividends from investment income -- net --
Net asset value, end of period 14.66
Total return (%)(2) 17.36(3)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.09(3)
Ratio of net investment income (loss) to average net assets (%) (.26)(3)
Portfolio turnover rate (%) .05(3)
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Net assets, end of period ($ x 1,000) 21,244
(1) FROM NOVEMBER 4, 1997 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
PERIOD ENDED OCTOBER 31,
CLASS T 1998(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Investment operations: Investment income (loss) -- net .03
Net realized and unrealized gain (loss) on investments 2.22
Total from investment operations 2.25
Distributions: Dividends from investment income -- net (.01)
Net asset value, end of period 14.74
Total return (%)(2) 17.97(3)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.59(3)
Ratio of net investment income (loss) to average net assets (%) .25(3)
Portfolio turnover rate (%) .05(3)
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 4,501
(1) FROM NOVEMBER 4, 1997 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) EXCLUSIVE OF SALES CHARGE.
(3) NOT ANNUALIZED.
</TABLE>
The Fund 5
<PAGE>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
(pound) CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
(pound) CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer-term investment horizon
(pound) CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter-term investment horizon
(pound) CLASS T shares have a lower front-end load and a higher Rule 12b-1 fee
than Class A shares
Your financial representative can help you choose the share class that is
appropriate for you.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Because Class A has lower expenses
than Class T, if you invest $1 million or more in the fund you should consider
buying Class A shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------
Class Class Class Class
A T A T
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<S> <C> <C> <C> <C>
Up to $49,999 5.75% 4.50% 6.10% 4.70%
$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%
$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%
$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%
$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%
$1 million or more* 0.00% 0.00% 0.00% 0.00%
* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any shares in this fund or any
other Dreyfus Premier fund sold with a sales load (that you already own) to the
amount of your next Class A or Class T investment for purposes of calculating
the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
6
<PAGE>
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the NAV next
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are valued based on market value or, where market quotations are not readily
available, based on fair value as determined in good faith by the fund's board.
ORDERS TO BUY AND SELL SHARES RECEIVED BY DEALERS by the close of trading on
the NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
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Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A and T shares are offered to the public at NAV plus a sales charge. Classes B
and C are offered at NAV, but are subject to higher annual distribution fees and
may be subject to a sales charge upon redemption.
Selling shares
YOU MAY SELL SHARES AT ANY TIME through your financial representative, or you
can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the Statement of
Additional Information for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 7
<PAGE>
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 30 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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of 1% of the fund's
total assets
(pound) change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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).
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income and distributes any net capital gains that it has realized once a year.
Each share class will generate a different dividend because each has different
expenses. Your distributions will be reinvested in the fund unless you instruct
the fund otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are taxable at the federal level as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
The fund may not be suitable for individual retirement accounts (IRAs) and other
qualified retirement plans whose income is not subject to current federal tax.
At the same time, the fund is not a tax-exempt fund and may earn and distribute
taxable income and realize and distribute capital gains from time to time.
Except for tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above is a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
or exchanged up to 12 months after buying them. "Long-term capital gains"
applies to shares sold or exchanged after 12 months.
8
<PAGE>
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can also exchange Class T shares into Class A shares of other funds. You can
request your exchange by contacting your financial representative. Be sure to
read the current prospectus for any fund into which you are exchanging before
investing. Any new account established through an exchange will generally have
the same privileges as your original account (as long as they are available).
There is currently no fee for exchanges, although you may be charged a sales
load when exchanging into any fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A, B or T
shares you redeemed within 45 days of selling them at the current share price
without any sales charge. If you paid a CDSC, it will be credited back to your
account. This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 9
<PAGE>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4500" for
Class A, "4510" for Class B, "4520" for Class C, or "4530" for Class T.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
10
<PAGE>
INSTRUCTIONS FOR IRAS
The fund may not be suitable for individual retirement accounts (IRAs) and other
qualified retirement plans whose income is not subject to current federal tax.
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4500" for
Class A, "4510" for Class B, "4520" for Class C, or "4530" for Class T.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials. All contributions
will count as current year.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427 Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 11
<PAGE>
NOTES
<PAGE>
[Application p 1 here]
<PAGE>
[Application p 2 here]
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Tax Managed Growth Fund
A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation
149P0399
<PAGE>
DREYFUS BOND MARKET INDEX FUND
INVESTOR SHARES AND BASIC SHARES
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 Bond Market Index 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-14
Management Arrangements B-20
Purchase of Shares B-22
Distribution Plan B-25
Redemption of Shares B-27
Shareholder Services B-30
Additional Information About Purchases,
Exchanges and Redemptions B-36
Determination of Net Asset Value B-37
Dividends, Other Distributions and Taxes B-38
Portfolio Transactions B-41
Performance Information B-43
Information About the Fund/Company B-45
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors B-46
Financial Statements B-47
Appendix B-48
DESCRIPTION OF THE FUND
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company
is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund.
Prior to October 17, 1994, the Fund's name was Laurel Bond Market Index
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 Fund seeks to match the total return of the Lehman Brothers
Aggregate Bond Index (the "Aggregate Bond Index"). The Aggregate Bond Index
covers the U.S. investment grade fixed-rate bond market, including
government and corporate securities, agency mortgage pass-through
securities, and asset-backed securities. The Aggregate Bond Index covers
those securities in the Lehman Brothers Government/Corporate Bond Index,
("Government/Corporate Bond Index") plus those covered by the Lehman
Mortgage-Backed Securities Index ("MBS Index") and the Lehman Asset-Backed
Securities Index ("ABS Index"). The Government/Corporate Bond Index is
composed of (i) all public obligations of the U.S. Government, its agencies
and instrumentalities (excluding "flower" bonds and pass-through issues such
as GNMA Certificates) and (ii) all publicly issued, fixed-rate, non-
convertible, investment grade, dollar-denominated, Securities and Exchange
Commission ("SEC")-registered obligations of domestic corporations, foreign
governments and supranational organizations. The MBS Index covers all fixed-
rate securities backed by mortgage pools of the Government National Mortgage
Association ("GNMA"), Federal Home Loan Mortgage Corporation ("FHLMC") and
Federal National Mortgage Association ("FNMA"). The ABS Index covers three
subsectors - credit and charge cards, auto, and home equity loans - and
includes pass-through, bullet, and controlled amortization structures. As
of December 31, 1998, over 7.257 issues were included in the Aggregate Bond
Index, representing $5.5 trillion in market value, distributed as follows:
46% governments; 22% corporates; and 31% mortgage-backed securities. Prior
to November 14, 1997, the Fund's investment objective was to seek to match
the total return of the Government/Corporate Bond Index.
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.
Corporate Obligations. The Fund may invest in corporate obligations
rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's Ratings Service, or if unrated, of comparable quality as
determined by Dreyfus. Securities rated BBB by Standard & Poor's or Baa by
Moody's are considered by those rating agencies to be "investment grade"
securities, although Moody's considers securities rated Baa to have
speculative characteristics. Further, while bonds rated BBB by Standard
& Poor's exhibit adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to
pay interest and principal for debt in this category than debt in higher rated
categories. The Fund will dispose in a prudent and orderly fashion of bonds
whose ratings drop below these minimum ratings.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as GNMA participation
certificates), (b) the right of the issuer to borrow an amount limited to a
specific line of credit from the U.S. Treasury, (c) the discretionary
authority of the U.S. Treasury to lend to the 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, Fannie Mae and Small Business Administration). 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.
Fixed-Income Securities. The Fund may invest in fixed-income
securities to achieve its investment objective. In periods of declining
interest rates, the Fund's yield (its income from portfolio investments over
a stated period of time) may tend to be higher than prevailing market rates,
and in periods of rising interests rates, the Fund's yield may tend to be
lower than prevailing market rates. Also, in periods of falling interest
rates, the inflow of net new money to the Fund from the continuous sales of
its shares will likely be invested in portfolio instruments producing lower
yields than the balance of the Fund's portfolio, thereby reducing the yield
of the Fund. In periods of rising interest rates, the opposite can be true.
The net asset value ("NAV") of a fund investing in fixed-income securities
also may change as general levels of interest rates fluctuate. When
interest rates increase, the value of a portfolio of fixed-income securities
can be expected to decline. Conversely, when interest rates decline, the
value of a portfolio of fixed-income securities can be expected to increase.
Floating Rate Securities. The Fund may invest in floating rate
securities. A floating rate security provides for the automatic adjustment
of its interest whenever a specified interest rate changes. Interest rates
on these securities are ordinarily tied to, and are a percentage of, a
widely recognized interest rate, such as the yield on 90-day U.S. Treasury
bills or the prime rate of a specified bank. These rates may change as
often as twice daily. Generally, changes in interest rates will have a
smaller effect on the market value of floating rate securities than on the
market value of comparable fixed income obligations. Thus, investing in
variable and floating rate securities generally allows less opportunity for
capital appreciation and depreciation than investing in comparable fixed
income securities.
Variable Amount Master Demand Notes. The Fund may invest in variable
amount master demand notes. Variable amount master demand notes are
unsecured obligations that are redeemable upon demand and are typically
unrated. These instruments are issued pursuant to written agreements
between their issuers and holders. The agreements permit the holders to
increase (subject to an agreed maximum) and the holders and issuers to
decrease the principal amount of the notes, and specify that the rate of
interest payable on the principal fluctuates according to an agreed-upon
formula. If an issuer of a variable amount master demand note were to
default on its payment obligation, the Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Fund will
invest in variable amount master demand notes issued only by entities that
Dreyfus finds creditworthy.
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.
Mortgage-Related Securities. Mortgage-related securities are
securities that, directly or indirectly, represent interests in, or are
secured by and payable from, loans secured by real property, including pass-
through securities such as GNMA, FNMA and FHLMC certificates, private pass-
through securities, commercial mortgage-related securities, and certain
collateralized mortgage obligations. See "Mortgage Pass-Through
Certificates" discussed below. Investors should note that mortgage-related
securities in which the Fund may invest are developed and marketed from time-
to-time and that, consistent with its investment limitations, the Fund may
invest in those mortgage-related securities that Dreyfus believes may assist
the Fund in achieving its investment objective.
The yield characteristics of mortgage-related securities differ from
those of traditional debt securities. Among the major differences are that
interest and principal payments on mortgage-related securities are made more
frequently, generally once a month, and that principal prepayments on
mortgage-related securities may occur at any time because the underlying
mortgage loans generally may be prepaid at any time. As a result, if the
Fund purchases mortgage-related securities at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a
prepayment rate that is slower than expected will have the opposite effect
of increasing yield to maturity. Conversely, if the Fund purchases mortgage-
related securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield to
maturity. The timing and magnitude of prepayments cannot be predicted.
Generally, however, prepayments on fixed-rate mortgage loans will increase
during a period of falling mortgage interest rates and will decrease during
a period of rising mortgage interest rates. Amounts available for
reinvestment by the Fund are likely to be greater during a period of falling
interest rates and, as a result, are likely to be reinvested at lower
interest rates than during a period of rising interest rates. Accelerated
prepayments on mortgage-related securities purchased by the Fund at a
premium also impose a risk of loss of principal because the premium may not
have been fully amortized at the time the principal is repaid in full. The
value of mortgage-related securities may be significantly affected by
changes in interest rates, the market's perception of the issuers, and the
creditworthiness of the parties involved.
Collateralized mortgage obligations ("CMOs") are debt obligations
collateralized by mortgage-related securities issued by GNMA, FNMA or FHLMC,
or by whole loans or private issuer pass-through securities. CMOs may be
issued by GNMA, FNMA, FHLMC or private issuers. CMOs are structured to
direct payments on underlying collateral to different series or classes of
the obligations. CMO classes may be specially structured in a manner that
provides any of a wide variety of investment characteristics, such as yield,
effective maturity and interest rate sensitivity. CMO structuring is
accomplished by in effect stripping out portions of the cash flows
(comprised of principal and interest payments) on the underlying mortgage
assets and prioritizing the payments of those cash flows. In the most
extreme case, one class will be entitled to receive all of the interest, but
none of the principal, from the underlying mortgage assets (the interest-
only or "IO" class) and one class will be entitled to receive all of the
principal, but none of the interest (the principal-only or "PO" class).
CMOs may be structured in other ways that, based on mathematical modeling or
similar techniques, are expected to provide certain results. As market
conditions change, however, and particularly during periods of rapid or
unanticipated changes in market interest rates, the attractiveness of a CMO
class and the ability of a structure to provide the anticipated investment
characteristics may be significantly reduced. Such changes can result in
volatility in the market value, and in some instances reduced liquidity, of
the CMO class.
In determining the Fund's average maturity, the maturity of a mortgage-
related security is deemed to be its effective life (i.e., the average time
in which the principal amount of the security is repaid), as estimated by
Dreyfus based on scheduled principal amortization and an anticipated rate of
principal prepayments, which rate, in turn, is based on past prepayment
patterns, prevailing interest rates and other factors. The effective life
of a mortgage-related security generally is substantially shorter than its
stated maturity and can be further shortened by greater than expected
prepayments.
Mortgage Pass-Through Certificates. Mortgage pass-through certificates
are issued by governmental, government-related and private entities and are
backed by pools of mortgages (including those on residential properties and
commercial real estate). The mortgage loans are made by savings and loan
institutions, mortgage bankers, commercial banks and other lenders. The
securities are "pass-through" securities because they provide investors with
monthly payments of principal and interest which, in effect, are a
"pass-through" of the monthly payments made by the individual borrowers on
the underlying mortgages, net of any fees paid to the issuer or guarantor of
the pass-through certificates. The principal governmental issuer of such
securities is GNMA, which is a wholly-owned U.S. Government corporation
within the Department of Housing and Urban Development. Government-related
issuers include FHLMC and FNMA, both government sponsored corporations owned
entirely by private stockholders. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and
other secondary market issuers also create pass-through pools of
conventional residential and commercial mortgage loans. Such issuers may be
the originators of the underlying mortgage loans as well as the guarantors
of the mortgage-related securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie
Maes represent an undivided interest in a pool of mortgages that are insured
by the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. Ginnie Maes entitle the holder to
receive all payments (including prepayments) of principal and interest owed
by the individual mortgagors, net of fees paid to GNMA and to the issuer
which assembles the mortgage pool and passes through the monthly mortgage
payments to the certificate holders (typically, a mortgage banking firm),
regardless of whether the individual mortgagor actually makes the payment.
Because payments are made to certificate holders regardless of whether
payments are actually received on the underlying mortgages, Ginnie Maes are
of the "modified pass-through" mortgage certificate type. The GNMA is
authorized to guarantee the timely payment of principal and interest on the
Ginnie Maes as securities backed by an eligible pool of mortgages. The GNMA
guarantee is backed by the full faith and credit of the United States, and
the GNMA has unlimited authority to borrow funds from the U.S. Treasury to
make payments under the guarantee. The market for Ginnie Maes is highly
liquid because of the size of the market and the active participation in the
secondary market of securities dealers and a variety of investors.
(2) FHLMC Mortgage Participation Certificates ("Freddie Macs").
Freddie Macs represent interests in groups of specified first lien
residential conventional mortgages underwritten and owned by the FHLMC.
Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans.
In cases where the FHLMC has not guaranteed timely payment of principal, the
FHLMC may remit the amount due on account of its guarantee of ultimate
payment of principal at any time after default on an underlying mortgage,
but in no event later than one year after it becomes payable. Freddie Macs
are not guaranteed by the United States or by any of the Federal Home Loan
Banks and do not constitute a debt or obligation of the United States or of
any Federal Home Loan Bank. The secondary market for Freddie Macs is highly
liquid because of the size of the market and the active participation in the
secondary market of the FHLMC, securities dealers and a variety of
investors.
(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes"). Fannie Maes represent an undivided interest in a pool of
conventional mortgage loans secured by first mortgages or deeds of trust, on
one family, or two to four family, residential properties. The FNMA is
obligated to distribute scheduled monthly installments of principal and
interest on the mortgages in the pool, whether or not received, plus full
principal of any foreclosed or otherwise liquidated mortgages. The
obligation of the FNMA under its guaranty is solely the obligation of the
FNMA and is not backed by, nor entitled to, the full faith and credit of the
United States.
(4) Private issuer mortgage certificates are pass-through securities
structured in a similar fashion to GNMA, FNMA and FHLMC certificates.
Private issuer mortgage certificates are generally backed by conventional
single family, multi-family and commercial mortgages. Private issuer
mortgage certificates typically are not guaranteed by the U.S. Government,
its agencies or instrumentalities, but generally have some form of credit
support in the form of over-collateralization, pool insurance or other form
of credit enhancement.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the mortgagors of the underlying mortgages.
Asset-Backed Securities. Asset-backed securities are securities that
represent direct or indirect participations in, or are secured by and
payable from, assets such as motor vehicle installment sales contracts,
installment loan contracts, leases of various types of real and personal
property, and receivables from revolving credit (credit card) agreements.
Such assets are securitized through the use of trusts and special purpose
corporations. The value of such securities partly depends on loan
repayments by individuals, which may be adversely affected during general
downturns in the economy. Payments or distributions of principal and
interest on asset-backed securities may be supported by credit enhancements,
such as various forms of cash collateral accounts or letters of credit.
Like mortgage-related securities, asset-backed securities are subject to the
risk of prepayment. The risk that recovery or repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities,
however, is greater than is the case for mortgage-backed securities.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's, Prime-1 by Moody's, F-1 by Fitch IBCA, Inc. or, Duff-1 by
Duff & Phelps Credit Rating Co.
Bank Instruments. The Fund may purchase bankers' acceptances,
certificates of deposit, time deposits, and other short-term obligations
issued by domestic banks, foreign subsidiaries or foreign branches of
domestic banks, domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs"),
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"), and Eurodollar bonds and notes. ECDs are U.S. dollar-
denominated certificates of deposit issued by foreign branches of domestic
banks. ETDs are U.S. dollar-denominated time deposits in a foreign branch
of a U.S. bank or a foreign bank. Yankee CDs are certificates of deposit
issued by a U.S. branch of a foreign bank denominated in U.S. dollars and
held in the United States. The Fund may also invest in Eurodollar bonds and
notes which are obligations that pay principal and interest in U.S. dollars
held in banks outside the United States, primarily in Europe. All of these
obligations are subject to somewhat different risks than are the obligations
of domestic banks or issuers in the United States. See "Foreign
Securities."
Foreign Securities. The Fund may purchase securities of foreign
governments and may invest in obligations of foreign branches of domestic
banks and domestic branches of foreign banks. Investment in foreign
securities presents certain risks, including those resulting from
fluctuations in currency exchange rates, revaluation of currencies, adverse
political and economic developments, the possible imposition of currency
exchange blockages or other foreign governmental laws or restrictions,
reduced availability of public information concerning issuers, and the fact
that foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices
and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their
prices more volatile than those of comparable domestic issuers. In
addition, with respect to certain foreign countries, there is the
possibility of expropriation, confiscatory taxation and limitations on the
use or removal of funds or other assets of the Fund, including withholding
of dividends. Foreign securities may be subject to foreign government taxes
that would reduce the yield on such securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holder.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in the
Fund's Prospectus, the Fund also may engage in the investment techniques
described below. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
Borrowing. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues
of U.S. Treasury and Government securities are often offered on a
"when-issued" basis. This means that delivery and payment for the securities
normally will take place approximately 7 to 45 days after the date the buyer
commits to purchase them. The payment obligation and the interest rate that
will be received on securities purchased on a "when-issued" basis are each
fixed at the time the buyer enters into the commitment. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt securities
equal to the amount of the above commitments will be segregated on the
Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a "when-issued" basis and the securities held
by the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's 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.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks.)
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in such securities would exceed 5% of the Fund's
total assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: this limitation shall not apply to standby commitments, and
this limitation shall not apply to the Fund's transactions in futures
contracts and options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in
the values of assets will not constitute a violation of such restriction,
except as otherwise required by the 1940 Act.
If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains
an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements between the
Company, on behalf of the Fund, and those companies that furnish services to
the Fund. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of nine Directors. The following
lists the Directors and officers and their positions with the Company and
their present and principal occupations during the past five years. Each
Director who is an "interested person" of the Company (as defined in the
1940 Act) is indicated by an asterisk(*). Each of the Directors also serves
as a Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.) a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources) a temporary placement agency. 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. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 26 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. 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 Investment Services
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 and 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
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
Joseph S. DiMartino* $17,710.00 $619,660
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 and separately by the
Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1998, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $17,710. For the year ended
December 31, 1998, the aggregate amount of fees received by Mr. Fort for
serving as a Board member of all funds in the Dreyfus/Laurel Funds (including
the Company) and Dreyfus High Yield Strategies Fund (for which payment is made
directly by the fund) was $59,010. In addition, Dreyfus reimbursed Mr. Fort a
total of $733.11 for expenses attributable to the Company's Board meetings
which is not included in the $5,313.37 amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The 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.
Principal Shareholders. As of February 1, 1999, the following
shareholder(s) owned beneficially or of record 5% or more of Investor shares
of the Fund: Charles Schwab & Co. Inc., Reinvest Account, 101 Montgomery
Street, San Francisco, CA 94104-4122, 26.32%; Resources Trust Co., P.O. Box
3865, Englewood, CO, 14.14%; NFSC FEBO, FMT Co-Custodian IRA Rollover, FBO
James E. McKeon, 4 Carriage Lane, New Farfield, CT 06812, 13.04%; Dreyfus
Trust Co., Custodian FBO Richard D. Fitzgerald Under IRA Rollover Plan, 2000
Royal Marco Way PH1, Marco, FL 34145, 5.37%; and Dreyfus Trust Co.,
Custodian FBO Martin Deckett Under IRA Rollover Plan, 163 South Bay Lane,
Port Ludlow, WA 98365-9562, 5.24%.
As of February 1, 1999 the following shareholder(s) owned of record 5%
or more of BASIC shares of the Fund; MAC & CO A/C MLCF8548682, P.O. Box
3198, Pittsburgh, PA 15230-3198, 52.04%; Boston Safe Deposit & Trust Co.,
Trustee As Agent - Omnibus Account, 1 Cabot Road, Medford, MA 02155-5141,
16.17%; MAC & CO. A/C FORF1741102, P.O. Box 3198, Pittsburgh, PA 15230-3198,
11.80%; MAC & Co. A/C MIDF3050072, P.O. Box 3198, Pittsburgh, PA 15230-3198,
5.87% of record; and MAC & Co. Mellon Bank, N.A. FCSF1788322, Mutual Fund
Operations, P.O. Box 3198 Pittsburgh, PA 15230-3198, 4.96%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and
"Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994, subject to the overall authority of the Company's Board of
Directors in accordance with Maryland law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus manages
the Fund by making investment decisions based on the Fund's investment
objective, policies and restrictions. The Management Agreement is subject
to review and approval at least annually by the Board of Directors.
The Fund is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities
based upon economic, financial and market analysis and investment judgment.
Instead, the Fund utilizes a "passive" investment approach, attempting to
duplicate the investment performance of the Aggregate Bond Index through the
use of statistical procedures.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. The Company may terminate the
Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities
on 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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. Effective August 15, 1997, the Management Agreement was
amended to reflect a reduction in the annual management fee payable by the
Fund to Dreyfus from 0.40% to 0.15% of the value of the Fund's average daily
net assets. Dreyfus pays all of the Fund's expenses, except brokerage fees,
taxes, interest, fees and expenses of the non-interested directors
(including counsel fees), Rule 12b-1 fees (if applicable) and extraordinary
expenses. Although Dreyfus does not pay for the fees and expenses of the
non-interested Directors (including counsel fees), Dreyfus is contractually
required to reduce its investment management fee by an amount equal to the
Fund's allocable share of such fees and expenses. From time to time,
Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense
ratio of the Fund and increasing return to investors. Expenses attributable
to the Fund are charged against the Fund's assets; other expenses of the
Company are allocated among its funds on the basis determined by the Board,
including, but not limited to, proportionately in relation to the net assets
of each fund.
For the last three years, the Fund had the following expenses:
For the Fiscal Year
Ended October 31,
1998 1997 1996
Management fees $69,550 $114,334 $69,108
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 a sub-administrator for the Fund and as distributor
for the other funds in the Dreyfus Family of Funds.
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 offers Investor shares and BASIC shares. (Investor
shares and BASIC shares of the Fund were formerly called Institutional
shares and Retail shares, respectively.) Investor shares and BASIC shares
are identical, except as to the services offered to, the expenses borne by,
and the minimum purchase and account balance maintenance requirements of,
each Class. Investor shares and BASIC shares are offered to any investor.
You should consult your Agent to determine which Class of shares is offered
by the Agent. You may be charged a fee if you effect transactions in Fund
shares through an Agent. Unless the Fund is otherwise instructed, new
purchases by existing shareholders will be in the same Class of shares that
the shareholder then holds. The Fund reserves the right to reject any
purchase order.
The minimum initial investment for BASIC shares is $10,000. The
minimum initial investment for Investor shares is $2,500, or $1,000 if you
are a client of an Agent which maintains an omnibus account in the Investor
Class of the Fund and has made an aggregate minimum initial purchase for its
customers of $2,500. Subsequent investments for BASIC shares must be at
least $1,000 (or at least $100 in the case of persons who have held BASIC
shares since August 14, 1997) and for Investor shares must be at least $100.
However, the minimum initial investment for BASIC shares with respect to
Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs
for a non-working spouse, Roth IRAs, SEP-IRAs and rollover IRAs), and
403(b)(7) Plans with only one participant is $5,000; subsequent investments
for BASIC shares with respect to such accounts must be at least $1,000 (with
no minimum on subsequent purchases by holders of BASIC shares in such
accounts since August 14, 1997). The minimum initial investment for
Investor shares with respect to Dreyfus-sponsored Keogh Plans, IRAs
(including regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs,
SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one participant
is $750 and with respect to Dreyfus-sponsored Education IRAs is $500. There
is no minimum on subsequent purchases of Investor shares with respect to
such accounts. The initial investment must be accompanied by the Fund's
Account Application. For full-time or part-time employees of Dreyfus or any
of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus including members of the Company's Board, or the
spouse or minor child of any of the foregoing, the minimum initial
investment for Investor shares is $1,000. For full-time or part-time
employees of Dreyfus or any of its affiliates or subsidiaries who elect to
have a portion of their pay directly deposited into their Fund account, the
minimum initial investment for Investor shares is $50. The Fund reserves
the right to offer shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
Investor shares are offered without regard to the minimum initial
investment requirements, through Dreyfus-Automatic Asset 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.
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.
Both Investor shares and BASIC 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. NAV per share of each class is
computed by dividing the value of the Fund's net assets represented by such
class (i.e., the value of its assets less liabilities) by the total number
of shares of such class outstanding. For further information regarding the
methods employed in valuing the Fund's investments, see "Determination of
Net Asset Value".
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the 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 the NAV per share determined as
of the close of trading on the floor of the NYSE on that day. Otherwise,
the orders will be based on the next determined NAV. It is the dealers'
responsibility to transmit orders so that they will be received by the
Distributor or its designee before the close of its business day. For
certain institutions that have entered into agreements with the Distributor,
payment for the purchase of Fund shares may be transmitted, and must be
received by the Transfer Agent, within three business days after the order
is placed. If such payment is not received within three business days after
the order is placed, the order may be canceled and the institution could be
held liable for resulting fees and/or losses.
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 Fund 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 that 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 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 "Your Investment."
Investor shares are subject to annual fees for distribution and
shareholder services. Distribution and shareholder servicing fees paid by
Investor shares will cause Investor shares to have a higher expense ratio
and pay lower dividends than BASIC shares.
The Securities and Exchange Commission 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 - Investor Shares. The Company has adopted a
Distribution Plan ("Plan") with respect to the Investor shares of the Fund.
Under the Plan, the Fund may spend annually up to 0.25% of its average daily
net assets attributable to Investor shares to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities
and the Distributor for shareholder servicing activities and for activities
or expenses primarily intended to result in the sale of Investor shares of
the Fund. The Plan allows the Distributor to make payments from the Rule
12b-1 fees it collects from the Fund to compensate Agents that have entered
into Selling Agreements ("Agreements") with the Distributor. Under the
Agreements, the Agents are obligated to provide distribution-related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Investor shares of the Fund.
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" (as defined in the 1940 Act)
of the Company and who do not have any direct or indirect financial interest
in the operation of the Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to annual
approval by the entire Board of Directors and by the Directors who are
neither interested persons nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. The Plan was so approved by
the Directors at a meeting held on February 4, 1999. The Plan is
terminable, as to the Fund's Investor shares, at any time by vote of a
majority of the Directors who are not interested persons and have no direct
or indirect financial interest in the operation of the Plan or by vote of
the holders of a majority of the outstanding Investor shares of the Fund.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Plan are payable without regard to
actual 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. From
time to time, the Agents, the Distributor and the Fund may voluntarily agree
to reduce the maximum fees payable under the Plan.
For the fiscal year ended October 31, 1998, the Fund paid the
Distributor and Dreyfus Service Corporation: $368 and $1,978, respectively,
pursuant to the Plan with respect to Investor shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges when shares are redeemed. Agents or other
institutions may charge their clients a fee for effecting redemptions of
Fund shares. Any certificates representing Fund shares being redeemed must
be submitted with the redemption request. The value of the shares redeemed
may be more or less than their original cost, depending upon the Fund's then-
current NAV per share.
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
Shareholders Services Form with the Transfer Agent. If you are a client of
certain Agents ("Selected Dealers"), you can also redeem Fund shares through
the Selected Dealer. Other redemption procedures may be in effect for
clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs, or other
retirement plans, and shares for which certificates have been issued, are
not eligible for the Wire Redemption, Telephone Redemption or TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus Touchr automated telephone system) from any person
representing himself or herself to be you, or a representative of your
Agent, and reasonably believed by the Transfer Agent to be genuine. The
Fund will require the Transfer Agent to employ reasonable procedures, such
as requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers
may make redemption requests to their Selected Dealer. If the Selected
Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor 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 per share. 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.
Redemption proceeds, if wired, will be wired to the investor's account at
the bank of record designated in the investor's file at the Transfer Agent,
if the investor's bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. 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."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. 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 the investor's account at an ACH member bank
ordinarily two business days after receipt of the redemption request.
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. 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. See "Purchase of Shares - Dreyfus TeleTransfer Privilege."
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 of
Directors reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In 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. Shares of any Class of the Fund may be exchanged for
shares of certain other funds advised or administered by Dreyfus. Unless
the Fund is otherwise instructed, exchanges are in the same class of shares
that the shareholder then holds. Shares of the 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
certain other eligible funds 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 per share as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next Auto-Exchange transaction. Shares held
under IRAs and other retirement plans are eligible for this Privilege.
Exchanges of IRA shares may be made between IRA accounts and from regular
accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only
among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to 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 the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. 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 (registered). 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.
Dreyfus Automatic Withdrawal Plan. The Automatic Withdrawal Plan
permits an investor with a $5,000 minimum account to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis. Withdrawal payments are the proceeds from sales of Fund shares, not
the yield on the shares. If withdrawal payments exceed reinvested dividends
and other distributions, the investor's shares will be reduced and
eventually may be depleted. An Automatic Withdrawal Plan may be established
by filing an Automatic Withdrawal Plan application with the Transfer Agent
or by oral request from any of the authorized signatories on the account by
calling 1-800-645-6561. 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 other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a 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 other distributions, if any, from the Fund to a designated
bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You
may cancel these Privileges by mailing written notification to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island, 02940-9671. To
select a new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dreyfus Dividend Sweep. The Fund
may modify or terminate these privileges at any time or charge a service
fee. No such fee currently is contemplated. Shares held under Keogh Plans,
IRAs or other retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained by calling 1-800-645-
6561. Death or legal incapacity will terminate your participation in this
Privilege. You may elect at any time to terminate your participation by
notifying in writing the appropriate Federal agency. Further, the Fund may
terminate your participation upon 30 days' notice to you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum $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.
Dreyfus Step Program. Dreyfus Step Program enables you to purchase
Investor shares without regard to the Fund's minimum initial investment
requirements through Dreyfus-Automatic Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a
Dreyfus Step Program account, you must supply the necessary information on
the Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing your participation in Dreyfus-Automatic Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). The Fund
reserves the right to redeem your account if you have terminated your
participation in the Program and your account's 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 Investor shares through the Dreyfus Step Program in conjunction
with a Dreyfus-sponsored retirement plan may do so only for IRAs (including
regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and
Rollover IRAs), SEP-IRAs and IRA "Rollover Accounts."
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and, with respect to Investor shares, Education IRAs), 401(k) Salary
Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566;
for IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-
IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-
322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES
AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is engaged in excessive
trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund exchanges, or reject in whole
or part any purchase or exchange request, with respect to such investor's
account. Such investors also may be barred from purchasing other funds in
the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes
exchanges that appear to coincide with an active market-timing strategy may
be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may
refuse or restrict purchase or exchange requests by any person or group if,
in the judgment of the Fund's management, the Fund would be unable to invest
the money effectively in accordance with its investment objective and
policies or could otherwise be adversely affected or if the Fund receives or
anticipates receiving simultaneous orders that may significantly affect the
Fund (e.g., amounts equal to 1% or more of the Fund's total assets). If an
exchange request is refused, the Fund will take no other action with respect
to the shares until it receives further instructions from the investor. The
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount
of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy
on excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined NAV
but the purchase order would be effective only at the NAV next determined
after the fund being purchased receives the proceeds of the redemption,
which may result in the purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. Substantially all of the Fund's
investments (excluding short-term investments) are valued each business day
by an independent pricing service (the "Service") approved by the Fund's
Board. Securities valued by the Service for which quoted bid prices in the
judgment of the Service are readily available and are representative of the
bid side of the market are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked
prices (as calculated by the Service based upon its evaluation of the market
for such securities). Other debt securities valued by the Service are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Short-term investments are not valued by the
Service and are carried at amortized cost, which approximates value. Debt
Securities that are not valued by the Service are valued at the average of
the most recent bid and asked prices in the market in which such investments
are primarily traded, or at the last sales price for securities traded
primarily on an exchange. In the absence of reported sales of investments
traded primarily on an exchange, the average of the most recent bid and
asked prices is used. Bid price is used when no asked price is available.
Investments traded in foreign currencies are translated to U.S. dollars at
the prevailing rates of exchange. If the Fund has to obtain prices as of
the close of trading on various exchanges throughout the world, the
calculation of NAV may not take place contemporaneously with the
determination of prices of certain of the Funds securities. Expenses and
fees, including the management fee, are accrued daily and are taken into
account for the purpose of determining the NAV of Fund shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board 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. To qualify for treatment as a regulated investment company
("RIC") under the Code, the Fund--which is treated as a separate corporation
for federal tax purposes--(1) must distribute to its shareholders each
taxable year at least 90% of its investment company taxable income
(generally consisting of net investment income, net short-term capital gains
and net gains from certain foreign currency transactions) ("Distribution
Requirement"), (2) must derive at least 90% of its annual gross income from
specified sources ("Income Requirement"), (3) must derive less than 30% of
its annual gross income from gain on the sale or disposition of any of the
following that are held for less than three months -- (i) securities,
(ii) non-foreign-currency options and futures and (iii) foreign currencies
(or foreign currency options, futures and forward contracts) that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect thereto) ("Short-Short Limitation") --
and (4) must meet certain asset diversification and other requirements.
The Fund ordinarily declares daily and pays monthly dividends from its
net investment income and distributes net realized capital gains and gains
from foreign currency transactions, if any, once a year, but it may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the 1940
Act. All expenses are accrued daily and deducted before declaration of
dividends to investors. Fund shares begin earning dividends on the day
following the date of purchase. The Fund will not make distributions from
net realized capital gains unless all capital loss carryovers, if any, have
been utilized or have expired. Investors other than qualified retirement
plans may choose whether to receive dividends and other distributions in
cash, to receive dividends in cash and reinvest other distributions in
additional Fund shares at NAV, or to reinvest both dividends and other
distributions in additional Fund shares. Dividends and other distributions
paid to qualified retirement plans are reinvested automatically in
additional Fund shares at NAV.
It is expected that the Fund will continue to qualify for treatment as
a regulated investment company ("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. The term "regulated investment
company" does not imply the supervision of management or investment
practices or policies by any government agency. The Fund will be subject to
a non-deductible 4% excise tax ("Excise Tax") to the extent it fails to
distribute substantially all of its taxable investment income and capital
gains. If the Fund failed to qualify for treatment as a RIC for any taxable
year, (1) it would be taxed at corporate rates on the full amount of its
taxable income for that year without being able to deduct the distributions
it makes to its shareholders and (2) the shareholders would treat all those
distributions, including distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), as dividends
(that is, ordinary income) to the extent of the Fund's earnings and profits.
In addition, the Fund could be required to recognize unrealized gains, pay
substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.
Distributions. If you elect to receive 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 gain, net realized gains
from certain foreign currency transactions, and all or a portion of any
gains realized from the sale or other disposition of certain market discount
bonds (collectively, "dividend distributions"), will be taxable to U.S.
shareholders, including certain non-qualified Retirement Plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to those shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and
whether the distributions are received in cash or reinvested in additional
Fund shares.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the non-resident foreign investor claims the benefit of a lower rate
specified in a tax treaty. Capital gain distributions paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions by
such an investor, regardless of the extent to which gain or loss may be
realized, generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, unless the foreign
investor certifies his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions, if any, paid
during the year.
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 a 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholders if the
shareholder fails to furnish a TIN to the Fund and certify that it is
correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income. A TIN is either the
Social Security number, IRS individual taxpayer identification number or
employer identification number of the record owner of an account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax imposed on the record owner and may be claimed as a credit on his or her
Federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such 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 received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends received deduction are subject indirectly to the
federal alternative minimum tax.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, it may be subject to the tax laws thereof. Shareholders are
advised to consult their tax advisers concerning the application of state
and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder") depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund,
such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. Foreign shareholders are advised to consult their own
tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) generally will not be subject to U.S. federal income tax
unless the foreign shareholder is a non-resident alien individual and is
physically present in the United States for more than 182 days during the
taxable year. In the case of certain foreign shareholders, the Fund may be
required to withhold U.S. Federal income tax at a rate of 31% of capital
gain distributions and of the gross proceeds from a redemption of Fund
shares unless the shareholder furnishes the Fund with a certificate
regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of Fund shares will be subject to U.S. federal income tax
at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 under the 1940 Act.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the fiscal year ended October 31, 1998, the Fund paid brokerage
commissions amounting to $28,985 respectively. For the fiscal years ended
October 31, 1997 and 1996, the Fund paid no brokerage commissions on
portfolio transactions. For the fiscal year ended October 31, 1998, the
Fund paid brokerage concessions amounting to $15,063.
Portfolio Turnover. While securities are purchased for the Fund on the
basis of potential for replicating the total return of the Aggregate Bond
Index and not for short-term trading profits, the Fund's portfolio turnover
rate may exceed 100%. A portfolio turnover rate of 100% would occur, for
example, if all the securities held by the Fund were replaced once in a
period of one year. A higher rate of portfolio turnover involves
correspondingly greater brokerage commissions and other expenses that must
be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a higher rate of portfolio turnover may result in the realization
of larger amounts of short-term capital gains that, when distributed to the
Fund's shareholders, are taxable to them as ordinary income. Nevertheless,
securities transactions for the Fund will be based only upon investment
considerations and will not be limited by any other considerations when
Dreyfus deems its appropriate to make changes in the Fund's assets. The
portfolio turnover rate for the Fund is calculated by dividing the lesser of
the Fund's annual sales or purchases of portfolio securities (exclusive of
purchases and sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of
securities in the Fund during the year. Portfolio turnover may vary from
year to year as well as within a year. The portfolio turnover rates for the
fiscal years ended October 31, 1998 and 1997 were 43.39% and 48.86%,
respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for BASIC
shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year Since Inception
BASIC shares 9.69% 6.84% (11/30/93)
Inception date appears in parentheses following the average annual total
return since inception.
The aggregate total return (expressed as a percentage) for BASIC shares
of the Fund for the period beginning with the date of inception (November
30, 1993) and ending October 31, 1998 was 38.46%.
Average annual total returns (expressed as a percentage) for Investor
shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year Since Inception
Investor shares 9.43% 8.02% (4/28/94)
Inception date appears in parentheses following the average annual total
return since inception.
The total return (expressed as a percentage) for Investor shares of the
Fund for the period beginning with the date of inception (April 28, 1994)
and ending October 31, 1998 was 41.58%.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV per share with a
hypothetical $1,000 payment made at the beginning of the period (assuming
the reinvestment of dividends and other distributions), dividing by the
amount of the initial investment, taking the "n"th root of the quotient
(where "n" is the number of years in the period) and subtracting 1 from the
result.
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.
Prior to November 14, 1997, the fund sought to match the performance of
a different index, which did not include certain mortgage and asset-backed
securities in which the fund now invests.
The Fund may also advertise yield from time to time. The current yield
for the 30-day period ended October 31, 1998 was 5.37% for BASIC shares and
5.12% for Investor shares. Yields are computed by using standardized methods
of calculation required by the SEC. Yields are calculated by dividing the
net investment income per share earned during a 30-day (or one-month) period
by the maximum offering price per share on the last day of the period,
according to the following formula:
YIELD = 2[(a-b + 1)6-1]
cd
Where: a = dividends and interest earned during the
period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares
outstanding during the period that were entitled to
receive dividends; and
d = maximum offering price per share on the
last day of the period.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Lehman Brothers Aggregate Bond Index; (ii) the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average, or other
appropriate unmanaged domestic or foreign indices of performance of various
types of investments so that investors may compare the Fund's results with
those of indices widely regarded by investors as representative of the
securities markets in general; (iii) other groups of mutual funds tracked by
Lipper Analytical Services, a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives and assets,
or tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
The Fund is one of nineteen portfolios of the Company. Fund shares have no
preemptive, subscription or conversion rights and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they
vote separately by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
The Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
The Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart, LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 31, 1999, providing audit services including (1) examination of the
annual financial statements, (2) assistance, review and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. 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 AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
. Leading market positions in well-established industries.
. High rates of return on funds employed.
. Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
. Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
. Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings, Inc.
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Credit Rating Co.
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
modest but
AA may vary slightly from time to time because of economic
conditions.
AA-
A+ Protection factors are average but adequate. However, risk
factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
for prudent
BBB investment. Considerable variability in risk during economic
cycles.
BBB-
BB+ Below investments grade but deemed likely to meet obligations when
due.
BB Present or prospective financial protection factors fluctuate
according to
BB- industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
not be met
B when due. Financial protection factors will fluctuate widely
according to
B- economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
____________________________________________________________________________
THE DREYFUS/LAUREL FUNDS, INC.
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
dated March 1, 1999, of each fund listed below (each a "Fund", collectively,
the "Funds"), as such Prospectus may be revised from time to time. The
Funds are separate, diversified portfolios of The Dreyfus/Laurel Funds,
Inc., an open-end management investment company (the "Company"), known as a
mutual fund.
Dreyfus Money Market Reserves ("Money Market Reserves")
Dreyfus U.S. Treasury Reserves ("U.S. Treasury Reserves")
Dreyfus Municipal Reserves ("Municipal Reserves")
Dreyfus Institutional Prime Money Market Fund ("Institutional Prime
Fund")
Dreyfus Institutional Government Money Market Fund ("Institutional
Government Fund")
Dreyfus Institutional U.S. Treasury Money Market Fund ("Institutional
U.S. Treasury Fund")
To obtain a copy of a Fund's Prospectus, please write to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call one of the
following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Funds B-3
Management of the Funds B-17
Management Arrangements B-24
Purchase of Shares B-26
Distribution Plan and Shareholder Servicing Plan B-30
Redemption of Shares B-32
Shareholder Services B-36
Determination of Net Asset Value B-41
Dividends, Other Distributions and Taxes B-42
Portfolio Transactions B-47
Performance Information B-49
Information About the Funds/Company B-50
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors B-51
Financial Statements B-52
Appendix B-53
DESCRIPTION OF THE FUNDS
The following information supplements and should be read in conjunction
with the sections of each Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company
is an open-end management investment company comprised of separate
portfolios, including the Funds, each of which is treated as a separate
fund. Prior to June 9, 1995, the name of Money Market Reserves was
Dreyfus/Laurel Prime Money Market Fund; the name of U.S. Treasury Reserves
was Dreyfus/Laurel U.S. Treasury Money Market Fund; the name of Municipal
Reserves was Dreyfus/Laurel Tax-Exempt Money Market Fund; the name of
Institutional Prime Fund was Dreyfus/Laurel Institutional Prime Money Market
Fund; the name of Institutional Government Fund was Dreyfus/Laurel
Institutional Government Money Market Fund; and the name of Institutional
U.S. Treasury Fund was Dreyfus/Laurel Institutional U.S. Treasury Money
Market Fund. Prior to October 17, 1994, the name of Money Market Reserves
was Laurel Prime Money Market Fund; the name of U.S. Treasury Reserves was
Laurel U.S. Treasury Money Market Fund; the name of Municipal Reserves was
Laurel Tax-Exempt Money Market Fund; the name of Institutional Prime Fund
was Laurel Institutional Prime Money Market Fund; the name of Institutional
Government Fund was Laurel Institutional Government Money Market Fund; and
the name of Institutional U.S. Treasury Fund was Laurel Institutional U.S.
Treasury Money Market Fund.
Each Fund expects to maintain, but does not guarantee, a net asset
value ("NAV") of $1.00 per share. To do so, each Fund uses the amortized
cost method of valuing its securities pursuant to Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act") which Rule
includes various maturity, quality and diversification requirements, certain
of which are summarized as follows. In accordance with Rule 2a-7, each Fund
must maintain a dollar-weighted average portfolio maturity of 90 days or
less and invest only in U.S. dollar-denominated securities with remaining
maturities of 397 days or less and which are determined to be of high
quality with minimal credit risk in accordance with procedures adopted by
the Board of Directors. In determining whether a security is of high
quality with minimal credit risk, Dreyfus must consider whether the security
is rated in one of the two highest short-term rating categories by
nationally recognized statistical rating organizations or determined to be
of comparable quality by Dreyfus in accordance with requirements of these
procedures. These procedures are reasonably designed to assure that the
prices determined by the amortized cost valuation will approximate the
current market value of each Fund's securities. Each Fund is diversified,
which means that, with respect to 75% of its total assets, a Fund will not
invest more than 5% of its assets in the securities of any single issuer.
In addition, in accordance with Rule 2a-7, each Fund generally will not
invest more than 5% of its assets in the securities of any one issuer.
The Dreyfus Corporation ("Dreyfus") serves as each Fund's investment
manager.
Certain Portfolio Securities
The following information regarding the securities that the Funds may
purchase supplements that found in each Fund's Prospectus.
Municipal Securities (Municipal Reserves). Municipal securities are
obligations issued by or on behalf of states, territories and possessions of
the United States and their political subdivisions, agencies, and
instrumentalities, the interest from which is, in the opinion of bond
counsel, exempt from regular Federal income tax. The municipal securities
in which Municipal Reserves will invest are limited to those obligations
which at the time of purchase:
1. are backed by the full faith and credit of the United States;
or
2. are municipal notes rated MIG-1/VMIG-1 or MIG-2/VMIG-2 by
Moody's Investors Service, Inc. ("Moody's") or SP-1 or SP-2 by
Standard & Poor's Ratings Services ("S&P"), or, if not rated, are
of equivalent investment quality as determined by Dreyfus under
guidelines approved by the Board of Directors or are obligations
of an issuer which has outstanding municipal bonds rated Aa or
higher by Moody's or AAa or higher by S&P; or
3. are municipal bonds rated Aa or higher by Moody's or AA or
higher by S&P or, if not rated, are of equivalent investment
quality as determined by Dreyfus under guidelines approved by the
Board of Directors or are obligations of an issuer which has
outstanding municipal notes rated MIG-1/VMIG-1 or MIG-2/VMIG-2 by
Moody's or SP-1 or SP-2 by S&P; or
4. are other types of municipal securities, provided that such
obligations are rated Prime-2 or higher by Moody's or A-2 or
higher by S&P or determined by Dreyfus to be of comparable quality
pursuant to guidelines approved by the Board of Directors (see the
Appendix for a description of these ratings).
The municipal securities in which Municipal Reserves may invest include
municipal notes, short-term municipal bonds and municipal leases. Municipal
notes are generally used to provide for the issuer's short-term capital
needs and generally have maturities of one year or less. Examples include
tax anticipation and revenue anticipation notes which generally are issued
in anticipation of various seasonal revenues, bond anticipation notes,
construction loan notes and tax exempt commercial paper. Short-term
municipal bonds may include "general obligation bonds," which are secured by
the issuer's pledge of its faith, credit and taxing power for payment of
principal and interest, "revenue bonds," which are generally paid from the
revenues of a particular facility or a specific excise or other source,
"industrial revenue bonds," which are issued by or on behalf of public
authorities to provide funding for various privately operated industrial and
commercial facilities, and "private activity bonds." Municipal Reserves may
purchase certain municipal securities, including certain industrial
development bonds and bonds issued after August 7, 1986 to finance "private
activities," the interest on which may constitute a "tax preference item"
for purposes of the Federal alternative minimum tax, even though the
interest will continue to be fully tax-exempt for Federal income tax
purposes. Municipal Reserves may invest without limitation in such
municipal securities as long as such investment is consistent with the
Fund's investment objective.
"Municipal leases," which may take the form of a lease or an
installment purchase or conditional sale contract, are issued by state and
local governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications
equipment and other capital assets. Municipal leases frequently have
special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
government issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance
limitations of many state constitutions and statutes are deemed to be
inapplicable because of the inclusion in many leases or contracts of "non-
appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money
is appropriated for such purpose by the appropriate legislative body on a
yearly or other periodic basis. To reduce these risks, Municipal Reserves
will only purchase municipal leases subject to a non-appropriation clause
when the payment of principal and accrued interest is backed by an
unconditional irrevocable letter of credit or guarantee of a bank.
Municipal Reserves proposes to purchase municipal lease obligations
principally from banks, equipment vendors or other parties that have entered
into an agreement with Municipal Reserves providing that such party will
remarket the municipal lease obligations on certain conditions (described
below) within seven days after demand by Municipal Reserves. (Such
agreements are referred to as "remarketing agreements" and the party that
agrees to remarket or repurchase a municipal lease obligation is referred to
as a "remarketing party.") The agreement will provide for a remarketing
price equal to the principal balance on the obligation as determined
pursuant to the terms of the remarketing agreement as of the repurchase date
(plus accrued interest). The Funds' investment manager, Dreyfus,
anticipates that, in most cases, the remarketing agreement will also provide
for the seller of the municipal lease obligation or the remarketing party to
service it for a servicing fee. The conditions to Municipal Reserves right
to require the remarketing party to purchase or remarket the obligation are
that Municipal Reserves must certify at the time of remarketing that (1)
payments of principal and interest under the municipal lease obligation are
current and Municipal Reserves has no knowledge of any default thereunder by
the governmental issuer, (2) such remarketing is necessary in the sole
opinion of a designated officer of Municipal Reserves to meet the Fund's
liquidity needs, and (3) the governmental issuer has not notified Municipal
Reserves of termination of the underlying lease.
The remarketing agreement described above requires the remarketing
party to purchase (or market to a third party) municipal lease obligations
of Municipal Reserves under certain conditions to provide liquidity if share
redemptions of Municipal Reserves exceed purchases of Municipal Reserves
shares. Municipal Reserves will only enter into remarketing agreements with
banks, equipment vendors or other responsible parties (such as insurance
companies, broker-dealers and other financial institutions) that in Dreyfus'
opinion are capable of meeting their obligations to the Fund. Dreyfus will
regularly monitor the ability of remarketing parties to meet their
obligations to Municipal Reserves. Municipal Reserves will enter into
remarketing agreements covering at least 75% of the principal amount of the
municipal lease obligations in its portfolio. Municipal Reserves will not
enter into remarketing agreements with any one remarketing party in excess
of 5% of its total assets. Remarketing agreements with broker-dealers may
require an exemptive order under the 1940 Act. Municipal Reserves will not
enter into such agreements with broker-dealers prior to the issuance of such
an order or interpretation of the Securities and Exchange Commission ("SEC")
that such an order is not required. There can be no assurance that such an
order or interpretation will be granted.
The "remarketing" feature of the agreement entitles the remarketing
party to attempt to resell the municipal lease obligation within seven days
after demand from the Fund; however, the remarketing party will be obligated
to repurchase the obligation for its own account at the end of the seven-day
period if such obligation has not been resold. The remarketing agreement
will often be entered into with the party who has sold a municipal lease
obligation to Municipal Reserves, but remarketing agreements may also be
entered into with a separate remarketing party of the same type that meets
the credit and other criteria listed above. Up to 25% of Municipal Reserves
municipal lease obligations may not be covered by remarketing agreements.
Municipal Reserves, however, will not invest in municipal lease obligations
that are not subject to remarketing agreements if, as a result of such
investment, more than 10% of its total assets would be invested in illiquid
securities such as (1) municipal lease obligations not subject to
remarketing agreements and not deemed by Dreyfus at the time of purchase to
be at least of comparable quality to rated municipal debt obligations, or
(2) other illiquid assets such as securities restricted as to resale under
federal or state securities laws. For purposes of the preceding sentence, a
municipal lease obligation that is backed by an irrevocable bank letter of
credit or an insurance policy, issued by a bank or issuer deemed by Dreyfus
to be of high quality and minimal credit risk, will not be deemed to be
"illiquid" solely because the underlying municipal lease obligation is
unrated, if Dreyfus determines that such municipal lease obligation is
readily marketable because it is backed by such letter of credit or
insurance policy.
As used within this section, high quality means that the municipal
lease obligation meets all of the following criteria: (1) the underlying
equipment is for an essential governmental function; (2) the municipality
has a documented history of stable financial operations and timely payments
of principal and interest on its municipal debt or lease obligation; (3) the
lease/purchase agreement contains proper terms and conditions to protect
against non-appropriation, substitution of equipment and other more general
risks associated with the purchase of securities; (4) the equipment
underlying the lease was leased in a proper and legal manner; and (5) the
equipment underlying the lease was leased from a reputable equipment vendor.
A letter of credit or insurance policy would generally provide that the
issuer of the letter of credit or insurance policy would pay the outstanding
principal balance of the municipal lease obligations plus any accrued but
unpaid interest upon non-appropriation or default by the governmental
lessee. However, the terms of each letter of credit or insurance policy may
vary significantly and would affect the degree to which such protections
increase the liquidity of a particular municipal lease obligation.
Municipal Reserves may invest more than 25% of its assets in industrial
development bonds, in participation interests therein issued by banks, and
in municipal securities and other obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. A participation
interest gives Municipal Reserves an undivided interest in a municipal bond
owned by a bank and generally is backed by the bank's irrevocable letter of
credit or guarantee.
When the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the issuing entity and a security is backed only by the assets or
revenues of the entity, the entity will be deemed to be the sole issuer of
the security. Similarly, in the case of an industrial development bond
backed only by the assets or revenues of the non-governmental user, the non-
governmental user will be deemed to be the sole issuer of the bond.
Municipal Reserves will invest in securities, including the foregoing
types of securities, only if the investments are of a type which would
satisfy the requirements of Rule 2a-7 promulgated under the 1940 Act and
only to the extent permitted by Municipal Reserves' investment limitations.
Accordingly, if the creating agency, authority, instrumentality or other
political subdivision or some other entity, such as an insurance company or
other corporate obligor, guarantees a security purchased by Municipal
Reserves or a bank issues a letter of credit in support of a security
purchased by Municipal Reserves, it will not purchase any security which, as
to 75% of the value of all securities held, it would result in the value of
all securities issued or guaranteed by a single guarantor or issuer of
letters of credit exceeding 10% of the total value of the Fund's assets.
Yields on municipal securities are dependent on a variety of factors,
including the general conditions of the money market and of the municipal
bond and municipal note markets, the size of a particular offering, the
maturity of the obligation and the rating of the issue. The achievement of
the investment objective of Municipal Reserves is dependent in part on the
continuing ability of the issuers of municipal securities in which the Fund
invests to meet their obligations for the payment of principal and interest
when due. Municipal securities historically have not been subject to
registration with the SEC, although there have been proposals which would
require registration in the future.
Obligations of issuers of municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers may
become subject to laws enacted in the future by Congress or state
legislatures, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. There is
also the possibility that, as a result of litigation or other conditions,
the ability of any issuer to pay, when due, the principal of and interest on
its municipal securities may be materially affected.
Variable Rate Obligations (Money Market Reserves and Municipal
Reserves). The interest rates payable on certain securities, including
municipal leases, in which the Funds may invest, called "variable rate"
obligations, are not fixed and may fluctuate based upon changes in market
rates. The interest rate payable on a variable rate security is adjusted at
predesignated periodic intervals. Other features may include the right
whereby the Funds may demand prepayment of the principal amount of the
obligation prior to its stated maturity and the right of the issuer to
prepay the principal amount prior to maturity. The main benefit of variable
rate securities is that the interest rate adjustment minimizes changes in
the market value of the obligation. As a result, the purchase of variable
rate securities enhances the ability of the Funds to maintain a stable NAV
per share and to sell an obligation prior to maturity at a price
approximating the full principal amount of the obligation. The payment of
principal and interest by issuers of certain securities purchased may be
guaranteed by letters of credit or other credit facilities offered by banks
or other financial institutions. Such guarantees will be considered in
determining whether a security meets a Fund's investment quality
requirements.
Variable rate obligations purchased by the Funds may include
participation interests, including those in industrial development bonds,
purchased from banks, insurance companies or other financial institutions,
and variable rate obligations that are backed by irrevocable letters of
credit or guarantees of banks. The Funds can exercise the right, on not
more than thirty days' notice, to sell such an instrument back to the bank
from which it purchased the instrument and draw on the letter of credit for
all or any part of the principal amount of a Fund's participation interest
in the instrument, plus accrued interest, but will do so only (i) as
required to provide liquidity to the Funds, (ii) to maintain a high quality
investment portfolio, or (iii) upon a default under the terms of the demand
instrument. Banks and other financial institutions retain portions of the
interest paid on such variable rate obligations as their fees for servicing
such instruments and the issuance of related letters of credit, guarantees
and repurchase commitments. Dreyfus will monitor the pricing, quality and
liquidity of variable rate demand obligations and participation interests
therein held by the Funds on the basis of published financial information,
rating agency reports and other research services.
Stand-by Commitments (Municipal Reserves). Municipal Reserves may
purchase municipal securities together with the right to resell them to the
seller or to some third party at an agreed-upon price or yield within
specified periods prior to their maturity dates. The right to resell is
commonly known as a "stand-by commitment," and the aggregate price which
Municipal Reserves pays for securities with a stand-by commitment may be
higher than the price which otherwise would be paid. The primary purpose of
this practice is to permit Municipal Reserves to be as fully invested as
practicable in municipal securities while preserving the necessary
flexibility and liquidity to meet unanticipated redemptions. In this
regard, Municipal Reserves acquires stand-by commitments solely to
facilitate portfolio liquidity and does not exercise its rights thereunder
for trading purposes. In connection with stand-by commitments, Municipal
Reserves will segregate on its records cash or liquid high-grade debt
obligations of the Fund in an amount at least equal to the commitments. On
delivery dates under the commitments, Municipal Reserves will meet its
obligations from maturing securities, sales of securities held in a separate
account or other available sources of cash. Since the value of a stand-by
commitment is dependent on the ability of the stand-by commitment writer to
meet its obligation to repurchase, the policy of Municipal Reserves is to
enter into stand-by commitment transactions only with municipal securities
dealers which are determined to present minimal credit risks as determined
by Dreyfus.
The acquisition of a stand-by commitment does not affect the valuation
or maturity of the underlying municipal securities which continue to be
valued in accordance with the amortized cost method. Stand-by commitments
acquired by Municipal Reserves are valued at zero in determining NAV. When
Municipal Reserves pays directly or indirectly for a stand-by commitment its
cost is reflected as unrealized depreciation for the period during which the
commitment is held. Stand-by commitments do not affect the average weighted
maturity of the Fund's portfolio of securities.
Stand-by commitments may involve certain expenses and risks, including
the inability of the issuer of the commitment to pay for the securities at
the time the commitment is exercised, non-marketability of the commitment,
and differences between the maturity of the commitment.
Variable Amount Master Demand Notes (Money Market Reserves,
Institutional Prime Fund and Institutional Government Fund). These Funds
may invest in variable amount master demand notes. Variable amount master
demand notes are unsecured obligations that are redeemable upon demand and
are typically unrated. These instruments are issued pursuant to written
agreements between their issuers and holders. The agreements permit the
holders to increase (subject to an agreed maximum) and the holders and
issuers to decrease the principal amount of the notes, and specify that the
rate of interest payable on the principal fluctuates according to an agreed-
upon formula. If an issuer of a variable amount master demand note were to
default on its payment obligation, a Fund might be unable to dispose of the
note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. A Fund will
invest in variable amount master demand notes issued only by entities that
Dreyfus considers creditworthy.
Floating Rate Securities (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). These Funds
may invest in floating rate securities. A floating rate security provides
for the automatic adjustment of its interest rate whenever a specified
interest rate changes. Interest rates on these securities are ordinarily
tied to, and are a percentage of, a widely recognized interest rate, such as
the yield on 90-day U.S. Treasury bills or the prime rate of a specified
bank. These rates may change as often as twice daily. Generally, changes
in interest rates will have a smaller effect on the market value of floating
rate securities than on the market value of comparable fixed income
obligations. Thus, investing in variable and floating rate securities
generally allows less opportunity for capital appreciation and depreciation
than investing in comparable fixed income securities.
Bank Instruments (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). These Funds
may purchase bank instruments. Bank instruments consist mainly of
certificates of deposit, time deposits and bankers' acceptances.
ECDs, ETDs and Yankee CDs (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). These Funds
may purchase Eurodollar certificates of deposit ("ECDs"), which are U.S.
dollar-denominated certificates of deposit issued by foreign branches of
domestic banks, Eurodollar time deposits ("ETDs"), which are U.S. dollar
denominated deposits in a foreign branch of a domestic bank or a foreign
bank, and Yankee-Dollar certificates of deposit ("Yankee CDs") which are
certificates of deposit issued by a domestic branch of a foreign bank
denominated in U.S. dollars and held in the United States. ECDs, ETDs, and
Yankee CDs are subject to somewhat different risks than domestic obligations
of domestic banks. See "Foreign Securities."
Eurodollar Bonds and Notes (Money Market Reserves). This Fund may
invest in Eurodollar bonds and notes. Eurodollar bonds and notes are
obligations which pay principal and interest in U.S. dollars held in banks
outside the United States, primarily in Europe. Investments in Eurodollar
bonds and notes involve risks that differ from investments in securities of
domestic issuers. See "Foreign Securities."
Corporate Obligations (Institutional Prime Fund, Money Market Reserves
and Municipal Reserves). Each Fund may invest in corporate obligations
rated at least Aa by Moody's or AA by Standard & Poor's, or if unrated, of
comparable quality as determined by Dreyfus. The Fund will dispose in a
prudent and orderly fashion of bonds whose ratings drop below these minimum
ratings.
Government Obligations (All Funds). Each Fund may invest in a variety
of U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance: (a) U.S. Treasury bills have a maturity of
one year or less, (b) U.S. Treasury notes have maturities of one to ten
years, and (c) U.S. Treasury bonds generally have maturities of greater than
ten years.
In addition to U.S. Treasury obligations, Money Market Reserves,
Municipal Reserves, Institutional Prime Fund and Institutional Government
Fund may invest in obligations issued or guaranteed by U.S. Government
agencies and instrumentalities that are supported by any of the following:
(a) the full faith and credit of the U.S. Treasury, (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) the discretionary authority of the U.S. Treasury to lend
to such Government agency or instrumentality, or (d) the credit of the
instrumentality. (Examples of agencies and instrumentalities are: Federal
Land Banks, Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Central Bank for Cooperatives,
Federal Intermediate Credit Banks, Federal Home Loan Banks, General Services
Administration, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Inter-American Development Bank, Asian-
American Development Bank, Student Loan Marketing Association, International
Bank for Reconstruction and Development, Small Business Administration and
Fannie Mae). No assurance can be given that the U.S. Government will provide
financial support to the agencies or instrumentalities described in (b), (c)
and (d) in the future, other than as set forth above, since it is not
obligated to do so by law.
Repurchase Agreements (All Funds). Each 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 respective Fund's credit guidelines.
This technique offers a method of earning income on idle cash. In a
repurchase agreement, a Fund buys a security from a seller that has agreed
to repurchase the same security at a mutually agreed upon date and price. A
Fund's resale price will be in excess of the purchase price, reflecting an
agreed upon interest rate. This interest rate is effective for the period of
time the Fund is invested in the agreement and is not related to the coupon
rate on the underlying security. Repurchase agreements may also be viewed as
a fully collateralized loan of money by a Fund to the seller. The period of
these repurchase agreements will usually be short, from overnight to one
week, and at no time will a Fund invest in repurchase agreements for more
than one year. A Fund will always receive as collateral securities whose
market value including accrued interest is, and during the entire term of
the agreement remains, at least equal to 100% of the dollar amount invested
by the Fund in each agreement, including interest, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the custodian. If the seller defaults,
a Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. Each Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the Fund's credit
guidelines.
Commercial Paper (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). The Funds may
invest in commercial paper. These instruments are short-term obligations
issued by banks and corporations that have maturities ranging from two to
270 days. Each instrument may be backed only by the credit of the issuer or
may be backed by some form of credit enhancement, typically in the form of a
guarantee by a commercial bank. Commercial paper backed by guarantees of
foreign banks may involve additional risk due to the difficulty of obtaining
and enforcing judgments against such banks and the generally less
restrictive regulations to which such banks are subject. Money Market
Reserves and Municipal Reserves will only invest in commercial paper of U.S.
and foreign companies rated at the time of purchase at least A-1 by S&P,
Prime-1 by Moody's, F-1 by Fitch IBCA, Inc. or Duff-1 by Duff & Phelps,
Credit Rating Co., or determined by Dreyfus to be of comparable quality.
Foreign Securities (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). These Funds
may purchase securities of foreign issuers and may invest in obligations of
foreign branches of domestic banks and domestic branches of foreign banks.
Investment in foreign securities presents certain risks, including those
resulting from adverse political and economic developments and the possible
imposition of foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal
of funds or other assets of a Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the yield on such securities.
Illiquid Securities (All Funds). No Fund will knowingly invest more
than 10% of the value of its net assets in illiquid securities, including
time deposits and repurchase agreements having maturities longer than seven
days. Securities that have readily available market quotations are not
deemed illiquid for purposes of this limitation (irrespective of any legal
or contractual restrictions on resale). A Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). A Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Funds, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Funds through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities.
Credit Enhancements (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). Certain
instruments in which these Funds may invest, including floating rate
securities, variable amount master demand notes and variable rate
obligations, may be backed by letters of credit or insured or guaranteed by
financial institutions, such as banks, or insurance companies, whose credit
quality ratings are judged by Dreyfus to be comparable in quality to the two
highest quality ratings of Moody's or Standard & Poor's. Changes in the
credit quality of banks and other financial institutions that provide such
credit or liquidity enhancements to a Fund's portfolio securities could
cause losses to the Fund and affect its share price.
Other Investment Companies (All Funds). Each Fund may invest in
securities issued by other investment companies to the extent that such
investments are consistent with the respective Fund's investment objective
and policies and permissible under the 1940 Act. As a shareholder of
another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that a Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in each
Fund's Prospectus, the 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 (All Funds). Each 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 (All Funds).
New issues of U.S. Treasury and Government securities are often offered on a
"when-issued" basis. This means that delivery and payment for the securities
normally will take place approximately 7 to 45 days after the date the buyer
commits to purchase them. The payment obligation and the interest rate that
will be received on securities purchased on a "when-issued" basis are each
fixed at the time the buyer enters into the commitment. Each Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt securities
equal to the amount of the above commitments will be segregated on each
Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a "when-issued" basis and the securities held
by each Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income each Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's NAV.
When payment for "when-issued" securities is due, each Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the "when-issued" securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
To secure advantageous prices or yields, a Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by a Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed
delivery basis involves the risk that the value of the securities purchased
will decline prior to the settlement date. The sale of securities for
delayed delivery involves the risk that the prices available in the market
on the delivery date may be greater than those obtained in the sale
transaction. The Funds 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 (All Funds except U.S. Treasury Reserves).
Each Fund may lend securities from its portfolio to brokers, dealers and
other financial institutions needing to borrow securities to complete
certain transactions. A Fund continues to be entitled to payments in
amounts equal to the interest, dividends or other distributions payable on
the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of a
Fund's total assets and the Fund will receive collateral consisting of cash,
U.S. Government securities or irrevocable letters of credit which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. These loans are terminable by a Fund
at any time upon specified notice. A Fund might experience loss if the
institution to which it has lent its securities fails financially or
breaches its agreement with the Fund. In addition, it is anticipated that a
Fund may share with the borrower some of the income received on the
collateral for the loan or that it will be paid a premium for the loan. In
determining whether to lend securities, a Fund considers all relevant
factors and circumstances including the creditworthiness of the borrower.
Reverse Repurchase Agreements (Money Market Reserves, Municipal
Reserves and Institutional Prime Fund). A Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, a Fund: (1) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (2) agrees to repurchase the
securities at a future date by repaying the cash with interest. A Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. Cash or liquid high-grade debt
securities held by a Fund equal in value to the repurchase price including
any accrued interest will be maintained in a segregated account while a
reverse repurchase agreement is in effect.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, each Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
any Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of a Fund will be given at least
30 days' prior notice of any such investment. Such investment would be made
only if the Company's Board of Directors determines it to be in the best
interest of a Fund and its shareholders. In making that determination, the
Company's Board of Directors will consider, among other things, the benefits
to shareholders and/or the opportunity to reduce costs and achieve
operational efficiency. Although the Funds believe that the Company's Board
of Directors will not approve an arrangement that is likely to result in
higher costs, no assurance is given that costs will be materially reduced if
this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by each Fund.
A Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. Each
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks.)
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowings, and (b) a Fund
may issue multiple classes of shares. The purchase or sale of futures
contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of a Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of a Fund's total assets would be invested in the securities of that
issuer, or (b) a Fund would hold more than 10% of the outstanding voting
securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans.
For purposes of this limitation debt instruments and repurchase agreements
shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contacts and other
similar instruments.
Each Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
None of the Funds intends to engage in futures contracts, related
options or forward currency contracts.
Nonfundamental. The Funds have adopted the following additional non-
fundamental restrictions. These non-fundamental restrictions may be changed
without shareholder approval, in compliance with applicable law and
regulatory policy.
1. No Fund shall sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities
sold short.
2. No Fund shall purchase securities on margin, except that a Fund
may obtain such short-term credits as are necessary for the clearance of
transactions.
3. No Fund shall purchase oil, gas or mineral leases.
4. Each Fund will not purchase or retain the securities of any issuer
if the officers, Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than five percent of such securities.
5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of such
Fund's investment in such securities would exceed 5% of such Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. None of the Funds will invest more than 10% of the value of its
net assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) Paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. No Fund may invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. No Fund shall purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. No Fund will purchase warrants if at the time of such purchase:
(a) more than 5% of the value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would be
invested in warrants that are not listed on the New York or American Stock
Exchange (for purposes of this limitation, warrants acquired by a Fund in
units or attached to securities will be deemed to have no value).
10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitment, and
(b) this limitation shall not apply to a Fund's transactions in futures
contracts and related options.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in
the values of assets will not constitute a violation of such restriction,
except as otherwise required by the 1940 Act.
If a Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position
and needs.
MANAGEMENT OF THE FUNDS
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with a Fund, and in
providing services to a Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or a Fund. If Mellon Bank or Dreyfus were prohibited from
serving a Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Funds. The Board approves all significant agreements between the
Company, on behalf of the Funds, and those companies that furnish services
to the Funds. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of nine Directors. The following
lists the Directors and officers and their positions with the Company and
their present and principal occupations during the past five years. Each
Director who is an "interested person" of the Company (as defined in the
1940 Act) is indicated by an asterisk(*). Each of the Directors also serves
as a Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.) a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.) a provider of various outservicing functions for small and medium
sized companies; and Career Blazers, Inc. (formerly Staffing Resources)
a temporary placement agency. 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 Co. 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 of the Board and
CEO, LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; Member of Advisory Committee, Decedents
Estates Laws of Pennsylvania. Age: 67 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director,
Harvard/Pilgrim 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 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 Investment Services
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 and 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
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
Joseph S. DiMartino* $17,710.00 $619,660
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 P. 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
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October
31, 1998, the aggregate amount of fees and expenses received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Company
was $17,710.00. For the year ended December 31, 1998, the aggregate amount
of fees received by Mr. Fort for serving as a Board member of all funds in
the Dreyfus/Laurel Funds (including the Company) and Dreyfus High Yield
Strategies Fund (for which payment is made directly by the fund) was
$59,010.00. In addition, Dreyfus reimbursed Mr. Fort a total of $733.11
for expenses attributable to the Company's Board meetings which is not
included in the $5,313.37 amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
**** The 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 each Fund outstanding as of February 1,
1999.
As of February 1, 1999, the following shareholder owned beneficially or
of record 5% or more of Investor shares of the Money Market Reserves Fund:
Dreyfus Investment Services Inc., Two Mellon Bank Center, Pittsburgh, PA
15259, 5.19%.
As of February 1, 1999, the following shareholders owned beneficially
or of record 5% or more of Class R shares of the Money Market Reserves:
Dreyfus Investment Services Inc., Two Mellon Bank Center, Pittsburgh, PA
15259, 37.49%; Boston & Co., c/o Boston Safe Deposit & Trust Co., 1 Boston
Place, Boston, MA 02108, 34.74%; and Boston & Co., Three Mellon Bank Center,
Pittsburgh, PA 15259, 10.25%.
As of February 1, 1999, the following shareholders owned beneficially
or of record 5% or more of Class R shares of the U.S. Treasury Reserves
Fund: Mellon Bank NA/Mellon PSFS Cust, FBO Cash TRF Client A/C Aim
#1995264, P.O. Box 7899, Philadelphia, PA 19101-7899, 35.54%; Mellon Bank
N/A Western Region Cust, Cash Transfer A/C Client #1995264, P.O. Box 7899,
Philadelphia, PA 19101-7899, 24.53%; Boston & Co., c/o Boston Safe Deposit &
Trust Co., 1 Boston Place, Boston, MA 02108-4407, 8.24%; and Dreyfus
Investment Services Inc., Two Mellon Bank Center, Pittsburgh, PA 15259-0001,
5.58%.
As of February 1, 1999, the following shareholders owned beneficially
or of record 5% or more of Investor shares of the Municipal Reserves: John
Sharon, Joseph Sherman JT-TEN, P.O. Box 7168, Alhambra, CA 91802-7168,
6.75%; and Robert A Dunn, Jr. and Elizabeth J. Dunn JT TEN, 39 River Road,
P.O. Box 7189, North Arlington, NJ 07031-6101, 6.11%.
As of February 1, 1999, the following shareholders owned beneficially
or of record 5% or more of Class R shares of the Municipal Reserves: Boston
& Co., c/o Boston Safe Deposit & Trust Co., 1 Boston Place, Boston, MA 02108-
4407, 57.76%; Boston & Co., Three Mellon Bank Center, Pittsburgh, PA 15259,
17.89%; Mellon Bank, NA, #14 as Agent for Capital Markets Customers, One
Mellon Bank Center, Room 151-0440, Pittsburgh, PA 15258-0001, 6.39%; and
Dreyfus Investment Services Inc., Two Mellon Bank Center, Pittsburgh, PA
15259-0001, 5.65%.
As of February 1, 1999, the following shareholders owned beneficially
or of record 5% or more of the Institutional Prime Fund: Boston & Co.,
Three Mellon Bank Center, Pittsburgh, PA 15259, 18.64%; Boston & Co., Two
Mellon Bank Center, Pittsburgh, PA 15259, 18.09%; Mac & Co., Mutual Funds
Operations, P.O. Box 3198, Pittsburgh, PA 15230-3198, 14.87%; Boston & Co.,
c/o Boston Safe Deposit & Trust Co., 1 Boston Place, Boston, MA 02108-4407,
14.21%; Boston & Co., P.O. Box 3198, Pittsburgh, PA 15230-3198, 10.54%;
Boston & Co., Three Mellon Bank Center, Pittsburgh, PA 15259, 9.34%; and
Dreyfus Investment Services Inc., Two Mellon Bank Center, Pittsburgh, PA
15259-0001, 7.74%.
As of February 1, 1999, the following shareholders owned beneficially
or of record 5% or more of the Institutional Government Fund: Boston & Co.,
Three Mellon Bank Center, Pittsburgh, PA 15259, 66.30%; Boston & Co., Three
Mellon Bank Center, Pittsburgh, PA 15259, 17.55%; and Boston & Co., c/o
Boston Safe Deposit & Trust Co., 1 Boston Place, Boston, MA 02108-4407,
11.98%.
As of February 1, 1999, the following shareholders owned beneficially
or of record 5% or more of the Institutional U.S. Treasury Fund: Boston &
Co., c/o Boston Safe Deposit & Trust Co., 1 Boston Place, Boston, MA 02108-
4407, 32.96%; Boston & Co., Three Mellon Bank Center, Pittsburgh, PA 15259,
25.52%; Boston & Co., Three Mellon Bank Center, Pittsburgh, PA 15259,
21.55%; The Chase Manhattan Bank, 450 W. 33rd Street, New York, NY 10001-
2603, 10.27%; and Boston & Co., Three Mellon Bank Center, Pittsburgh, PA
15259, 5.30%.
A shareholder who beneficially owns, directly or indirectly more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Expenses" and
"Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Funds pursuant to an Investment Management Agreement with the Company on
behalf of each Fund, dated April 4, 1994 (the "Management Agreement"),
transferred to Dreyfus as of October 17, 1994, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Management Agreement, Dreyfus provides, or arranges
for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Funds. As investment manager, Dreyfus manages the Funds by making
investment decisions based on each Fund's investment objective, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.
The Management Agreement will continue from year to year with respect
to each Fund provided that a majority of the Directors who are not
"interested persons" of the Company and either a majority of all Directors
or a majority (as defined in the 1940 Act) of the shareholders of the Fund
approve its continuance. The Management Agreement was last approved by the
Board of Directors on February 4, 1999 to continue until April 4, 2000. The
Company may terminate the Management Agreement with respect to each Fund
upon the vote of a majority of the Board of Directors or upon the vote of a
majority of the respective Fund's outstanding voting securities on 60 days'
written notice to Dreyfus. Dreyfus may terminate the Management Agreement
upon 60 days' written notice to the Company. The Management Agreement will
terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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, Money Market Reserves, U.S.
Treasury Reserves and Municipal Reserves have each agreed to pay Dreyfus a
monthly fee at the annual rate of 0.50% of the value of each such Fund's
average daily net assets and Institutional Prime Fund, Institutional
Government Fund and Institutional U.S. Treasury have each agreed to pay
Dreyfus a monthly fee at the annual rate of 0.15% of the value of each such
Fund's average daily net assets. Dreyfus pays all of the Funds' expenses,
except brokerage fees, taxes, interest, fees and expenses of the non-
interested directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. Although Dreyfus does not pay for
the fees and expenses of the non-interested Directors (including counsel
fees), Dreyfus is contractually required to reduce its investment management
fee by an amount equal to each Fund's allocable share of such fees and
expenses. From time to time, Dreyfus may voluntarily waive a portion of the
investment management fees payable by a Fund, which would have the effect of
lowering the expense ratio of the Fund and increasing return to investors.
Expenses attributable to a 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, each Fund had the following management
fees:
For the Fiscal Years Ended October 31,
1998 1997 1996
Money Market Reserves $2,507,548 $1,931,340 $1,651,339
U.S. Treasury Reserves $3,499,709 $2,571,553 $2,138,371
Municipal Reserves $1,197,439 $1,080,023 $1,182,931
Institutional Prime Fund $897,957 $848,936 $808,812
Institutional Government Fund $331,234 $382,114 $458,878
Institutional U.S. Treasury Fund $1,025,270 $1,097,044 $967,698
The Distributor. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109,
serves as the Funds' distributor on a best efforts basis pursuant to an
agreement which is renewable annually. Dreyfus may pay the Distributor for
shareholder services from Dreyfus' own assets, including past profits but
not including the management fee paid by a Fund. The Distributor may use
part or all of such payments to pay certain banks, securities brokers or
dealers and other financial institutions ("Agents") for these services. The
Distributor also provides various administrative and corporate secretarial
services to the Funds as sub-administrator for each Fund pursuant to a Sub-
Administration Agreement effective October 17, 1994. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. Each of Money Market Reserves, U. S. Treasury Reserves and
Municipal Reserves offers two share classes - Class R shares and Investor
shares. Investor shares and Class R shares are identical, except as to the
services offered to and the expenses borne by each class. Investor shares
are sold primarily to investors maintaining related securities, brokerage,
commodities trading or similar accounts with Agents that have entered into
Selling Agreements ("Agreements") with the Distributor. Additionally,
holders of Investor shares who have held their shares since August 31, 1995,
may continue to purchase Investor shares whether or not they otherwise would
be eligible to do so.
Class R shares are sold primarily to bank trust departments (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
or to customers who have received and hold shares of Money Market Reserves,
U.S. Treasury Reserves and Municipal Reserves distributed to them by virtue
of such an account or relationship.
A "Retirement Plan" is a qualified or non-qualified employee benefit
plan or other program, including pension, profit-sharing and other deferred
compensation plans, whether established by corporations, partnerships, non-
profit entities or state and local governments. Class R shares may be
purchased for a Retirement Plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such Plan. It is not
recommended that Municipal Reserves be used as a vehicle for Retirement
Plans, Keogh plans or Individual Retirement Accounts.
If shares of Money Market Reserves, U.S. Treasury Reserves or Municipal
Reserves are held in an account at a bank or with an Agent, such bank or
Agent may require you to place all purchase, exchange and redemption orders
through them. All banks and Agents have agreed to transmit transaction
requests to each Fund's transfer agent or to the Distributor. Agents
effecting transactions in Fund shares for the accounts of their clients may
charge their clients direct fees in connection with such transactions.
Distribution and shareholder servicing fees paid by Investor shares will
cause Investor shares to have a higher expense ratio and to pay lower
dividends than Class R shares.
The minimum initial investment to establish a new account in
Institutional Prime Fund, Institutional Government Fund or Institutional
U.S. Treasury Fund is $1 million. There is no minimum requirement for
subsequent investments.
The minimum initial investment to establish a new account in Money
Market Reserves, U.S. Treasury Reserves or Municipal Reserves is $100,000.
Each such Fund may waive its minimum initial investment requirement for new
Fund accounts opened through an Agent whenever Dreyfus Institutional
Services Division ("DISD") has determined for the initial account opened
through such Agent which is below the Fund's minimum initial investment
requirement that the existing accounts in the Fund opened through that Agent
have an average account size, or the Agent has adequate intent and access to
funds to result in maintenance of accounts in the Fund opened through that
Agent with an average account size, in an amount equal to or in excess of
$100,000. DISD is required to periodically review the average size of the
accounts opened through each Agent and, if necessary, reevaluate the Agent's
intent and access to funds. DISD will discontinue the waiver as to new
accounts to be opened through an Agent if DISD determines that the average
size of accounts opened through that Agent is less than $100,000 and the
Agent does not have the requisite intent and access to funds. Money Market
Reserves, U.S. Treasury Reserves and Municipal Reserves each reserve the
right to offer their shares without regard to minimum purchase rquirements
to employees participating in certain qualified and non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to such Funds. There is
no minimum for subsequent purchases. The initial investment must be
accompanied by the appropriate Account Application.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain Retirement Plans. These limitations apply with respect to
participants at the plan level and, therefore, do not directly affect the
amount that may be invested in a Fund by a Retirement Plan. Participants
and plan sponsors should consult their tax advisers for details.
Fund shares are sold on a continuous basis. NAV per share is
determined on each day that the New York Stock Exchange ("NYSE") is open (a
"business day").
Institutional Government Fund and Institutional U.S. Treasury Fund.
The NAV per share of each of these Funds is calculated at 3 p.m., Eastern
time. Purchase orders (except for purchase orders through Dreyfus
TeleTransfer Privilege) received in proper form by the Transfer Agent by 3
p.m., Eastern time, on a business day will become effective on, and will
receive the share price next determined on, that day; purchase orders
received after 3 p.m., Eastern time, will become effective on, and will
receive the share price determined on, the next business day. Shares begin
accruing dividends on the day the purchase order for the shares is effected
if the instructions to purchase shares and immediately available funds are
received by the Transfer Agent prior to 3 p.m., Eastern time for a Fund.
Dividends begin accruing on shares on the next business day with regard to
purchase orders effected after 3 p.m., Eastern Time.
Institutional Prime Fund. The NAV per share of this Fund is calculated
at 5 p.m., Eastern time. Purchase orders (except for purchase orders
through Dreyfus TeleTransfer Privilege) received in proper form by the
Transfer Agent or the Distributor or its designee by 5 p.m., Eastern time,
will become effective at the price determined at 5 p.m., Eastern time, on
that day and the shares purchased will receive the dividend on Fund shares
declared that day, provided Federal Funds are received by 6 p.m., Eastern
time, on that day. A purchase order received in proper form after 5 p.m.,
Eastern time, will become effective on, and dividends will begin accruing on
shares on, the next business day.
Money Market Reserves, U.S. Treasury Reserves, and Municipal Reserves.
The NAV per share of Money Market Reserves, U.S. Treasury Reserves and
Municipal Reserves is calculated two times each business day, at 12 noon and
4 p.m., Eastern time. Orders received in proper form by the Transfer Agent
or other entity authorized to receive orders on behalf of the Fund before 4
p.m., Eastern time, are effective on, and will receive the price next
determined on, that business day. Orders received after 4 p.m., Eastern
time, are effective at 12 noon on, and receive the first share price
determined on, the next business day.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by
Eligible Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from a Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to a Fund could subject you
to a $50 penalty imposed by the Internal Revenue Service.
Dreyfus TeleTransfer Privilege. You may purchase Fund 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 that 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 Shares - Dreyfus TeleTransfer Privilege." A 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.
Procedures for Multiple Accounts (Institutional Prime Fund,
Institutional Government Fund and Institutional U.S. Treasury Fund).
Special procedures have been designed for banks and other institutions that
wish to open multiple accounts. The institution may open a single master
account by filing one application with the Transfer Agent and may open
individual sub-accounts at the same time or at some later date.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING PLAN
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Your Investment."
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. With respect to the Investor shares of Money Market
Reserves, U.S. Treasury Reserves and Municipal Reserves, the Company has
adopted a Distribution Plan (the "Distribution Plan") pursuant to the Rule,
under which the Investor shares of such Funds bear some of the cost of
selling those shares under the Plan. The Distribution Plan allows each of
Money Market Reserves, U.S. Treasury Reserves and Municipal Reserves to
spend annually up to 0.25% (currently limited by the Company's Board of
Directors to 0.20%) of the average daily net assets attributable to its
Investor shares to compensate Dreyfus Service Corporation, an affiliate of
Dreyfus, for shareholder servicing activities and the Distributor for
shareholder servicing activities and for activities or expenses primarily
intended to result in the sale of Investor shares of the respective Fund.
The Distribution Plan allows the Distributor to make payments from the Rule
12b-1 fees it collects from a Fund to compensate Agents that have entered
into Agreements with the Distributor. Under the Agreements, the Agents are
obligated to provide distribution related services with regard to the Funds
and/or shareholder services to the Agent's clients that own Investor shares
of a Fund.
The Funds and the Distributor may suspend or reduce payments under the
Distribution Plan at any time, and payments are subject to the continuation
of a Fund's Distribution Plan and the Agreements described above. From time
to time, the Agents, the Distributor and the Funds may agree to voluntarily
reduce the maximum fees payable under the Distribution Plan.
Potential investors should read this Statement of Additional
Information in light of the terms governing Agreements with their Agents.
An Agent entitled to receive compensation for selling and servicing a Fund's
shares may receive different compensation with respect to different classes
of shares.
Shareholder Servicing Plan. With respect to the Institutional Prime
Fund, Institutional Government Fund and Institutional U.S. Treasury Fund,
the Company has adopted a Shareholder Servicing Plan (the "Institutional
Plan") which is not subject to the Rule, and may enter into Shareholder
Servicing Agreements with Agents.
The Institutional Plan permits each of Institutional Prime Fund,
Institutional Government Fund and Institutional U.S. Treasury Fund to
compensate Agents that have entered into Shareholder Servicing Agreements
with the Company. Payments under the Institutional Plan are calculated
daily and paid monthly at a rate or rates set from time to time by the Board
of such Fund, provided that the annual rate may not exceed 0.15% of the
average daily NAV of the Fund shares. Payments under the Institutional Plan
may be increased without shareholder approval.
The fees payable under the Institutional Plan are used primarily to
compensate Agents for shareholder services provided, and related expenses
incurred by such Agents. The shareholder services provided by Agents may
include: (i) aggregating and processing purchase and redemption requests
for Fund shares from their customers and transmitting net purchase and
redemption orders to the Distributor or Transfer Agent; (ii) providing
customers with a service that invests the assets of their accounts in Fund
shares pursuant to specific or pre-authorized instructions; (iii) processing
dividend and distribution payments from a Fund on behalf of customers; (iv)
providing information periodically to customers showing their positions in
Fund shares; (v) arranging for bank wires; and (vi) providing general
shareholder liaison services.
The Company may suspend or reduce payments under the Institutional Plan
at any time, and payments are subject to the continuation of the
Institutional Plan and the Agreements described above. From time to time,
the Agents and the Company may agree to voluntarily reduce the maximum fees
payable under the Institutional Plan.
The Company understands that Agents may charge fees to their clients
who are owners of shares of Institutional Prime Fund, Institutional
Government Fund or Institutional U.S. Treasury Fund for various services
provided in connection with a client's account. These fees would be in
addition to any amounts received by an Agent under its Shareholder Servicing
Agreement with the Company. The Shareholder Servicing Agreement requires
each Agent to disclose to their clients any compensation payable to such
Agent by the Company and any other compensation payable by the clients for
various services provided in connection with their accounts. Potential
investors should read this Statement of Additional Information in light of
the terms governing their accounts with their Agents.
The Distribution Plan and the Institutional Plan each provides that a
report of the amounts expended thereunder, and the purposes for which such
expenditures were incurred, must be made to the Directors for their review
at least quarterly. In addition, the Distribution Plan provides that it may
not be amended to increase materially the costs which a Fund may bear for
distribution pursuant to the plan without approval of a Fund's shareholders,
and that other material amendments of the Distribution Plan must be approved
by the vote of a majority of the Directors and of the Directors who are not
"interested persons" of the Company and who do not have any direct or
indirect financial interest in the operation of the Distribution Plan or in
the related Agreements, cast in person at a meeting called for the purpose
of considering such amendments. Both plans are subject to annual approval
by all of the Directors and by the Directors who are neither "interested
persons" nor have any direct or indirect financial interest in the operation
of either plan or in the related Agreements or Shareholder Servicing
Agreements, by vote cast in person at a meeting called for the purpose of
voting on such approval. Each plan was so approved by the Directors at a
meeting held on February 4, 1999. The plans are terminable, as to a Fund or
a Fund's class of shares, at any time by vote of a majority of the Directors
who are not "interested persons" and have no direct or indirect financial
interest in the operation of the plan or in the related Agreements or
Shareholder Servicing Agreements or by vote of the holders of a majority of
the outstanding shares of such Fund or a class of a Fund.
The fees payable under the plans are payable without regard to actual
expenses incurred.
For the fiscal year ended October 31, 1998, the distribution and
service fees paid by the Funds subject to the Distribution Plan to Dreyfus
Service Corporation and the Distributor were:
Dreyfus Service
Corporation Distributor
Money Market Reserves $500,607 $ 5,402
Municipal Reserves $ 48,219 $ 677
U.S. Treasury Reserves $262,174 $31,319
For the fiscal year ended October 31, 1998, the service fees by the
Funds subject to the Institutional Plan were:
Institutional Prime Fund $ 897,957
Institutional Government Fund $ 331,234
Institutional U.S. Treasury Fund $1,025,271
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If, in the case of Money Market Reserves, U.S. Treasury
Reserves and Municipal Reserves, you hold Fund shares of more than one
Class, any request for redemption must specify the Class of shares being
redeemed. If you fail to specify the Class of shares to be redeemed or if
you own fewer shares of the Class than specified to be redeemed, the
redemption request may be delayed until the Transfer Agent receives further
instructions from you or your Agent.
The Funds impose no charges when shares are redeemed. Agents or other
institutions may charge their clients a fee for effecting redemptions of
Fund shares. Any certificates representing Fund shares being redeemed must
be submitted with the redemption request. The value of the shares redeemed
may be more or less than their original cost, depending upon 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 or, in the case of Money Market Reserves, U.S. Treasury Reserves
and Municipal Reserves, the Check Redemption Privilege, which are granted
automatically unless you specifically refuse them by checking the applicable
"No" box on the Account Application. The Telephone Redemption Privilege
and, in the case of Money Market Reserves, U.S. Treasury Reserves and
Municipal Reserves, the Check Redemption Privilege, may be established for
an existing account by a separate signed Shareholder Services Form or, with
respect to the Telephone Redemption Privilege, by oral request from any of
the authorized signatories on the account by calling 1-800-645-6561. You
also may redeem shares through the Wire Redemption Privilege or the Dreyfus
TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a
Shareholders Services Form with the Transfer Agent. Other redemption
procedures may be in effect for clients of other Agents and institutions.
The Funds make available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. Each Fund
reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. Each Fund may modify or terminate
any redemption privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated. Shares held under
Keogh Plans, IRAs, or other retirement plans, and shares for which
certificates have been issued, are not eligible for the Check Redemption,
Wire Redemption, Telephone Redemption or Dreyfus TeleTransfer Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus 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
Funds will require the Transfer Agent to employ reasonable procedures, such
as requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, a Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Funds nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a 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.
Check Redemption Privilege (Money Market Reserves, U.S. Treasury
Reserves and Municipal Reserves). Investors may write Redemption Checks
("Checks") drawn on a Fund account. Each Fund provides Checks automatically
upon opening an account, unless the investor specifically refuses the Check
Redemption Privilege by checking the applicable "No" box on the Account
Application. The Check Redemption Privilege may be established for an
existing account by a separate signed Shareholder Services Form. Checks
will be sent only to the registered owner(s) of the account and only to the
address of record. The Account Application or Shareholder Services Form
must be manually signed by the registered owner(s). Checks may be made
payable to the order of any person in an amount of $500 or more. When a
Check is presented to the Transfer Agent for payment, the Transfer Agent, as
the investor's agent, will cause the Fund to redeem a sufficient number of
full or fractional shares in the investor's account to cover the amount of
the Check. Dividends are earned until the Check clears. After clearance, a
copy of the Check will be returned to the investor. Investors generally
will be subject to the same rules and regulations that apply to checking
accounts, although the election of this Privilege creates only a shareholder-
transfer agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account. Checks are free but the
Transfer Agent will impose a fee for stopping payment of a Check upon
request or if the Transfer Agent cannot honor a Check because of
insufficient funds or other valid reason. Investors should date Checks with
the current date when writing them. Please do not postdate Checks. If
Checks are postdated, the Transfer Agent will honor, upon presentment, even
if presented before the date of the Check, all postdated Checks which are
dated within six months of presentment for payment, if they are otherwise in
good order.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. With respect to the
Institutional Prime Fund only, ordinarily, the Fund will initiate payment
for shares redeemed pursuant to this Privilege on the same business day
after receipt by the Transfer Agent of the redemption request in proper form
prior to 5:00 p.m., New York time, on such day; otherwise the Fund will
initiate payment on the next business day. With respect to the
Institutional Government Fund and the Institutional U.S. Treasury Fund only,
ordinarily, the Funds will initiate payment for shares redeemed pursuant to
this Privilege on the same business day if the Transfer Agent receives the
redemption request in proper form prior to 3:00 p.m., New York time, on such
day; otherwise the Funds will initiate payment on the next business day.
With respect to each Fund other than the Institutional Prime Fund, the
Institutional Government Fund and the Institutional U.S. Treasury Fund,
ordinarily, the Funds will initiate payment for shares redeemed pursuant to
this Privilege on the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption proceeds ($1,000
minimum), will be transferred by Federal Reserve wire only to the commercial
bank account specified by the investor on the Account Application or
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 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 business days after receipt of the redemption request. 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. 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. 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 a Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Company's Board
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets a Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of a Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect a Fund's
shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Shares of a Fund may be exchanged for shares certain
other funds managed 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 a shareholder'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 each Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares of Money Market Reserves, U.S. Treasury
Reserves or Municipal Reserves, as the case may be, 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 a Fund, shares of
certain other funds 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 Class R shares of
Money Market Reserves, U.S. Treasury Reserves or Municipal Reserves, or Fund
shares of the Institutional Prime Fund, Institutional Government Fund or
Institutional Treasury Fund, as the case may be, 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 per share 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 IRAs and other retirement plans are
eligible for this Privilege. Exchanges of IRA shares may be made between
IRA accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by a
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 Funds
may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. For more information concerning this Privilege
and the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. Each 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 Builderr. 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
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-645-6561. Automatic Withdrawal may be terminated at any time by the
investor, a Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan.
Dreyfus Dividend Options. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and other distributions,
if any, from a Fund in shares of 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 other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a 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
and other distributions, if any, from a Fund to a designated bank account.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. Banks may charge a fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these Privileges by mailing written notification to the Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dreyfus Dividend Sweep. A Fund may
modify or terminate these privileges at any time or charge a service fee.
No such fee currently is contemplated. Shares held under Keogh Plans, IRAs
or other retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. 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, a 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, Dreyfus, the Funds, the Transfer Agent
or any other person, to arrange for transactions under the Dreyfus Payroll
Savings Plan. A Fund may modify or terminate this Privilege at any time or
charge a service fee. No such fee currently is contemplated.
Retirement Plans. The Funds make 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 call 1-800-645-6561;
for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-
800-322-7880.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Account Policies."
The NAV for Fund shares is calculated on the basis of amortized cost,
which involves initially valuing a portfolio instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the
market value of the instrument. Each Fund intends to maintain a constant
NAV of $1.00 per share, although there is no assurance that this can be done
on a continuing basis.
The use of amortized cost is permitted by Rule 2a-7 under the 1940 Act.
Pursuant to the provisions of Rule 2a-7, the Directors have established
procedures reasonably designed to stabilize each Fund's price per share, as
computed for the purpose of sale and redemption, at $1.00. These procedures
include the determination by the Directors, at such times as they deem
appropriate, of the extent of deviation, if any, of each Fund's current NAV
per share, using market values, from $1.00; periodic review by the Directors
of the amount of and the methods used to calculate the deviation;
maintenance of records of the determination; and review of such deviations.
The procedures employed to stabilize each Fund's price per share require the
Directors to promptly consider what action, if any, should be taken by the
Directors if such deviation exceeds 1/2 of one percent. Such procedures
also require the Directors to take appropriate action to eliminate or
reduce, to the extent reasonably practicable, material dilution or other
unfair effects resulting from any deviation. In addition to such
procedures, Rule 2a-7 requires each Fund to purchase instruments having
remaining maturities of 397 days or less, to maintain a dollar-weighted
average portfolio maturity of 90 days or less and to invest only in
securities determined by the Directors to be of high quality, as defined in
Rule 2a-7, with minimal credit risks.
In periods of declining interest rates, the indicated daily yield on
shares of a Fund computed by dividing the annualized daily income on the
Fund by the NAV per share computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the indicated
daily yield on shares of a Fund computed the same way may tend to be lower
than a similar computation made by using a method of calculation based upon
market prices and estimates.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Distributions and
Taxes."
General. Each Fund ordinarily declares dividends from net investment
income on each day that the NYSE is open for business. A Fund's earnings
for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. Dividends usually are paid on the last calendar day
of each month and are automatically reinvested in additional Fund shares at
NAV or, at your option, paid in cash. If you redeem all shares in your
account at any time during the month, all dividends to which you are
entitled will be paid to you along with the proceeds of the redemption. If
an omnibus accountholder indicates in a partial redemption request that a
portion of any accrued dividends to which such account is entitled belongs
to an underlying accountholder who has redeemed all of his or her Fund
shares, that portion of the accrued dividends will be paid along with the
proceeds of the redemption. Dividends from net realized short-term capital
gains, if any, generally are declared and paid once a year, but a Fund may
make distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. A Fund will not make distributions from net
realized capital gains unless capital loss carryovers, if any, have been
utilized or have expired. The Funds do not expect to realize any long-term
capital gains or losses. You may choose whether to receive dividends in
cash or to reinvest them in additional Fund shares at NAV. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Dividends paid by Money Market Reserves, U.S. Treasury Reserves and
Municipal Reserves with respect to one class of shares may be greater or
less per share than those paid with respect to another class of shares due
to the different expenses of the different classes. Except as provided
below, shares of any of these Funds purchased on a day on which the Fund
calculates its NAV will not begin to accrue dividends until the following
business day and redemption orders effected on any particular day will
receive all dividends declared through the day of redemption. However, if
immediately available funds are received by the Transfer Agent prior to
12:00 noon, Eastern time, you may receive the dividend declared on the day
of purchase. You will not receive the dividends declared on the day of
redemption if a wire redemption order is placed prior to 12:00 noon, Eastern
time.
Shares of Institutional Government Fund and Institutional U.S. Treasury
Fund begin accruing dividends on the business day the purchase order is
effected if the instructions to purchase shares (except for purchase orders
through Dreyfus TeleTransfer Privilege) and immediately available funds are
received by the Transfer Agent or the Distributor or its designee prior to 3
p.m., Eastern time. Dividends begin accruing on shares on the next business
day with regard to purchase orders effected after 3 p.m., Eastern time.
With respect to Institutional Prime Fund, purchase orders (except for
purchase orders through Dreyfus TeleTransfer Privilege) received in proper
form by the Transfer Agent or the Distributor or its designee by 5 p.m.,
Eastern time, will receive the dividend on Fund shares declared that day,
provided Federal funds are received by 6 p.m., Eastern time, on that day. A
purchase order for shares received in proper form after 5 p.m., Eastern
time, will begin accruing dividends on the shares on the next business day.
With respect to Institutional Government Fund and Institutional U.S.
Treasury Fund, requests to redeem or exchange Fund shares received in proper
form by the Transfer Agent by 3 p.m., Eastern time, on a business day are
effective on, and will receive the share price next determined on, that day.
Redemption and exchange requests received after 3 p.m., Eastern time, are
effective on, and will receive the share price determined on, the next
business day. If the redemption is requested to be made by wire, the
proceeds of the redemption ordinarily will be sent on the same day the
request is effective and the shares will not receive the dividend declared
on that day.
With respect to Institutional Prime Fund, redemption or exchange
requests received in proper form by the Transfer Agent or its designee by 5
p.m., Eastern time, on a business day are effective on that day; such
requests received after 5 p.m., Eastern time, will be effective on the next
business day. If the redemption is requested to be made by wire, the
proceeds of the redemption ordinarily will be sent on the day the request is
effective and the shares will not receive the dividend declared on that day.
It is expected that each Fund will continue to qualify for treatment as
a regulated investment company ("RIC") under the Code. Such qualification
will relieve a Fund of any liability for federal income tax to the extent
its earnings and realized gains are distributed in accordance with
applicable provisions of the Code. To qualify for treatment as a RIC under
the Code, each Fund - which is treated as a separate corporation for federal
tax purposes - (1) must distribute to its shareholders each year at least
90% of its investment company taxable income (generally consisting of net
taxable investment income and net short-term capital gains, plus in the case
of Municipal Reserves, its net interest income excludable from gross income
under section 103(a) of the Code) ("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 a 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 that otherwise would
be "exempt-interest dividends" (described below under "Municipal Reserves"),
as dividends (that is, ordinary income) to the extent of the Fund's earnings
and profits. In addition, a Fund could be required to recognize unrealized
gains, pay substantial taxes and interest and make substantial distributions
before requalifying for RIC treatment.
Each Fund may be subject to a 4% nondeductible excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of
its ordinary (taxable) income for that year and capital gain net income for
the one-year period ending October 31 of that year, plus certain other
amounts. Each Fund expects to make the distributions necessary to avoid the
imposition of this tax.
If you elect to receive dividends in cash, and your dividend check is
returned to a Fund as undeliverable or remains uncashed for six months, the
Fund reserves the right to reinvest that dividend and all future dividends
payable to you in additional Fund shares at NAV. No interest will accrue on
amounts represented by uncashed dividend or redemption checks.
Dividends from a Fund's investment company taxable income together with
distributions from net realized short-term capital gains, if any
(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 by Municipal
Reserves that are designated by it as "exempt-interest dividends" generally
may be excluded by you from your gross income. The Funds are not expected
to realize long-term capital gains, or, therefore, to make distributions of
net capital gain (the excess of net long-term capital gain over net short-
term capital loss). Nor will dividends paid by any of the Funds will be
eligible for the dividends-received deductions allowed to corporations.
Dividends paid by a Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the
plans. A 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 a 20% income tax withholding.
In January of each year, your Fund will send you a Form 1099-DIV
notifying you of the status for federal income tax purposes of your
dividends from the Fund for the preceding year. Municipal Reserves also
will advise shareholders of the percentage, if any, of the dividends paid
that are exempt interest dividends and the portion, if any, of those
dividends that is a tax preference item for purposes of the federal
alternative minimum tax.
You must furnish the Funds with your TIN and state whether you are
subject to backup withholding for prior under-reporting, certified under
penalties of perjury. Unless previously furnished, investments received
without such a certification will be returned. Each Fund is required to
withhold 31% of all dividends payable to any individuals and certain other
non-corporate shareholders who do not provide the Fund with a correct TIN or
who otherwise are subject to backup withholding. A TIN is either the Social
Security number, IRS individual taxpayer identification number, or employer
identification number of the record owner of an account. Any tax withheld
as a result of backup withholding does not constitute an additional tax
imposed on the record owner and may be claimed as a credit on the record
owner's Federal income tax return.
Municipal Reserves. Dividends paid by Municipal Reserves will qualify
as "exempt-interest dividends," and thus will be excludable from gross
income by its shareholders, if the Fund satisfies the requirement that, at
the close of each quarter of its taxable year, at least 50% of the value of
its total assets consists of securities the interest on which is excludable
from gross income under section 103(a) of the Code ("tax-exempt interest");
the Fund expects to continue to satisfy this requirement. The aggregate
amount designated by Municipal Reserves as exempt-interest dividends for any
taxable year may not exceed its tax-exempt interest for the year over
certain amounts disallowed as deductions. The treatment of dividends from
the Fund under local and state income tax laws may differ from the treatment
thereof under the Code.
Interest on indebtedness incurred or continued to purchase or carry
shares of Municipal Reserves will not be deductible for federal income tax
purposes to the extent that Fund's distributions consist of exempt-interest
dividends. If Municipal Reserves shares are sold at a loss after being held
for six months or less, the loss will be disallowed to the extent of any
exempt-interest dividends received on those shares.
Tax-exempt interest attributable to certain private activity bonds
("PABs") (including, in the case of a RIC receiving interest on such bonds,
a proportionate part of the exempt-interest dividends paid by that RIC) is
an item of tax preference for purposes of the federal alternative minimum
tax. Exempt-interest dividends received by a corporate shareholder also may
be indirectly subject to that tax without regard to whether Municipal
Reserves' tax-exempt interest is attributable to those bonds.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by PABs or industrial
development bonds ("IDBs") should consult their tax advisers before
purchasing shares of Municipal Reserves because, for users of certain of
these facilities, the interest on those bonds is not exempt from federal
income tax. For these purposes, the term "substantial user" is defined
generally to include a "non-exempt person" who regularly uses in trade or
business a part of a facility financed from the proceeds of PABs or IDBs.
Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income
(including income from tax-exempt sources such as Municipal Reserves) plus
50% of their benefits exceeds certain base amounts. Exempt-interest
dividends paid by that Fund still are tax-exempt to the extent described
above; they are only included in the calculation of whether a recipient's
income exceeds the established amounts.
Proposals have been and may be introduced before Congress that would
restrict or eliminate the federal income tax exemption for interest on
municipal securities. If such a proposal were enacted, the availability of
such securities for investment by Municipal Reserves and the value of its
portfolio would be affected. In that event, that Fund would reevaluate its
investment objective and policies.
If Municipal Reserves invests in any instrument that generates taxable
income, under the circumstances described in its Prospectus, distributions
of the interest earned thereon will be taxable to its shareholders as
ordinary income to the extent of its earnings and profits. Moreover, if
Municipal Reserves realizes capital gain as a result of market transactions,
any distribution of that gain will be taxable to its shareholders. There
also may be collateral federal income tax consequences regarding the receipt
of exempt-interest dividends by shareholders such as S corporations,
financial institutions and property and casualty insurance companies. A
shareholder falling into any such category should consult its tax adviser
concerning its investment in shares of Municipal Reserves.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, a
Fund may be subject to the tax laws thereof. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a non-
resident alien individual, a foreign trust or estate, a foreign corporation
or a foreign partnership (a "foreign shareholder") depends on whether the
income from a Fund is "effectively connected" with a U.S. trade or business
carried on by the shareholder, as discussed below. Special U.S. federal
income tax rules that differ from those described below may apply to certain
foreign persons who invest in a Fund such as a foreign shareholder entitled
to claim the benefits of an applicable tax treaty. Foreign shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.
Foreign Shareholders - Dividends. Dividends (other than exempt-
interest dividends) distributed to a foreign shareholder whose ownership of
Fund shares is not effectively connected with a U.S. trade or business
carried on by the foreign shareholder ("effectively connected") generally
will be subject to a U.S. federal withholding tax of 30% (or lower treaty
rate). If a foreign shareholder's ownership of Fund shares is effectively
connected, however, then all distributions to that shareholder will not be
subject to such withholding and instead will be subject to U.S. federal
income tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of the
Fund by Dreyfus. Debt securities purchased and sold by a Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with a Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. A Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to a Fund and at spreads and commission rates,
if any, which are reasonable in relation to the benefits received. Dreyfus
also places transactions for other accounts that it provides with investment
advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of a Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 under the 1940 Act.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
None of the Funds paid a stated brokerage commission during the fiscal
years ended October 31, 1996, 1997 and 1998.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Past Performance."
Each Fund computes its current annualized and compound effective yields
using standardized methods required by the SEC. The annualized yield for
each Fund is computed by (a) determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a
seven calendar day period; (b) dividing the net change by the value of the
account at the beginning of the period to obtain the base period return; and
(c) annualizing the results (i.e., multiplying the base period return by
365/7). The net change in the value of the account reflects the value of
additional shares purchased with dividends declared on both the original
share and such additional shares, but does not include realized gains and
losses or unrealized appreciation and depreciation. Compound effective
yields are computed by adding 1 to the base period return (calculated as
described above), raising that sum to a power equal to 365/7 and subtracting
1.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because each Fund's yield fluctuates, its yield cannot be
compared with yields on savings accounts or other investment alternatives
that provide an agreed-to or guaranteed fixed yield for a stated period of
time. However, yield information may be useful to an investor considering
temporary investments in money market instruments. In comparing the yield
of one money market fund to another, consideration should be given to each
Fund's investment policies, including the types of investments made, length
of maturities of portfolio securities, the methods used by each Fund to
compute the yield (methods may differ) and whether there are any special
account charges which may reduce effective yield.
The following are the current and effective yields for the Funds for
the seven-day period ended October 31, 1998:
Current Yield Effective Yield
Investor Class R Investor Class R
Money Market Reserves 4.82% 5.03% 4.94% 5.16%
U.S. Treasury Reserves 4.33% 4.52% 4.42% 4.62%
Municipal Reserves 2.69% 2.89% 2.73% 2.93%
Current Yield Effective Yield
Institutional Prime Fund 5.08% 5.21%
Institutional Government Fund 4.79% 4.90%
Institutional U.S. Treasury Fund 4.65% 4.76%
Municipal Reserves may also, from time to time, utilize tax-equivalent
yields. The tax-equivalent yield is calculated by dividing that portion of
the Fund's yield (as calculated above) which is tax-exempt by one minus a
stated tax rate and adding the quotient to that portion of the Fund's yield,
if any (as calculated above), that is not tax-exempt. The following are the
tax-equivalent yields based on a tax rate of 39.6% for Municipal Reserves for
the seven-day period ended October 31, 1998:
Investor Class R
Tax-Equivalent Yield 4.45% 4.78%
Municipal Reserves may from time to time for illustrative purposes only
use tax-equivalency tables which compare tax-exempt yields to their equivalent
taxable yields for relevant federal income tax brackets. The following is an
example of such a table:
Tax Bracket 28% 31% 36% 39.6%
Tax-Exempt Yields Equivalent Taxable Yields
4.5% 6.25% 6.52% 7.03% 7.45%
5.0% 6.94% 7.25% 7.81% 8.28%
5.5% 7.64% 7.97% 8.59% 9.11%
6.0% 8.33% 8.70% 9.38% 9.93%
6.5% 9.03% 9.42% 10.16% 10.76%
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
From time to time, advertising material for a Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to, investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUNDS/COMPANY
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Each Fund is one of nineteen portfolios of the Company. Fund shares have no
preemptive, subscription or conversion 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 Funds, the handling of certain communications
between shareholders and the Funds, and the payment of dividends and
distributions payable by the Funds. For these services, Dreyfus Transfer,
Inc. receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Company during the month, and is
reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Funds' investments.
Under a custody agreement with the Company, Mellon Bank holds the Funds'
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Funds or which securities are to be purchased
or sold by the Funds.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectuses and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Funds' 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
returns filed on behalf of the Funds.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in each Fund's Annual
Report to shareholders. A copy of each Fund's Annual Report accompanies
this Statement of Additional Information. The financial statements included
in the Annual Reports, and the Independent Auditors' Reports thereon
contained therein, and related notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
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.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
Duff & Phelps Credit Rating, Co. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
DREYFUS BASIC S&P 500 STOCK INDEX 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 BASIC S&P 500 Stock Index 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-17
Management Arrangements B-23
Purchase of Shares B-25
Redemption of Shares B-28
Shareholder Services B-31
Additional Information About Purchases,
Exchanges and Redemptions B-36
Determination of Net Asset Value B-37
Dividends, Other Distributions and Taxes B-38
Portfolio Transactions B-42
Performance Information B-44
Information About the Fund/Company B-45
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors B-46
Financial Statements B-47
DESCRIPTION OF THE FUND
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company
is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund.
Prior to August 15, 1997, the Fund's name was Dreyfus Institutional S&P 500
Stock Index Fund, and prior to September 1, 1995, the Fund's name was
Dreyfus S&P 500 Stock Index Fund. Prior to October 17, 1994, the Fund's
name was Laurel S&P 500 Stock Index 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.
Additional Information About the Fund. "Standard & Poor's(R)," "S&P(R),"
"S&P 500(R)," and "Standard & Poor's 500(R)," are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by the Company. The Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's Rating
Services, a division of the McGraw-Hill Companies, Inc. ("Standard &
Poor's"), and Standard & Poor's makes no representation regarding the
advisability of investing in the Fund. Standard & Poor's makes no
representation or warranty, express or implied, to the owners of the Fund or
any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of the S&P
500 Index to track general stock market performance. Standard & Poor's only
relationship to the Company is the licensing of certain trademarks and trade
names of Standard & Poor's and of the S&P 500 Index which is determined,
composed and calculated by Standard & Poor's without regard to the Company
or the Fund. Standard & Poor's has no obligation to take the needs of the
Company or the owners of the Fund into consideration in determining,
composing or calculating the S&P 500 Index. Standard & Poor's is not
responsible for and has not participated in the determination of the prices
and amount of the Fund or the timing of the issuance or sale of the Fund or
in the determination or calculation of the equation by which the Fund is to
be converted into cash. Standard & Poor's has no obligation or liability in
connection with the administration, marketing or trading of the Fund.
STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD
& POOR'S SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. STANDARD & POOR'S MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY THE FUND, OWNERS OF THE FUND, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
STANDARD & POOR'S MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL STANDARD
& POOR'S HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
General. To maintain liquidity, the Fund may invest up to 5% of its
assets in U.S. Government securities, commercial paper, bank certificates of
deposit, bank demand and time deposits, repurchase agreements, when-issued
transactions and variable amount master demand notes.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association). No assurance
can be given that the U.S. Government will provide financial support to the
agencies or instrumentalities described in (b), (c) and (d) in the future,
other than as set forth above, since it is not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the Fund's credit guidelines. In a repurchase
agreement, the Fund buys a security from a seller that has agreed to
repurchase the same security at a mutually agreed upon date and price. The
Fund's resale price will be in excess of the purchase price, reflecting an
agreed upon interest rate. This interest rate is effective for the period of
time the Fund is invested in the agreement and is not related to the coupon
rate on the underlying security. Repurchase agreements may also be viewed as
a fully collateralized loan of money by the Fund to the seller. The period
of these repurchase agreements will usually be short, from overnight to one
week, and at no time will the Fund invest in repurchase agreements for more
than one year. The Fund will always receive as collateral securities whose
market value including accrued interest is, and during the entire term of
the agreement remains, at least equal to 100% of the dollar amount invested
by the Fund in each agreement, including interest, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the custodian. If the seller defaults,
the Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the Fund's credit
guidelines.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's, Prime-1 by Moody's Investors Service, Inc., F-1 by Fitch
IBCA, Inc. or Duff-1 by Duff & Phelps Credit Rating Co.
The Fund may invest in commercial paper issued in reliance on the
so-called "private placement" exemption from registration afforded by
Section 4(2) of the Securities Act of 1933, as amended ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors, such as the
Fund, who agree that they are purchasing the paper for an investment and not
with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) paper is normally resold to other
investors through or with the assistance of the issuer or investment dealers
who make a market in Section 4(2) paper, thus providing liquidity. Pursuant
to guidelines established by the Company's Board of Directors, Dreyfus may
determine that Section 4(2) paper is liquid for the purposes of complying
with the Fund's investment restriction relating to investments in illiquid
securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may purchase securities that
are not registered under the Securities Act of 1933, as amended, but that
can be sold to qualified institutional buyers in accordance with Rule 144A
under that Act ("Rule 144A securities"). Liquidity determinations with
respect to Section 4(2) paper and Rule 144A securities will be made by the
Board of Directors or by Dreyfus pursuant to guidelines established by the
Board of Directors. The Board or Dreyfus will consider availability of
reliable price information and other relevant information in making such
determinations. Rule 144A securities generally must be sold to other
qualified institutional buyers. If a particular investment in Section 4(2)
paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development, and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holders.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
Variable Amount Master Demand Notes. The Fund may invest in variable
amount master demand notes. Variable amount master demand notes are
unsecured obligations that are redeemable upon demand and are typically
unrated. These instruments are issued pursuant to written agreements
between their issuers and holders. The agreements permit the holders to
increase (subject to an agreed maximum) and the holders and issuers to
decrease the principal amount of the notes, and specify that the rate of
interest payable on the principal fluctuates according to an agreed-upon
formula. If an issuer of a variable amount master demand note were to
default on its payment obligation, the Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Fund will
only invest in variable amount master demand notes issued by entities that
Dreyfus considers creditworthy.
Investment Techniques
In addition to the principal investment strategies discussed in the
Fund's Prospectus, the Fund also may engage in the investment techniques
described below. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
Borrowing. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues of
U.S. Treasury and Government securities are often offered on a when-issued
basis. This means that delivery and payment for the securities normally will
take place approximately 7 to 45 days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at
the time the buyer enters into the commitment. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt securities
equal to the amount of the above commitments will be segregated on the
Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value
("NAV").
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
To secure advantageous prices or yields, the Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed
delivery basis involves the risk that the value of the securities purchased
will decline prior to the settlement date. The sale of securities for
delayed delivery involves the risk that the prices available in the market
on the delivery date may be greater than those obtained in the sale
transaction. The Fund will establish a segregated account consisting of
cash, U.S. Government securities or other high-grade debt obligations in an
amount at least equal at all times to the amounts of its delayed delivery
commitments.
Loans of Fund Securities. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to
be entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities, which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed 33-
1/3% of the value of the Fund's total assets and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities.
These loans are terminable by the Fund at any time upon specified notice.
The Fund might experience loss if the institution to which it has lent its
securities fails financially or breaches its agreement with the Fund. In
addition, it is anticipated that the Fund may share with the borrower some
of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the
Fund considers all relevant factors and circumstances including the
creditworthiness of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, the Fund: (1) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (2) agrees to repurchase the
securities at a future date by repaying the cash with interest. The Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. Cash or liquid high-grade debt
securities held by the Fund equal in value to the repurchase price including
any accrued interest will be maintained in a segregated account while a
reverse repurchase agreement is in effect.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
including financial futures contracts (such as index futures contracts) and
options (such as options on U.S. and foreign securities or indices of such
securities). The index Derivative Instruments which the Fund may use may be
based on indices of U.S. or foreign equity securities. These Derivative
Instruments may be used, for example, to preserve a return or spread or to
facilitate or substitute for the sale or purchase of securities.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments may be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities.
There can be no assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs, and may result in certain
tax consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value unless
the option is closed out in an offsetting transaction.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value and the Fund could experience losses to the extent of premiums
paid for them.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market. The Fund will not purchase put or call
options that are traded on a national stock exchange in an amount exceeding
5% of its net assets.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the price at which the option can be exercised).
The repurchase price with primary dealers is typically a formula price that is
generally based on a multiple of the premium received for the option plus the
amount by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write options on securities only if it covers the transaction
through: an offsetting option with respect to the security underlying the
option it has written, exercisable by it at a more favorable price; ownership of
(in the case of a call) or a short position in (in the the case of a put) the
underlying security; or segretation of cash or certain other assets suficient 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 or options on
futures contracts, traded on an exchange regulated by the CFTC, in each case
other than for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish those positions
(excluding the amount by which options are "in-the-money" at the time of
purchase) will not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into. This policy does not limit to 5% the
percentage of the Fund's assets that are at risk in futures contracts and
options on futures contracts for hedging purposes.
The Fund will not enter into futures contracts to the extent that its
outstanding obligations under these contracts would exceed 25% of the Fund's
total assets.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks.)
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options 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 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 and securities which may be resold under
Rule 144A under the 1933 Act, provided that the Board of Directors, or its
delegate, determines that such securities are liquid based upon the trading
markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
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 of the Company
The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements between the
Company, on behalf of the Fund, and those companies that furnish services to
the Fund. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of 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.
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.), a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers Inc. (formerly, Staffing
Resources) a temporary placement agency. 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; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company; President
and Chief Executive Officer, The Palladium Company; President and Chief
Executive Officer, Himmel & Co., Inc.; Chief Executive Officer, American
Food Management. 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. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 26 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. 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 Investment Services
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 and 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 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 and separately by the
Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1998, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $17,710 the year ended
December 31, 1998, the aggregate amount of fees received by Mr. Fort for
serving as a Board member of all funds in the Dreyfus/Laurel Funds (including
the Company) and Dreyfus High Yield Strategies Fund (for which payment is made
directly by the fund) was $59,010. In addition, Dreyfus reimbursed Mr. Fort a
total of $733.11 for expenses attributable to the Company's Board meetings
which is not included in the $5,313.37 amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The 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
of record 5% or more of Fund shares: Boston Safe Deposit & Trust Co.
Trustee As Agent-Omnibus Account, 1 Cabot Road, Medford MA 02155-5141,
28.82%; MAC & Co. A/C # MCCF8628232, Mellon Bank, NA, Mutual Fund
Operations, P.O. Box 3198, Pittsburgh, PA 15230-3198, 14.05%; MAC &Co. A/C
# MLCF8548692, Mutual Funds Operations, P.O. Box 3198, Pittsburgh PA, 15230-
3198, 12.15%; MAC & Co. 853-922, Mutual Funds Operations, P.O. Box 3198,
Pittsburgh, PA 15230-3198, 5.40%.
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 twenty-five 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 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 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; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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 .20% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee by an
amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering
the expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other
expenses of the Company are allocated among its funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each fund.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Year Ended October 31,
1998 1997 1996
Management fees $2,119,347 $1,246,259 $631,728
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 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 $5,000 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse,
Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one
participant. For all other accounts, the minimum initial investment is
$10,000. Subsequent investments must be at least $1,000 (or at least $100
in the case of persons who have held Fund shares since September 14, 1995).
There is no minimum on subsequent purchases for holders of Fund shares in a
Dreyfus-sponsored Keogh Plan, IRA or 403(b)(7) Plan with only one
participant account since September 14, 1995. The initial investment must
be accompanied by the Account Application. The Fund reserves the right to
offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Management understands that some Agents may impose certain conditions
on their clients which are different from those described in the Fund's
Prospectus and this Statement of Additional Information, and, to the extent
permitted by applicable regulatory authority, may charge their clients
direct fees. You should consult your Agent in this regard.
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 .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 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 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.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. 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 other 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 share for which certificates have been issued, are not
eligible for the Wire Redemption, Telephone Redemption or TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including of
The Dreyfus Touch automated telephone system) from any person representing
himself or herself to be you, or a representative of your Agent, and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers
may make redemption requests to their Selected Dealer. If the Selected
Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor 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. 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. 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.
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, 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, in exchange for shares of the
Fund, shares of another fund in the Dreyfus Family of Funds. 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 the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. 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. 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,
or if for Dreyfus retirement plan accounts to The Dreyfus Trust Company,
Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427, and the
notification will be effective three business days following receipt. The
Fund may modify or terminate this Privilege at any time or charge a service
fee. No such fee currently is contemplated.
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.
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 Dividend Options
Form. Enrollment in or cancellation of these Privileges is effective three
business days following receipt. These Privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dreyfus Dividend Sweep. The Fund
may modify or terminate these Privileges at any time or charge a service
fee. No such fee currently is contemplated. Shares held under Keogh Plans,
IRAs or other retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security, or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as the
Fund, may be appropriate for you. To enroll in Dreyfus Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained by calling 1-800-645-6561.
Death or legal incapacity will terminate your participation in this
Privilege. You may elect at any time to terminate your participation by
notifying in writing the appropriate Federal agency. Further, the Fund may
terminate your participation upon 30 days' notice to you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you
may have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the ACH system at each pay period. To
establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. Your employer
must complete the reverse side of the form and return it to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. You
may obtain the necessary authorization form by calling 1-800-645-6561. You
may change the amount of purchase or cancel the authorization only by
written notification to your employer. It is the sole responsibility of
your employer, not the Distributor, Dreyfus, the Fund, the Transfer Agent or
any other person, to arrange for transactions under the Dreyfus Payroll
Savings Plan. The Fund may modify or terminate this Privilege at any time
or charge a service fee. No such fee currently is contemplated. Shares
held under Keogh Plans, IRAs or other retirement plans are not eligible for
this Privilege.
Corporate Pension/Profit-Sharing and Retirement Plans. The Fund makes
available to corporations a variety of prototype pension and profit-sharing
plans, including a 401(k) Salary Reduction Plan. In addition, the Fund
makes available Keogh Plans, IRAs (including regular IRAs, spousal IRAs for
a non-working spouse, Roth IRAs, SEP-IRAs and IRA "Rollover Accounts"), and
403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with such a
plan should call 1-800-358-5566 for Keogh plans, 1-800-645-6561 for IRAs,
Roth IRAs and IRA "Rollover Accounts," and 1-800-322-7880 for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans.
If you wish to purchase Fund shares in conjunction with a Keogh Plan, a
403(b)(7) Plan or an IRA, including a SEP-IRA, you 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
anticipated receiving simultaneous orders that may significantly affect the
Fund (e.g., amounts equal to 1% or more of the Fund's total assets). If an
exchange request is refused, the Fund will take no other action with respect
to the shares until it receives further instructions from the investor. The
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount
of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy
on excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined NAV
but the purchase order would be effective only at the NAV next determined
after the fund being purchased receives the proceeds of the redemption,
which may result in the purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at
the last sale price on the securities exchange or national securities market
on which such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available. Where market
quotations are not readily available, the Fund's investments are valued
based on fair value as determined in good faith by the Company's Board.
Debt securities may be valued by an independent pricing service approved by
the Company's Board and are valued at fair value as determined by the
pricing service. Any assets or liabilities initially expressed in terms of
foreign currency will be translated into U.S. dollars at the midpoint of
the New York interbank market spot exchange rate as quoted on the day of
such translation or, if no such rate is quoted on such date, such other
quoted market exchange rate as may be determined to be appropriate by
Dreyfus. If the Fund has to obtain prices as of the close of trading on
various exchanges throughout the world, the calculation of NAV may not take
place contemporaneously with the determination of prices of certain of the
Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee,
are accrued daily and taken into account for the purpose of determining the
NAV of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors if it
believes that the discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled " Distributions and
Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income, if any, four times yearly, and distributes net realized
capital gains and gains from foreign currency transactions, if any, once a
year, but it may make distributions on a more frequent basis to comply with
the distribution requirements of the Code in all events in a manner
consistent with 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, and net short-term capital gains and ("Distribution
Requirement"), (2) must derive at least 90% of its annual gross income from
specified sources ("Income Requirement") and (3) must meet certain asset
diversification and other requirements. The term "regulated investment
company" does not imply the supervision of management or investment
practices or policies by any government agency. The Fund will be subject to
a non-deductible 4% excise tax ("Excise Tax") to the extent it falls to
distribute substantially all of its taxable investment income and capital
gains.
If the Fund failed to qualify for treatment as a RIC for any taxable
year, (1) it would be taxed at corporate rates on the full amount of its
taxable income for that year without being able to deduct the distributions
it makes to its shareholders and (2) the shareholders would treat all those
distributions, including distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), as dividends
(that is, ordinary income) to the extent of the Fund's earnings and profits.
In addition, the Fund could be required to recognize unrealized gains, pay
substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.
Distributions. If you elect to receive 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"), paid by the Fund 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, if any, 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 a 20%
income tax withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, 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,
individual taxpayer identification number or employer identification number
of the record owner of the account. Any tax withheld as a result of backup
withholding does not constitute an additional tax and may be claimed as a
credit on the record owner's Federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such a distribution would be a
return on investment in an economic sense, although taxable as stated. In
addition, if a shareholder sells shares of the Fund held for six months or
less and received 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.
Hedging Transactions. Gains from options and futures forward contracts
derived by the Fund with respect to its business of investing in securities
will qualify as permissible income under the Income Requirement.
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. 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 transaction respecting, certain
options, conform certain futures contracts ("Section 1256 Contracts") may be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. In addition, any Section 1256 Contracts remaining
unexercised at the end of the Fund's taxable year will be treated as sold
for their then fair market value (a process known as "marking-to-market"),
resulting in additional gain or loss to the Fund characterized in the manner
described above.
Offsetting positions held by the Fund involving certain options or
future contracts may constitute "straddles" which are defined to include
"offsetting positions" in actively traded personal property. Under Section
1092 of the Code, any loss from the disposition of a position in a straddle
generally may be deducted only to the extent the loss exceeds the unrealized
gain on the offsetting position(s) of the straddle. In addition, these
rules may postpone the recognition of loss that otherwise would be
recognized under the mark-to-market rules discussed above. The regulations
under Section 1092 also provide certain "wash sale" rules, which apply to
transactions where a position is sold at a loss and a new offsetting
position is acquired within a prescribed period, and "short sale" rules
applicable to straddles. If the Fund makes certain elections (including an
election as to straddles that include a position in one or more Section 1256
Contracts (so-called "mixed straddles"), the amount, character, and timing
of recognition of gains and losses from the affected straddle positions
would be determined under rules that vary according to the elections made.
Because only a few of the regulations implementing the straddle rules have
been promulgated, the tax consequences to the Fund of straddle transactions
are not entirely clear.
If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures 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 contract entered into by the Fund or
a related person with respect to the same or substantially similar property.
In addition, if the appreciated financial position is itself a short sale or
such a contract, acquisition of the underlying property or substantially
similar property will be deemed a constructive sale.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules, affect
the amount and timing of distributions to shareholders by causing the Fund
to recognize income prior to the receipt of cash payments. For example, the
Fund could be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and could
need to distribute such income to satisfy the Distribution Requirement and
to avoid the Excise Tax. In such case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, it may be subject to the tax laws thereof. Shareholders are also
advised to consult their tax advisers concerning the application of state
and local taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder") depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund,
such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of
an investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain generally will not be subject to U.S. federal income tax unless
the foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable year.
In the case of certain foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at the rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder certifies his or her foreign status to the Fund.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
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 these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. It is
the present opinion of the Directors that the desirability of retaining
Dreyfus as investment manager to the Fund outweighs any disadvantages that
may be said to exist from exposure to simultaneous transactions.
For fiscal years ended October 31, 1996, 1997 and 1998, the Fund paid
brokerage commissions of $44,814, $44,307 and $49,094, respectively.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. Portfolio turnover
may vary from year to year as well as within a year. The portfolio turnover
rates for the fiscal years ended October 31, 1997 and 1998 were 3.75% and
16.76%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total 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.
Average annual total return (expressed as a percentage) for Fund shares
for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year 5 Years Since Inception
BASIC S&P 500 Fund 21.68 20.92 21.05% (9/30/93)
Inception date appears in parentheses following the average annual total
return since inception.
The Fund's total return for the period September 30, 1993 (the Fund's
inception date) to October 31, 1998 was 164.44%. 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.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
From time to time, 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
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
From time to time, 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, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 31, 1999, providing audit services including (1) examination of the
annual financial statements, (2) assistance, review and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and financial highlights and the
Independent Auditors' Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual
Report, and the Independent Auditors' Report thereon contained therein, and
related notes, are incorporated herein by reference.
______________________________________________________________________________
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
INVESTOR SHARES AND RESTRICTED SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 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 Intermediate Bond 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-26
Management Arrangements B-32
Purchase of Shares B-34
Distribution Plan B-38
Redemption of Shares B-39
Shareholder Services B-43
Additional Information About Purchases, Exchanges and Redemptions B-48
Determination of Net Asset Value B-49
Dividends, Other Distributions and Taxes B-50
Portfolio Transactions B-55
Performance Information B-57
Information About the Fund/Company B-59
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors B-60
Financial Statements B-60
Appendix B-61
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.
The Fund seeks investment returns that exceed those of the Lehman
Brothers Aggregate Bond Index (the "Benchmark"). The Benchmark is a broad
market weighted index which covers the U.S. investment grade fixed-rate bond
market, including government and corporate securities, agency mortgage pass-
through securities, and asset-backed securities. The Benchmark covers those
securities in the Lehman Brothers Government/Corporate Bond Index, the
Lehman Brothers Mortgage-Backed Securities Index and the Lehman Brothers
Asset-Backed Securities Index. All issues have at least one year to
maturity. The Fund is not (and will not operate as) an index fund, and the
Fund's portfolio investments will not be limited to debt issues included in
the Benchmark.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
Corporate Obligations. The Fund may invest in corporate obligations
rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's Ratings Services ("Standard & Poors"), or if unrated, of
comparable quality as determined by Dreyfus. Securities rated BBB by
Standard & Poor's or Baa by Moody's are considered by those rating agencies
to be "investment grade" securities, although Moody's considers securities
rated Baa to have speculative characteristics. Further, while bonds rated
BBB by Standard & Poor's exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and principal for debt in this category
than debt in higher rated categories. The Fund will dispose in a prudent
and orderly fashion of bonds whose ratings drop below these minimum ratings.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Treasury to lend to such Government
agency or instrumentality, or (d) the credit of the instrumentality.
(Examples of agencies and instrumentalities are: Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Small Business Administration, Government National
Mortgage Association ("GNMA"), Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks, General Services
Administration, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Inter-American Development Bank, Asian-
American Development Bank, Student Loan Marketing Association, International
Bank for Reconstruction and Development, Federal Home Loan Mortgage
Corporation ("FHLMC"), and Federal National Mortgage Association ("FNMA").
No assurance can be given that the U.S. Government will provide financial
support to 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.
Fixed-Income Securities. The Fund may invest in fixed-income
securities to achieve its investment objective. In periods of declining
interest rates, the Fund's yield (its income from portfolio investments over
a stated period of time) may tend to be higher than prevailing market rates,
and in periods of rising interests rates, the Fund's yield may tend to be
lower than prevailing market rates. Also, in periods of falling interest
rates, the inflow of net new money to the Fund from the continuous sales of
its shares will likely be invested in portfolio instruments producing lower
yields than the balance of the Fund's portfolio, thereby reducing the yield
of the Fund. In periods of rising interest rates, the opposite can be true.
The net asset value ("NAV") of a fund investing in fixed-income securities
also may change as general levels of interest rates fluctuate. When
interest rates rise, the value of a portfolio of fixed-income securities can
be expected to decline. Conversely, when interest rates decline, the value
of a portfolio of fixed-income securities can be expected to rise.
Variable and Floating Rate Securities. The Fund may invest in variable
and floating rate securities. A variable rate security provides for the
adjustment of its interest either at predesignated periodic intervals or
whenever the market rate to which the security's interest rate is tied
changes. A floating rate security provides for the automatic adjustment of
its interest whenever a specified interest rate changes. Interest rates on
floating rate securities are ordinarily tied to, and are a percentage of, a
widely recognized interest rate, such as the yield on 90-day U.S. Treasury
bills or the prime rate of a specified bank. These rates may change as often
as twice daily. Generally, changes in interest rates will have a smaller
effect on the market value of variable and floating rate securities than on
the market value of comparable fixed-income obligations. Thus, investing in
variable and floating rate securities generally allows less opportunity for
capital appreciation and depreciation than investing in comparable fixed-
income securities.
Repurchase Agreements. The Fund may enter into repurchase agreements
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.
Mortgage-Related Securities. Mortgage-related securities are
securities that, directly or indirectly, represent interests in, or are
secured by and payable from, loans secured by real property, including pass-
through securities such as GNMA, FNMA and FHLMC certificates, private pass-
through securities, commercial mortgage-related securities, and certain
collateralized mortgage obligations. See "Mortgage Pass-Through
Certificates" discussed below. Investors should note that mortgage-related
securities in which the Fund may invest are developed and marketed from time-
to-time and that, consistent with its investment limitations, the Fund may
invest in those mortgage-related securities that Dreyfus believes may assist
the Fund in achieving its investment objective.
The yield characteristics of mortgage-related securities differ from
those of traditional debt securities. Among the major differences are that
interest and principal payments on mortgage-related securities are made more
frequently, generally once a month, and that principal prepayments on
mortgage-related securities may occur at any time because the underlying
mortgage loans generally may be prepaid at any time. As a result, if the
Fund purchases mortgage-related securities at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a
prepayment rate that is slower than expected will have the opposite effect
of increasing yield to maturity. Conversely, if the Fund purchases mortgage-
related securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield to
maturity. The timing and magnitude of prepayments cannot be predicted.
Generally, however, prepayments on fixed-rate mortgage loans will increase
during a period of falling mortgage interest rates and will decrease during
a period of rising mortgage interest rates. Amounts available for
reinvestment by the Fund are likely to be greater during a period of falling
interest rates and, as a result, are likely to be reinvested at lower
interest rates than during a period of rising interest rates. Accelerated
prepayments on mortgage-related securities purchased by the Fund at a
premium also impose a risk of loss of principal because the premium may not
have been fully amortized at the time the principal is repaid in full. The
value of mortgage-related securities may be significantly affected by
changes in interest rates, the market's perception of the issuers, and the
creditworthiness of the parties involved.
Collateralized mortgage obligations ("CMOs") are debt obligations
collateralized by mortgage-related securities issued by GNMA, FNMA or FHLMC,
or by whole loans or private issuer pass-through securities. CMOs may be
issued by GNMA, FNMA, FHLMC or private issuers. CMOs are structured to
direct payments on underlying collateral to different series or classes of
the obligations. CMO classes may be specially structured in a manner that
provides any of a wide variety of investment characteristics, such as yield,
effective maturity and interest rate sensitivity. CMO structuring is
accomplished by in effect stripping out portions of the cash flows
(comprised of principal and interest payments) on the underlying mortgage
assets and prioritizing the payments of those cash flows. In the most
extreme case, one class will be entitled to receive all of the interest, but
none of the principal, from the underlying mortgage assets (the interest-
only or "IO" class) and one class will be entitled to receive all of the
principal, but none of the interest (the principal-only or "PO" class).
CMOs may be structured in other ways that, based on mathematical modeling or
similar techniques, are expected to provide certain results. As market
conditions change, however, and particularly during periods of rapid or
unanticipated changes in market interest rates, the attractiveness of a CMO
class and the ability of a structure to provide the anticipated investment
characteristics may be significantly reduced. Such changes can result in
volatility in the market value, and in some instances reduced liquidity, of
the CMO class. The Fund may invest up to 20% of its total assets in CMOs.
In determining the Fund's average maturity, the maturity of a mortgage-
related security is deemed to be its effective life (i.e., the average time
in which the principal amount of the security is repaid), as estimated by
Dreyfus based on scheduled principal amortization and an anticipated rate of
principal prepayments, which rate, in turn, is based on past prepayment
patterns, prevailing interest rates and other factors. The effective life
of a mortgage-related security generally is substantially shorter than its
stated maturity.
Mortgage Pass-Through Certificates. Mortgage pass-through certificates
are issued by governmental, government-related and private entities and are
backed by pools of mortgages (including those on residential properties and
commercial real estate). The mortgage loans are made by savings and loan
institutions, mortgage bankers, commercial banks and other lenders. The
securities are "pass-through" securities because they provide investors with
monthly payments of principal and interest which, in effect, are a
"pass-through" of the monthly payments made by the individual borrowers on
the underlying mortgages, net of any fees paid to the issuer or guarantor of
the pass-through certificates. The principal governmental issuer of such
securities is GNMA, which is a wholly-owned U.S. Government corporation
within the Department of Housing and Urban Development. Government-related
issuers include FHLMC and FNMA, both government sponsored corporations owned
entirely by private stockholders. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and
other secondary market issuers also create pass-through pools of
conventional residential and commercial mortgage loans. Such issuers may be
the originators of the underlying mortgage loans as well as the guarantors
of the mortgage-related securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie
Maes represent an undivided interest in a pool of mortgages that are insured
by the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. Ginnie Maes entitle the holder to
receive all payments (including prepayments) of principal and interest owed
by the individual mortgagors, net of fees paid to GNMA and to the issuer
which assembles the mortgage pool and passes through the monthly mortgage
payments to the certificate holders (typically, a mortgage banking firm),
regardless of whether the individual mortgagor actually makes the payment.
Because payments are made to certificate holders regardless of whether
payments are actually received on the underlying mortgages, Ginnie Maes are
of the "modified pass-through" mortgage certificate type. The GNMA is
authorized to guarantee the timely payment of principal and interest on the
Ginnie Maes as securities backed by an eligible pool of mortgages. The GNMA
guarantee is backed by the full faith and credit of the United States, and
the GNMA has unlimited authority to borrow funds from the U.S. Treasury to
make payments under the guarantee. This is not a guarantee against market
decline of the value of these securities or the shares of the Fund. It is
possible that the availability (i.e., liquidity) of these securities could
be adversely affected by actions of the U.S. Government to tighten the
availability of its credit. The market for Ginnie Maes is highly liquid
because of the size of the market and the active participation in the
secondary market of securities dealers and a variety of investors.
(2) FHLMC Mortgage Participation Certificates ("Freddie Macs").
Freddie Macs represent interests in groups of specified first lien
residential conventional mortgages underwritten and owned by FHLMC. Freddie
Macs entitle the holder to timely payment of interest, which is guaranteed
by FHLMC. FHLMC guarantees either ultimate collection or timely payment of
all principal payments on the underlying mortgage loans. In cases where
FHLMC has not guaranteed timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at
any time after default on an underlying mortgage, but in no event later than
one year after it becomes payable. Freddie Macs are not guaranteed by the
United States or by any of the Federal Home Loan Banks and do not constitute
a debt or obligation of the United States or of any Federal Home Loan Bank.
The secondary market for Freddie Macs is highly liquid because of the size
of the market and the active participation in the secondary market of FHLMC,
securities dealers and a variety of investors.
(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes"). Fannie Maes represent an undivided interest in a pool of
conventional mortgage loans secured by first mortgages or deeds of trust, on
one family, or two to four family, residential properties. FNMA is
obligated to distribute scheduled monthly installments of principal and
interest on the mortgages in the pool, whether or not received, plus full
principal of any foreclosed or otherwise liquidated mortgages. The
obligation of FNMA under its guaranty is solely the obligation of FNMA and
is not backed by, nor entitled to, the full faith and credit of the United
States.
(4) Private issuer mortgage certificates are pass-through securities
structured in a similar fashion to Ginnie Maes, Fannie Maes and Freddie
Macs. Private issuer mortgage certificates are generally backed by
conventional single family, multi-family and commercial mortgages. Private
issuer mortgage certificates typically are not guaranteed by the U.S.
Government, its agencies or instrumentalities, but generally have some form
of credit support in the form of over-collateralization, pool insurance or
other form of credit enhancement.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the mortgagors of the underlying mortgages.
Asset-Backed Securities. Asset-backed securities are securities that
represent direct or indirect participations in, or are secured by and
payable from, assets such as motor vehicle installment sales contracts,
installment loan contracts, leases of various types of real and personal
property, and receivables from revolving credit (credit card) agreements.
Such assets are securitized through the use of trusts and special purpose
corporations. The value of such securities partly depends on loan
repayments by individuals, which may be adversely affected during general
downturns in the economy. Payments or distributions of principal and
interest on asset-backed securities may be supported by credit enhancements,
such as various forms of cash collateral accounts or letters of credit.
Like mortgage-related securities, asset-backed securities are subject to the
risk of prepayment. The risk that recovery or repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities,
however, is greater than is the case for mortgage-backed securities.
Municipal Bonds and Other Municipal Obligations. The Fund may invest
in debt obligations issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multistate
agencies or authorities. Municipal obligations bear fixed, floating or
variable rates of interest that are determined in some instances by formulas
under which the municipal obligation's interest rate will change directly or
inversely to changes in interest rates or an index, or multiples thereof, in
many cases subject to a maximum and minimum. The Fund limits its
investments in municipal obligations to those obligations the interest on
which is subject to federal income tax.
Municipal Bonds. Municipal bonds, which generally have a maturity of
more than one year when issued, have two principal classifications: general
obligation bonds and revenue bonds. A private activity bond is a particular
kind of revenue bond. The classification of general obligation bonds,
revenue bonds and private activity bonds are discussed below.
(1) General Obligation Bonds. The proceeds of these obligations are
used to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.
General obligation bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
(2) Revenue Bonds. Revenue bonds are issued to finance a wide variety
of capital projects including: electric, gas, water and sewer systems;
highways, bridges and tunnels; port and airport facilities; colleges and
universities; and hospitals. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities or, in some cases, the proceeds of a special excise or other
specific revenue source. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service
reserve fund whose money may be used to make principal and interest payments
on the issuer's obligations. Some authorities provide further security in
the form of a state's ability (without obligation) to make up deficiencies
in the debt service reserve fund.
(3) Private Activity Bonds. Private activity bonds are issued by or
on behalf of public authorities to raise money to finance various privately
operated facilities for business and manufacturing, housing, sports and
pollution control. These bonds are also used to finance public facilities
such as airports, mass transit systems, ports and parking. The payment of
the principal and interest on such bonds is dependent solely on the ability
of the facility's user to meet its financial obligations and the pledge, if
any, of real and personal property so financed as security for such payment.
Municipal Notes. Municipal notes generally are used to provide for
short-term capital needs and generally have maturities of thirteen months or
less. Municipal notes include:
(1) Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are issued
in anticipation of various seasonal tax revenue, such as income, sales, use
and business taxes, and are payable from these specific future taxes.
(2) Revenue Anticipation Notes. Revenue anticipation notes are issued
in expectation of receipt of other kinds of revenue, such as Federal
revenues available under the Federal Revenue Sharing Programs.
(3) Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment of
the notes.
Municipal Commercial Paper. Issues of municipal commercial paper
typically represent short-term, unsecured, negotiable promissory notes.
These obligations are issued by agencies of state and local governments to
finance seasonal working capital needs of municipalities or to provide
interim construction financing and are paid from general revenues of
municipalities or are refinanced with long-term debt. In most cases,
municipal commercial paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
Convertible Securities. The Fund may purchase convertible securities,
which are fixed-income securities such as bonds or preferred stock that may
be converted into or exchanged for a specified number of shares of common
stock of the same or a different issuer within a specified period of time
and at a specified price or formula. Convertible securities are senior to
common stock in a corporation's capital structure, but may be subordinated
to non-convertible debt securities. Before conversion, convertible
securities ordinarily provide a stable stream of income with yields
generally higher than those on common stock, but lower than those on non-
convertible debt securities of similar quality. In general, the market
value of a convertible security is the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., the value of the underlying shares of common stock if the security is
converted). As a fixed-income security, the market value of a convertible
security generally increases when interest rates decline and generally
decreases when interest rates rise. However, the price of a convertible
security also is influenced by the market value of the security's underlying
common stock. Thus, the price of a convertible security generally increases
as the market value of the underlying stock rises, and generally decreases
as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the
common stock of the same issuer. The Fund does not invest in common stocks
and does not intend to exercise conversion rights for any convertible
security that it may hold and will sell any common stocks received upon the
conversion of convertible securities as promptly as it can and in a manner
that it believes will reduce its risk of loss in connection with the sale.
Preferred Stock. The Fund may also purchase preferred stock, which is
a class of capital stock that typically pays dividends at a specified rate.
Preferred stock is generally senior to common stock, but subordinate to debt
securities, with respect to the payment of dividends and on liquidation of
the issuer. In general, the market value of preferred stock is its
"investment value," or its value as a fixed-income security. Accordingly,
the market value of preferred stock generally increases when interest rates
decline and decreases when interest rates rise, but, as with debt
securities, is also affected by the issuer's ability to make payments on the
preferred stock.
Zero Coupon Securities. The Fund may invest in zero coupon securities,
which are debt securities that do not entitle the holder to any periodic
payment of interest, but instead are issued or sold at a discount from their
face value. The amount of the discount varies depending on, among other
factors, prevailing interest rates, the liquidity of the security, and the
perceived creditworthiness of the issuer. Zero coupon securities may take
the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interests in such stripped debt obligations and coupons. The
market prices of zero coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to a greater degree to changes in interest rates than non-zero
coupon securities having similar maturities and credit qualities.
Illiquid Investments. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid investments. Investments
currently considered to be illiquid include securities for which market
quotations are not readily available; repurchase agreements and time
deposits with maturities in excess of seven days; certain mortgage-related
securities; securities involved in swap, cap, collar and floor transactions;
and certain options traded in the over-the-counter market and securities
used to cover such options. The Fund may not be able to sell illiquid
securities when Dreyfus considers it desirable to do so or may have to sell
such securities at a price lower than the price that could be obtained if
they were more liquid. Illiquid securities may be more difficult to value
due to the unavailability of reliable market quotations for such securities,
and investment in illiquid securities may have an adverse impact on the
Fund's NAV. The Fund may invest in commercial obligations issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended ("Section
4(2) paper"). The Fund may also purchase securities that are not registered
under the Securities Act of 1933, as amended, but that can be sold to
qualified institutional buyers in accordance with Rule 144A under that Act
("Rule 144A securities"). Liquidity determinations with respect to Section
4(2) paper and Rule 144A securities will be made by the Board of Directors
or by Dreyfus pursuant to guidelines established by the Board of Directors.
The Board or Dreyfus will consider availability of reliable price
information and other relevant information in making such determinations.
Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors, such as
the Fund, that agree that they are purchasing the paper for investment and
not with a view to public distribution. Any resale by the purchaser must be
pursuant to registration or an exemption therefrom. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from the
Fund or other holder.
Over-the-counter ("OTC") options purchased by the Fund will be
considered illiquid for purposes of the Fund's operating policy that
provides that it may not invest more than 15% of its net assets in illiquid
investments. When the Fund sells OTC options, it will segregate assets or
cover its obligations with respect to OTC options written by it. The assets
used as cover for OTC options written by the Fund will also be considered
illiquid investments for purposes of this limitation unless the OTC options
are sold to qualified dealers who agree that the Fund may repurchase any OTC
option it writes at a maximum price to be calculated by a formula set forth
in the option agreement. The cover for an OTC option written subject to
this procedure would be considered illiquid only to the extent that the
maximum repurchase price under the formula exceeds the intrinsic value of
the option.
Under current guidelines of the staff of the Securities and Exchange
Commission ("SEC"), IOs and POs are also considered to be illiquid; however,
IO and PO classes of fixed-rate mortgage-related securities issued by the
U.S. Government or one of its agencies or instrumentalities will not be
considered illiquid if Dreyfus determines that they are liquid pursuant to
guidelines established by or under the direction of the Company's Board of
Directors.
Commercial Paper. To maintain liquidity, or to establish temporary
liquidity positions necessary to effect pending investments, the Fund may
invest in commercial paper. These instruments are short-term obligations
issued by banks and corporations that have maturities ranging from two to
270 days. Each instrument may be backed only by the credit of the issuer or
may be backed by some form of credit enhancement, typically in the form of a
guarantee by a commercial bank. Commercial paper backed by guarantees of
foreign banks may involve additional risk due to the difficulty of obtaining
and enforcing judgments against such banks and the generally less
restrictive regulations to which such banks are subject. The Fund will only
invest in commercial paper of U.S. and foreign companies rated at the time
of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's, F-1 by
Fitch IBCA, Inc., Duff-1 by Duff & Phelps Credit Rating Co.
Bank Obligations. To maintain liquidity, or to establish temporary
liquidity positions necessary to effect pending investments, the Fund may
purchase bankers' acceptances, certificates of deposit, time deposits, and
other short-term obligations issued by domestic banks, foreign subsidiaries
or foreign branches of domestic banks, domestic and foreign branches of
foreign banks, domestic savings and loan associations and other banking
institutions. Included among such obligations are Eurodollar certificates
of deposit ("ECDs"), Eurodollar time deposits ("ETDs") and Yankee Dollar
certificates of deposit ("Yankee CDs"). ECDs are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks. ETDs
are U.S. dollar-denominated time deposits in a foreign branch of a U.S. bank
or a foreign bank. Yankee CDs are certificates of deposit issued by a U.S.
branch of a foreign bank denominated in U.S. dollars and held in the United
States. The Fund may also invest in Eurodollar bonds and notes, which are
obligations that pay principal and interest in U.S. dollars held in banks
outside the United States, primarily in Europe. All of these obligations
are subject to somewhat different risks than are the obligations of domestic
banks or issuers in the United States. See "Foreign Securities."
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal
of funds or other assets of the Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the yield on such securities.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended ("1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
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. In when-
issued transactions, delivery and payment for the securities normally takes
place approximately seven to 45 days after the date the buyer commits to
purchase them (delivery and payment could take place considerably later in
the case of some mortgage related securities). The payment obligation and
the interest rate that will be received on securities purchased on a
"when-issued" basis are each fixed at the time the buyer enters into the
commitment. The Fund will make commitments to purchase such securities only
with the intention of actually acquiring the securities, but the Fund may
sell these securities or dispose of the commitment before the settlement
date if 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 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.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (including interest rate, index and
foreign currency futures contracts), options (including options on
securities, indices, foreign currencies and futures contracts), forward
currency contracts, and interest rate and currency swaps, caps, collars and
floors. The index Derivative Instruments which the Fund may use may be
based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or
spread, to lock in unrealized market value gains or losses, to facilitate or
substitute for the sale or purchase of securities, to manage the duration of
securities, to alter the exposure of a particular investment or portion of
the Fund's portfolio to fluctuations in interest rates or currency rates, to
uncap a capped security or to convert a fixed rate security into a variable
rate security or a variable rate security into a fixed rate security.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the SEC, the several options and futures exchanges upon which they are
traded, the Commodity Futures Trading Commission ("CFTC") and various state
regulatory authorities. In addition, the Fund's ability to use Derivative
Instruments may be limited by tax considerations. See "Dividends, Other
Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities, currency and interest rate markets, which requires
different skills than predicting changes in the prices of individual
securities. There can be no assurance that any particular strategy will
succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs, and may result in certain
tax consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures, options, currencies
or forward contracts or (2) cash and short-term liquid debt securities with
a value sufficient at all times to cover its potential obligations to the
extent not covered as provided in (1) above. The Fund will comply with SEC
guidelines regarding cover for Derivative Instruments and will, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value unless
the option is closed out in an offsetting transaction.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value and the Fund would experience losses to the extent of premiums
paid for them.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and OTC options.
Exchange-traded options in the United States are issued by a clearing
organization that, in effect, guarantees completion of every exchange-traded
option transaction. In contrast, OTC options are contracts between the Fund
and its counterparty (usually a securities dealer or a bank) with no
clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to
make or take delivery of the underlying investment upon exercise of the
option. Failure by the counterparty to do so would result in the loss of
any premium paid by the Fund as well as the loss of any expected benefit of
the transaction. The Fund will enter into only those option contracts that
are listed on a national securities or commodities exchange or traded in the
OTC market for which there appears to be a liquid secondary market. The
Fund will not purchase put or call options that are traded on a national
exchange in an amount exceeding 5% of its net assets.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the option's price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
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.
Futures strategies also can be used to manage the average duration of
the Fund's fixed income portfolio. If Dreyfus wishes to shorten the average
duration of the Fund's fixed income portfolio, the Fund may sell an interest
rate futures contract or a call option thereon, or purchase a put option on
that futures contract. If Dreyfus wishes to lengthen the average duration
of the Fund's fixed income portfolio, the Fund may buy an interest rate
futures contact or a call option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5%, the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts for hedging purposes.
Foreign Currency Strategies - Special Considerations. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in
the values of the foreign currencies in which the Fund's securities are
denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such
hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
The Fund might seek to hedge against changes in the value of particular
currency when no Derivative Instruments on that currency are available or
such Derivative Instruments are more expensive than certain other Derivative
Instruments. In such cases, the Fund may hedge against price movements in
that currency by entering into transactions using Derivative Instruments on
another currency or a basket of currencies, the values of which Dreyfus
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the
Derivative Instrument will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
foreign currency Derivative Instruments, the Fund could be disadvantaged by
having to deal in the odd lot market (generally consisting of transactions
of less than $1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions
in the interbank market and thus might not reflect odd-lot transactions
where rates might be less favorable. The interbank market in foreign
currencies is a global, round-the-clock market.
Settlement of transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Forward Contracts. The Fund may engage in currency exchange
transactions on a spot or forward basis and may hold foreign currency
deposits. (See "Bank Obligations".) The Fund may exchange foreign currency
on a spot basis at the spot rate then prevailing for purchasing or selling
foreign currencies in the foreign exchange market.
The Fund may also enter into forward foreign currency exchange
contracts ("forward contracts"). Forward contracts are contracts 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 with respect
to either specific transactions or portfolio positions. The Fund may enter
into forward contracts to purchase or sell foreign currencies for a fixed
amount of U.S. dollars or other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund may
purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Fund intends to acquire. Forward
contracts may also serve as short hedges -- for example, the Fund may sell a
forward contract to lock in the U.S. dollar equivalent of the proceeds from
the anticipated sale of a security denominated in a foreign currency or from
anticipated dividend or interest payments denominated in a foreign currency.
Dreyfus may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or basket of
currencies, the value of which Dreyfus believes will bear a positive
correlation to the value of the currency being hedged.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are usually
entered into a principal basis, no fees or commissions are involved. When
the Fund enters into a forward contract, it relies on the counterparty to
make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of
any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets generally
do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by negotiating
directly with the counterparty. Thus, there can be no assurance that the
Fund will in fact be able to close out a forward contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the
counterparty, the Fund might be unable to close out a forward contract at
any time prior to maturity. In either event, the Fund would continue to be
subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that are
the subject of the hedge or to maintain cash or securities in a segregated
account.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value
of such securities measured in the foreign currency will change after the
forward contract has been established. Thus, the Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.
Forward currency contracts may substantially change the Fund's
investment exposure to changes in currency exchange rates and could result
in losses if currencies do not perform as Dreyfus anticipates. There is no
assurance that Dreyfus' use of forward currency contracts will be
advantageous to the Fund or that it will hedge at an appropriate time.
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 in accordance with guidelines established by the Board.
If there is a default by the other party to such a transaction, the Fund
will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreement relating
to the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments. See "Illiquid
Investments."
Mortgage Dollar Rolls. The Fund may enter into mortgage "dollar
rolls" in which the Fund sells mortgage-related securities for delivery in
the current month and simultaneously contracts to purchase substantially
similar securities on a specified future date. The mortgage-related
securities that are purchased will be of the same type and will have the
same interest rate as those securities sold, but generally will be supported
by different pools of mortgages with different prepayment histories than
those sold. The Fund forgoes principal and interest paid during the roll
period on the securities sold in a dollar roll, but the Fund is compensated
by the difference between the current sales price and the lower price of the
future purchase, as well as by any interest earned on the proceeds of the
securities sold. The Fund could be compensated also through the receipt of
fee income equivalent to a lower forward price. The dollar rolls entered
into by the Fund normally will be "covered." A covered roll is a specific
type of dollar roll for which there is an offsetting cash position or a cash
equivalent security position that matures on or before the forward
settlement date of the related dollar roll transaction. Covered rolls are
not treated as a borrowing or other senior security and will be excluded
from the calculation of the Fund's borrowings and other senior securities.
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.)
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, options, forward contracts, swaps, caps, collars and
floors shall not be considered to involve the borrowing of money or issuance
of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments, swaps, caps, collars, floors,
and repurchase agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may purchase and
sell foreign currency, futures contracts, options, forward currency
contracts, swaps, caps, collars and floors, and other similar instruments.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amounts to the
securities sold short, and provided that transactions in futures contracts,
options, forward contracts, swaps, caps, collars, floors, and other similar
financial instruments are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts, options, forward contracts, swaps, caps, collars, floors,
and other similar financial instruments shall not constitute purchasing
securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers, Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of 1% of the securities of such issuer,
together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in 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 not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include interest only (IO) and principal only (PO) classes of fixed rate
mortgage related securities issued by the U.S. Government or one of its
agencies or instrumentalities; provided, that the Board of Directors, or its
delegate, determines that such securities are liquid pursuant to guidelines
established by or under the direction of the Board of Directors. Also, for
purposes of this limitation, illiquid securities shall not include Section
4(2) paper or securities that may be resold under Rule 144A under the
Securities Act of 1933; provided that the Board of Directors, or its
delegate, determines that such securities are liquid based upon the trading
markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and
any combination thereof if, as a result of such purchase, the value of its
aggregate investment in such securities will exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and options on futures contracts.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in
the values of assets will not constitute a violation of such restriction,
except as otherwise required by the 1940 Act.
If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains
an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements between the
Company, on behalf of the Fund, and those companies that furnish services to
the Fund. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of nine Directors. The following
lists the Directors and officers and their positions with the Company and
their present and principal occupations during the past five years. Each
Director who is an "interested person" of the Company (as defined in the
1940 Act) is indicated by an asterisk(*). Each of the Directors also serves
as a Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.), a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources) a temporary placement agency. 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. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 26 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. 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 Investment Services
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 and 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
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
Joseph S. DiMartino* $17,710.00 $619,660
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 and separately by the
Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1998, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $17,710. For the year ended
December 31, 1998, the aggregate amount of fees received by Mr. Fort for
serving as a Board member of all funds in the Dreyfus/Laurel Funds (including
the Company) and Dreyfus High Yield Strategies Fund (for which payment is made
directly by the fund) was $59,010. In addition, Dreyfus reimbursed Mr. Fort a
total of $733.11 for expenses attributable to the Company's Board meetings
which is not included in the $5,313.37 amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The 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 shareholders owned of record 5%
or more of Investor shares of the Fund: Mary C. Spalding, Residencia La
Fuente 12A, 29650 Mijas, Malaga Spain, 14.13%; Charles Schwab & Co. Inc.,
Reinvest Account, 101 Montgomery Street, San Francisco, CA 94104-4122, 7.62%
of record; Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, 6.43% of record; Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998,
6.43%; Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052,
Jersey City, NJ 07303-9998, 5.91%; Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, 5.89%; and
Donaldson and Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052,
Jersey City, NJ 07303-9998, 5.84%.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and
"Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994, subject to the overall authority of the Company's Board of
Directors in accordance with Maryland law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus manages
the Fund by making investment decisions based on the Fund's investment
objective, policies and restrictions. The Management Agreement is subject
to review and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. The Company may terminate the
Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities
on 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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 0.55% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee by an
amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering
the expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other
expenses of the Company are allocated among its funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each fund.
For the last three years, the Fund had the following expenses:
For the Fiscal Year
Ended October 31,
1998 1997 1996
Management fees $823,224 $426,110 $169,710
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 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 offers Investor shares and Restricted shares.
(Investor and Restricted shares of the Fund were formerly called
Institutional and Retail shares, respectively.) Investor shares and
Restricted shares are identical, except as to the services offered to and
the expenses borne by each class. Investor shares are offered to any
investor. Restricted shares are sold primarily to bank trust departments
and other financial service providers acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
or to customers who have received and hold shares of the Fund distributed to
them by virtue of such an account or relationship. Unless the Fund is
otherwise instructed, new purchases by existing shareholders are in the same
class of shares that the shareholder then holds. The Fund reserves the
right to reject any purchase order. You may be charged a fee if you effect
transactions in Fund shares through an Agent.
The minimum initial investment is $2,500, or $1,000 if you are a client
of an Agent that maintains an omnibus account in the Fund and has made an
aggregate minimum initial purchase for its customers of $2,500. Subsequent
investments must be at least $100. The minimum initial investment is $750
for Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal
IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and
403(b)(7) Plans with only one participant and $500 for Dreyfus-sponsored
Education IRAs, with no minimum on subsequent purchases. The initial
investment must be accompanied by the Fund's Account Application. For full-
time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, Board members of a fund advised by
Dreyfus including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment for Investor
shares is $1,000. For full-time or part-time employees of Dreyfus or any of
its affiliates or subsidiaries who elect to have a portion of their pay
directly deposited into their Fund account, the minimum initial investment
for Investor shares is $50. The Fund reserves the right to offer Fund
shares without regard to minimum purchase requirements to employees
participating in certain qualified or non-qualified employee benefit plans
or other programs where contributions or account information can be
transmitted in a manner and form acceptable to the Fund. The Fund reserves
the right to vary further the initial and subsequent investment minimum
requirements at any time.
Investor shares are also 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.
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.
Both Investor shares and Restricted shares are sold on a continuous
basis. NAV per share is determined as of the close of trading on the floor
of the New York Stock Exchange ("NYSE") (currently 4:00 p.m., New York
time), on each day the NYSE is open for business. For purposes of
determining NAV, options and futures contracts will be valued 15 minutes
after the close of trading on the floor of the NYSE. NAV per share of each
class is computed by dividing the value of the Fund's net assets represented
by such class (i.e., the value of its assets less liabilities) by the total
number of shares of such class outstanding. For further information
regarding the methods employed in valuing the Fund's investments, see
"Determination of Net Asset Value".
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the 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 the NAV determined as of the
close of trading on the floor of the NYSE on that day. Otherwise, the
orders will be based on the next determined NAV. It is the dealers'
responsibility to transmit orders so that they will be received by the
Distributor or its designee before the close of its business day. For
certain institutions that have entered into agreements with the Distributor,
payment for the purchase of Fund shares may be transmitted, and must be
received by the Transfer Agent, within three business days after the order
is placed. If such payment is not received within three business days after
the order is placed, the order may be canceled and the institution could be
held liable for resulting fees and/or losses.
Agents may receive different levels of compensation for selling
different classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the Fund's Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution Plan. Each Agent has agreed to transmit to its clients a
schedule of such fees. You should consult your Agent in this regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by
Eligible Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service.
Dreyfus TeleTransfer Privilege. You may purchase Fund 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 that 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 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 "Your Investment."
Investor shares are subject to annual fees for distribution and
shareholder services. Distribution and shareholder servicing fees paid by
Investor shares will cause Investor shares to have a higher expense ratio
and pay lower dividends than Restricted shares.
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 - Investor Shares. The Company has adopted a
Distribution Plan ("Plan") with respect to the Investor shares of the Fund.
Under the Plan, the Fund may spend annually up to 0.25% of its average daily
net assets attributable to Investor shares to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities
and the Distributor for shareholder servicing activities and for activities
or expenses primarily intended to result in the sale of Investor shares of
the Fund. The Plan allows the Distributor to make payments from the Rule
12b-1 fees it collects from the Fund to compensate Agents that have entered
into Selling Agreements ("Agreements") with the Distributor. Under the
Agreements, the Agents are obligated to provide distribution-related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Investor shares of the Fund.
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" (as defined in the 1940 Act)
of the Company and who do not have any direct or indirect financial interest
in the operation of the Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to annual
approval by the entire Board of Directors and by the Directors who are
neither interested persons nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. The Plan was so approved by
the Directors at a meeting held on February 4, 1999. The Plan is
terminable, as to the Fund's Investor shares, at any time by vote of a
majority of the Directors who are not interested persons and have no direct
or indirect financial interest in the operation of the Plan or by vote of
the holders of a majority of the outstanding Investor shares of the Fund.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Plan are payable without regard to
actual 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. From
time to time, the Agents, the Distributor and the Fund may voluntarily agree
to reduce the maximum fees payable under the Plan.
For the fiscal year ended October 31, 1998, the Fund paid the
Distributor and Dreyfus Service Corporation: $14 and $1,656, respectively,
pursuant to the Plan with respect to Investor shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If you hold Fund shares of more than one class, any request
for redemption must specify the class of shares being redeemed. If you fail
to specify the class of shares to be redeemed or if you own fewer shares of
the class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges when shares are redeemed. Agents or other
institutions may charge their clients a fee for effecting redemptions of
Fund shares. Any certificates representing Fund shares being redeemed must
be submitted with the redemption request. The value of the shares redeemed
may be more or less than their original cost, depending upon the Fund's then-
current NAV per share.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Check Redemption Privilege, which are granted automatically
unless you specifically refuse them by checking the applicable "No" box on
the Account Application. The Telephone Redemption Privilege and the Check
Redemption Privilege may be established for an existing account by a
separate signed Shareholder Services Form or, with respect to the Telephone
Redemption Privilege, by oral request from any of the authorized signatories
on the account by calling 1-800-645-6561. You also may redeem shares
through the Wire Redemption Privilege or the Dreyfus TeleTransfer Privilege
if you have checked the appropriate box and supplied the necessary
information on the Account Application or have filed a Shareholders 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 other
Agents and institutions. The Fund makes available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities. The Fund reserves the right to refuse any request made
by telephone, including requests made shortly after a change of address, and
may limit the amount involved or the number of such requests. The Fund may
modify or terminate any redemption privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs, or other retirement plans, and shares
for which certificates have been issued, are not eligible for the Check
Redemption, Wire Redemption, Telephone Redemption or Dreyfus TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus 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.
Check Redemption Privilege. You may write Redemption Checks drawn on
your Fund account. Redemption Checks may be made payable to the order of
any person in the amount of $500 or more. Potential fluctuations in the
Fund's NAV per share should be considered in determining the amount of the
check. Redemption Checks should not be used to close your account.
Redemption Checks are free, but the Transfer Agent will impose a fee for
stopping payment of a Redemption Check upon your request or if the Transfer
Agent cannot honor a Redemption Check due to insufficient funds or other
valid reason. You should date your Redemption Checks with the current date
when you write them. Please do not postdate your Redemption Checks. If you
do, the Transfer Agent will honor, upon presentment, even if presented
before the date of the check, all postdated Redemption Checks which are
dated within six months of presentment for payment, if they are otherwise in
good order.
Redemption Through a Selected Dealer. Customers of Selected Dealers
may make redemption requests to their Selected Dealer. If the Selected
Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor 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 per share. 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.
Redemption proceeds, if wired, will be wired to the investor's account at
the bank of record designated in the investor's file at the Transfer Agent,
if the investor's bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. 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."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. 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 the investor's account at an ACH member bank
ordinarily two business days after receipt of the redemption request.
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. 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. See "Purchase of Shares - Dreyfus TeleTransfer Privilege."
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 90day 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 of
Directors reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In 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. Shares of any class of the Fund may be exchanged for
shares of certain other funds advised or administered by Dreyfus. Unless
the Fund is otherwise instructed, exchanges are in the same class of shares
that the shareholder then holds. Shares of the 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
certain other eligible funds 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 per share as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next Auto-Exchange transaction. Shares held
under IRAs and other retirement plans are eligible for this Privilege.
Exchanges of IRA shares may be made between IRA accounts and from regular
accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only
among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to 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 the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. 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 Builderr. 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
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-645-6561. 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 (referred to hereinafter
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load charged by
the fund from which dividends or other distributions are being
swept, without giving effect to any reduced loads, the difference
will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a 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 other distributions, if any, from the Fund to a designated
bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You
may cancel these Privileges by mailing written notification to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island, 02940-9671. To
select a new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these Privileges is effective three
business days following receipt. These Privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dreyfus Dividend Sweep. The Fund
may modify or terminate these Privileges at any time or charge a service
fee. No such fee currently is contemplated. Shares held under Keogh Plans,
IRAs or other retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained by calling 1-800-645-
6561. Death or legal incapacity will terminate your participation in this
Privilege. You may elect at any time to terminate your participation by
notifying in writing the appropriate Federal agency. Further, the Fund may
terminate your participation upon 30 days' notice to you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum $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.
Dreyfus Step Program. Dreyfus Step Program enables you to purchase
Investor shares without regard to the Fund's minimum initial investment
requirements through Dreyfus-Automatic Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a
Dreyfus Step Program account, you must supply the necessary information on
the Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing your participation in Dreyfus-Automatic Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). The Fund
reserves the right to redeem your account if you have terminated your
participation in the Program and your account's NAV is $500 or less. See
"Account Policies - General Policies" in the Fund's Prospectus. The Fund
may modify or terminated this Program at any time. Investors who wish to
purchase Investor shares through the Dreyfus Step-Program in conjunction
with a Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs
and IRA "Rollover Accounts."
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-645-6561; 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 participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined NAV
but the purchase order would be effective only at the NAV next determined
after the fund being purchased receives the proceeds of the redemption,
which may result in the purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. Substantially all of the fund's
investments (excluding short-term investments) are valued each business day
by an independent pricing service (the "Service") approved by the Fund's
Board. Securities valued by the Service for which quoted bid prices in the
judgment of the Service are readily available and are representative of the
bid side of the market are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked
prices (as calculated by the Service based upon its evaluation of the market
for such securities). Other debt securities valued by the Service are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Short-term investments are not valued by the
Service and are carried at amortized cost, which approximates value. Debt
securities that are not valued by the Service are valued at the average of
the most recent bid and asked prices in the market in which such investments
are primarily traded, or at the last sales price for securities traded
primarily on an exchange. In the absence of reported sales of investments
traded primarily on an exchange, the average of the most recent bid and
asked prices is used. Bid price is used when no asked price is available.
Investments traded in foreign currencies are translated to U.S. dollars at
the prevailing rates of exchange. If the Fund has to obtain prices as of
the close of trading on various exchanges throughout the world, the
calculation of NAV may not take place contemporaneously with the
determination of prices of certain of the Fund's securities. Expenses and
fees, including the management fee, are accrued daily and are taken into
account for the purpose of determining the NAV of Fund shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board 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 daily and pays monthly dividends
from its net investment income and distributes net realized capital gains
and gains from foreign currency transactions, if any, once a year, but it
may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent
with the 1940 Act. All expenses are accrued daily and deducted before
declaration of dividends to investors. The Fund will not make distributions
from net realized capital gains unless all capital loss carryovers, if any,
have been utilized or have expired. Shares begin accruing dividends on the
day following the date of purchase. The Fund's earnings for Saturdays,
Sundays and holidays are declared as dividends on the next business day. If
you redeem all shares in your account at any time during the month, all
dividends to which you are entitled will be paid to you along with the
proceeds of the redemption. Investors other than qualified retirement plans
may choose whether to receive dividends and other distributions in cash, to
receive dividends in cash and reinvest other distributions in additional
Fund shares at NAV, or to reinvest both dividends and other distributions in
additional Fund shares at NAV; dividends and other distributions paid to
qualified retirement plans are reinvested automatically in additional Fund
shares at NAV. Dividends paid by each Class are calculated at the same time
and in the same manner and are in the same amount, except that the expenses
attributable solely to a particular Class are borne exclusively by that
Class. Investor shares will receive lower per share dividends than
Restricted shares because of the higher expenses borne by the Investor
shares.
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.
Distributions. If you elect to receive dividends and other
distributions in cash, and your distribution check is returned to the Fund
as undeliverable or remains uncashed for six months, the Fund reserves the
right to reinvest that distribution and all future distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains, net realized gains
from certain foreign currency transactions and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to those shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and
whether the distributions are received in cash or reinvested in additional
Fund shares.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the non-resident foreign investor claims the benefit of a lower rate
specified in a tax treaty. Capital gain distributions paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions by
such an investor, regardless of the extent to which gain or loss may be
realized, generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, unless the foreign
investor certifies his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions paid during
the year.
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.
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.
Interest received by the Fund may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
Foreign Currency and Hedging Transactions. Gains from the sale or
other disposition of foreign currencies (except certain gains that may be
excluded by future regulations), and gains from options, futures and forward
contracts derived by the Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under
the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gains or
losses from the disposition of foreign currencies and certain foreign-
currency-denominated instruments (including debt instruments and financial
forward, futures contracts and options) may be treated as ordinary income or
loss under Section 988 of the Code. In addition, all or a portion of any
gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that otherwise would be treated as
capital gain may be treated as ordinary income. "Conversion transactions"
are defined to include certain option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by 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. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any Section 1256 contracts remaining unexercised at the end of 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 rule discussed above. The
regulations under Section 1092 also provide certain "wash sale" rules, which
apply to transactions where a position is sold at a loss and a new
offsetting position is acquired within a prescribed period, and "short sale"
rules applicable to straddles. If the Fund makes certain elections
(including an election as to straddles that include a position in one or
more Section 1256 Contracts (so-called "mixed straddles")), the amount,
character, and timing of recognition of gains and losses from the affected
straddle positions would be determined under rules that vary according to
the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules, affect
the amount and timing of distributions to shareholders by causing the Fund
to recognize income prior to the receipt of cash payments. For example, the
Fund would be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and could
need to distribute that income to satisfy the Distribution Requirement and
avoid imposition of the 4% excise tax referred to in the Fund's Prospectus
under "Dividends, Other Distributions and Taxes." In that case, the Fund
may have to dispose of securities it might otherwise have continued to hold
in order to generate cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the
fund may be subject to the tax laws thereof. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder") depends on
whether the income from 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 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 transactions and the commission are
comparable to what they would be with other qualified brokerage firms.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
did not pay any brokerage commissions.
Portfolio Turnover. While securities are purchased for the Fund on the
basis of potential for high current income and possible capital appreciation
and not for short-term trading profits, the Fund's portfolio turnover rate
may exceed 100%. A portfolio turnover rate of 100% would occur, for
example, if all the securities held by the Fund were replaced once in a
period of one year. A higher rate of portfolio turnover involves
correspondingly greater brokerage commissions and other expenses that must
be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a higher rate of portfolio turnover (100% or higher) may result in
the realization of larger amounts of short-term and/or long-term capital
gains that, when distributed to the Fund's shareholders, are taxable to them
at the then current rate. Nevertheless, securities transactions for the
Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus deems its appropriate to
make changes in the Fund's assets. The portfolio turnover rate for the Fund
is calculated by dividing the lesser of the Fund's annual sales or purchases
of portfolio securities (exclusive of purchases and sales of securities
whose maturities at the time of acquisition were one year or less) by the
monthly average value of securities in the Fund during the year. Portfolio
turnover may vary from year to year as well as within a year. The portfolio
turnover rates for the fiscal years ended October 31, 1997 and 1998 were
143.91% and 106.93%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for Investor
shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year Since Inception
Investor shares 8.80% 7.04% (11/1/95)
Inception date appears in parentheses following the average annual total
return since inception.
The total return (expressed as a percentage) for Investor shares of the
Fund for the period beginning with the date of inception (November 1, 1995)
and ending October 31, 1998 was 22.65%.
Average annual total returns (expressed as a percentage) for Restricted
shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year Since Inception
Restricted shares 8.90% 7.26% (11/1/95)
Inception date appears in parentheses following the average annual total
return since inception.
The total return (expressed as a percentage) for Restricted shares of
the Fund for the period beginning with the date of inception (November 1,
1995) and ending October 31, 1998 was 23.40%.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV per share with a
hypothetical $1,000 payment made at the beginning of the period (assuming
the reinvestment of dividends and other distributions), dividing by the
amount of the initial investment, taking the "n"th root of the quotient
(where "n" is the number of years in the period) and subtracting 1 from the
result.
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.
The current yield for the 30-day period ended October 31, 1998 was
5.05% for Investor shares and 5.30% for Restricted shares. Yields are
computed by using standardized methods of calculation required by the SEC.
Yields are calculated by dividing the net investment income per share earned
during a 30-day (or one-month) period by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD = 2[(a-b + 1)6-1]
cd
Where: a = dividends and interest earned during the
period;
b = expenses accrued for the period (net of
reimbursements);
c = average daily number of shares
outstanding during the period that were
entitled to receive dividends; and
d = maximum offering price per share on the
last day of the period.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Lehman Brothers Aggregate Bond Index; (ii) other Lehman Brothers indices,
the Dow Jones Industrial Average, or other appropriate unmanaged domestic or
foreign indices of performance of various types of investments so that
investors may compare the Fund's results with those of indices widely
regarded by investors as representative of the securities markets in
general; (iii) other groups of mutual funds tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds
by overall performance, investment objectives and assets, or tracked by
other services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; (iv) the Consumer Price Index (a
measure of inflation) to assess the real rate of return from an investment
in the Fund; and (v) products managed by a universe of money managers with
similar country allocation and performance objectives. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect
deductions or administrative and management costs and expenses. From time
to time, advertising materials for the Fund may refer to Morningstar ratings
and related analyses supporting the rating.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
The Fund is one of nineteen portfolios of the Company. Fund shares have no
preemptive, subscription or conversion rights and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they
vote separately by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
The Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
The Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 31, 1999, providing audit services including (1) examination of the
annual financial statements, (2) assistance, review and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. 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 AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Credit Ratings, Co. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
DREYFUS PREMIER LIMITED TERM INCOME FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
DREYFUS PREMIER BALANCED FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
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 Premier Limited Term Income Fund (the "Limited Term Income
Fund") and the current Prospectus of the Dreyfus Premier Balanced Fund (the
"Balanced Fund") (Limited Term Income Fund and Balanced Fund are referred to
herein individually, as a "Fund" and, collectively, as the "Funds") each
dated March 1, 1999, as they may be revised from time to time. The Funds
are separate, diversified portfolios of The Dreyfus/Laurel Funds, Inc., an
open-end management investment company (the "Company"), known as a mutual
fund. To obtain a copy of a Fund's Prospectus, please write to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call one of
the following numbers:
Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Funds B-2
Management of the Funds B-19
Management Arrangements B-26
Purchase of Shares B-28
Distribution and Service Plans B-36
Redemption of Shares B-39
Shareholder Services B-43
Additional Information About Purchases,
Exchanges and Redemptions B-49
Determination of Net Asset Value B-50
Dividends, Other Distributions and Taxes B-51
Portfolio Transactions B-56
Performance Information B-58
Information About the Funds/Company B-61
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors B-62
Financial Statements B-63
Appendix B-64
DESCRIPTION OF THE FUNDS
The following information supplements and should be read in conjunction
with the sections of each Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company
is an open-end management investment company comprised of separate
portfolios, including the Funds, each of which is treated as a separate
fund. Prior to March 1, 1997, the name of Limited Term Income Fund was
Premier Limited Term Income Fund and the name of Balanced Fund was Premier
Balanced Fund. Prior to December 19, 1994, the name of Limited Term Income
Fund was Laurel Limited Term Income Fund and the name of Balanced Fund was
Laurel Balanced Fund. Each Fund is diversified, which means that, with
respect to 75% of its total assets, each Fund will not invest more than 5%
of its assets in the securities of any single issuer.
Limited Term Income Fund seeks to provide shareholders with as high a
level of current income as is consistent with safety of principal and
maintenance of liquidity.
Balanced Fund seeks to outperform a hybrid index, 60% of which is the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500") and 40% of
which is the Lehman Brothers Intermediate Government/Corporate Bond Index
("Intermediate Index"). The S&P 500 is composed of 500 common stocks which
are chosen by Standard & Poor's to best capture the price performance of a
large cross-section of the U.S. publicly traded stock market. The S&P 500
is structured to approximate the general distribution of industries in the
U.S. economy. The inclusion of a stock in the S&P 500 does not imply that
Standard & Poor's believes the stock to be an attractive or appropriate
investment, nor is Standard & Poor's in any way affiliated with the Fund.
The 500 securities, most of which trade on the New York Stock Exchange
("NYSE"), represent approximately 75% of the market value of all U.S. common
stocks. Each stock in the S&P 500 is weighted by its market capitalization.
That is, each security is weighted by its total market value relative to the
total market values of all the securities in the S&P 500. Component stocks
included in the S&P 500 are chosen with the aim of achieving a distribution
at the index level representative of the various components of the U.S.
economy and therefore do not represent the 500 largest companies. Aggregate
market value and trading activity are also considered in the selection
process. A limited percentage of the S&P 500 may include foreign
securities. The Intermediate Index is an index established by Lehman
Brothers, Inc. which includes fixed rate debt issues rated investment grade
or higher by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Rating Services, a division of McGraw-Hill Companies, Inc. ("Standard &
Poor's"), or Fitch IBCA, Inc. ("Fitch"). All issues have at least one year
to maturity and an outstanding par value of at least $100 million for U.S.
Government issues and $50 million for all others. The Intermediate Index
includes bonds with maturities of up to ten years.
The Dreyfus Corporation ("Dreyfus") serves as each Fund's investment
manager.
Certain Portfolio Securities
The following information regarding the securities that the Funds may
purchase supplements that found in each Fund's Prospectus.
American Depository Receipts ("ADRs"). The Funds may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market. Investment in
securities of foreign issuers presents certain risks. See "Foreign
Securities."
Corporate Obligations. The Funds may invest in corporate obligations
rated at least Baa by Moody's or BBB by Standard & Poor's, or if unrated, of
comparable quality as determined by Dreyfus. Securities rated BBB by
Standard & Poor's or Baa by Moody's are considered by those rating agencies
to be "investment grade" securities, although Moody's considers securities
rated Baa to have speculative characteristics. Further, while bonds rated
BBB by Standard & Poor's exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and principal for debt in this category
than debt in higher rated categories. Each Fund will dispose in a prudent
and orderly fashion of bonds whose ratings drop below these minimum ratings.
Government Obligations. Each Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, each Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Treasury to lend to such Government
agency or instrumentality, or (d) the credit of the instrumentality.
(Examples of agencies and instrumentalities are: Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Home Loan Banks, General Services Administration,
Maritime Administration, Tennessee Valley Authority, District of Columbia
Armory Board, Inter-American Development Bank, Asian-American Development
Bank, Student Loan Marketing Association, International Bank for
Reconstruction and Development, Small Business Administration and Fannie
Mae). No assurance can be given that the U.S. Government will provide
financial support to the agencies or instrumentalities described in (b), (c)
and (d) in the future, other than as set forth above, since it is not
obligated to do so by law.
GNMA Certificates. The Funds may invest in Government National
Mortgage Association ("GNMA") Certificates. GNMA Certificates are mortgage-
backed securities representing part ownership of a pool of mortgage loans.
These loans are made by mortgage bankers, commercial banks, savings and loan
associations, and other lenders and are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A
"pool" or group of such mortgages is assembled and, after being approved by
GNMA, is offered to investors through securities dealers. Once approved by
GNMA, the timely payment of interest and principal on each mortgage is
guaranteed by the full faith and credit of the U.S. Government. Although
the mortgage loans in a pool underlying a GNMA Certificate will have
maturities of up to 30 years, the average life of a GNMA Certificate will be
substantially less because the mortgages will be subject to normal principal
amortization and also may be prepaid prior to maturity. Prepayment rates
vary widely and may be affected by changes in mortgage interest rates. In
periods of falling interest rates, the rate of prepayment on higher interest
mortgage rates tends to increase, thereby shortening the actual average life
of the GNMA Certificate. Conversely, when interest rates are rising, the
rate of prepayment tends to decrease, thereby lengthening the average life
of the GNMA Certificates. Reinvestment of prepayments may occur at higher
or lower rates than the original yield of the Certificates. Due to the
prepayment feature and the need to reinvest prepayments of principal at
current rates, GNMA Certificates, with underlying mortgages bearing higher
interest rates can be less effective than typical non-callable bonds of
similar maturities at locking in yields during periods of declining interest
rates, although they may have comparable risks of decline in value during
periods of rising interest rates.
Fixed-Income Securities. The Funds may invest in fixed-income
securities. In periods of declining interest rates, a Fund's yield (its
income from portfolio investments over a stated period of time) may tend to
be higher than prevailing market rates, and in periods of rising interest
rates, a Fund's yield may tend to be lower than prevailing interest rates.
Also, in periods of falling interest rates, the inflow of net new money to a
Fund from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of a Fund's
portfolio, thereby reducing the yield of the Fund. In periods of rising
interest rates, the opposite can be true. The net asset value ("NAV") of a
Fund investing in fixed-income securities also may change as general levels
of interest rates fluctuate. When interest rates increase, the value of a
portfolio of fixed-income securities can be expected to decline.
Conversely, when interest rates decline, the value of a portfolio of fixed-
income securities can be expected to increase.
Variable Amount Master Demand Notes. The Funds may invest in Variable
Amount Master Demand Notes. Variable amount master demand notes are
unsecured obligations that are redeemable upon demand and are typically
unrated. These instruments are issued pursuant to written agreements
between their issuers and holders. The agreements permit the holders to
increase (subject to an agreed maximum) and the holders and issuers to
decrease the principal amount of the notes, and specify that the rate of
interest payable on the principal fluctuates according to an agreed-upon
formula. If an issuer of a variable amount master demand note were to
default on its payment obligations, a Fund might be unable to dispose of the
note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Funds will
only invest in variable amount master demand notes issued by entities that
Dreyfus considers creditworthy.
Floating Rate Securities (Limited Term Income Fund only). The Fund may
invest in floating rate securities. A floating rate security provides for
the automatic adjustment of its interest whenever a specified interest rate
changes. Interest rates on these securities are ordinarily tied to, and are
a percentage of, a widely recognized interest rate, such as the yield on 90-
day U.S. Treasury bills or the prime rate of a specified bank. These rates
may change as often as twice daily. Generally, changes in interest rates
will have a smaller effect on the market value of floating rate securities
than on the market value of comparable fixed income obligations. Thus,
investing in variable and floating rate securities generally allows less
opportunity for capital appreciation and depreciation than investing in
comparable fixed income securities.
Mortgage Pass-Through Certificates. Each Fund may invest in mortgage
pass-through certificates. Mortgage pass-through certificates are issued by
governmental, government-related and private organizations and are backed by
pools of mortgage loans. These mortgage loans are made by lenders such as
savings and loan associations, mortgage bankers, commercial banks and others
to residential home buyers throughout the United States. The securities are
deemed "pass-through" securities because they provide investors with monthly
payments of principal and interest that, in effect, are a "pass-through" of
the monthly payments made by the individual borrowers on the underlying
mortgage loans. The principal governmental issuer of such securities is
GNMA, which is a wholly owned U.S. government corporation within the
Department of Housing and Urban Development. Government related issuers
include the Federal Home Loan Mortgage Corporation ("FHLMC"), and the
Federal National Mortgage Association ("FNMA"), both government-sponsored
corporations owned entirely by private stockholders. Commercial banks,
savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers also create pass-through
pools of conventional residential mortgage loans. Such issuers may be
originators of the underlying mortgage loans as well as the guarantors of
the mortgage-related securities. The market value of mortgage-related
securities depends on, among other things, the level of interest rates, the
certificates' coupon rates and the payment history of underlying mortgage
loans.
Repurchase Agreements. The Funds may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the Funds' credit guidelines. This technique
offers a method of earning income on idle cash. In a repurchase agreement, a
Fund buys a security from a seller that has agreed to repurchase the same
security at a mutually agreed upon date and price. A Fund's resale price
will be in excess of the purchase price, reflecting an agreed upon interest
rate. This interest rate is effective for the period of time the Fund is
invested in the agreement and is not related to the coupon rate on the
underlying security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by a Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and
at no time will a Fund invest in repurchase agreements for more than one
year. A Fund will always receive as collateral securities whose market value
including accrued interest is, and during the entire term of the agreement
remains, at least equal to 100% of the dollar amount invested by the Fund in
each agreement, including interest, and the Fund will make payment for such
securities only upon physical delivery or upon evidence of book entry
transfer to the account of the custodian. If the seller defaults, a Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of a security which is the subject of a
repurchase agreement, realization upon the collateral by the Fund may be
delayed or limited. The Funds seek to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligors
under repurchase agreements, in accordance with the Funds' credit
guidelines.
Commercial Paper. The Funds may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Funds will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's, Prime-1 by Moody's, F-1 by Fitch or Duff-1 by Duff &
Credit Ratings, Co.
Bank Instruments. The Funds may purchase bankers' acceptances,
certificates of deposit, time deposits, and other short-term obligations
issued by domestic banks, foreign subsidiaries or foreign branches of
domestic banks, domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs"),
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are U.S. dollar-
denominated time deposits in a foreign branch of a U.S. bank or a foreign
bank. Yankee CDs are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States. The
Funds may also invest in Eurodollar bonds and notes which are obligations
that pay principal and interest in U.S. dollars held in banks outside the
United States, primarily in Europe. All of these obligations are subject to
somewhat different risks than are the obligations of domestic banks or
issuers in the United States. See "Foreign Securities."
Foreign Securities. The Funds may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal
of funds or other assets of a Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the yield on such securities.
Illiquid Securities. A Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid securities, including time deposits
and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Funds may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Funds may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Funds, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors, like the Funds, through or with the assistance of
the issuer or investment dealers who make a market in the Section 4(2)
paper, thus providing liquidity. Rule 144A securities generally must be
sold to other qualified institutional buyers. If a particular investment in
Section 4(2) paper or Rule 144A securities is not determined to be liquid,
that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities
to qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from a Fund or other holders.
Other Investment Companies. A Fund may invest in securities issued by
other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, a Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that a Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in each
Fund's Prospectus, the Funds also may engage in the investment techniques
described below. The Funds might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
Borrowing. The Funds are authorized, within specified limits, to
borrow money for temporary administrative purposes and to pledge its assets
in connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues
of U.S. Treasury and Government securities are often offered on a
"when-issued" basis. This means that delivery and payment for the securities
normally will take place approximately 7 to 45 days after the date the buyer
commits to purchase them. The payment obligation and the interest rate that
will be received on securities purchased on a "when-issued" basis are each
fixed at the time the buyer enters into the commitment. Each Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt securities
equal to the amount of the above commitments will be segregated on each
Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a "when-issued" basis and the securities held
by each Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income each Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's NAV.
When payment for "when-issued" securities is due, each Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the "when-issued" securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
To secure advantageous prices or yields, each Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by a Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed
delivery basis involves the risk that the value of the securities purchased
will decline prior to the settlement date. The sale of securities for
delayed delivery involves the risk that the prices available in the market
on the delivery date may be greater than those obtained in the sale
transaction. Each Fund will establish a segregated account consisting of
cash, U.S. Government securities or other high-grade debt obligations in an
amount at least equal at all times to the amounts of its delayed delivery
commitments.
Loans of Fund Securities. A Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. A Fund continues to be
entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities, which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed 33-
1/3% of the value of a Fund's total assets and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities.
These loans are terminable by a Fund at any time upon specified notice. A
Fund might experience loss if the institution to which it has lent its
securities fails financially or breaches its agreement with the Fund. In
addition, it is anticipated that a Fund may share with the borrower some of
the income received on the collateral for the loan or that it will be paid a
premium for the loan. In determining whether to lend securities, a Fund
considers all relevant factors and circumstances including the
creditworthiness of the borrower.
Reverse Repurchase Agreements. A Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, a Fund: (1) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (2) agrees to repurchase the
securities at a future date by repaying the cash with interest. The Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. Cash or liquid high-grade debt
securities held by a Fund equal in value to the repurchase price including
any accrued interest will be maintained in a segregated account while a
reverse repurchase agreement is in effect.
Futures, Options and Other Derivative Instruments (Balanced Fund only;
Limited Term Income Fund may enter into futures contracts and related
options for hedging purposes but does not intend to do so during the coming
year). The Fund may purchase and sell various financial instruments
("Derivative Instruments"), such as financial futures contracts (including
interest rate and index futures contracts) and options (including options on
securities, indices, and futures contracts). The index Derivative
Instruments which the Fund may use may be based on indices of U.S. or
foreign equity or debt securities. These Derivative Instruments may be
used, for example, to preserve a return or spread, to lock in unrealized
market value gains or losses, to facilitate or substitute for the sale or
purchase of securities, or to alter the exposure of a particular investment
or portion of a Fund's portfolio to fluctuations in interest rates.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments may be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities, currency and interest rate markets, which requires
different skills than predicting changes in the prices of individual
securities. There can be no assurance that any particular strategy will
succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected, may
increase portfolio turnover rates, which results in correspondingly greater
commission expenses and transaction costs, and may result in certain tax
consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value unless the
option is closed out in an offsetting transaction.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value and the Fund would experience losses to the extent of premiums
paid for them.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market. The Fund will not purchase put or call
options that are traded on a national exchange in an amount exceeding 5% of
its net assets.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write options on securities only if it covers the transaction
through: an offsetting option with respect to the security underlying the
option it has written, exercisable by it at a more favorable price; ownership of
(in the case of a call) or a short postion in (in the case of a put) the
underlying security; or segregation of cash or certain other assets sufficient
to cover its exposure.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund writes a call, it assumes a short futures position. If
the Fund writes a put, it assumes a long futures position. When the Fund
purchases an option on a futures contract, it acquires the right, in return
for the premium it pays, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a
put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of
the Fund's fixed income portfolio. If Dreyfus wishes to shorten the average
duration of the Fund's fixed income portfolio, the Fund may sell an interest
rate futures contract or a call option thereon, or purchase a put option on
that futures contract. If Dreyfus wishes to lengthen the average duration
of the Fund's fixed income portfolio, the Fund may buy an interest rate
futures contract or a call option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts or options on
futures contracts on an exchange regulated by the CFTC, in each case other
than for bona fide hedging purposes (as defined by the CFTC), the aggregate
initial margin and premiums required to establish those positions (excluding
the amount by which options are "in-the-money" at the time of purchase) will
not exceed 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into. This policy does not limit to 5% the percentage of
the Fund's assets that are at risk in futures contracts and options on
futures contracts for hedging purposes.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, each Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve a
Fund's investment objective by investing all of the Fund's net investable
assets in another investment company having the same investment objective
and substantially the same investment policies and restrictions as those
applicable to the Fund. Shareholders of a Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made
only if the Company's Board of Directors determines it to be in the best
interest of a Fund and its shareholders. In making that determination, the
Company's Board of Directors will consider, among other things, the benefits
to shareholders and/or the opportunity to reduce costs and achieve
operational efficiency. Although the Funds believe that the Company's Board
of Directors will not approve an arrangement that is likely to result in
higher costs, no assurance is given that costs will be materially reduced if
this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by each Fund.
A Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of a Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of a Fund, whichever is less. Each
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money in an amount not exceeding one-third of
the Fund's total assets at the time of such borrowings, and (b) a Fund may issue
multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of securities.
3. Purchase with respect to 75% of a Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of a Fund's total assets would be invested in the securities of that
issuer, or (b) a Fund would hold more than 10% of the outstanding voting
securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contacts and other
similar instruments.
Nonfundamental. Each Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law and
regulatory policy.
Each Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
1. No Fund shall sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities
sold short, and provided that transactions in futures contracts and options
are not deemed to constitute selling short.
2. No Fund shall purchase securities on margin, except that a Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.
3. No Fund shall purchase oil, gas or mineral leases.
4. Each Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of such
Fund's investment in such securities would exceed 5% of such Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. No Fund will invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess
of seven days and other securities which are not readily marketable. For
purposes of this limitation, illiquid securities shall not include Section
4(2) Paper and securities which may be resold under Rule 144A under the
Securities Act of 1933, provided that the Board of Directors, or its
delegate, determines that such securities are liquid based upon the trading
markets for the specific security.
7. No Fund may invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. No Fund shall purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. No Fund will purchase warrants if at the time of such purchase:
(a) more than 5% of the value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would be
invested in warrants that are not listed on the New York or American Stock
Exchange (for purposes of this undertaking, warrants acquired by a Fund in
units or attached to securities will be deemed to have no value).
10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to a Fund's transactions in futures
contracts and related options.
As an operating policy, each Fund will not invest more than 25% of the
value of its total assets at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board of Directors.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in
the values of assets will not constitute a violation of such restriction,
except as otherwise required by the 1940 Act.
If a Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position
and needs.
MANAGEMENT OF THE FUNDS
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Funds, and in
providing services to the Funds as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or a Fund. If Mellon Bank or Dreyfus were prohibited from
serving a Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Funds. The Board approves all significant agreements between the
Company, on behalf of the Funds, and those companies that furnish services
to the Funds. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund's
The Company has a Board composed of nine Directors. The following
lists the Directors and officers and their positions with the Company and
their present and principal occupations during the past five years. Each
Director who is an "interested person" of the Company (as defined in the
1940 Act) is indicated by an asterisk(*). Each of the Directors also serves
as a Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.), a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources) a temporary placement agency. 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. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 26 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. 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 Investment Services
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 and 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
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board
Member****
Joseph S. DiMartino* $17,710.00 $619,660
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 and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October
31, 1998, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Company was $17,710. For the
year ended December 31, 1998, the aggregate amount of fees received by Mr.
Fort for serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Company) and Dreyfus High Yield Strategies Fund (for which
payment is made directly by the fund) was $59,010. In addition, Dreyfus
reimbursed Mr. Fort a total of $733.11 for expenses attributable to the
Company's Board meetings which is not included in the $5,313.37 amount in
note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
*** The 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 Balanced Fund outstanding as of February
1, 1999.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of Limited Term Income Fund outstanding as
of February 1, 1999.
Principal Shareholders. As of February 1, 1999, the following
shareholders(s) owned beneficially or of record 5% or more of Class A shares
of the Balanced Fund: State of Wyoming Trustee, State of Wyoming Public
Employees, Deferred Compensation Plan, C/O Great West Life Recordkeeper,
8515 East Orchard Road #2T2, Englewood, CO. 80111-5022, 20.03% and
Prudential Securities Inc., FBO PMFS Recordkeeper For DC Clients Trustee,
Sutliff Chevrolet 401K, Edison, NJ 08837, 7.41%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class B shares of the Balanced Fund: MLPF & S
For The Sole Benefit of It's Customers, 4800 Deer Lake Drive East,
Jacksonville, FL 32246-6484, 14.54%.
As of February 1, 1999, the following shareholders(s) owned
beneficially or of record 5% or more of Class C shares of the Balanced Fund:
MLPF & S For The Sole Benefit of It's Customers, 4800 Deer Lake Drive East,
Jacksonville, FL 32246-6484, 25.95%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class R shares of the Balanced Fund: Boston Safe
Deposit & Trust Co.; Trustee As Agent - Omnibus Account, 1 Cabot Road,
Medford, MA 02155-5141, 45.91%; and MAC & Co. BRCF8539242, Mutual Funds
Operations, P.O. Box 3198, Pittsburgh, PA 15230-3198, 21.84%; First Union
National Bank Trustee, FBO Buckeye Pipeline Company, 1525 W. WT. Harris Blvd.
# 1151, Charlotte, NC 28262-8522, 13.45%; and MAC & Co., A/CHMWF1731802,
P.O. Box 3198, Pittsburgh, PA 15230-3198, 6.46%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class A shares of the Limited Term Income Fund:
MLPF & S For The Sole Benefit of It's Customers, 4800 Deer Lake Drive East,
Jacksonville, FL 32246-6484, 25.94%; Painewebber For The Benefit of Amore
Family LTD Partnership, 125 Stillwater Court, Marco Island, FL 34145-4221,
15.81%; and NFSC FEBO #C1B - 310808, Local 803 Health and Welfare Fund, 91-
01 80th Street, Woodhaven, NY 11421, 14.29%.
As of February 1, 199, the following shareholder(s) owned beneficially
or of record 5% or more of Class B shares of the Limited Term Income Fund:
MLPF & S For The Sole Benefit of It's Customers, 4800 Deer Lake Drive East,
Jacksonville, FL 32246-6484, 61.97%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class C shares of the Limited Term Income Fund:
Summit Financial Services (FBO) Forest Green Park Cemetery, One Bethlehem
Plaza, Bethlehem, PA 18018, 30.31%; Painewebber For The Benefit of John D.
Neil and Josephine R. Neil JTWROS, 5840 McLain Road, Jackson, MI 49201-8929,
5.38%; MLPF & S For The Sole Benefit of It's Customers, 4800 Deer Lake Drive
East, Jacksonville, FL 32246-6484, 5.25%; and Interstate/Johnson Lane FBO
201-10246-15 Interstate Tower, P.O. Box 1220, Charlotte, NC 28201-1220,
5.20%.
As of February 1, 1999 the following shareholder(s) owned beneficially
of record 5% or more of Class R shares of the Limited Term Income Fund: MAC
& CO. A/C #042-441, P.O. Box 3198, Pittsburgh, PA 15230-3198, 13.96% and MAC
& Co. A/C LTDF 1747222, P.O. Box 3198, Pittsburgh, PA 15230-3198, 5.98%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Expenses" and
"Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Funds pursuant to an Investment Management Agreement with the Company on
behalf of each Funds dated April 4, 1994 (the "Management Agreement"),
transferred to Dreyfus as of October 17, 1994, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Management Agreement, Dreyfus provides, or arranges
for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Funds. As investment manager, Dreyfus manages the Funds by making
investment decisions based on each Fund's investment objective, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.
The Management Agreement will continue from year to year with respect
to each Fund provided that a majority of the Directors who are not
"interested persons" of the Company and either a majority of all Directors
or a majority (as defined in the 1940 Act) of the shareholders of the
respective Fund approve its continuance. The Management Agreement was last
approved by the Board of Directors on February 4, 1999 to continue until
April 4, 2000. The Company may terminate the Management Agreement with
respect to each Fund upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the respective Fund's outstanding voting
securities on 60 days' written notice to Dreyfus. Dreyfus may terminate the
Management Agreement upon 60 days' written notice to the Company. The
Management Agreement will terminate immediately and automatically upon its
assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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, Balanced Fund has agreed to
pay Dreyfus a monthly fee at the annual rate of 1.00% of the value of
Balanced Fund's average daily net assets and Limited Term Income Fund has
agreed to pay Dreyfus a monthly fee at the annual rate of 0.60% of the value
of Limited Term Income Fund's average daily net assets. Dreyfus pays all of
the Funds' expenses, except brokerage fees, taxes, interest, fees and
expenses of the non-interested directors (including counsel fees), Rule 12b-
1 fees (if applicable) and extraordinary expenses. Although Dreyfus does
not pay for the fees and expenses of the non-interested Directors (including
counsel fees), Dreyfus is contractually required to reduce its investment
management fee by an amount equal to each Fund's allocable share of such
fees and expenses. From time to time, Dreyfus may voluntarily waive a
portion of the investment management fees payable by the Funds, which would
have the effect of lowering the expense ratio of the Funds and increasing
return to investors. Expenses attributable to the Funds are charged against
the respective Fund's assets; other expenses of the Company are allocated
among its funds on the basis determined by the Board, including, but not
limited to, proportionately in relation to the net assets of each fund.
For the last three years, each Fund had the following management fees:
For the Fiscal Year Ended October 31,
1998 1997 1996
Balanced Fund $2,497,384 $1,690,361 $1,888,750
Limited Term Income Fund $ 309,714 $ 301,794 $ 351,360
The Distributor. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109,
serves as each Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. Dreyfus may pay the Distributor for
shareholder services from Dreyfus' own assets, including past profits but
not including the management fee paid by a Fund. The Distributor may use
part or all of such payments to pay certain banks, securities brokers or
dealers and other financial institutions ("Agents") for these services. The
Distributor also acts as sub-administrator for the Funds and as distributor
for the other funds in the Dreyfus Family of Funds.
For the fiscal year ended October 31, 1998, the Distributor retained no
sale loads on Balanced Fund's and Limited Term Income Fund's Class A shares.
For the fiscal year ended October 31, 9998, the Distributor retained $62,048
and $22,162 from the contingent deferred sales charge ("CDSC") on Class B
shares for Balanced Fund and Limited Term Income Fund, respectively. For
the same period, the Distributor retained $1,394 and $1,047 from the CDSC on
Class C shares of Balanced Fund and Limited Term Income Fund, respectively.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most
beneficial to you depends on the amount and the intended length of your
investment. You should consider whether, during the anticipated life of
your investment in a Fund, the accumulated distribution fee, service fee and
CDSC, if any, on Class B or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares
purchased at the same time, and to what extent, if any, such differential
would be offset by the return on Class A shares. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution and service fees on
Class B or Class C shares may exceed the accumulated distribution fee and
initial sales charge on Class A shares during the life of the investment.
Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than
Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to ongoing distribution and service fees. Thus,
Class B shares may be more attractive than Class C shares to investors with
longer term investment outlooks. Generally, Class A shares may be more
appropriate for investors who invest $1,000,000 or more in Fund shares, but
will not be appropriate for investors who invest less than $50,000 in the
case of Balanced Fund and $100,000 in the case of Limited Term Income Fund,
in Fund shares. Each Fund reserves the right to reject any purchase order.
Class A shares, Class B shares and Class C shares may be purchased only
by clients of Agents, except that full-time or part-time employees of
Dreyfus or any of its affiliates or subsidiaries, directors of Dreyfus,
Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing may
purchase Class A shares directly through the Distributor. Subsequent
purchases may be sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates)
acting on behalf of customers having a qualified trust or investment account
or relationship at such institution, or to customers who have received and
hold shares of a Fund distributed to them by virtue of such an account or
relationship. In addition, holders of Restricted shares of a Fund who have
held their shares since April 4, 1994, may continue to purchase Class R
shares of that Fund whether or not they would otherwise be eligible to do
so. Class R shares may be purchased for a retirement plan only by a
custodian, trustee, investment manager or other entity authorized to act on
behalf of such a plan. Institutions effecting transactions in Class R
shares for the accounts of their clients may charge their clients direct
fees in connection with such transactions.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum on subsequent purchases. The initial investment must be
accompanied by the respective Fund's Account Application. Each Fund
reserves the right to offer shares without regard to minimum purchase
requirements to employees participating in certain qualified or non-
qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to
such Fund. Each Fund reserves the right to vary further the initial and
subsequent investment minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in a Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value".
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so
that they will be received by the Distributor or its designee before the
close of its business day. For certain institutions that have entered into
agreements with the Distributor, payment for the purchase of Fund shares may
be transmitted, and must be received by the Transfer Agent, within three
business days after the order is placed. If such payment is not received
within three business days after the order is placed, the order may be
canceled and the institution could be held liable for resulting fees and/or
losses.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the respective Fund's Prospectus, and, to the extent permitted
by applicable regulatory authority, may charge their clients direct fees
which would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by
Eligible Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from a Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
respective Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to a Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares of
Balanced Fund is the NAV per share of that Class, plus, except for
shareholders beneficially owning Class A shares of Balanced Fund on November
30, 1996, a sales load as shown below:
Total Sales Load as a
% of Offering Price Dealers' Reallowance
Amount of Transaction Per Share as a % of Offering Price
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
For shareholders who opened Balanced Fund accounts after December 19,
1994, and who beneficially owned Class A shares of Balanced Fund on November
30, 1996, the public offering price for Class A shares of Balanced Fund is
the NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a
% of Offering Price Dealers' Reallowance
Amount of Transaction Per Share as a % of Offering Price
Less than $50,000 4.50 4.25
$50,000 to less than $100,000 4.00 3.75
$100,000 to less than $250,000 3.00 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Holders of Class A accounts of Balanced Fund as of December 19, 1994
may continue to purchase Class A shares of Balanced Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to any applicable front-end sales load.
The public offering price of Class A shares of Limited Term Income Fund
is the NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a
% of Offering Price Dealers' Reallowance
Amount of Transaction Per Share as a % of Offering Price
Less than $100,000 3.00 2.75
$100,000 to less than $250,000 2.75 2.50
$250,000 to less than $500,000 2.25 2.00
$500,000 to less than $1,000,000 2.00 1.75
Holders of Class A accounts of Limited Term Income Fund as of December
19, 1994 may continue to purchase Class A shares of the Fund at NAV.
However, investments by such holders in other funds advised by Dreyfus will
be subject to any applicable front-end sales load.
Sales Loads -- Class A. The scale of sales loads applies to purchases
of Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or for
the account of any minor children, or a trustee or other fiduciary
purchasing securities for a single trust estate or a single fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Code) although
more than one beneficiary is involved; or a group of accounts established by
or on behalf of the employees of an employer or affiliated employers
pursuant to an employee benefit plan or other program (including accounts
established pursuant to Sections 403(b), 408(k) and 457 of the Code); or an
organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the
purchases are made through a central administration or a single dealer, or
by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares for each Fund aggregating less than $50,000 with respect to
Balanced Fund and less than $100,000 with respect to Limited Term Income
Fund subject to the schedule of sales charges set forth in each Fund's
Prospectus at a price based upon the NAV of a Class A share for each Fund at
the close of business on October 31, 1998:
For Balanced Fund
NAV per share $14.88
Per Share Sales Charge - 5.75%* of offering price
(6.10% of NAV per share) $ .91
Per Share Offering Price to Public $15.79
_______________
* Class A shares purchased by shareholders beneficially owning Class A
shares on November 30, 1996, but who opened their accounts after December
19, 1994, are subject to a different sales load schedule as described above.
For Limited Term Income Fund
NAV per share $11.31
Per Share Sales Charge - 3.00% of offering price
(3.10% of NAV per share) $ .35
Per Share Offering Price to Public $11.66
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of a Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain
the same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by Dreyfus which are sold with a sales load, such as Class A shares.
In some instances, these incentives may be offered only to certain dealers
who have sold or may sell significant amounts of such shares. Dealers
receive a larger percentage of the sales load from the Distributor than they
receive for selling most other funds.
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in each Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class R Shares. The public offering price for Class R shares is the
NAV per share of that Class.
Right of Accumulation-Class A Shares. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier
Family of Funds, shares of certain other funds advised by Dreyfus which are
sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined above, where the aggregate investment, including such
purchase, is $50,000 or more in the case of Balanced Fund and $100,000 or
more in the case of Limited Term Income Fund. If, for example, you
previously purchased and still hold Class A shares of Balanced Fund, or
shares of any other Eligible Fund or combination thereof, with an aggregate
current market value of $40,000 and subsequently purchase Class A shares of
Balanced Fund or shares of an Eligible Fund having a current value of
$20,000, the sales load applicable to the subsequent purchase would be
reduced to 4.5% of the offering price. Class A shares purchased by
shareholders beneficially owning Balanced Fund shares on November 30, 1996,
but who opened their Fund accounts after December 19, 1994, are subject to a
different sales load schedule, as described above. Similarly, if you
previously purchased and still hold Class A shares of Limited Term Income
Fund or shares of any other Eligible Fund or combination thereof, with an
aggregate market value of $80,000 and subsequently purchase Class A shares
of Limited Term Income Fund or shares of an Eligible Fund having a current
value of $40,000, the sales load applicable to the subsequent purchase would
be reduced to 2.75% of the offering price. All present holdings of Eligible
Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the TeleTransfer Privilege if you have checked the appropriate box
and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained in a
domestic financial institution that is an Automated Clearing House ("ACH")
member may be so designated. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 p.m., New York time, on any
business day that the Transfer Agent and the NYSE are open for business will
be credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New
York time, on any business day the Transfer Agent and the NYSE are open for
business, or orders made on Saturday, Sunday or any Fund holiday (e.g., when
the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order.
To qualify to use the TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to,
the same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Shares -
TeleTransfer Privilege." Each Fund may modify or terminate this Privilege
at any time or charge a service fee upon notice to shareholders. No such
fee currently is contemplated by either Fund.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, a Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the applicable Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the
shares purchased and securities exchanged. Securities accepted by a Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to a Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Your Investment."
Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule.
Distribution Plan--Class A Shares. With respect to the Class A shares
of each Fund, the Company has adopted a Distribution Plan pursuant to the
Rule (each a "Class A Plan"), whereby Class A shares of a Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. Each Class A Plan allows the Distributor to make payments from the
Rule 12b-1 fees it collects from a Fund to compensate Agents that have
entered into Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Funds and/or shareholder services to the Agent's
clients that own Class A shares of the Funds.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Class A Plan without approval of the Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Company or
the Distributor and who do not have any direct or indirect financial
interest in the operation of the Class A Plan, cast in person at a meeting
called for the purpose of considering such amendments. The Class A Plan is
subject to annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct or indirect
financial interest in the operation of the Class A Plan, by vote cast in
person at a meeting called for the purpose of voting on the Class A Plan.
Each Fund's Class A Plan was so approved by the Directors at a meeting held
on February 4, 1999. The Class A Plan is terminable, as to a Fund's Class A
shares, at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B and Class C Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan, with respect to Class B and
Class C shares of each Fund (each a "Service Plan") under the Rule pursuant
to which each Fund pays the Distributor and Dreyfus Service Corporation a
fee at the annual rate of 0.25% of the value of the average daily net assets
of Class B and Class C shares for the provision of certain services to the
holders of Class B and Class C shares. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding a Fund and providing reports and other
information, and providing services related to the maintenance of such
shareholder accounts. With regard to such services, each Agent is required
to disclose to its clients any compensation payable to it by a Fund and any
other compensation payable by its clients in connection with the investment
of their assets in Class B and Class C shares. The Distributor may pay one
or more Agents in respect of services for these Classes of shares. The
Distributor determines the amounts, if any, to be paid to Agents under the
Service Plan and the basis on which such payments are made. With respect to
Class B and Class C shares of each Fund, the Company's Board of Directors
has also adopted a Distribution Plan pursuant to the Rule (each a
"Distribution Plan") pursuant to which Balanced Fund pays the Distributor
for distributing the Balanced Fund's Class B and Class C shares at an
aggregate annual rate of 0.75% of the value of the average daily net assets
of Class B and Class C shares of Balanced Fund and Limited Term Income Fund
pays the Distributor for distributing Limited Term Income Fund's Class B and
Class C shares at an aggregate annual rate of 0.50% of the value of the
average daily net assets of Class B and Class C shares of Limited Term
Income Fund. The Company's Board of Directors believes that there is a
reasonable likelihood that the Distribution and Service Plans (the "Plans")
will benefit the Funds and the holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or Class
C shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be
approved by the Board of Directors and by the Directors who are not
interested persons of the Funds and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. Each Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Directors at a meeting held on February 4, 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B and Class C
shares.
An Agent entitled to receive compensation for selling and servicing a
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Class A Plan and the Distribution and
Service Plans are payable without regard to actual expenses incurred. Each
Fund and the Distributor may suspend or reduce payments under the Class A
Plan and the Distribution and Service Plans at any time, and payments are
subject to the continuation of the Fund's plans and the Agreements described
above. From time to time, the Agents, the Distributor and each Fund may
voluntarily agree to reduce the maximum fees payable under the plans.
For the fiscal year ended October 31, 1998, Balanced Fund paid the
Distributor and Dreyfus Service Corporation $16,123 and $45,548,
respectively, pursuant to the respective Class A Plan. For the fiscal year
ended October 31, 1998, Balanced Fund paid the Distributor $331,614 and
$36,555 pursuant to the applicable Distribution Plan with respect to Class B
and Class C shares, respectively, and paid the Distributor and Dreyfus
Service Corporation $58,883 and $51,655, respectively, pursuant to the
Service Plan with respect to Class B shares and $2,162 and $10,023,
respectively, pursuant to the Service Plan with respect to Class C shares.
For the fiscal year ended October 31, 1998, Limited Term Income Fund
paid the Distributor and Dreyfus Service Corporation $7,222 and $2,549,
respectively, pursuant to the respective Class A Plan. For the fiscal year
ended October 31, 1998, Limited Term Income Fund paid the Distributor $8,882
and $2,967, pursuant to the applicable Distribution Plan with respect to
Class B and Class C shares, respectively, and paid the Distributor and
Dreyfus Service Corporation $443 and $3,998, respectively, pursuant to the
Service Plan with respect to Class B shares and $1,392 and $91,
respectively, pursuant to the Service Plan with respect to Class C shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Funds impose no charges (other than any applicable CDSC) when
shares are redeemed. Agents or other institutions may charge their clients
a fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the
redemption request. The value of the shares redeemed may be more or less
than their original cost, depending upon the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or if you have checked the appropriate
box and supplied the necessary information on the Account Application or
have filed a Shareholder Services Form with the Transfer Agent, through the
TeleTransfer Privilege. If you are a client of a Selected Dealer, you may
redeem Fund shares through the Selected Dealer. Other redemption procedures
may be in effect for clients of certain Agents and institutions. Each Fund
makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. Each Fund
reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. Each Fund may modify or terminate
any redemption privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated. Shares held under
Keogh Plans, IRAs, or other retirement plans, and shares for which
certificates have been issued, are not eligible for the TeleTransfer
Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TeleTransfer
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus Touchr automated
telephone system) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. Each Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Funds nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a TeleTransfer redemption or an exchange of Fund shares. In such
cases, you should consider using the other redemption procedures described
herein. Use of these other redemption procedures may result in your
redemption request being processed at a later time than it would have been
if TeleTransfer redemption had been used. During the delay, the Fund's NAV
may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers
may make redemption requests to their Selected Dealer. If the Selected
Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, your account will be credited with an amount
equal to the CDSC previously paid upon redemption of the Class A or Class B
shares reinvested. The Reinvestment Privilege may be exercised only once.
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two days
after receipt of the redemption request. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a wire
redemption will be effected as a TeleTransfer transaction through the ACH
system unless more prompt transmittal specifically is requested. Holders of
jointly registered Fund or bank accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account only up to $250,000 within any
30-day period. See "Purchase of Shares-TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash
all redemption requests by any shareholder of record of a Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Company's Board
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as each Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets a Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of a Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect a Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of a Fund's performance, a CDSC may be
applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years in the case of Balanced Fund and five
years in the case of Limited Term Income Fund; then of amounts representing
the cost of shares purchased six years prior to redemption in the case of
Balanced Fund and five years prior to the redemption in the case of Limited
Term Income Fund; and finally, of amounts representing the cost of shares
held for the longest period of time within the applicable six-year period in
the case of Balanced Fund and five-year period in the case of Limited Term
Income Fund.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (3% in the case of Limited Term Income
Fund) (the applicable rate in the second year after purchase) for a total
CDSC of $9.60 ($7.20 in the case of Limited Term Income Fund).
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of a Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1% in the
case of Balanced Fund and 0.75% in the case of Limited Term Income Fund
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC. The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with a Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described below. If the Company's Board determines to discontinue the
waiver of the CDSC, the disclosure herein will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Prospectus of each Fund or this Statement of Additional Information at the
time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Shares of any Class of a Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such other funds
purchased by exchange will be purchased on the basis of relative NAV per
share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
To request an exchange, an investor or an investor's Agent acting on
the investor's behalf must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr automated telephone system) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class of certain other funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to
the schedule the investor has selected. This Privilege is available only
for existing accounts. With respect to Class R shares held by a Retirement
Plan, exchanges may be made only between the investor's Retirement Plan
account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV as described
above under "Fund Exchanges." Enrollment in or modification or cancellation
of this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by
each Fund or the Transfer Agent. You may modify or cancel your exercise of
this Privilege at any time by mailing written notification to the applicable
Fund at P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund may
charge a service fee for the use of this Privilege. No such fee currently
is contemplated. For more information concerning this Privilege and the
funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Premier Family of Funds or the Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Funds reserve the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builderr. Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to the
applicable Fund at P.O. Box 6587, Providence, Rhode Island 02940-6587 and
the notification will be effective three business days following receipt.
Each Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. Automatic Withdrawal may be terminated at any time by the
investor, a Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan. The Automatic Withdrawal
Plan may be ended at any time by the shareholder, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A shares to
which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A shares where the sales load is imposed concurrently with
withdrawals of Class A shares generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from a Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and other distributions, if any, from a Fund to a designated
bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to the applicable Fund at
P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new fund
after cancellation, you must submit a new Dividend Options Form. Enrollment
in or cancellation of these privileges is effective three business days
following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. Each Fund may modify
or terminate these privileges at any time or charge a service fee. No such
fee currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as the
Funds, may be appropriate for you. To enroll in Dreyfus Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the respective Fund may terminate your participation upon 30 days'
notice to you.
Letter of Intent-Class A Shares. By signing a Letter of Intent form,
which can be obtained by calling 1-800-554-4611, you become eligible for the
reduced sales load applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and conditions set
forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of
shares you hold (on the date of submission of the Letter of Intent) in any
Eligible Fund that may be used toward "Right of Accumulation" benefits
described above may be used as a credit toward completion of the Letter of
Intent. However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
shares of the applicable Fund held in escrow to realize the difference.
Signing a Letter of Intent does not bind you to purchase, or a Fund to sell,
the full amount indicated at the sales load in effect at the time of
signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter
of Intent will be made at the then-current NAV plus the applicable sales
load in effect at the time such Letter of Intent was executed.
Retirement Plans. Each Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Funds are intended to be long-term investment vehicles and are not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to a Fund's performance and its shareholders. Accordingly, if a
Fund's management determines that an investor is engaged in excessive
trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole
or part any purchase or exchange request, with respect to such investor's
account. Such investors also may be barred from purchasing other funds in
the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of a Fund during any calendar year or who makes exchanges
that appear to coincide with an active market-timing strategy may be deemed
to be engaged in excessive trading. Accounts under common ownership or
control will be considered as one account for purposes of determining a
pattern of excessive trading. In addition, a Fund may refuse or restrict
purchase or exchange requests by any person or group if, in the judgment of
the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or
could otherwise be adversely affected or if the Fund receives or anticipates
receiving simultaneous orders that may significantly affect the Fund (e.g.,
amounts equal to 1% or more of the Fund's total assets). If an exchange
request is refused, a Fund will take no other action with respect to the
shares until it receives further instructions from the investor. A Fund may
delay forwarding redemption proceeds for up to seven days if the investor
redeeming shares is engaged in excessive trading or if the amount of the
redemption request otherwise would be disruptive to efficient portfolio
management or would adversely affect the Fund. A Fund's policy on excessive
trading applies to investors who invest in the Fund directly or through
financial intermediaries, but does not apply to the Dreyfus Auto-Exchange
Privilege, to any automatic investment or withdrawal privilege described
herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, a Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined NAV
but the purchase order would be effective only at the NAV next determined
after the fund being purchased receives the proceeds of the redemption,
which may result in the purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Balanced Fund's equity
securities are valued at the last sale price on the securities exchange or
national securities market on which such securities primarily are traded.
Equity securities not listed on an exchange or national securities market,
or equity securities in which there were no transactions, are valued at the
average of the most recent bid and asked prices. Bid price is used when no
asked price is available. Where market quotations are not readily
available, the Balanced Fund's equity investments are valued based on fair
value as determined in good faith by the Company's Board. Debt securities
(excluding short-term investments) are valued by an independent pricing
service approved by the Company's Board (the "Service"). Securities valued
by the Service for which quoted bid prices in the judgment of the Service
are readily available and are representative of the bid side of the market
are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by
the Service based upon its evaluation of the market for such securities).
Other debt securities valued by the Service are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Investments traded in foreign currencies are translated to U.S. dollars at
the prevailing rates of exchange. If the Fund has to obtain prices as of
the close of trading on various exchanges throughout the world, the
calculation of NAV may not take place contemporaneously with the
determination of prices of certain of the Fund's securities. Short-term
investments not valued by the Service are carried at amortized cost, which
approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV
of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors if it
believes that the discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Distributions and
Taxes."
General. Each Fund ordinarily declares daily and pays monthly
dividends from its net investment income and distributes net realized
capital and foreign currency gains, if any once a year, but may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the 1940
Act. All expenses are accrued daily and deducted before declaration of
dividends to investors. The Funds will not make distributions from net
realized capital gains unless all capital loss carryovers, if any, have been
utilized or have expired. Shares begin accruing dividends on the day
following the date of purchase. Each Fund's earnings for Saturdays, Sundays
and holidays are declared as dividends on the next business day. If you
redeem all shares in your account at any time during the month, all
dividends to which you are entitled will be paid to you along with the
proceeds of the redemption. Investors other than qualified retirement plans
may choose whether to receive dividends and other distributions in cash, to
receive dividends in cash and reinvest other distributions in additional
Fund shares at NAV, or to reinvest both dividends and other distributions in
additional Fund shares at NAV; dividends and other distributions paid to
qualified retirement plans are reinvested automatically in additional Fund
shares at NAV. Dividends paid by each Class are calculated at the same time
and in the same manner and are in the same amount, except that the expenses
attributable solely to a particular Class are borne exclusively by that
Class. Class B and Class C shares will receive lower per share dividends
than Class A shares, which will in turn receive lower per share dividends
than Class R shares, because of the higher expenses borne by the relevant
Classes.
It is expected that each Fund will continue to qualify for treatment as
a regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve a Fund of any liability for federal income tax to
the extent its earnings and realized gains are distributed in accordance
with applicable provisions of the Code. To qualify for treatment as a RIC
under the Code, a Fund -- which is treated as a separate corporation for
federal tax purposes -- (1) must distribute to its shareholders each year at
least 90% of its investment company taxable income (generally consisting of
net investment income, net short-term capital gains and net gains from
certain foreign currency transactions) ("Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
("Income Requirement"), and (3) must meet certain asset diversification and
other requirements. The term "regulated investment company" does not imply
the supervision of management or investment practices or policies by any
government agency. The Fund will be subject to a non-deductible 4% excise
tax ("Excised Tax") to the extent it fails to distribute substantially all
of its taxable investment income and capital gains. If the Fund failed to
qualify for treatment as a RIC for any taxable year, (1) it would be taxed
at corporate rates on the full amount of its taxable income for that year
without being able to deduct the distributions it makes to its shareholders
and (2) the shareholders would treat all those distributions, including
distributions of net capital gain (the excess of net long-term capital gain
over net short-term capital loss), as dividends (that is, ordinary income)
to the extent of the Fund's earnings and profits. In addition, the Fund
could be required to recognize unrealized gains, pay substantial taxes and
interest and make substantial distributions before requalifying for RIC
treatment.
Distribution. If you elect to receive other dividends and
distributions in cash, and your distribution check is returned to a Fund as
undeliverable or remains uncashed for six months, the Fund reserves the
right to reinvest that distribution and all future distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distribution or redemptions check.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains, net realized gains
from certain foreign currency transactions and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to those shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and
whether the distributions are received in cash or reinvested in additional
Fund shares.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the foreign investor claims the benefit of a lower rate specified in
a tax treaty. Capital gain distributors paid by the Fund to a non-resident
foreign investor, as well as the proceeds of any redemptions by such an
investor, regardless of the extent to which gain or loss may be realized,
generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions paid during
the year.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
Internal Revenue Service ("IRS") distributions paid to such plans.
Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be
taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to 10%
of the taxable portion of the distribution. The administrator, trustee or
custodian of a retirement plan will be responsible for reporting
distributions from the plan to the IRS. Moreover, certain contributions to
a qualified retirement plan in excess of the amounts permitted by law may be
subject to an excise tax. If a distributee of an "eligible rollover
distribution" from a qualified retirement plan does not elect to have the
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the distribution is subject to 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholders if such
shareholder fails to furnish a TIN to the Fund and certify that it is
correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income. A TIN is either the
Social Security number, IRS individual taxpayer identification number or
employer identification number of the record owner of an account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax imposed on the record owner and may be claimed as a credit on the his or
her federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such a distribution would be a
return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives any capital gain distributions with respect to
those shares, any loss incurred on the sale of those shares will be treated
as a long-term capital loss to the extent of those distributions.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by a Fund and
received by the shareholders on December 31 if the distributions are paid by
a Fund during the following January. Accordingly, those distributions will
be taxed to shareholders for the year in which that December 31 falls.
Interest received by the Fund may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
Foreign Currency, Hedging Transactions. Gains from the sale or other
disposition of foreign currencies (except certain gains therefrom that may
be excluded by future regulations), and gain from options, futures and
forward contracts derived by the Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gain or
loss from the disposition of foreign currencies and certain foreign currency
denominated instruments (including debt instruments and certain financial
forward, futures contracts and options) may be treated as ordinary income or
loss under Section 988 of the Code. In addition, all or a portion of any
gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions that otherwise would be treated as
capital gain" may be treated as ordinary income. "Conversion transactions"
are defined to include certain option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by a Fund on
the exercise of lapse of, or closing transactions respecting, certain
options, futures and forward contracts ("Section 1256 contracts") will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any Section 1256 contracts remaining unexercised at the end of a Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss
to the Fund characterized in the same manner.
Offsetting positions held by a Fund involving certain contracts or
options may constitute "straddles," which are defined to include "offsetting
positions" in actively traded personal property. Under Section 1092 of the
Code, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on
the offsetting position(s) of the straddle. In addition, these rules may
postpone the recognition of loss that otherwise would be recognized under
the mark-to-market rules discussed above. The regulations under Section
1092 also provide certain "wash sale" rules, which apply to transactions
where a position is sold at a loss and a new offsetting position is acquired
within a prescribed period, and "short sale" rules applicable to straddles.
If the Fund makes certain elections (including an election as to straddles
that include a position in one or more Section 1256 Contracts (so-called
"mixed straddles"), the amount, character, and timing of recognition of
gains and losses from the affected straddle positions would be determined
under rules that vary according to the elections made. Because only a few
of the regulations implementing the straddle rules have been promulgated,
the tax consequences to the Fund of straddle transactions are not entirely
clear.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules, affect
the amount and timing of distributions to shareholders by causing the Fund
to recognize income prior to the receipt of cash payments. For example, the
Fund would be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and could
need to distribute that income to satisfy the Distribution Requirement and
avoid imposition of the 4% excise tax referred to in the Fund's Prospectus
under "Dividends, Other Distributions and Taxes." In that case, the Fund
may have to dispose of securities it might otherwise have continued to hold
in order to generate cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the
Fund may be subject to the tax laws thereof. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from a Fund is "effectively connected" with a U.S. trade
or business carried on by the shareholder, as discussed below. Special U.S.
federal income tax rules that differ from those described below may apply to
certain foreign persons who invest in the Fund, such as a foreign
shareholder entitled to claim the benefits of an applicable tax treaty.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a
Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to a U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain generally will not be subject to U.S. federal income tax unless
the foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable year.
In the case of certain foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of each
Fund by Dreyfus. Debt securities purchased and sold by each Fund are
generally traded on a net basis (i.e., without commission) through dealers
acting for their own account and not as brokers, or otherwise involve
transactions directly with the issuer of the instrument. This means that a
dealer (the securities firm or bank dealing with a Fund) makes a market for
securities by offering to buy at one price and sell at a slightly higher
price. The difference between the prices is known as a spread. Other
portfolio transactions may be executed through brokers acting as agent.
Each Fund will pay a spread or commissions in connection with such
transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to each Fund and at
spreads and commission rates, if any, which are reasonable in relation to
the benefits received. Dreyfus also places transactions for other accounts
that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of a Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 under the 1940 Act.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.
Brokers or dealers may be selected who provide brokerage and/or
research services to a Fund and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include advice
concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to a Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Funds,
investment decisions for the Funds are made independently from decisions
made for these other accounts. It sometimes happens that the same security
is held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as a particular Fund is
concerned. In other cases, however, the ability of a Fund to participate in
volume transactions will produce better executions for the Fund. While the
Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to a Fund outweighs any disadvantages that may be said to exist from
exposure to simultaneous transactions.
For the fiscal years ended October 31, 1998, 1997 and 1996, Balanced
Fund paid brokerage commissions amounting to $213,688, $171,266 and
$152,452, respectively. For the fiscal years ended October 31, 1998, 1997
and 1996, Balanced Fund paid brokerage concessions amounting to $14,229,
$32,249 and $113,445, respectively.
For the fiscal years ended October 31, 1998, 1997 and 1996, Limited
Term Income Fund did not pay any brokerage commission. Limited Term Income
Fund typically does not pay a stated brokerage fee on transactions.
Portfolio Turnover. While securities are purchased for Balanced Fund
on the basis of potential for growth and high current income and Limited
Term Income Fund for high current income and not for short-term trading
profits, in the past the portfolio turnover rate of the Limited Term Income
Fund has exceeded 100% and, for each Fund, may exceed 100% in the future. A
portfolio turnover rate of 100% would occur, for example, if all the
securities held by a Fund were replaced once in a period of one year. In
past years Limited Term Income Fund's rate of portfolio turnover exceeded
that of certain other mutual funds with a similar investment objective. A
higher rate of portfolio turnover (100% or greater) involves correspondingly
greater brokerage commissions and other expenses that must be borne directly
by a Fund and, thus, indirectly by its shareholders. In addition, a high
rate of portfolio turnover may result in the realization of larger amounts
of short-term capital gains that, when distributed to a Funds' shareholder,
are taxable to them as ordinary income. Nevertheless, security transactions
will be based only upon investment considerations and will not be limited by
any other considerations when Dreyfus deems it appropriate to make changes
in a Fund's assets. The portfolio turnover rate for each Fund is calculated
by dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases and sales of securities whose maturities
at the time of acquisition were one year or less) by the monthly average
value of securities in the Fund during the year. Portfolio turnover may vary
from year to year as well as within a year. The portfolio turnover rates
for the last two years of each Fund were:
Fiscal Year Ended October 31,
1998 1997
Limited Term Income Fund 149.08% 129.94%
Balanced Fund 69.71% 99.88%
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of Balanced Fund
for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year 5 Years Since Inception
Class A shares 9.36% - 17.26% (4/14/94)
Class B shares 11.28% - 20.33% (12/19/94)
Class C shares 14.26% - 20.87% (12/19/94)
Class R shares 16.37% 16.28% 16.24% (9/15/93)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase
and the assessment of the maximum CDSC.
Average annual total returns (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of Limited Term
Income Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year 5 Years Since Inception
Class A shares 5.46% - 6.53% (4/7/94)
Class B shares 5.14% - 7.66% (12/19/94)
Class C shares 7.50% - 7.70% (12/19/94)
Class R shares 9.02% 6.26% 7.57% (7/11/91)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase
and the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price
in the case of Class A) per share with a hypothetical $1,000 payment made at
the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment,
taking the "n"th root of the quotient (where "n" is the number of years in
the period) and subtracting 1 from the result. The average annual total
return figures for a Class calculated in accordance with such formula assume
that, in the case of Class A, the maximum sales load has been deducted from
the hypothetical initial investment at the time of purchase or, in the case
of Class B or Class C, the maximum applicable CDSC has been paid upon
redemption at the end of the period.
Balanced Fund's total return for the period September 15, 1993
(commencement of operations) to October 31, 1998 for Class R was 116.44%.
Balanced Fund's total return for Class A for the period April 14, 1994
(inception date of Class A) to October 31, 1998 was 106.36%. Based on NAV
per share, the total return for Class A was 118.87% for this period.
Balanced Fund's total return for Class B and Class C for the period from
December 19, 1994 (inception date of Class B and Class C) through October
31, 1998 was 104.68% and 108.27%, respectively. Without giving effect to
the applicable CDSC, total return for Class B and Class C was 107.68% and
108.27%, respectively, for this period. Dreyfus Premier Limited Term Income
Fund's total return for the period July 11, 1991 (commencement of
operations) to October 31, 1998 for Class R was 70.45%. The Limited Term
Income Fund's total return for Class A for the period April 7, 1994
(inception date of Class A) to October 31, 1998 was 33.52%. Based on NAV
per share, the total return for Class A was 37.59% for this period. Limited
Term Income Fund's total return for Class B and Class C for the period from
December 19, 1994 (inception date of Class B and Class C) through October
31, 1998 was 33.08% and 33.24%, respectively. Without giving effect to the
applicable CDSC, total return for Class B and Class C was 35.08% and 33.24%,
respectively, for this period.
Total return is calculated by subtracting the amount of a Fund's NAV
(maximum offering price in the case of Class A) per share at the beginning
of a stated period from the NAV (maximum offering price in the case of Class
A) per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period and any
applicable CDSC), and dividing the result by the NAV (maximum offering price
in the case of Class A) per share at the beginning of the period. Total
return also may be calculated based on the NAV per share at the beginning of
the period instead of the maximum offering price per share at the beginning
of the period for Class A shares or without giving effect to any applicable
CDSC at the end of the period for Class B or C shares. In such cases, the
calculation would not reflect the deduction of the sales load with respect
to Class A shares or any applicable CDSC with respect to Class B or C
shares, which, if reflected would reduce the performance quoted.
Dreyfus Premier Limited Term Income Fund's current yield for the 30-day
period ended October 31, 1998, was 4.41%, 4.04%, 4.06% and 4.82% for its
Class A, Class B Class C and Class R shares, respectively. Current yield is
computed pursuant to a formula which operates, with respect to each Class,
as follows: the amount of the Fund's expenses with respect to such Class
accrued for the 30-day period (net of reimbursements) is subtracted from the
amount of the dividends and interest earned (computed in accordance with
regulatory requirements) by the Fund with respect to such Class during the
period. That result is then divided by the product of: (a) the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and (b) the maximum offering price per share in the case
of Class A or the net asset value per share in the case of Class B, Class C
and Class R on the last day of the period less any undistributed earned
income per share reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and the sum is raided to the
6th power, after which 1 is subtracted. The current yield is then arrived
at by multiplying the result by 2.
Performance information for the Funds may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Lehman Brothers Aggregate Bond Index; (ii) the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average, or other
appropriate unmanaged domestic or foreign indices of performance of various
types of investments so that investors may compare the Fund's results with
those of indices widely regarded by investors as representative of the
securities markets in general; (iii) other groups of mutual funds tracked by
Lipper Analytical Services, a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives and assets,
or tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market shares,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUNDS/COMPANY
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Each Fund is one of nineteen portfolios of the Company. Fund shares have no
preemptive, subscription or conversion rights and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they
vote separately by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
The Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
Each Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for each Fund, the handling of certain communications
between shareholders and each Fund, and the payment of dividends and
distributions payable by the Fund. For these services, Dreyfus Transfer,
Inc. receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Company during the month, and is
reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of each Fund's
investments. Under a custody agreement with the Company, Mellon Bank holds
each Fund's portfolio securities and keeps all necessary accounts and
records. Dreyfus Transfer, Inc. and Mellon Bank, as custodian, have no part
in determining the investment policies of a Fund or which securities are to
be purchased or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectuses and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by
the Directors to serve as each Fund's independent auditors for the year
ending October 31, 1999, providing audit services including (1) examination
of the annual financial statements, (2) assistance, review and consultation
in connection with SEC filings and (3) review of the annual federal income
tax return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in each Fund's Annual
Report to shareholders. A copy of each Fund's Annual Report accompanies
this Statement of Additional Information. The financial statements included
in the Annual Reports, and the Independent Auditors' Reports thereon
contained therein, and related notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Credit Rating Co. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
modest but
AA may vary slightly from time to time because of economic
conditions.
AA-
A+ Protection factors are average but adequate. However, risk
factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
for prudent Investment.
BBB Considerable variability in risk during economic cycles.
BBB-
BB+ Below investments grade but deemed likely to meet obligations when
due.
BB Present or prospective financial protection factors fluctuate
according to
BB- industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
not be met
B when due. Financial protection factors will fluctuate widely
according to
B- economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends.
Protection factors are narrow and risk can be substantial with
unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or
interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
____________________________________________________________________________
DREYFUS PREMIER SMALL COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
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 Premier Small Company 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 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Fund.................................. B-2
Management of the Fund................................... B-20
Management Arrangements.................................. B-27
Purchase of Shares....................................... B-29
Distribution and Service Plans........................... B-36
Redemption of Shares..................................... B-39
Shareholder Services..................................... B-43
Additional Information About Purchases, Exchanges
and Redemptions........................................ B-49
Determination of Net Asset Value......................... B-50
Dividends, Other Distributions and Taxes................. B-51
Portfolio Transactions................................... B-57
Performance Information.................................. B-59
Information About the Fund/Company....................... B-61
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors..... B-62
Financial Statements..................................... B-62
Appendix................................................. B-63
DESCRIPTION OF THE FUND
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company
is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund.
Prior to March 1, 1997, the Fund's name was Premier Small Company Stock Fund
and prior to October 17, 1994, the Fund's name was Laurel Smallcap Stock
Fund. The Fund is diversified, which means that, with respect to 75% of its
total assets, the Fund will not invest more than 5% of its assets in the
securities of any single issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
The Fund seeks investment returns that exceed those of the Russell 2500(R)
Stock Index. The Russell 2500 Stock Index(R), published by Frank Russell
Company, is comprised of the bottom 500 companies in the Russell 1000(R) Index
as ranked by total market capitalization, and all 2,000 stocks in the Russell
2000(R) Index. The Russell 2000(R) Index consists of the smallest 2,000
companies in the Russell Index 3000(R), representing approximately 10% of the
Russell 3000(R) Index total market capitalization. The Russell 3000(R) Index is
composed of 3,000 large U.S. companies, as determined by market capitalization.
The Russell 1000(R) Index consists of the 1,000 largest companies in the Russell
3000(R) Index. The Fund's managers do not attempt to time the financial market,
or use sector or industry rotation techniques.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's Prospectus.
Bank Instruments. The Fund may invest in bank instruments. Bank
instruments consist mainly of certificates of deposit, time deposits and
bankers' acceptances.
American Depository Receipts ("ADRs"). The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market. Investment in
securities of foreign issuers presents certain risks. See "Foreign
Securities."
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Treasury to lend to such Government
agency or instrumentality, or (d) the credit of the instrumentality.
(Examples of agencies and instrumentalities are: Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Home Loan Banks, General Services Administration,
Maritime Administration, Tennessee Valley Authority, District of Columbia
Armory Board, Inter-American Development Bank, Asian-American Development
Bank, Student Loan Marketing Association, International Bank for
Reconstruction and Development and Fannie Mae). No assurance can be given
that the U.S. Government will provide financial support to the agencies or
instrumentalities described in (b), (c) and (d) in the future, other than as
set forth above, since it is not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the Fund's credit guidelines. This technique
offers a method of earning income on idle cash. In a repurchase agreement,
the Fund buys a security from a seller that has agreed to repurchase the
same security at a mutually agreed upon date and price. The Fund's resale
price will be in excess of the purchase price, reflecting an agreed upon
interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate on
the underlying security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and
at no time will the Fund invest in repurchase agreements for more than one
year. The Fund will always receive as collateral securities whose market
value including accrued interest is, and during the entire term of the
agreement remains, at least equal to 100% of the dollar amount invested by
the Fund in each agreement, including interest, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the custodian. If the seller defaults,
the Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the Fund's credit
guidelines.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's Rating Services ("Standard & Poor's"), Prime-1 by Moody's
Investors Service, Inc. ("Moody's"), F-1 by Fitch IBCA, Inc. or Duff-1 by
Duff & Phelps Credit Rating Co.
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal
of funds or other assets of the Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the yield on such securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holder.
Initial Public Offerings ("IPOs"). The Fund may invest in an IPO, a
corporation's first offering of stock to the public. Shares are given a
market value reflecting expectations for the corporation's future growth.
Special rules of the National Association of Securities Dealers apply to the
distribution of IPOs. Corporations offering IPOs generally have a limited
operating history and may involve greater risk.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in the
Fund's Prospectus, the Fund also may engage in the investment techniques
described below. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
Borrowing. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues
of U.S. Treasury and Government securities are often offered on a
"when-issued" basis. This means that delivery and payment for the securities
normally will take place approximately 7 to 45 days after the date the buyer
commits to purchase them. The payment obligation and the interest rate that
will be received on securities purchased on a "when-issued" basis are each
fixed at the time the buyer enters into the commitment. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt securities
equal to the amount of the above commitments will be segregated on the
Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a "when-issued" basis and the securities held
by the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value
("NAV").
When payment for "when-issued" securities is due, the Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the "when-issued" securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
To secure advantageous prices or yields, the Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed
delivery basis involves the risk that the value of the securities purchased
will decline prior to the settlement date. The sale of securities for
delayed delivery involves the risk that the prices available in the market
on the delivery date may be greater than those obtained in the sale
transaction. The Fund will establish a segregated account consisting of
cash, U.S. Government securities or other high-grade debt obligations in an
amount at least equal at all times to the amounts of its delayed delivery
commitments.
Loans of Fund Securities. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to
be entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities, which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed 33-
1/3% of the value of the Fund's total assets and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities.
These loans are terminable by the Fund at any time upon specified notice.
The Fund might experience loss if the institution to which it has lent its
securities fails financially or breaches its agreement with the Fund. In
addition, it is anticipated that the Fund may share with the borrower some
of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the
Fund considers all relevant factors and circumstances including the
creditworthiness of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, the Fund: (1) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (2) agrees to repurchase the
securities at a future date by repaying the cash with interest. The Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. Cash or liquid high-grade debt
securities held by the Fund equal in value to the repurchase price including
any accrued interest will be maintained in a segregated account while a
reverse repurchase agreement is in effect.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
including financial futures contracts (such as interest rate, index and
foreign currency futures contracts), options (such as options on securities,
indices, foreign currencies and futures contracts), forward currency
contracts and interest rate, equity index and currency swaps, caps, collars
and floors. The index Derivative Instruments which the Fund may use may be
based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or
spread, to lock in unrealized market value gains or losses, to facilitate or
substitute for the sale or purchase of securities, to manage the duration of
securities, to alter the exposure of a particular investment or portion of
the Fund's portfolio to fluctuations in interest rates or currency rates, to
uncap a capped security or to convert a fixed rate security into a variable
rate security or a variable rate security into a fixed rate security.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments may be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities, currency and interest rate markets, which requires
different skills than predicting changes in the prices of individual
securities. There can be no assurance that any particular strategy will
succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs, and may result in certain
tax consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures, options, currencies
or forward contracts or (2) cash and short-term liquid debt securities with
a value sufficient at all times to cover its potential obligations to the
extent not covered as provided in (1) above. The Fund will comply with SEC
guidelines regarding cover for Derivative Instruments and will, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value unless the
option is closed out in an offsetting transaction.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value and the Fund would experience losses to the extent of premiums
paid for them.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market. The Fund will not purchase put or call
options that are traded on a national exchange in an amount exceeding 5% of
its net assets.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
Generally, the OTC debt and foreign currency options used by the Fund
are European style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American style
options, which are exercisable at any time prior to the expiration date of
the option.
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. A call
option is covered if the Fund owns the underlying security or a call option
on the same security with a lower strike price.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund writes a call, it assumes a short futures position. If
the Fund writes a put, it assumes a long futures position. When the Fund
purchases an option on a futures contract, it acquires the right, in return
for the premium it pays, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a
put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of
the Fund's fixed income portfolio. If Dreyfus wishes to shorten the average
duration of the Fund's fixed income portfolio, the Fund may sell an interest
rate futures contract or a call option thereon, or purchase a put option on
that futures contract. If Dreyfus wishes to lengthen the average duration
of the Fund's fixed income portfolio, the Fund may buy an interest rate
futures contract or a call option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts for hedging purposes.
Foreign Currency Transactions. The Fund may engage in currency
exchange transactions on a spot or forward basis. The Fund may exchange
foreign currency on a spot basis at the spot rate then prevailing for
purchasing or selling foreign currencies in the foreign exchange market.
The Fund may also enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date either
with respect to specific transactions or portfolio positions in order to
minimize the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. For example, when the Fund
anticipates purchasing or selling a security denominated in a foreign
currency, the Fund may enter into a forward contract in order to set the
exchange rate at which the transaction will be made. The Fund may also
enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's securities positions
denominated in that currency.
Forward currency contracts may substantially change the Fund's
investment exposure to changes in currency exchange rates and could result
in losses if currencies do not perform as Dreyfus anticipates. There is no
assurance that Dreyfus' use of forward currency contracts will be
advantageous to the Fund or that it will hedge at an appropriate time.
Foreign Currency Strategies - Special Considerations. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in
the values of the foreign currencies in which the Fund's securities are
denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such
hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
The Fund might seek to hedge against changes in the value of particular
currency when no Derivative Instruments on that currency are available or
such Derivative Instruments are more expensive than certain other Derivative
Instruments. In such cases, the Fund may hedge against price movements in
that currency by entering into transactions using Derivative Instruments on
another currency or a basket of currencies, the values of which Dreyfus
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the
Derivative Instrument will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
foreign currency Derivative Instruments, the Fund could be disadvantaged by
having to deal in the odd lot market (generally consisting of transactions
of less than $1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions
in the interbank market and thus might not reflect odd-lot transactions
where rates might be less favorable. The interbank market in foreign
currencies is a global, round-the clock market.
Settlement of transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Forward Contracts. A forward foreign currency exchange contract
("forward contract") is a contract to purchase or sell a currency at a
future date. The two parties to the contract set the number of days and the
price. Forward contracts are used as a hedge against future movements in
foreign exchange rates. The Fund may enter into forward contracts to
purchase or sell foreign currencies for a fixed amount of U.S. dollars or
other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund may
purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Fund intends to acquire. Forward
contracts may also serve as short hedges -- for example, the Fund may sell a
forward contract to lock in the U.S. dollar equivalent of the proceeds from
the anticipated sale of a security denominated in a foreign currency or from
anticipated dividend or interest payments denominated in a foreign currency.
Dreyfus may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or basket of
currencies, the value of which Dreyfus believes will bear a positive
correlation to the value of the currency being hedged.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are
usually entered into a principal basis, no fees or commissions are involved.
When the Fund enters into a forward contract, it relies on the counterparty
to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of
any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets generally
do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by negotiating
directly with the counterparty. Thus, there can be no assurance that the
Fund will in fact be able to close out a forward contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the
counterparty, the Fund might be unable to close out a forward contract at
any time prior to maturity. In either event, the Fund would continue to be
subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that are
the subject of the hedge or to maintain cash or securities in a segregated
account.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value
of such securities measured in the foreign currency will change after the
forward contract has been established. Thus, the Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest
rate, equity index and currency swaps, caps, collars and floors, may be
individually negotiated and structured to include exposure to a variety of
different types of investments or market factors. Swaps involve two parties
exchanging a series of cash flows at specified intervals. In the case of an
interest rate swap, the parties exchange interest payments based on an
agreed upon principal amount (referred to as the "notional principal
amount"). Under the most basic scenario, Party A would pay a fixed rate on
the notional principal amount to Party B, which would pay a floating rate on
the same notional principal amount to Party A. Depending on their
structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors.
Swap agreements can take many different forms and are known by a variety of
names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a swap
agreement on a net basis (that is, the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount
of the two payments), the Fund will maintain cash or liquid assets with a
daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis or writes a cap, collar or floor, it
will maintain cash or liquid assets with a value equal to the full amount of
the Fund's accrued obligations under the agreement.
The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that
determine the amounts of payments due to and from the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declines, the value of a swap agreement would likely decline, potentially
resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with
banks and recognized securities dealers believed by Dreyfus to present
minimal credit risks. If there is a default by the other party to such a
transaction, the Fund will have to rely on its contractual remedies (which
may be limited by bankruptcy, insolvency or similar laws) pursuant to the
agreement relating to the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amounts to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in such securities would exceed 5% of the Fund's
total assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) Paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in
the values of assets will not constitute a violation of such restriction,
except as otherwise required by the 1940 Act.
If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains
an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements between the
Company, on behalf of the Fund, and those companies that furnish services to
the Fund. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of nine Directors. The following
lists the Directors and officers and their positions with the Company and
their present and principal occupations during the past five years. Each
Director who is an "interested person" of the Company (as defined in the
1940 Act) is indicated by an asterisk(*). Each of the Directors also serves
as a Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.) a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources) a temporary placement agency. 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 and CEO, The
Palladium Company; President and CEO, Himmel and Company, 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 of the Board and
CEO, LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; Member of Advisory Committee, Decedents
Estates Laws of Pennsylvania. Age: 67 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director,
Harvard/Pilgrim 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 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 Investment Services
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 and 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
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
____________________ _________________ ________________________
Joseph S. DiMartino* $17,710.00 $619,660
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 and separately by the
Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1998, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $17,710. For the year ended
December 31, 1998, the aggregate amount of fees received by Mr. Fort for
serving as a Board member of all funds in the Dreyfus/Laurel Funds (including
the Company) and Dreyfus High Yield Strategies Fund (for which payment is made
directly by the fund) was $59,010. In addition, Dreyfus reimbursed Mr. Fort a
total of $733.11 for expenses attributable to the Company's Board meetings
which is not included in the $5,313.37 amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The 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.
Principal Shareholders. As of February 1, 1999, the following
shareholder(s) owned beneficially or of record 5% or more of Class A shares
of the Fund: MLPF&S For The Sole Benefit of Its Customers, 4800 Deer Lake
Drive East, Jacksonville, FL 32246-6484, 5.81%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class B shares of the Fund: MLPF&S For The Sole
Benefit of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-
6484, 10.73%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class C shares of the Fund: MLPF&S For The Sole
Benefit of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-
6484, 57.02%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class R shares of the Fund: MLPF&S For The Sole
Benefit of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-
6484, 10.38%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and
"Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994, subject to the overall authority of the Company's Board of
Directors in accordance with Maryland law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus manages
the Fund by making investment decisions based on the Fund's investment
objective, policies and restrictions. The Management Agreement is subject
to review and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. The Company may terminate the
Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities
on 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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 1.25% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee by an
amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering
the expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other
expenses of the Company are allocated among its funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each fund.
For the last three years, the Fund had the following expenses:
For the Fiscal Year
Ended October 31,
1998 1997 1996
Management fees $3,780,009 $2,337,782 $1,035,858
The Distributor. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109,
serves as the Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. Dreyfus may pay the Distributor for
shareholder services from Dreyfus' own assets, including past profits but
not including the management fee paid by the Fund. The Distributor may use
part or all of such payments to pay certain banks, securities brokers or
dealers and other financial institutions ("Agents") for these services. The
Distributor also acts as sub-administrator for the Fund and as distributor
for the other funds in the Dreyfus Family of Funds.
For the fiscal year ended October 31, 1998, the Distributor retained no
sales loads on the Fund's Class A shares. For the fiscal year ended October
31, 1998, the Distributor retained $78,006 from the contingent deferred
sales charge ("CDSC") on Class B shares of the Fund. For the same period,
the Distributor retained $5,462 from the CDSC on Class C shares for the
Fund.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most
beneficial to you depends on the amount and the intended length of your
investment. You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee, service fee
and CDSC, if any, on Class B shares or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares
purchased at the same time, and to what extent, if any, such differential
would be offset by the return on Class A shares. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution and service fees on
Class B shares or Class C shares may exceed the accumulated distribution fee
and initial sales charge on Class A shares during the life of the
investment. Finally, you should consider the effect of the CDSC period and
any conversion rights of the Classes in the context of your own investment
time frame. For example, while Class C shares have a shorter CDSC period
than Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to ongoing distribution and service fees. Thus,
Class B shares may be more attractive than Class C shares to investors with
longer term investment outlooks. Generally, Class A shares may be more
appropriate for investors who invest $1,000,000 or more in Fund shares, but
will not be appropriate for investors who invest less than $50,000 in Fund
shares. The Fund reserves the right to reject any purchase order.
Class A shares, Class B shares and Class C shares may be purchased only
by clients of Agents, except that full-time or part-time employees of
Dreyfus or any of its affiliates or subsidiaries, directors of Dreyfus,
Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing may
purchase Class A shares directly through the Distributor. Subsequent
purchases may be sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
or to customers who have received and hold shares of the Fund distributed to
them by virtue of such an account or relationship. In addition, holders of
Restricted shares of the Fund as of January 15, 1998 may continue to
purchase Class R shares of the Fund whether or not they would otherwise be
eligible to do so. Class R shares may be purchased for a retirement plan
only by a custodian, trustee, investment manager or other entity authorized
to act on behalf of such a plan. Institutions effecting transactions in
Class R shares for the accounts of their clients may charge their clients
direct fees in connection with such transactions.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum on subsequent purchases. The initial investment must be
accompanied by the Fund's Account Application. The Fund reserves the right
to offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value".
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined NAV. It is
the dealers' responsibility to transmit orders so that they will be received
by the Distributor or its designee before the close of its business day.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the Fund's Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by
Eligible Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service ("IRS").
Class A Shares. The public offering price for Class A shares is the
NAV per share of that Class, plus, except for shareholders owning Class A
shares of the Fund on November 30, 1996, a sales load as shown below:
Total Sales Load Dealers'
Amount of Transaction as a % Reallowance
of Offering Price as a % of Offering
Per Share Price
Less than $50,000 5.75 5.00
$50,000 to less than 4.50 3.75
$100,000
$100,000 to less than 3.50 2.75
$250,000
$250,000 to less than 2.50 2.25
$500,000
$500,000 to less than 2.00 1.75
$1,000,000
$1,000,000 or more 0 0
For shareholders who opened Fund accounts after December 19, 1994, but
who beneficially owned Class A shares on November 30, 1996, the public
offering price for Class A shares is the NAV per share of that Class plus a
sales load as shown below:
Total Sales Load Dealers'
Amount of Transaction as a % Reallowance
of Offering Price as a % of Offering
Per Share Price
Less than $50,000 4.50 4.25
$50,000 to less than 4.00 3.75
$100,000
$100,000 to less than 3.00 2.75
$250,000
$250,000 to less than 2.50 2.25
$500,000
$500,000 to less than 2.00 1.75
$1,000,000
$1,000,000 or more 0 0
Sales Loads -- Class A. The scale of sales loads applies to purchases
of Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or for
the account of any minor children, or a trustee or other fiduciary
purchasing securities for a single trust estate or a single fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Code) although
more than one beneficiary is involved; or a group of accounts established by
or on behalf of the employees of an employer or affiliated employers
pursuant to an employee benefit plan or other program (including accounts
established pursuant to Sections 403(b), 408(k) and 457 of the Code); or an
organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the
purchases are made through a central administration or a single dealer, or
by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the NAV of a Class A share at the close of business on October 31, 1998:
NAV per share $15.18
Per Share Sales Charge - 5.75%* of offering price
(6.10% of NAV per share) $ .93
Per Share Offering Price to Public $16.11
__________________________________________
* Class A shares purchased by shareholders beneficially owning Class A
shares on November 30, 1996, but who opened their accounts after
December 19, 1994, are subject to a different sales load schedule as
described above.
Holders of Class A accounts of the Fund as of December 19, 1994 may
continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to any applicable front-end sales load.
There is no initial sale charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to sales of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain
the same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by Dreyfus which are sold with a sales load, such as Class A shares.
In some instances, these incentives may be offered only to certain dealers
who have sold or may sell significant amounts of such shares. Dealers
receive a larger percentage of the sales load from the Distributor than they
receive for selling most other funds.
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in the Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class R Shares. The public offering for Class R shares is the NAV per
share of that Class.
Right of Accumulation-Class A Shares. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier
Family of Funds, shares of certain other funds advised by Dreyfus which are
sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined above, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you previously purchased and
still hold Class A shares of the Fund, or shares of any other Eligible Fund
or combination thereof, with an aggregate current market value of $40,000
and subsequently purchase Class A shares of the Fund or shares of an
Eligible Fund having a current value of $20,000, the sales load applicable
to the subsequent purchase would be reduced to 4.5% of the offering price.
All present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the sales
load applicable to each subsequent purchase. Class A shares purchased by
shareholders beneficially owning Fund shares on November 30, 1996, but who
opened their Fund accounts after December 19, 1994, are subject to a
different sales load structure, as described above.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the TeleTransfer Privilege if you have checked the appropriate box
and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained in a
domestic financial institution that is an Automated Clearing House ("ACH")
member may be so designated. TeleTransfer purchase orders may be made at
the Transfer Agent any time. Purchase orders received by 4:00 p.m., New
York time, on any business day that the Transfer Agent and the NYSE are open
for business will be credited to the shareholder's Fund account on the next
bank business day following such purchase order. Purchase orders made after
4:00 p.m., New York time, on any business day the Transfer Agent and the
NYSE are open for business, or orders made on Saturday, Sunday or any Fund
holiday (e.g., when the NYSE is not open for business), will be credited to
the shareholder's Fund account on the second bank business day following
such purchase order. To qualify to use the TeleTransfer Privilege, the
initial payment for purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares - TeleTransfer Privilege." The Fund may modify or terminate this
Privilege at any time or charge a service fee upon notice to shareholders.
No such fee currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the
shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule.
Distribution Plan--Class A Shares. The Company has adopted a
Distribution Plan pursuant to the Rule with respect to the Class A shares of
the Fund ("Class A Plan"), whereby Class A shares of the Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A Plan allows the Distributor to make payments from the
Rule 12b-1 fees it collects from the Fund to compensate Agents that have
entered into Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution-related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Class A shares of the Fund.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without approval of the Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Company and
who do not have any direct or indirect financial interest in the operation
of the Class A Plan, cast in person at a meeting called for the purpose of
considering such amendments. The Class A Plan is subject to annual approval
by the entire Board of Directors and by the Directors who are neither
interested persons nor have any direct or indirect financial interest in the
operation of the Class A Plan, by vote cast in person at a meeting called
for the purpose of voting on the Class A Plan. The Class A Plan was so
approved by the Directors at a meeting held on February 4, 1999. The Class
A Plan is terminable, as to the Fund's Class A shares, at any time by vote
of a majority of the Directors who are not interested persons and have no
direct or indirect financial interest in the operation of the Class A Plan
or by vote of the holders of a majority of the outstanding shares of such
class of the Fund.
Distribution and Service Plans -- Class B and Class C Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B and Class C shares, pursuant to which the Fund pays the
Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B and Class C
shares for the provision of certain services to the holders of Class B and
Class C shares. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and
providing services related to the maintenance of such shareholder accounts.
With regard to such services, each Agent is required to disclose to its
clients any compensation payable to it by the Fund and any other
compensation payable by its clients in connection with the investment of
their assets in Class B and Class C shares. The Distributor may pay one or
more Agents in respect of services for these Classes of shares. The
Distributor determines the amounts, if any, to be paid to Agents under the
Service Plan and the basis on which such payments are made. The Company's
Board of Directors has also adopted a Distribution Plan pursuant to the Rule
with respect to Class B and Class C shares (the "Distribution Plan")
pursuant to which the Fund pays the Distributor for distributing the Fund's
Class B and Class C shares at an aggregate annual rate of 0.75% of the value
of the average daily net assets of Class B and Class C shares. The
Company's Board of Directors believes that there is a reasonable likelihood
that the Distribution and Service Plans (the "Plans") will benefit the Fund
and the holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or Class
C shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be
approved by the Board of Directors and by the Directors who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. Each Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Directors at a meeting held on February 4, 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B shares and Class
C shares.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Class A Plan and the Distribution and
Service Plans are payable without regard to actual expenses incurred. The
Fund and the Distributor may suspend or reduce payments under the Class A
Plan and the Distribution and Service Plans at any time, and payments are
subject to the continuation of the Fund's plans and the Agreements described
above. From time to time, the Agents, the Distributor and the Fund may
voluntarily agree to reduce the maximum fees payable under the plans.
For the fiscal year ended October 31, 1998, the Fund paid the
Distributor and Dreyfus Service Corporation $15,148 and $13,570,
respectively, pursuant to the Class A Plan. For the fiscal year ended
October 31, 1998, the Fund paid the Distributor $187,216 and $33,521
pursuant to the Distribution Plan with respect to Class B shares and Class C
shares, respectively, and paid the Distributor and Dreyfus Service
Corporation $16,830 and $45,575, respectively, pursuant to the Service Plan
with respect to Class B shares and $0 and $11,174, respectively, pursuant to
the Service Plan with respect to Class C shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the TeleTransfer Privilege. If you are a client of a
Selected Dealer, you may redeem shares through the Selected Dealer. Other
redemption procedures may be in effect for clients of certain Agents and
institutions. The Fund makes available to certain large institutions the
ability to issue redemption instructions through compatible computer
facilities. The Fund reserves the right to refuse any request made by
telephone, including requests made shortly after a change of address, and
may limit the amount involved or the number of such requests. The Fund may
modify or terminate any redemption privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs, or other retirement plans, and shares
for which certificates have been issued, are not eligible for the
TeleTransfer Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TeleTransfer
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus Touchr automated
telephone system) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers
may make redemption requests to their Selected Dealer. If the Selected
Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, your account will be credited with an amount
equal to the CDSC previously paid upon redemption of the Class A or Class B
shares reinvested. The Reinvestment Privilege may be exercised only once.
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two days
after receipt of the redemption request. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a wire
redemption will be effected as a TeleTransfer transaction through the ACH
system unless more prompt transmittal specifically is requested. Holders of
jointly registered Fund or bank accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account only up to $250,000 within any
30-day period. See "Purchase of Shares-TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Company's Board
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect the Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years; then of amounts representing the cost
of shares purchased six years prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1%
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC. - The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described below. If the Company's Board determines to discontinue the
waiver of the CDSC, the disclosure herein will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Prospectus or this Statement of Additional Information at the time of the
purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such other funds
purchased by exchange will be purchased on the basis of relative NAV per
share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
To request an exchange, an investor or an investor's Agent acting on
the investor's behalf must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr automated telephone system) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class of certain other funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to
the schedule the investor has selected. This Privilege is available only
for existing accounts. With respect to Class R shares held by a Retirement
Plan, exchanges may be made only between the investor's Retirement Plan
account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV as described
above under "Fund Exchanges." Enrollment in or modification or cancellation
of this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification Dreyfus Premier Small
Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
The Fund may charge a service fee for the use of this Privilege. No such
fee currently is contemplated. For more information concerning this
Privilege and the funds in the Dreyfus Premier Family of Funds or the
Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free 1-
800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to Dreyfus
Premier Small Company Stock Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587 and the notification will be effective three business days
following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A shares to
which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A shares where the sales load is imposed concurrently with
withdrawals of Class A shares generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from the Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-554-4611. You
may cancel these Privileges by mailing a written notification to Dreyfus
Premier Small Company Stock Fund, P.O. Box 6587, Providence Rhode Island,
02940-6587. To select a new fund after cancellation, you must submit a new
Dividend Options Form. Enrollment in or cancellation of these privileges is
effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for Dreyfus Dividend
Sweep. The Fund may modify or terminate these privileges at any time or
charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for
Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Letter of Intent-Class A Shares. By signing a Letter of Intent form,
which can be obtained by calling 1-800-554-4611, you become eligible for the
reduced sales load applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and conditions set
forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of
shares you hold (on the date of submission of the Letter of Intent) in any
Eligible Fund that may be used toward "Right of Accumulation" benefits
described above may be used as a credit toward completion of the Letter of
Intent. However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
shares of the Fund held in escrow to realize the difference. Signing a
Letter of Intent does not bind you to purchase, or the Fund to sell, the
full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales
load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter
of Intent will be made at the then-current NAV plus the applicable sales
load in effect at the time such Letter of Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is engaged in excessive
trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole
or part any purchase or exchange request, with respect to such investor's
account. Such investors also may be barred from purchasing other funds in
the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes
exchanges that appear to coincide with an active market-timing strategy may
be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may
refuse or restrict purchase or exchange requests by any person or group if,
in the judgment of the Fund's management, the Fund would be unable to invest
the money effectively in accordance with its investment objective and
policies or could otherwise be adversely affected or if the Fund receives or
anticipates receiving simultaneous orders that may significantly affect the
Fund (e.g., amounts equal to 1% or more of the Fund's total assets). If an
exchange request is refused, the Fund will take no other action with respect
to the shares until it receives further instructions from the investor. The
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount
of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy
on excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined NAV
but the purchase order would be effective only at the NAV next determined
after the fund being purchased receives the proceeds of the redemption,
which may result in the purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at
the last sale price on the securities exchange or national securities market
on which such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available. Where market
quotations are not readily available, the Fund's investments are valued
based on fair value as determined in good faith by the Company's Board.
Debt securities may be valued by an independent pricing service approved by
the Company's Board and are valued at fair value as determined by the
pricing service. Any assets or liabilities initially expressed in terms of
foreign currency will be translated into U.S. dollars at the midpoint of
the New York interbank market spot exchange rate as quoted on the day of
such translation or, if no such rate is quoted on such date, such other
quoted market exchange rate as may be determined to be appropriate by
Dreyfus. If the Fund has to obtain prices as of the close of trading on
various exchanges throughout the world, the calculation of NAV may not take
place contemporaneously with the determination of prices of certain of the
Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee,
are accrued daily and taken into account for the purpose of determining the
NAV of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors if it
believes that the discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and
Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income, if any, four times yearly and distributes net realized
capital gains and gains from foreign currency transactions, if any, once a
year, but it may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with the 1940 Act. All expenses are accrued daily and deducted
before declaration of dividends to investors. The Fund will not make
distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Investors other
than qualified retirement plans may choose whether to receive dividends and
other distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both
dividends and other distributions in additional Fund shares at NAV;
dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV. Dividends and
other distributions paid by each Class are calculated at the same time and
in the same manner and will be in the same amount, except that the expenses
attributable solely to a particular Class are borne exclusively by that
Class. Class B and Class C shares will receive lower per share dividends
than Class A shares, which will in turn receive lower per share dividends
than Class R shares, because of the higher expenses borne by the relevant
Classes. See "Expenses" in the Fund's Prospectus.
It is expected that the Fund will continue to qualify for treatment as
a regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve the Fund of any liability for federal income tax
to the extent its earnings and realized gains are distributed in accordance
with applicable provisions of the Code. To qualify for treatment as a RIC
under the Code, the Fund -- which is treated as a separate corporation for
federal tax purposes -- (1) must distribute to its shareholders each year at
least 90% of its investment company taxable income (generally consisting of
net investment income, net short-term capital gains and net gains from
certain foreign currency transactions) (the "Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
(the "Income Requirement"), and (3) must meet certain asset diversification
and other requirements. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency. The Fund will be subject to a non-deductible 4%
excise tax ("Excise Tax") to the extent it fails to distribute substantially
all of its taxable income and capital gains. If the Fund failed to qualify
for treatment as a RIC for any taxable year, (1) it would be taxed at
corporate rates on the full amount of its taxable income for that year
without being able to deduct the distributions it makes to its shareholders
and (2) the shareholders would treat all those distributions, including
distributions of net capital gain (the excess of net long-term capital gain
over net short-term capital loss), as dividends (that is, ordinary income)
to the extent of the Fund's earnings and profits. In addition, the Fund
could be required to recognize unrealized gains, pay substantial taxes and
interest and make substantial distributions before requalifying for RIC
treatment.
Distributions. If you elect to receive dividends and other
distributions in cash, and your dividend or distribution check is returned
to the Fund as undeliverable or remains uncashed for six months, the Fund
reserves the right to reinvest that distribution and all future
distributions payable to you in additional Fund shares at NAV. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains, net realized gains
from certain foreign currency transactions and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess net of long-term capital gain over net short-term
capital loss) will be taxable to those shareholders as long-term capital
gains regardless of how long the shareholders have held their Fund shares
and whether the distributions are received in cash or reinvested in
additional Fund shares.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subjected to U.S. withholding tax at the rate of 30%,
unless the foreign investor claims the benefit of a lower rate specified in
a tax treaty. Distributions from net capital gain paid by the Fund to a non-
resident foreign investor, as well as the proceeds of any redemptions by
such an investor, regardless of the extent to which gain or loss may be
realized, generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to dividends and distributions
from net capital gain, if any, paid during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if a shareholder redeems those shares or exchanges
them for shares of another fund advised or administered by Dreyfus, within
90 days of purchase, and (1) in the case of a redemption, the shareholder
acquires other Fund Class A shares through exercise of the Reinvestment
Privilege or (2) in the case of an exchange, the other fund reduces or
eliminates its otherwise applicable sales load. In these cases, the amount
of the sales load charged on the purchase of the original Class A shares, up
to the amount of the reduction of sales load pursuant to the Reinvestment
Privilege or on the exchange, as the case may be, is not included in the tax
basis of those shares for purposes of computing gain or loss and instead is
added to the tax basis of the acquired shares.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
IRS distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of non-
deductible contributions thereto, will be taxable as ordinary income and, if
made prior to the time the participant reaches age 59 1/2, generally will be
subject to an additional tax equal to 10% of the taxable portion of the
distribution. The administrator, trustee or custodian of a qualified
retirement plan will be responsible for reporting distributions from the
plans to the IRS. Moreover, certain contributions to a qualified retirement
plan in excess of the amounts permitted by law may be subject to an excise
tax. If a distributee of an "eligible rollover distribution" from a
qualified retirement plan does not elect to have the distribution paid
directly from the plan to an eligible retirement plan in a "direct
rollover," the distribution will be subject to a 20% income tax withholding.
The Fund must withhold and remit to the U.S. treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if such
shareholder fails to furnish a TIN to the Fund and certify that it is
correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income.. A TIN is either the
Social Security number, individual taxpayer identification number or
employer identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax and may be claimed as a credit on the record owner's Federal income tax
return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such a distribution would be a
return on investment in an economic sense, although taxable as stated in the
Fund's Prospectus. In addition, if a shareholder sells shares of the Fund
held for six months or less and receives any capital gain distributions with
respect to those shares, any loss incurred on the sale of those shares will
be treated as a long-term capital loss to the extent of those distributions.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
federal alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries
and U.S. possessions that would reduce the yield on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign
investors. If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, it
will be eligible to, and may, file an election ("Election") with the IRS
that will enable its shareholders, in effect, to receive the benefit of the
foreign tax credit with respect to any foreign or U.S. possessions' income
taxes paid by it. Pursuant to the Election, the Fund would treat those
taxes as dividends paid to its shareholders and each shareholder would be
required to (1) include in gross income, and treat as paid by him or her,
his or her proportionate share of those taxes, (2) treat his or her share of
those taxes and of any dividend paid by the Fund that represents income from
foreign or U.S. possession sources as his or her own income from those
sources and (3) either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her federal
income tax. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions. Generally, a credit for foreign taxes may
not exceed the shareholder's federal income tax attributable to his total
foreign source taxable income. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the income from
sources within, and taxes paid to, foreign countries and U.S. possessions if
it makes the Election.
Passive Foreign Investment Companies. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at
least 75% of its gross income is passive or (2) an average of at least 50%
of its assets produce, or are held for the production of, passive income.
Under certain circumstances, the Fund will be subject to federal income tax
on a portion of any "excess distribution" received on the stock of a PFIC or
of any gain on disposition of the stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly,
will not be taxable to it to the extent that income is distributed to its
shareholders. If the Fund invests in a PFIC and elects to treat the PFIC as
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its
pro rata share of the qualified electing fund's annual ordinary earnings and
net capital gain (the excess of net long-term capital gain over net short-
term capital loss) -- which probably would have to be distributed to satisfy
the Distribution Requirement and avoid imposition of the 4% excise tax
referred to in the Fund's Prospectus under "Dividends, Other Distributions
and Taxes" -- even if those earnings and gain were not received by the Fund.
Pursuant to proposed regulations, open-end RICs, such as the Fund,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market
value of each such PFIC's stock over the adjusted basis in that stock
(including mark-to-market gain for each prior year for which an election was
in effect).
Foreign Currency, Futures, Forward and Hedging Transactions. Gains
from the sale or other disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or loss
from the disposition of foreign currencies and certain foreign-currency-
denominated instruments (including debt instruments and financial forward,
futures and option contracts) may be treated as ordinary income or loss
under Section 988 of the Code. In addition, all or a portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income. Moreover, all or a portion of the gain
realized from engaging in "conversion transactions" that otherwise would be
valued as capital gain may be treated as ordinary income under Section 1258
of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and straddle transactions, transactions marketed or
sold as producing capital gains and transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures, forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss
to the Fund characterized in the same manner.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles," which are defined to include "offsetting
positions" in actively traded personal property. Under Section 1092 of the
Code, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on
the offsetting position(s) of the straddle. In addition, these rules may
postpone the recognition of loss that otherwise would be recognized under
the mark-to-market rules discussed above. The regulations under Section
1092 also provide certain "wash sale" rules, which apply to transactions
where a position is sold at a loss and a new offsetting position is acquired
within a prescribed period, and "short sale" rules applicable to straddles.
If the Fund makes certain elections (including an election as to straddles
that include a position in one or more Section 1256 Contracts (so-called
"mixed straddles")), the amount, character, and timing of recognition of
gains and losses from the affected straddle positions would be determined
under rules that vary according to the elections made. Because only a few
of the regulations implementing the straddle rules have been promulgated,
the tax consequences to the Fund of straddle transactions are not entirely
clear.
Foreign Currency Gains and Losses. Gains and losses attributable to
fluctuations in foreign currency exchange rates that occur between the time
the Fund accrues dividends, interest or other receivables, or expenses or
other liabilities, denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on the disposition
of a debt security denominated in a foreign currency, or of an option or
forward contract on a foreign currency, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security, option or contract and the date of disposition
also are treated as ordinary income or loss. These gains or losses may
increase or decrease the amount of the Fund's investment company taxable
income to be distributed to its shareholders.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. Shareholders are
advised to consult their tax advisers concerning the application of state
and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed below. Special
U.S. federal income tax rules that differ from those described below may
apply to certain foreign persons who invest in the Fund, such as a foreign
shareholder entitled to claim the benefits of an applicable tax treaty.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to a U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) generally will not be subject to U.S. federal income tax
unless the foreign shareholder is a non-resident alien individual and is
physically present in the United States for more than 182 days during the
taxable year. In the case of certain foreign shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% of capital
gain distributions and of the gross proceeds from a redemption of Fund
shares unless the shareholder furnishes the Fund with a certificate
regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or 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 these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions amounting to $470,403, $347,777 and $179,990,
respectively.
Portfolio Turnover. Under normal market conditions, the Fund's
portfolio turnover rate is expected to be less than 100%. A portfolio
turnover rate of 100% would occur, for example, if all the securities held
by the Fund were replaced once in a period of one year. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions
and other expenses that must be borne directly by the Fund and, thus,
indirectly by its shareholders. In addition, a higher rate of portfolio
turnover may result in the realization of larger amounts of short-term
capital gains that, when distributed to the Fund's shareholders, are taxable
to them as ordinary income. Nevertheless, securities transactions for the
Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus deems its appropriate to
make changes in the Fund's assets. The portfolio turnover rate for the Fund
is calculated by dividing the lesser of the Fund's annual sales or purchases
of portfolio securities (exclusive of purchases and sales of securities
whose maturities at the time of acquisition were one year or less) by the
monthly average value of securities in the Fund during the year. Portfolio
turnover may vary from year to year as well as within a year. The portfolio
turnover rates for the fiscal years ended October 31, 1997 and 1998 were
39.18% and 47.44%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of the Fund for
the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year Since Inception
Class A shares (20.28)% 12.47% (9/2/94)
Class B shares (19.28)% 15.37% (12/19/94)
Class C shares (16.88)% 15.90% (12/19/94)
Class R shares (15.31)% 14.31% (9/2/94)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase
and the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price
in the case of Class A) per share with a hypothetical $1,000 payment made at
the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment,
taking the "n"th root of the quotient (where "n" is the number of years in
the period) and subtracting 1 from the result. The average annual total
return figures for a Class calculated in accordance with such formula assume
that, in the case of Class A, the maximum sales load has been deducted from
the hypothetical initial investment at the time of purchase or, in the case
of Class B or Class C, the maximum applicable CDSC has been paid upon
redemption at the end of the period.
The Fund's total return for the period September 2, 1994 (commencement
of operations) to October 31, 1998 for Class R was 74.44%. The Fund's total
return for Class A for the period September 2, 1994 (commencement of
operations) to October 31, 1998 was 63.02%. Based on NAV per share, the
total return for Class A was 72.97% for this period. The Fund's total
return for Class B and Class C for the period from December 19, 1994
(commencement of operations of Class B and Class C) through October 31, 1998
was 73.88% and 77.00%, respectively. Without giving effect to the
applicable CDSC, total return for Class B and Class C was 76.88% and 77.00%,
respectively, for the period.
Total return is calculated by subtracting the amount of the Fund's NAV
(maximum offering price in the case of Class A) per share at the beginning
of a stated period from the NAV (maximum offering price in the case of Class
A) per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period and any
applicable CDSC), and dividing the result by the NAV (maximum offering price
in the case of Class A) per share at the beginning of the period. Total
return also may be calculated based on the NAV per share at the beginning of
the period instead of the maximum offering price per share at the beginning
of the period for Class A shares or without giving effect to any applicable
CDSC at the end of the period for Class B or Class C shares. In such cases,
the calculation would not reflect the deduction of the sales load with
respect to Class A shares or any applicable CDSC with respect to Class B or
Class C shares, which, if reflected would reduce the performance quoted.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i)
Russell 2500 Index, the Russell 2000 Value Index, the Russell 2000 Growth
Index, or the Russell 2000 Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives and assets,
or tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund, or the Fund's performance against inflation to
the performance of other instruments against inflation; and (v) products
managed by a universe of money managers with similar performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market. From time
to time, advertising materials for the Fund may refer to Morningstar ratings
and related analyses supporting that rating.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
The Fund is one of nineteen portfolios of the Company. Fund shares have no
preemptive, subscription or conversion rights and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they
vote separately by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
The Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
The Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 31, 1999, providing audit services including (1) examination of the
annual financial statements, (2) assistance, review and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. 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 AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
. Leading market positions in well-established industries.
. High rates of return on funds employed.
. Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
. Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
. Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to the
`AAA' long-term rating category, to categories below `CCC', or to
short-term ratings other than `F-1'.
Duff & Phelps Inc. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic
conditions.
AA
AA-
A+ Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
for prudent investment. Considerable variability in risk during
economic cycles.
BBB
BBB-
BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends.
Protection factors are narrow and risk can be substantial with
unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or
interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
DREYFUS PREMIER MIDCAP STOCK FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
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 Premier Midcap 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 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Fund B-2
Management of the Fund B-17
Management Arrangements B-24
Purchase of Shares B-26
Distribution and Service Plans B-33
Redemption of Shares B-35
Shareholder Services B-40
Additional Information About Purchases, Exchanges and Redemptions B-47
Determination of Net Asset Value B-48
Dividends, Other Distributions and Taxes B-49
Portfolio Transactions B-56
Performance Information B-58
Information About the Fund/Company B-60
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors B-61
Financial Statements B-61
Appendix B-62
DESCRIPTION OF THE FUND
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company
is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund.
Prior to January 16, 1998, the Fund's name was Dreyfus Disciplined Midcap
Stock Fund and prior to October 17, 1994, the Fund's name was Laurel Midcap
Stock Fund. The Fund is diversified, which means that, with respect to 75%
of its total assets, the Fund will not invest more than 5% of its assets in
the securities of any single issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
The Fund seeks investment returns that exceed those of the Standard &
Poor's 400 MidCap Indexr ("S&P 400"). The S&P 400 is composed of 400
domestic common stocks chosen by Standard & Poor's Rating Services, a
division of McGraw-Hill Companies, Inc. ("Standard & Poor's") for market
size, liquidity and industry group representation. It is a market-weighted
index (stock price times shares outstanding), with each stock affecting the
S&P 400 in proportion to its market value. The inclusion of a stock in the
S&P 400 does not imply that Standard & Poor's believes the stock to be an
attractive or appropriate investment, nor is Standard & Poor's in any way
affiliated with the Fund. The S&P 400 was created by Standard & Poor's to
capture the performance of the stocks that fall in the medium capitalization
range. The medium capitalization range of stocks was defined, at the
original time of screening, as between $200 million and $5 billion in market
value. Any medium-capitalization stocks already included in the Standard &
Poor's 500 Composite Stock Price Indexr ("S&P 500") were excluded from
candidacy for the S&P 400. After removal of the 500 stocks, the S&P 400
candidate population was reduced to 1,200 stocks. Standard & Poor's then
subjected this smaller population to a variety of screens and eventually the
sample size was reduced to the final 400 stocks. Standard & Poor's screened
the candidate population using the following criteria: level of trading
activity, or liquidity; market value; industry group representation; and the
level of controlling interest. A limited percentage of the S&P 400 may
include Canadian securities. No other foreign securities are eligible for
inclusion.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
American Depository Receipts ("ADRs"). The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market. Investment in
securities of foreign issuers presents certain risks. See "Foreign
Securities."
Corporate Obligations. The Fund may invest in corporate obligations
rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's or if unrated, of comparable quality as determined by
Dreyfus. Securities rated BBB by Standard & Poor's or Baa by Moody's are
considered by those rating agencies to be "investment grade" securities,
although Moody's considers securities rated Baa to have speculative
characteristics. Further, while bonds rated BBB by Standard & Poor's
exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and principal for debt in this category than debt in higher rated
categories. The Fund will dispose in a prudent and orderly fashion of bonds
whose ratings drop below these minimum ratings.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Treasury to lend to such Government
agency or instrumentality, or (d) the credit of the instrumentality.
(Examples of agencies and instrumentalities are: Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Home Loan Banks, General Services Administration,
Maritime Administration, Tennessee Valley Authority, District of Columbia
Armory Board, Inter-American Development Bank, Asian-American Development
Bank, Student Loan Marketing Association, International Bank for
Reconstruction and Development and Fannie Mae). No assurance can be given
that the U.S. Government will provide financial support to the agencies or
instrumentalities described in (b), (c) and (d) in the future, other than as
set forth above, since it is not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the Fund's credit guidelines. This technique
offers a method of earning income on idle cash. In a repurchase agreement,
the Fund buys a security from a seller that has agreed to repurchase the
same security at a mutually agreed upon date and price. The Fund's resale
price will be in excess of the purchase price, reflecting an agreed upon
interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate on
the underlying security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and
at no time will the Fund invest in repurchase agreements for more than one
year. The Fund will always receive as collateral securities whose market
value including accrued interest is, and during the entire term of the
agreement remains, at least equal to 100% of the dollar amount invested by
the Fund in each agreement, including interest, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the custodian. If the seller defaults,
the Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the Fund's credit
guidelines.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's, Prime-1 by Moody's, F-1 by Fitch IBCA, Inc. or, Duff-1 by
Duff & Phelps Credit Rating Co.
Bank Instruments. The Fund may purchase bankers' acceptances,
certificates of deposit, time deposits, and other short-term obligations
issued by domestic banks, foreign subsidiaries or foreign branches of
domestic banks, domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs"),
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are U.S. dollar-
denominated time deposits in a foreign branch of a U.S. bank or a foreign
bank. Yankee CDs are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States. The
Fund may also invest in Eurodollar bonds and notes which are obligations,
which pay principal and interest in U.S. dollars held in banks outside the
United States, primarily in Europe. All of these obligations are subject to
somewhat different risks than are the obligations of domestic banks or
issuers in the United States. See "Foreign Securities."
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in foreign currencies and obligations of foreign
branches of domestic banks and domestic branches of foreign banks.
Investment in such foreign currencies securities and obligations presents
certain risks, including those resulting from fluctuations in currency
exchange rates, revaluation of currencies, adverse political and economic
developments, the possible imposition of currency exchange blockages or
other foreign governmental laws or restrictions, reduced availability of
public information concerning issuers, and the fact that foreign issuers are
not generally subject to uniform accounting, auditing and financial
reporting standards or to other regulatory practices and requirements
comparable to those applicable to domestic issuers. Moreover, securities of
many foreign issuers may be less liquid and their prices more volatile than
those of comparable domestic issuers. In addition, with respect to certain
foreign countries, there is the possibility of expropriation, confiscatory
taxation and limitations on the use or removal of funds or other assets of
the Fund, including withholding of dividends. Foreign securities may be
subject to foreign government taxes that would reduce the yield on such
securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holder.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in the
Fund's Prospectus, the Fund also may engage in the investment techniques
described below. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
Borrowing. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues
of U.S. Treasury and Government securities are often offered on a
"when-issued" basis. This means that delivery and payment for the securities
normally will take place approximately 7 to 45 days after the date the buyer
commits to purchase them. The payment obligation and the interest rate that
will be received on securities purchased on a "when-issued" basis are each
fixed at the time the buyer enters into the commitment. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt securities
equal to the amount of the above commitments will be segregated on the
Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a "when-issued" basis and the securities held
by the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value
("NAV").
When payment for "when-issued" securities is due, the Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the "when-issued" securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
To secure advantageous prices or yields, the Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed
delivery basis involves the risk that the value of the securities purchased
will decline prior to the settlement date. The sale of securities for
delayed delivery involves the risk that the prices available in the market
on the delivery date may be greater than those obtained in the sale
transaction. The Fund will establish a segregated account consisting of
cash, U.S. Government securities or other high-grade debt obligations in an
amount at least equal at all times to the amounts of its delayed delivery
commitments.
Loans of Fund Securities. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to
be entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities, which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed 33-
1/3% of the value of the Fund's total assets and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities.
These loans are terminable by the Fund at any time upon specified notice.
The Fund might experience loss if the institution to which it has lent its
securities fails financially or breaches its agreement with the Fund. In
addition, it is anticipated that the Fund may share with the borrower some
of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the
Fund considers all relevant factors and circumstances including the
creditworthiness of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, the Fund: (1) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (2) agrees to repurchase the
securities at a future date by repaying the cash with interest. The Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. Cash or liquid high-grade debt
securities held by the Fund equal in value to the repurchase price including
any accrued interest will be maintained in a segregated account while a
reverse repurchase agreement is in effect.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
including financial futures contracts (such as index futures contracts) and
options (such as options on U.S. and foreign securities or indices of such
securities). The index Derivative Instruments which the Fund may use may be
based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or
spread or to facilitate or substitute for the sale or purchase of
securities.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments may be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities.
There can be no assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs, and may result in certain
tax consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value unless
the option is closed out in an offsetting transaction.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value and the Fund would experience losses to the extent of premiums
paid for them.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market. The Fund will not purchase put or call
options that are traded on a national exchange in an amount exceeding 5% of
its net assets.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the option's price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write options on securities only if it covers the
transaction through: an offsetting option with respect to the security
underlying the option it has written, exercisable by it at a more favorable
price; ownership of (in the case of a call) or a short position in (in the
case of a put) the underlying security; or segregation of cash or certain
other assets sufficient to cover its exposure.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund writes a call, it assumes a short futures position. If
the Fund writes a put, it assumes a long futures position. When the Fund
purchases an option on a futures contract, it acquires the right, in return
for the premium it pays, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a
put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5%, the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts for hedging purposes.
The Fund will not enter into futures contracts to the extent that its
outstanding obligations under these contracts would exceed 25% of the Fund's
total assets.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in such securities would exceed 5% of the Fund's
total assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) Paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in
the values of assets will not constitute a violation of such restriction,
except as otherwise required by the 1940 Act.
If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains
an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements between the
Company, on behalf of the Fund, and those companies that furnish services to
the Fund. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of nine Directors. The following
lists the Directors and officers and their positions with the Company and
their present and principal occupations during the past five years. Each
Director who is an "interested person" of the Company (as defined in the
1940 Act) is indicated by an asterisk(*). Each of the Directors also serves
as a Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.) a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources) a temporary placement agency. 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. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 26 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. 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 Investment Services
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 and 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
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board
Member****
Joseph S. DiMartino* $17,710.00 $619,660
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 and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal year
ended October 31, 1998, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Company
was $17.710. For the year ended December 31, 1998, the aggregate amount
of fees received by Mr. Fort for serving as a Board member of all funds in
the Dreyfus/Laurel Funds (including the Company) and Dreyfus High Yield
Strategies Fund (for which payment is made directly by the fund) was
$59,010. In addition, Dreyfus reimbursed Mr. Fort a total of $733.11 for
expenses attributable to the Company's Board meetings which is not
included in the $5,313.37 amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date
she was elected as a Board member) through October 31, 1998.
**** The 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.
Principal Shareholders:
As of February 1, 1999, the following shareholder(s) owned of record 5%
or more of Class A of the Fund: Charles Schwab & Co. Inc., Reinvest
Account, 101 Montgomery Street, San Francisco, CA 94104-4122; 52.20% and
Boston Safe Deposit & Trust Co., Trustee, As Agent-Omnibus Account, 1 Cabot
Road, Medford, MA 02155-5144; 14.73%.
As of February 1, 1999, the following shareholder(s) owned of record 5%
or more of Class B of the Fund: MLPF & S for the Sole Benefit of its'
Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-6484; 17.02%.
As of February 1, 1999, the following shareholder(s) owned of record 5%
or more of Class C of the Fund: MLPF & S for the Sole Benefit of its
Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-6484; 52.12%.
As of February 1, 1999, the following shareholder(s) owned of record 5%
or more of Class R of the Fund: Boston Safe Deposit & Trust Co. Trustee, As
Agent-Omnibus Account, 1 Cabot Road, Medford, MA 02155-5141; 38.67 and
Mcwood & Co., First Citizens Bank and Trust, P.O. Box 29255, Raleigh, NC
27626; 18.06%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and
"Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994, subject to the overall authority of the Company's Board of
Directors in accordance with Maryland law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus manages
the Fund by making investment decisions based on the Fund's investment
objective, policies and restrictions. The Management Agreement is subject
to review and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. The Company may terminate the
Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities
on 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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 1.10% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee by an
amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering
the expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other
expenses of the Company are allocated among its funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each fund.
For the last three years, the Fund had the following expenses:
For the Fiscal Year
Ended October 31,
1998 1997 1996
Management fees $783,685 $318,694 $159,095
The Distributor. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109,
serves as the Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. Dreyfus may pay the Distributor for
shareholder services from Dreyfus' own assets, including past profits but
not including the management fee paid by the Fund. The Distributor may use
part or all of such payments to pay certain banks, securities brokers or
dealers and other financial institutions ("Agents") for these services. The
Distributor also acts as sub-administrator for the Fund and as distributor
for the other funds in the Dreyfus Family of Funds.
For the fiscal year ended October 31, 1998, the Distributor retained no
sales loads on the Fund's Class A shares. For the period January 16, 1998
(inception date of Class B and Class C shares) through October 31, 1998, the
Distributor retained $15,793 and $765 from the contingent deferred sales
charge ("CDSC"), on the Fund's Class B and Class C shares, respectively.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most
beneficial to you depends on the amount and the intended length of your
investment. You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee, service fee
and CDSC, if any, on Class B or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares
purchased at the same time, and to what extent, if any, such differential
would be offset by the return on Class A shares. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution and service fees on
Class B or Class C shares may exceed the accumulated distribution fee and
initial sales charge on Class A shares during the life of the investment.
Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than
Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to ongoing distribution and service fees. Thus,
Class B shares may be more attractive than Class C shares to investors with
longer term investment outlooks. Generally, Class A shares may be more
appropriate for investors who invest $1,000,000 or more in Fund shares, but
will not be appropriate for investors who invest less than $50,000 in Fund
shares. The Fund reserves the right to reject any purchase order.
Class A shares, Class B shares and Class C shares may be purchased only
by clients of Agents, except that full-time or part-time employees of
Dreyfus or any of its affiliates or subsidiaries, directors of Dreyfus,
Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing may
purchase Class A shares directly through the Distributor. Subsequent
purchases may be sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates),
acting on behalf of customers having a qualified trust or investment account
or relationship at such institution, or to customers who have received and
hold shares of the Fund distributed to them by virtue of such an account or
relationship. In addition, holders of Restricted shares of the Fund as of
January 15, 1998 may continue to purchase Class R shares of the Fund whether
or not they would otherwise be eligible to do so. Class R shares may be
purchased for a retirement plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such a plan.
Institutions effecting transactions in Class R shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum on subsequent purchases. The initial investment must be
accompanied by the Fund's Account Application. The Fund reserves the right
to offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value".
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined NAV. It is
the dealers' responsibility to transmit orders so that they will be received
by the Distributor or its designee before the close of its business day.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the Fund's Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by
Eligible Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares is the
NAV of that Class, plus, except for shareholders owning Investor shares of
the Fund on January 15, 1998, a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Sales Loads -- Class A. The scale of sales loads applies to purchases
of Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or for
the account of any minor children, or a trustee or other fiduciary
purchasing securities for a single trust estate or a single fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Code although
more than one beneficiary is involved; or a group of accounts established by
or on behalf of the employees of an employer or affiliated employers
pursuant to an employee benefit plan or other program (including accounts
established pursuant to Sections 403(b), 408(k) and 457 of the Code); or an
organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the
purchases are made through a central administration or a single dealer, or
by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the NAV of a Class A (Investor) share at the close of business on October
31, 1998:
NAV per share $14.24
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ .87
Per Share Offering Price to Public $15.11
Holders of Investor shares of the Fund as of January 15, 1998 may
continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to any applicable front-end sales load. Omnibus accounts will be
eligible to purchase Class A shares without a front-end sales load only on
behalf of their customers who held Investor shares of the Fund through such
omnibus account on January 15, 1998.
There is no initial sale charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain
the same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by Dreyfus which are sold with a sales load, such as Class A shares.
In some instances, these incentives may be offered only to certain dealers
who have sold or may sell significant amounts of such shares. Dealers
receive a larger percentage of the sales load from the Distributor than they
receive for selling most other funds.
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in the Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class R Shares. The public offering price for Class R shares is the
NAV per share of that Class.
Right of Accumulation-Class A Shares. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier
Family of Funds, shares of certain other funds advised by Dreyfus which are
sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined above, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you previously purchased and
still hold Class A shares of the Fund, or shares of any other Eligible Fund
or combination thereof, with an aggregate current market value of $40,000
and subsequently purchase Class A shares of the Fund or shares of an
Eligible Fund having a current value of $20,000, the sales load applicable
to the subsequent purchase would be reduced to 4.5% of the offering price.
All present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the sales
load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the TeleTransfer Privilege if you have checked the appropriate box
and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained in a
domestic financial institution that is an Automated Clearing House ("ACH")
member may be so designated. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 p.m., New York time, on any
business day that the Transfer Agent and the NYSE are open for business will
be credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New
York time, on any business day the Transfer Agent and the NYSE are open for
business, or orders made on Saturday, Sunday or any Fund holiday (e.g., when
the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order.
To qualify to use the TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to,
the same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Shares -
TeleTransfer Privilege." The Fund may modify or terminate this Privilege at
any time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the
shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule.
Distribution Plan--Class A Shares. The Company has adopted a
Distribution Plan pursuant to the Rule with respect to the Class A shares of
the Fund ("Class A Plan"), whereby Class A shares of the Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A Plan allows the Distributor to make payments from the
Rule 12b-1 fees it collects from the Fund to compensate Agents that have
entered into Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Class A shares of the Fund.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without approval of the Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Company or
the Distributor and who do not have any direct or indirect financial
interest in the operation of the Class A Plan, cast in person at a meeting
called for the purpose of considering such amendments. The Class A Plan is
subject to annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct or indirect
financial interest in the operation of the Class A Plan, by vote cast in
person at a meeting called for the purpose of voting on the Class A Plan.
The Class A Plan was so approved by the Directors at a meeting held on
February 4, 1999. The Class A Plan is terminable, as to the Fund's Class A
shares, at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B and Class C Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B and Class C shares, pursuant to which the Fund pays the
Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B and Class C
shares for the provision of certain services to the holders of Class B and
Class C shares. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and
providing services related to the maintenance of such shareholder accounts.
With regard to such services, each Agent is required to disclose to its
clients any compensation payable to it by the Fund and any other
compensation payable by its clients in connection with the investment of
their assets in Class B and Class C shares. The Distributor may pay one or
more Agents in respect of services for these Classes of shares. The
Distributor determines the amounts, if any, to be paid to Agents under the
Service Plan and the basis on which such payments are made. The Company's
Board of Directors has also adopted a Distribution Plan pursuant to the Rule
with respect to Class B and Class C shares (the "Distribution Plan")
pursuant to which the Fund pays the Distributor for distributing the Fund's
Class B and Class C shares at an aggregate annual rate of 0.75% of the value
of the average daily net assets of Class B and Class C shares. The
Company's Board of Directors believes that there is a reasonable likelihood
that the Distribution and Service Plans (the "Plans") will benefit the Fund
and the holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or Class
C shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be
approved by the Board of Directors and by the Directors who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. Each Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Directors at a meeting held on February 4, 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B and Class C
shares.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Class A Plan and the Distribution and
Service Plans are payable without regard to actual expenses incurred. The
Fund and the Distributor may suspend or reduce payments under the Class A
Plan and the Distribution and Service Plans at any time, and payments are
subject to the continuation of the Fund's plans and the Agreements described
above. From time to time, the Agents, the Distributor and the Fund may
voluntarily agree to reduce the maximum fees payable under the plans.
For the fiscal year ended October 31, 1998, the Fund paid the
Distributor and Dreyfus Service Corporation $10,877 and $22,334,
respectively, pursuant to the Class A Plan. For the fiscal year ended
October 31, 1998, the Fund paid the Distributor $51,095 and $10,843,
pursuant to the Distribution Plan with respect to Class B and Class C
shares, respectively, and paid the Distributor and Dreyfus Service
Corporation $3,008 and $14,024, respectively, pursuant to the Service Plan
with respect to Class B shares and $0 and $3,614 respectively, pursuant to
the Service Plan with respect to Class C shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege, which is granted automatically unless you specifically refuse it
by checking the applicable "No" box on the Account Application. The
Telephone Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form or by oral request from any of
the authorized signatories on the account by calling 1-800-554-4611. You
also may redeem shares through the Wire Redemption Privilege or the
TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you are a client of
certain Agents ("Selected Dealers"), you can also redeem Fund shares through
the Selected Dealer. Other redemption procedures may be in effect for
clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs, or other
retirement plans, and shares for which certificates have been issued, are
not eligible for the Wire Redemption, Telephone Redemption or TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
The Dreyfus Touchr automated telephone system) from any person representing
himself or herself to be you, or a representative of your Agent, and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers
may make redemption requests to their Selected Dealer. If the Selected
Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, your account will be credited with an amount
equal to the CDSC previously paid upon redemption of the Class A or Class B
shares reinvested. The Reinvestment Privilege may be exercised only once.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone, or letter
redemption instructions from any person representing himself or herself to
be the investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt by the Transfer Agent of the redemption request
in proper form. Redemption proceeds ($1,000 minimum), will be transferred
by Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form, or a
correspondent bank if the investor's bank is not a member of the Federal
Reserve System. Holders of jointly registered Fund or bank accounts may
have redemption proceeds of only up to $250,000 wired within any 30-day
period. Fees ordinarily are imposed by such bank and usually are borne by
the investor. Immediate notification by the correspondent bank to the
investor's bank is necessary to avoid a delay in crediting the funds to the
investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two days
after receipt of the redemption request. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a wire
redemption will be effected as a TeleTransfer transaction through the ACH
system unless more prompt transmittal specifically is requested. Holders of
jointly registered Fund or bank accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account only up to $250,000 within any
30-day period. See "Purchase of Shares-TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90 day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Company's Board
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect the Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years; then of amounts representing the cost
of shares purchased six years prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1%
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC. The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described below. If the Company's Board determines to discontinue the
waiver of the CDSC, the disclosure herein will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Prospectus or this Statement of Additional Information at the time of the
purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such other funds
purchased by exchange will be purchased on the basis of relative NAV per
share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
You also may exchange your Fund shares that are subject to a CDSC for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can
be made into certain other funds managed or administered by Dreyfus. No
CDSC is charged when an investor exchanges into an Exchange Account;
however, the applicable CDSC will be imposed when shares are redeemed from
an Exchange Account or other applicable Fund account. Upon redemption, the
applicable CDSC will be calculated without regard to the time such shares
were held in an Exchange Account. See "Redemption of Shares." Redemption
proceeds for Exchange Account shares are paid by Federal wire or check only.
Exchange Account shares also are eligible for the Auto-Exchange Privilege,
Dividend Sweep and the Automatic Withdrawal Plan.
To request an exchange, an investor or an investor's Agent acting on
the investor's behalf must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr automated telephone system) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class of certain other funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to
the schedule the investor has selected. This Privilege is available only
for existing accounts. With respect to Class R shares held by a Retirement
Plan, exchanges may be made only between the investor's Retirement Plan
account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV as described
above under "Fund Exchanges." Enrollment in or modification or cancellation
of this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier
Midcap Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. The
Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. For more information concerning this Privilege
and the funds in the Dreyfus Premier Family of Funds or the Dreyfus Family
of Funds eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builderr. Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to Dreyfus
Premier Midcap Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-
6587 and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or
charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A shares to
which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A shares where the sales load is imposed concurrently with
withdrawals of Class A shares generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from the Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Midcap
Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select
a new fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dreyfus Dividend Sweep. The Fund
may modify or terminate these privileges at any time or charge a service
fee. No such fee currently is contemplated. Shares held under Keogh Plans,
IRAs or other retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you
may have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the ACH system at each pay period. To
establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. Your employer
must complete the reverse side of the form and return it to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. You
may obtain the necessary authorization form by calling 1-800-554-4611. You
may change the amount of purchase or cancel the authorization only by
written notification to your employer. It is the sole responsibility of
your employer, not the Distributor, your Agent, Dreyfus, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for this Privilege.
Dreyfus Step Program. Holders of the Fund's Investor shares prior to
January 16, 1998 who had enrolled in Dreyfus Step Program may continue to
purchase shares of the same class (currently designated Class A shares)
without regard to the Fund's minimum initial investment requirements through
Dreyfus-Automatic Asset Builderr, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. Participation in this Program
may be terminated by the shareholder at any time by discontinuing
participation in Dreyfus-Automatic Asset Builder, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be, as
provided under the terms of such Privilege(s).The Fund reserves the right to
redeem your account if you have terminated your participation in the Program
and your account's NAV is $500 or less. See "Account Policies-General
Policies" in the Fund's Prospectus. The Fund may modify or terminate this
Program at any time. The Dreyfus Step Program is not available to open new
accounts in any Class of the Fund.
Letter of Intent-Class A Shares. By signing a Letter of Intent form,
which can be obtained by calling 1-800-554-4611, you become eligible for the
reduced sales load applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and conditions set
forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of
shares you hold (on the date of submission of the Letter of Intent) in any
Eligible Fund that may be used toward "Right of Accumulation" benefits
described above may be used as a credit toward completion of the Letter of
Intent. However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
shares of the Fund held in escrow to realize the difference. Signing a
Letter of Intent does not bind you to purchase, or the Fund to sell, the
full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales
load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter
of Intent will be made at the then-current NAV plus the applicable sales
load in effect at the time such Letter of Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is engaged in excessive
trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole
or part any purchase or exchange request, with respect to such investor's
account. Such investors also may be barred from purchasing other funds in
the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes
exchanges that appear to coincide with an active market-timing strategy may
be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may
refuse or restrict purchase or exchange requests by any person or group if,
in the judgment of the Fund's management, the Fund would be unable to invest
the money effectively in accordance with its investment objective and
policies or could otherwise be adversely affected or if the Fund receives or
anticipates receiving simultaneous orders that may significantly affect the
Fund (e.g., amounts equal to 1% or more of the Fund's total assets). If an
exchange request is refused, the Fund will take no other action with respect
to the shares until it receives further instructions from the investor. The
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount
of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy
on excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined NAV
but the purchase order would be effective only at the NAV next determined
after the fund being purchased receives the proceeds of the redemption,
which may result in the purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at
the last sale price on the securities exchange or national securities market
on which such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available. Where market
quotations are not readily available, the Fund's investments are valued
based on fair value as determined in good faith by the Company's Board.
Debt securities may be valued by an independent pricing service approved by
the Company's Board and are valued at fair value as determined by the
pricing service. Any assets or liabilities initially expressed in terms of
foreign currency will be translated into U.S. dollars at the midpoint of the
New York interbank market spot exchange rate as quoted on the day of such
translation or, if no such rate is quoted on such date, such other quoted
market exchange rate as may be determined to be appropriate by Dreyfus. If
the Fund has to obtain prices as of the close of trading on various
exchanges throughout the world, the calculation of NAV may not take place
contemporaneously with the determination of prices of certain of the Fund's
securities. Short-term investments are carried at amortized cost, which
approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV
of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors if it
believes that the discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and
Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income and distributes net realized capital gains, if any, once a
year, but it may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. The Fund will not make
distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Investors other
than qualified retirement plans may choose whether to receive dividends and
other distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both
dividends and other distributions in additional Fund shares at NAV;
dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Dividends and other distributions paid by each Class are calculated at the
same time and in the same manner and will be in the same amount, except that
the expenses attributable solely to a particular Class are borne exclusively
by that Class. Class B and Class C shares will receive lower per share
dividends than Class A shares, which will in turn receive lower per share
dividends than Class R shares, because of the higher expenses borne by the
respective Classes.
It is expected that the Fund will continue qualify for treatment as a
regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve the Fund of any liability for federal income tax
to the extent its earnings and realized gains are distributed in accordance
with applicable provisions of the Code. To qualify for treatment as a RIC
under the Code, the Fund -- which is treated as a separate corporation for
federal tax purposes -- (1) must distribute to its shareholders each year at
least 90% of its investment company taxable income (generally consisting of
net investment income, net short-term capital gains and net gains from
certain foreign currency transactions) (the "Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
(the "Income Requirement"), and (3) must meet certain asset diversification
and other requirements. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency. If the Fund failed to qualify for treatment as a RIC
for any taxable year, (1) it would be taxed at corporate rates on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (2) the shareholders would
treat all those distributions, including distributions of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
as dividends (that is, ordinary income) to the extent of the Fund's earnings
and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment.
The Fund will be subject to a non-deductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute substantially all of its taxable
investment income and capital gains.
Distributions. If you elect to receive dividends and other
distributions in cash, and your distribution check is returned to the Fund
as undeliverable or remains uncashed for six months, the Fund reserves the
right to reinvest that distribution and all future distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains, net realized gains
from certain foreign currencies transactions and all or a portion of any
gains realized from the sale or other disposition of certain market discount
bonds (collectively, "dividend distributions") will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to those shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and
whether the distributions are received in cash or reinvested in additional
Fund shares.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions paid during
the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if a shareholder redeems those shares or exchanges
them for shares of another fund advised or administered by Dreyfus, within
90 days of purchase, and (1) in the case of a redemption, the shareholder
acquires other Fund Class A shares through exercise of the Reinvestment
Privilege or, (2) in the case of an exchange, the other fund reduces or
eliminates its otherwise applicable sales load. In these cases, the amount
of the sales load charged on the purchase of the original Class A shares, up
to the amount of the reduction of the sales load pursuant to the
Reinvestment Privilege or on the exchange, as the case may be, is not
included in the tax basis of those shares for purposes of computing gain or
loss and instead is added to the tax basis of the acquired shares.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
Internal Revenue Service ("IRS") distributions paid to such plans.
Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be
taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to
10% of the taxable portion of the distribution. The administrator, trustee
or custodian of a qualified retirement plan will be responsible for
reporting distributions from the plan to the IRS. Moreover, certain
contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not
elect to have the distribution paid directly from the plan to an eligible
retirement plan in a "direct rollover," the distribution is subject to 20%
income tax withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if the
shareholder fails to certify furnish a TIN to the Fund and certify that it
is correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income. A TIN is either the
Social Security number, IRS individual taxpayer identification number or
employer identification number of the record owner of an account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax imposed on the record owner and may be claimed as a credit on his or her
federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such a distribution would be a
return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives any capital gain distributions with respect to
those shares, any loss incurred on the sale of those shares will be treated
as a long-term capital loss to the extent of those capital gain
distributions.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
federal alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that
would reduce the yield and/or total return on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign
investors. If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, it
will be eligible to, and may, file an election ("Election") with the IRS
that would enable its shareholders, in effect, to receive the benefit of the
foreign tax credit with respect to any foreign taxes it paid. Pursuant to
the Election, the Fund would treat those taxes as dividends paid to its
shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him or her, his or her proportionate share of
those taxes, (2) treat his or her share of those taxes and of any dividend
paid by the Fund that represents income from foreign or U.S. possession
sources as his or her own income from those sources and (3) either deduct
the taxes deemed paid by him or her in computing his or her taxable income
or, alternatively, use the foregoing information in calculating the foreign
tax credit against his or her federal income tax. No deduction for foreign
taxes may be claimed by a shareholder who does not itemize deductions.
Generally, a credit for foreign taxes may not exceed portion of the
shareholder's federal income tax attributable to his total foreign source
taxable income; however, pursuant to the Taxpayer Relief Act of 1997 (the
"Tax Act"), individuals who have no more than $300 ($600 for married persons
filing jointly) of creditable foreign taxes included on Forms 1099 and all
of whose foreign source income is "qualified passive income" may elect each
year to be exempt from the extremely complicated foreign tax credit
limitation and will be able to claim a foreign tax credit without having to
file the detailed Form 1116 that otherwise is required. The Fund will
report to its shareholders shortly after each taxable year their respective
shares of its income from sources within foreign countries and U.S.
possessions and foreign taxes it paid if it makes the Election.
Passive Foreign Investment Companies. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a
foreign corporation in which, on any day during its taxable year, more than
50% of the total voting power of all voting stock therein or the total value
of all stock therein is owned, directly, indirectly, or constructively, by
"U.S. shareholders," defined as U.S. persons that individually own,
directly, indirectly, or constructively, at least 10% of that voting power)
as to which the Fund is a U.S. shareholder -- that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or
(2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, the Fund will
be subject to federal income tax on a portion of any "excess distribution"
received on the stock of a PFIC or of any gain on disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a dividend to its shareholders. The balance
of the PFIC income will be included in the Fund's investment company taxable
income and, accordingly, will not be taxable to it to the extent that it
distributes income to its shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund would be required to include in income each
year its pro rata share of the QEF's annual ordinary earnings and net
capital gain -- which likely would have to be distributed by the Fund to
satisfy the Distribution Requirement and avoid imposition of the Excise Tax
- -- even if those earnings and gain were not distributed to the Fund by the
QEF. In most instances it will be very difficult, if not impossible, to
make this election because of certain requirements thereof.
The Fund may elect to "mark to market" its stock in any PFIC. "Marking-
to-market," in this context, means including in ordinary income each taxable
year the excess, if any, of the fair market value of a PFIC's stock over the
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not
capital, loss) the excess, if any, of its adjusted basis in PFIC stock over
the fair market value thereof as of the taxable year-end, but only to the
extent of any net mark-to-market gains with respect to that stock included
by the Fund for prior taxable years. The Fund's adjusted basis in each
PFIC's stock with respect to which it makes this election would be adjusted
to reflect the amounts of income included and deductions taken under the
election (and under regulations proposed in 1992 that provided a similar
election with respect to the stock of certain PFICs).
Foreign Currency and Hedging Transactions. Gains from the sale or
other disposition of foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and gains from options, futures and
forward contracts derived by the Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gains and
losses from the disposition of foreign currencies and certain foreign-currency-
denominated instruments (including debt instruments and financial
forward and futures contracts and options) may be treated as ordinary income
or loss under Section 988 of the Code. In addition, all or a portion of any
gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as
capital gain may be treated as ordinary income. "Conversion transactions"
are defined to include certain option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund
on the exercise or lapse of, or closing transactions respecting, certain
options, futures and forward contracts ("Section 1256 Contracts") will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. In addition, any Section 1256 Contracts remaining unexercised
at the end of the Fund's taxable year will be treated as sold for their then
fair market value (a process known as "marking-to-market"), resulting in
additional gain or loss to the Fund characterized in the same manner.
Offsetting positions held by the Fund involving certain options,
futures or forward contracts may constitute "straddles", which are defined
to include "offsetting positions" in actively traded personal property.
Under Section 1092 of the Code, any loss from the disposition of a position
in a straddle generally may be deducted only to the extent the loss exceeds
the unrealized gain on the offsetting position(s) of the straddle. In
addition, these rules may postpone the recognition of loss that otherwise
would be recognized under the mark-to-market rules discussed above. The
regulations under Section 1092 also provide certain " "wash sale" rules,
which apply to transactions where a position is sold at a loss and a new
offsetting position is acquired within a prescribed period, and "short sale"
rules applicable to straddles. If the Fund makes certain elections
(including an election as to straddles that include a position in one or
more Section 1256 Contracts (so-called "mixed straddles"), the amount,
character, and timing of recognition of gains and losses from the affected
straddle positions would be determined under rules that vary according to
the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward
contract, or short sale) with respect to any stock, debt instrument (other
than "straight debt"), or partnership interest the fair market value of
which exceeds its adjusted basis -- and enters into a "constructive sale" of
the same or substantially similar property, the Fund will be treated as
having made an actual sale thereof, with the result that gain will be
recognized at that time. A constructive sale generally consists of a short
sale, an offsetting notional principal contract, or futures or forward
contract entered into by the Fund or a related person with respect to the
same or substantially similar property. In addition, if the appreciated
financial position is itself a short sale or such a contract, acquisition of
the underlying property or substantially similar property will be deemed a
constructive sale. The foregoing will not apply, however, to any
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end
of that year and the Fund holds the appreciated financial position unhedged
for 60 days after that closing (i.e., at no time during that 60-day period
is the Fund's risk of loss regarding that position reduced by reason of
certain specified transactions with respect to substantially similar or
related property, such as having an option to sell, being contractually
obligated to sell, making a short sale, or granting an option to buy
substantially identical stock or securities).
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules, affect
the amount and timing of distributions to shareholders by causing the Fund
to recognize income prior to the receipt of cash payments. For example, the
Fund would be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and would
need to distribute that income to satisfy the Distribution Requirement and
avoid the Excise Tax. In that case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the
Fund may be subject to the tax laws thereof. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder") depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed below. Special
U.S. federal income tax rules that differ from those described below may
apply to certain foreign persons who invest in the Fund, such as a foreign
shareholder entitled to claim the benefits of an applicable tax treaty.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain generally will not be subject to U.S. federal income tax unless
the foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable year.
In the case of certain foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or 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 qualify of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to Dreyfus in carrying out its obligations to the
Fund. The receipt of such research services does not reduce the normal
independent research activities of Dreyfus; however, it enables Dreyfus to
avoid the additional expenses which might otherwise be incurred if Dreyfus
were to attempt to develop comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions amounting to $174,939, $63,701 and $37,784,
respectively.
Portfolio Turnover. While securities are purchased for the Fund on the
basis of potential for capital appreciation and not for short-term trading
profits, the Fund's portfolio turnover rate may exceed 100%. A portfolio
turnover rate of 100% would occur, for example, if all the securities held
by the Fund were replaced once in a period of one year. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions
and other expenses that must be borne directly by the Fund and, thus,
indirectly by its shareholders. In addition, a higher rate of portfolio
turnover may result in the realization of larger amounts of short-term
and/or long-term capital gains that, when distributed to the Fund's
shareholders, are taxable to them at the then current rate. Nevertheless,
securities transactions for the Fund will be based only upon investment
considerations and will not be limited by any other considerations when
Dreyfus deems its appropriate to make changes in the Fund's assets. The
portfolio turnover rate for the Fund is calculated by dividing the lesser of
the Fund's annual sales or purchases of portfolio securities (exclusive of
purchases and sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of
securities in the Fund during the year. Portfolio turnover may vary from
year to year as well as within a year. The portfolio turnover rates for the
fiscal years ended October 31, 1998 and 1997 were 78.02% and 81.87%,
respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for Class A
shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year Since Inception
Class A shares (7.79)% 15.71% (4/6/94)
Class R shares (1.88)% 16.04% (11/12/93)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes deduction of the maximum sales load from
the hypothetical initial investment at the time of purchase although no
sales load was applicable to Class A shares or its predecessor class until
January 16, 1998.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price
in the case of Class A) per share with a hypothetical $1,000 payment made at
the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment,
taking the "n"th root of the quotient (where "n" is the number of years in
the period) and subtracting 1 from the result. The average annual total
return figures for a Class calculated in accordance with such formula assume
that, in the case of Class A, the maximum sales load has been deducted from
the hypothetical initial investment at the time of purchase or, in the case
of Class B or Class C, the maximum applicable CDSC has been paid upon
redemption at the end of the period.
The Fund's total return for Class R shares (formerly called Restricted
Shares) for the period from November 12, 1993 (the Fund's inception date) to
October 31, 1998 was 109.42%. The Fund's total return for Class A shares
(formerly called Investor shares) for the period from April 6, 1994
(inception date of Class A shares) to October 31, 1998 was 94.79% (assuming
deduction of the maximum sales load from the hypothetical initial investment
at the time of purchase, although no sales load was applicable to Class A
shares or its predecessor class until January 16, 1998). Without giving
effect to the applicable front-end sales load, the total return for Class A
was 106.67% for this period. The Fund's aggregate total return for Class B
and Class C shares for the period from January 16, 1998 (inception date of
Class B and Class C shares) to October 31, 1998 was (7.28)% and (4.24)%,
respectively (assuming deduction of the maximum CDSC to each hypothetical
investment). Without giving effect to the applicable CDSC, the aggregate
total return for Class B and Class shares was (3.41)% and (3.28)%,
respectively, for this period. Total return is calculated by subtracting
the amount of the Fund's NAV (maximum offering price in the case of Class A)
per share at the beginning of a stated period from the NAV (maximum offering
price in the case of Class A) per share at the end of the period (after
giving effect to the reinvestment of dividends and other distributions
during the period and any applicable CDSC), and dividing the result by the
NAV (maximum offering price in the case of Class A) per share at the
beginning of the period. Total return also may be calculated based on the
NAV per share at the beginning of the period instead of the maximum offering
price per share at the beginning of the period for Class A shares or without
giving effect to any applicable CDSC at the end of the period for Class B or
Class C shares. In such cases, the calculation would not reflect the
deduction of the sales load with respect to Class A shares or any applicable
CDSC with respect to Class B or C shares, which, if reflected would reduce
the performance quoted.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's 400
MidCap Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives and assets,
or tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iii) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund or the Fund's performance against inflation to the
performance of other instruments against inflation; and (iv) products
managed by a universe of money managers with similar country allocation and
performance objectives. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions or administrative and
management costs and expenses. From time to time, advertising materials for
the Fund may refer to Morningstar ratings and related analyses supporting
the rating.
From time to time, advertising material for the Fund may include: (i)
biographical information relating to its portfolio manager and may refer to,
or include commentary by the Fund's portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors
(ii) information concerning retirement and investing for retirement,
including statistical data or general discussions about the growth and
development of Dreyfus Retirement Services (in terms of new customers,
assets under management, market share, etc.) and its presence in the defined
contribution plan market; (iii) the approximate number of then current Fund
shareholders; (iv) references to the Fund's quantitative, disciplined
approach to stock market investing and the number of stocks analyzed by
Dreyfus; and (v) Lipper or Morningstar ratings and related analysis
supporting the ratings. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions or administrative and
management costs and expenses.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
The Fund is one of nineteen portfolios of the Company. Fund shares have no
preemptive, subscription or conversion rights and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they
vote separately by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
The Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
The Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 31, 1999, providing audit services including (1) examination of the
annual financial statements, (2) assistance, review and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. 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 AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `BB' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and High internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Credit Rating Co. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
____________________________________________________________________________
DREYFUS PREMIER LARGE COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
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 Premier Large Company 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 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Fund B-2
Management of the Fund B-17
Management Arrangements B-23
Purchase of Shares B-25
Distribution and Service Plans B-32
Redemption of Shares B-34
Shareholder Services B-39
Additional Information About Purchases,
Exchanges and Redemptions B-46
Determination of Net Asset Value B-47
Dividends, Other Distributions and Taxes B-48
Portfolio Transactions B-54
Performance Information B-56
Information About the Fund/Company B-58
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-60
Financial Statements B-60
Appendix B-61
DESCRIPTION OF THE FUND
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company
is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund.
Prior to January 16, 1998, the Fund's name was Dreyfus Disciplined Equity
Income Fund. Prior to November 22, 1995, the Fund's name was Dreyfus Equity
Income Fund and prior to October 17, 1994, the Fund's name was Laurel Equity
Income Fund. The Fund is diversified, which means that, with respect to 75%
of its total assets, the Fund will not invest more than 5% of its assets in
the securities of any single issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
The Fund seeks investment returns (consisting of capital appreciation
and income) that are consistently superior to the Standard & Poor's 500
Composite Stock Price Index ("S&P 500"). The S&P 500 is composed of 500
common stocks, most of which are traded on the New York Stock Exchange
("NYSE"), chosen to reflect the industries of the U.S. economy. The
inclusion of a stock in the S&P 500 does not imply that Standard and Poor's
Rating Services ("Standard & Poor's") believes the stock to be an attractive
or appropriate investment, nor is Standard & Poor's affiliated with the
Company or the Fund. "S&P 500" is a trademark of Standard & Poor's.
Prior to January 16, 1998, the Fund's investment objective was to seek
an above-average level of income along with moderate long-term growth of
income and principal.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
American Depository Receipts ("ADRs") and New York Shares. The Fund
may invest in U.S. dollar-denominated ADRs and New York Shares. ADRs
typically are issued by an American bank or trust company and evidence
ownership of underlying securities issued by foreign companies. New York
Shares are securities of foreign companies that are issued for trading in
the United States. ADRs and New York Shares are traded in the United States
on national securities exchanges or in the over-the-counter market.
Investment in securities of foreign issuers presents certain risks,
including those resulting from adverse political and economic developments
and the imposition of foreign governmental laws or restrictions. See
"Foreign Securities."
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Treasury to lend to such Government
agency or instrumentality, or (d) the credit of the instrumentality.
(Examples of agencies and instrumentalities are: Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Home Loan Banks, General Services Administration,
Maritime Administration, Tennessee Valley Authority, District of Columbia
Armory Board, Inter-American Development Bank, Asian-American Development
Bank, Student Loan Marketing Association, International Bank for
Reconstruction and Development, Small Business Administration and Fannie
Mae). No assurance can be given that the U.S. Government will provide
financial support to the agencies or instrumentalities described in (b), (c)
and (d) in the future, other than as set forth above, since it is not
obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the Fund's credit guidelines. This technique
offers a method of earning income on idle cash. In a repurchase agreement,
the Fund buys a security from a seller that has agreed to repurchase the
same security at a mutually agreed upon date and price. The Fund's resale
price will be in excess of the purchase price, reflecting an agreed upon
interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate on
the underlying security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and
at no time will the Fund invest in repurchase agreements for more than one
year. The Fund will always receive as collateral securities whose market
value including accrued interest is, and during the entire term of the
agreement remains, at least equal to 100% of the dollar amount invested by
the Fund in each agreement, including interest, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the custodian. If the seller defaults,
the Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the Fund's credit
guidelines.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's, Prime-1 by Moody's Investors Service, Inc., F-1 by Fitch
IBCA, Inc. or Duff-1 by Duff & Phelps Credit Rating Co.
Bank Instruments. The Fund may purchase bankers' acceptances,
certificates of deposit, time deposits, and other short-term obligations
issued by domestic banks, foreign subsidiaries or foreign branches of
domestic banks, domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs"),
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are U.S. dollar-
denominated time deposits in a foreign branch of a U.S. bank or a foreign
bank. Yankee CDs are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States. The
Fund may also invest in Eurodollar bonds and notes, which are obligations
that pay principal and interest in U.S. dollars held in banks outside the
United States, primarily in Europe. All of these obligations are subject to
somewhat different risks than are the obligations of domestic banks or
issuers in the United States. See "Foreign Securities."
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal
of funds or other assets of the Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the return on such securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holders.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in the
Fund's Prospectus, the Fund also may engage in the investment techniques
described below. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
Borrowing. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues
of U.S. Treasury and Government securities are often offered on a
"when-issued" basis. This means that delivery and payment for the securities
normally will take place approximately 7 to 45 days after the date the buyer
commits to purchase them. The payment obligation and the interest rate that
will be received on securities purchased on a "when-issued" basis are each
fixed at the time the buyer enters into the commitment. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt securities
equal to the amount of the above commitments will be segregated on the
Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a "when-issued" basis and the securities held
by the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value
("NAV").
When payment for "when-issued" securities is due, the Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the "when-issued" securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
To secure advantageous prices or yields, the Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed
delivery basis involves the risk that the value of the securities purchased
will decline prior to the settlement date. The sale of securities for
delayed delivery involves the risk that the prices available in the market
on the delivery date may be greater than those obtained in the sale
transaction. The Fund will establish a segregated account consisting of
cash, U.S. Government securities or other high-grade debt obligations in an
amount at least equal at all times to the amounts of its delayed delivery
commitments.
Loans of Fund Securities. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to
be entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities, which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed 33-
1/3% of the value of the Fund's total assets and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities.
These loans are terminable by the Fund at any time upon specified notice.
The Fund might experience loss if the institution to which it has lent its
securities fails financially or breaches its agreement with the Fund. In
addition, it is anticipated that the Fund may share with the borrower some
of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the
Fund considers all relevant factors and circumstances including the
creditworthiness of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, the Fund: (1) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (2) agrees to repurchase the
securities at a future date by repaying the cash with interest. The Fund
retains record ownership of the security involved including the right to
receive interest and principal payments. Cash or liquid high-grade debt
securities held by the Fund equal in value to the repurchase price including
any accrued interest will be maintained in a segregated account while a
reverse repurchase agreement is in effect.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (such as index futures contracts) and
options (such as options on U.S. and foreign securities or indices of such
securities). The index Derivative Instruments which Fund may use may be
based on indices of U.S. or foreign equity securities. These Derivative
Instruments may be used, for example, to preserve a return or spread or to
facilitate or substitute for the sale or purchase of securities. The Fund
may invest in futures contracts and options to a limited extent but does not
currently intend to invest more than 5% of its assets in such instruments.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments may be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities.
There can be no assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs, and may result in certain
tax consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value unless
the option is closed out in an offsetting transaction.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value and the Fund would experience losses to the extent of premiums
paid for them.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the option's price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write options on securities only if it covers the
transaction through: an offsetting option with respect to the security
underlying the option it has written, exercisable by it at a more favorable
price; ownership of (in the case of a call) or a short position in (in the
case of a put) the underlying security; or segregation of cash or certain
other assets sufficient to cover its exposure.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund writes a call, it assumes a short futures position. If
the Fund writes a put, it assumes a long futures position. When the Fund
purchases an option on a futures contract, it acquires the right, in return
for the premium it pays, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a
put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5%, the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts for hedging purposes.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in such securities would exceed 5% of the Fund's
total assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board of Directors.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in
the values of assets will not constitute a violation of such restriction,
except as otherwise required by the 1940 Act.
If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains
an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements between the
Company, on behalf of the Fund, and those companies that furnish services to
the Fund. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of nine Directors. The following
lists the Directors and officers and their positions with the Company and
their present and principal occupations during the past five years. Each
Director who is an "interested person" of the Company (as defined in the
1940 Act) is indicated by an asterisk(*). Each of the Directors also serves
as a Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, ) a button packager and distributor; Century Business
Services, Inc. (formerly, International Alliance Services, Inc.), a
provider of various outservicing functions for small and medium sized
companies; and Career Blazers, Inc. (formerly Staffing Resources) a
temporary placement agency. 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: 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. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 26 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. 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 Investment Services
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 and 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
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board
Member****
Joseph S. DiMartino* $17,710.00 $619,660
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 and separately by the
Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1998, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $17,710.00. For the year
ended December 31, 1998, the aggregate amount of fees received by Mr. Fort for
serving as a Board member of all funds in the Dreyfus/Laurel Funds (including
the Company) and Dreyfus High Yield Strategies Fund (for which payment is made
directly by the fund) was $59,010.00. In addition, Dreyfus reimbursed Mr.
Fort a total of $733.11 for expenses attributable to the Company's Board
meetings which is not included in the $5,313.37 amount in note # above.
***Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The 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.
Principal Shareholders. As of February 1, 1999, the following
shareholder(s) owned beneficially or of record 5% or more of Class A of the
Fund: MLPF & S For the Sole Benefit of It's Customers, 4800 Deer Lake
Drive East, Jacksonville, FL 32246-6484, 5.34%.
As of February 1, 1999 the following shareholder(s) owned beneficially
or of record 5% or more of Class B of the Fund: MLPF & S For the Sole
Benefit of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-
6484, 17.13%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class C of the Fund: MLPF & S For The Sole
Benefit of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-
6484; 23.599%.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and
"Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994, subject to the overall authority of the Company's Board of
Directors in accordance with Maryland law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus manages
the Fund by making investment decisions based on the Fund's investment
objective, policies and restrictions. The Management Agreement is subject
to review and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. The Company may terminate the
Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities
on 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman Institutional and
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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 0.90% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee by an
amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering
the expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other
expenses of the Company are allocated among its funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each fund.
For the last three years, the Fund had the following expenses:
For the Fiscal Year Ended October 31,
1998 1997 1996
Management fees $467,761 $229,763 $94,844
The Distributor. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109,
serves as the Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. Dreyfus may pay the Distributor for
shareholder services from Dreyfus' own assets, including past profits but
not including the management fee paid by the Fund. The Distributor may use
part or all of such payments to pay certain banks, securities brokers or
dealers and other financial institutions ("Agents") for these services. The
Distributor also acts as sub-administrator for the Fund and as distributor
for the other funds in the Dreyfus Family of Funds.
For the fiscal year ended October 31, 1998, the Distributor retained no
sales loads on the Fund's Class A shares. For the period January 16, 1998
(inception date of Class B and Class C shares) through October 31, 1999 the
Distributor retained no fees from the contingent deferred sales charge
("CDSC") on Class B and Class C shares of the Fund, respectively.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most
beneficial to you depends on the amount and the intended length of your
investment. You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee, service fee
and CDSC, if any, on Class B or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares
purchased at the same time, and to what extent, if any, such differential
would be offset by the return on Class A shares. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution and service fees on
Class B or Class C shares may exceed the accumulated distribution fee and
initial sales charge on Class A shares during the life of the investment.
Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than
Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to ongoing distribution and service fees. Thus,
Class B shares may be more attractive than Class C shares to investors with
longer term investment outlooks. Generally, Class A shares may be more
appropriate for investors who invest $1,000,000 or more in Fund shares, but
will not be appropriate for investors who invest less than $50,000 in Fund
shares. The Fund reserves the right to reject any purchase order.
Class A shares, Class B shares and Class C shares may be purchased only
by clients of Agents, except that full-time or part-time employees of
Dreyfus or any of its affiliates or subsidiaries, directors of Dreyfus,
Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing may
purchase Class A shares directly through the Distributor. In addition,
holders of Investor shares of the Fund as of January 15, 1998 may continue
to purchase Class A shares of the Fund at NAV. Subsequent purchases may be
sent directly to the Transfer Agent or your Agent.
Class R shares are sold only to holders of Restricted shares of the
Fund as of November 30, 1997. Such shareholders were primarily bank trust
departments and other financial service providers (including Mellon Bank and
its affiliates) acting on behalf of customers having a qualified trust or
investment account or relationship at such institution, customers who
received and held shares of the Fund distributed to them by virtue of such
an account or relationship, or other persons who acquired Restricted shares
when they were generally available to the public.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum on subsequent purchases. The initial investment must be
accompanied by the Fund's Account Application. The Fund reserves the right
to offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value".
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so
that they will be received by the Distributor or its designee before the
close of its business day. For certain institutions that have entered into
agreements with the Distributor, payment for the purchase of Fund shares may
be transmitted, and must be received by the Transfer Agent, within three
business days after the order is placed. If such payment is not received
within three business days after the order is placed, the order may be
canceled and the institution could be held liable for resulting fees and/or
losses.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the Fund's Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by
Eligible Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares is the
NAV per share of that Class, plus, except for shareholders owning Investor
shares of the Fund on January 15, 1998, a sales load as shown below:
<TABLE>
<CAPTION>
Dealers' Reallowance
Total Sales Load as a % as a % of
Amount of Transaction of Offering Price Per Share Offering Price
<S> <C> <C>
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
</TABLE>
Sales Loads -- Class A. The scale of sales loads applies to purchases
of Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or for
the account of any minor children, or a trustee or other fiduciary
purchasing securities for a single trust estate or a single fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Code although
more than one beneficiary is involved; or a group of accounts established by
or on behalf of the employees of an employer or affiliated employers
pursuant to an employee benefit plan or other program (including accounts
established pursuant to Sections 403(b), 408(k) and 457 of the Code); or an
organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the
purchases are made through a central administration or a single dealer, or
by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the NAV of a Class A (Investor) share at the close of business on October
31, 1998:
NAV per share $20.45
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ 1.25
Per Share Offering Price to Public $21.70
Holders of Investor shares of the Fund as of January 15, 1998 may
continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to any applicable front-end sales load. Omnibus accounts will be
eligible to purchase Class A shares without a front-end sales load only on
behalf of their customers who held Investor shares of the Fund through such
omnibus account on January 15, 1998.
There is no initial sale charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or intrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain
the same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by Dreyfus which are sold with a sales load, such as Class A shares.
In some instances, these incentives may be offered only to certain dealers
who have sold or may sell significant amounts of such shares. Dealers
receive a larger percentage of the sales load from the Distributor than they
receive for selling most other funds.
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in the Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class R Shares. The public offering price for Class R shares is the
NAV per share of that Class.
Right of Accumulation-Class A Shares. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier
Family of Funds, shares of certain other funds advised by Dreyfus which are
sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined above, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you previously purchased and
still hold Class A shares of the Fund, or shares of any other Eligible Fund
or combination thereof, with an aggregate current market value of $40,000
and subsequently purchase Class A shares of the Fund or shares of an
Eligible Fund having a current value of $20,000, the sales load applicable
to the subsequent purchase would be reduced to 4.5% of the offering price.
All present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the sales
load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the TeleTransfer Privilege if you have checked the appropriate box
and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained in a
domestic financial institution that is an Automated Clearing House ("ACH")
member may be so designated. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 p.m., New York time, on any
business day that the Transfer Agent and the NYSE are open for business will
be credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New
York time, on any business day the Transfer Agent and the NYSE are open for
business, or orders made on Saturday, Sunday or any Fund holiday (e.g., when
the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order.
To qualify to use the TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to,
the same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Shares -
TeleTransfer Privilege." The Fund may modify or terminate this Privilege at
any time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the
shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call
1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule.
Distribution Plan--Class A Shares. The Company has adopted a
Distribution Plan pursuant to the Rule with respect to the Class A shares of
the Fund ("Class A Plan"), whereby Class A shares of the Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A Plan allows the Distributor to make payments from the
Rule 12b-1 fees it collects from the Fund to compensate Agents that have
entered into Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Class A shares of the Fund.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without approval of the Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Company or
the Distributor and who do not have any direct or indirect financial
interest in the operation of the Class A Plan, cast in person at a meeting
called for the purpose of considering such amendments. The Class A Plan is
subject to annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct or indirect
financial interest in the operation of the Class A Plan, by vote cast in
person at a meeting called for the purpose of voting on the Class A Plan.
The Class A Plan was approved by the Directors at a meeting held on February
4, 1999. The Class A Plan is terminable, as to the Fund's Class A shares,
at any time by vote of a majority of the Directors who are not interested
persons and have no direct or indirect financial interest in the operation
of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B and Class C Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B and Class C shares, pursuant to which the Fund pays the
Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B and Class C
shares for the provision of certain services to the holders of Class B and
Class C shares. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and
providing services related to the maintenance of such shareholder accounts.
With regard to such services, each Agent is required to disclose to its
clients any compensation payable to it by the Fund and any other
compensation payable by its clients in connection with the investment of
their assets in Class B and Class C shares. The Distributor may pay one or
more Agents in respect of services for these Classes of shares. The
Distributor determines the amounts, if any, to be paid to Agents under the
Service Plan and the basis on which such payments are made. The Company's
Board of Directors has also adopted a Distribution Plan pursuant to the Rule
with respect to Class B and Class C shares (the "Distribution Plan")
pursuant to which the Fund pays the Distributor for distributing the Fund's
Class B and Class C shares at an aggregate annual rate of 0.75% of the value
of the average daily net assets of Class B and Class C shares. The
Company's Board of Directors believes that there is a reasonable likelihood
that the Distribution and Service Plans (the "Plans") will benefit the Fund
and the holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or Class
C shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be
approved by the Board of Directors and by the Directors who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. Each Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Directors at a meeting held on February 4, 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B and Class C
shares.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Class A Plan and the Distribution and
Service Plans are payable without regard to actual expenses incurred. The
Fund and the Distributor may suspend or reduce payments under the Class A
Plan and the Distribution and Service Plans at any time, and payments are
subject to the continuation of the Fund's plans and the Agreements described
above. From time to time, the Agents, the Distributor and the Fund may
voluntarily agree to reduce the maximum fees payable under the plans.
For the fiscal year ended October 31, 1998, the Fund paid the
Distributor and Dreyfus Service Corporation $11,975 and $23,180,
respectively, pursuant to the Class A Plan. For the fiscal year ended
October 31, 1998, the Fund paid the Distributor $38,241 and $8,030 pursuant
to the Distribution Plan with respect to Class B and Class C shares,
respectively, and paid the Distributor and Dreyfus Service Corporation
$3,324 and $9,452, respectively, pursuant to the Service Plan with respect
to Class B shares and $44 and $2,633, respectively, pursuant to the Service
Plan with respect to Class C shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege, which is granted automatically unless you specifically refuse it
by checking the applicable "No" box on the Account Application. The
Telephone Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form or by oral request from any of
the authorized signatories on the account by calling 1-800-554-4611. You
also may redeem shares through the Wire Redemption Privilege or the
TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you are a client of
certain Agents ("Selected Dealers"), you can also redeem Fund shares through
the Selected Dealer. Other redemption procedures may be in effect for
clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs, or other
retirement plans, and shares for which certificates have been issued, are
not eligible for the Wire Redemption, Telephone Redemption or TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
The Dreyfus Touchr automated telephone system) from any person representing
himself or herself to be you, or a representative of your Agent, and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers
may make redemption requests to their Selected Dealer. If the Selected
Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, your account will be credited with an amount
equal to the CDSC previously paid upon redemption of the Class A or Class B
shares reinvested. The Reinvestment Privilege may be exercised only once.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone, or letter
redemption instructions from any person representing himself or herself to
be the investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt by the Transfer Agent of the redemption request
in proper form. Redemption proceeds ($1,000 minimum), will be transferred
by Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form, or a
correspondent bank if the investor's bank is not a member of the Federal
Reserve System. Holders of jointly registered Fund or bank accounts may
have redemption proceeds of only up to $250,000 wired within any 30-day
period. Fees ordinarily are imposed by such bank and usually are borne by
the investor. Immediate notification by the correspondent bank to the
investor's bank is necessary to avoid a delay in crediting the funds to the
investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two days
after receipt of the redemption request. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a
TeleTransfer transaction will be effected through the ACH system unless more
prompt transmittal specifically is requested. Holders of jointly registered
Fund or bank accounts may redeem through the TeleTransfer Privilege for
transfer to their bank account only up to $250,000 within any 30-day period.
See "Purchase of Shares-TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Company's Board
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect the Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years; then of amounts representing the cost
of shares purchased six years prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1%
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC. The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described below. If the Company's Board determines to discontinue the
waiver of the CDSC, the disclosure herein will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Prospectus or this Statement of Additional Information at the time of the
purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such other funds
purchased by exchange will be purchased on the basis of relative NAV per
share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
You also may exchange your Fund shares that are subject to a CDSC for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can
be made into certain other funds managed or administered by Dreyfus. No
CDSC is charged when an investor exchanges into an Exchange Account;
however, the applicable CDSC will be imposed when shares are redeemed from
an Exchange Account or other applicable Fund account. Upon redemption, the
applicable CDSC will be calculated without regard to the time such shares
were held in an Exchange Account. See "Redemption of Shares." Redemption
proceeds for Exchange Account shares are paid by Federal wire or check only.
Exchange Account shares also are eligible for the Auto-Exchange Privilege,
Dividend Sweep and the Automatic Withdrawal Plan.
To request an exchange, an investor or an investor's Agent acting on
the investor's behalf must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr automated telephone system) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class of certain other funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to
the schedule the investor has selected. This Privilege is available only
for existing accounts. With respect to Class R shares held by a Retirement
Plan, exchanges may be made only between the investor's Retirement Plan
account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV as described
above under "Fund Exchanges." Enrollment in or modification or cancellation
of this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier
Large Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-
6587. The Fund may charge a service fee for the use of this Privilege. No
such fee currently is contemplated. For more information concerning this
Privilege and the funds in the Dreyfus Premier Family of Funds or the
Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free 1-
800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builderr. Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to Dreyfus
Premier Large Company Stock Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587 and the notification will be effective three business days
following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A shares to
which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A shares where the sales load is imposed concurrently with
withdrawals of Class A shares generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from the Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Large
Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To
select a new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dreyfus Dividend Sweep. The Fund
may modify or terminate these privileges at any time or charge a service
fee. No such fee currently is contemplated. Shares held under Keogh Plans,
IRAs or other retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you
may have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the ACH system at each pay period. To
establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. Your employer
must complete the reverse side of the form and return it to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. You
may obtain the necessary authorization form by calling 1-800-554-4611. You
may change the amount of purchase or cancel the authorization only by
written notification to your employer. It is the sole responsibility of
your employer, not the Distributor, your Agent, Dreyfus, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for this Privilege.
Dreyfus Step Program. Holders of the Fund's Investor shares prior to
January 16, 1998 who had enrolled in Dreyfus Step Program may continue to
purchase shares of the same class (currently designated Class A shares)
without regard to the Fund's minimum initial investment requirements through
Dreyfus-Automatic Asset Builderr, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. Participation in this Program
may be terminated by the shareholder at any time by discontinuing
participation in Dreyfus-Automatic Asset Builder, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be, as
provided under the terms of such Privilege(s).The Fund reserves the right to
redeem your account if you have terminated your participation in the Program
and your account's NAV is $500 or less. See "Account Policies-General
Policies" in the Fund's Prospectus. The Fund may modify or terminate this
Program at any time. The Dreyfus Step Program is not available to open new
accounts in any Class of the Fund.
Letter of Intent-Class A Shares. By signing a Letter of Intent form,
which can be obtained by calling 1-800-554-4611, you become eligible for the
reduced sales load applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and conditions set
forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of
shares you hold (on the date of submission of the Letter of Intent) in any
Eligible Fund that may be used toward "Right of Accumulation" benefits
described above may be used as a credit toward completion of the Letter of
Intent. However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
shares of the Fund held in escrow to realize the difference. Signing a
Letter of Intent does not bind you to purchase, or the Fund to sell, the
full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales
load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter
of Intent will be made at the then-current NAV plus the applicable sales
load in effect at the time such Letter of Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is engaged in excessive
trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole
or part any purchase or exchange request, with respect to such investor's
account. Such investors also may be barred from purchasing other funds in
the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year (for calendar year
1998 beginning on January 15th) or who makes exchanges that appear to
coincide with an active market-timing strategy may be deemed to be engaged
in excessive trading. Accounts under common ownership or control will be
considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if, in the judgment of the Fund's
management, the Fund would be unable to invest the money effectively in
accordance with its investment objective and policies or could otherwise be
adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts
equal to 1% or more of the Fund's total assets). If an exchange request is
refused, the Fund will take no other action with respect to the shares until
it receives further instructions from the investor. The Fund may delay
forwarding redemption proceeds for up to seven days if the investor
redeeming shares is engaged in excessive trading or if the amount of the
redemption request otherwise would be disruptive to efficient portfolio
management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined NAV
but the purchase order would be effective only at the NAV next determined
after the fund being purchased receives the proceeds of the redemption,
which may result in the purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at
the last sale price on the securities exchange or national securities market
on which such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available. Where market
quotations are not readily available, the Fund's investments are valued
based on fair value as determined in good faith by the Company's Board.
Debt securities may be valued by an independent pricing service approved by
the Company's Board and are valued at fair value as determined by the
pricing service. Any assets or liabilities initially expressed in terms of
foreign currency will be translated into U.S. dollars at the midpoint of the
New York interbank market spot exchange rate as quoted on the day of such
translation or, if no such rate is quoted on such date, such other quoted
market exchange rate as may be determined to be appropriate by Dreyfus. If
the Fund has to obtain prices as of the close of trading on various
exchanges throughout the world, the calculation of NAV may not take place
contemporaneously with the determination of prices of certain of the Fund's
securities. Short-term investments are carried at amortized cost, which
approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV
of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors if it
believes that the discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and
Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income, if any, four times yearly and distributes net realized
capital gains and gains from foreign currency transactions, if any, once a
year, but it may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with of the 1940 Act. All expenses are accrued daily and
deducted before declaration of dividends to investors. The Fund will not
make distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Investors other
than qualified retirement plans may choose whether to receive dividends and
other distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both
dividends and other distributions in additional Fund shares at NAV;
dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV. Dividends and
other distributions paid by each Class are calculated at the same time and
in the same manner and will be in the same amount, except that the expenses
attributable solely to a particular Class are borne exclusively by that
Class. Class B and Class C shares will receive lower per share dividends
than Class A shares, which will in turn receive lower per share dividends
than Class R shares, because of the higher expenses borne by the relevant
Classes.
It is expected that the Fund will continue to qualify for treatment as
a regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve the Fund of any liability for federal income tax
to the extent its earnings and realized gains are distributed in accordance
with applicable provisions of the Code. To qualify for treatment as a RIC
under the Code, the Fund -- which is treated as a separate corporation for
federal tax purposes -- (1) must distribute to its shareholders each year at
least 90% of its investment company taxable income (generally consisting of
net investment income, net short-term capital gains and net gains from
certain foreign currency transactions) ("Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
("Income Requirement"), and (3) must meet certain asset diversification and
other requirements. The term "regulated investment company" does not imply
the supervision of management or investment practices or policies by any
government agency. If the Fund failed to qualify for treatment as a RIC for
any taxable year, (1) it would be taxed at corporate rates on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (2) the shareholders would
treat all those distributions, including distributions of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
as dividends (that is, ordinary income) to the extent of the Fund's earnings
and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment. The Fund will be
subject to a non-deductible 4% excise tax ("Excise Tax"), to the extent it
fails to distribute as substantially all of its taxable investment income
and capital gains.
Distributions. If you elect to receive dividends and other
distributions in cash, and your distribution check is returned to the Fund
as undeliverable or remains uncashed for six months, the Fund reserves the
right to reinvest that distribution and all future distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains not realized gains
from certain foreign currency transactions and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to those shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and
whether the distributions are received in cash or reinvested in additional
Fund shares. Dividends and other distributions also may be subject to state
and local taxes.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of
30%,unless the foreign investor claims the benefit of a lower rate specified
in a tax treaty. Distributions from net capital gain paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions by
such an investor, regardless of the extent to which gain or loss may be
realized, generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions if any, paid
during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if a shareholder redeems those shares or exchanges
them for shares of another fund advised or administered by Dreyfus, within
90 days of purchase, and (1) in the case of a redemption, the shareholder
acquires other Fund Class A shares through exercise of the Reinvestment
Privilege (2) or, in the case of an exchange, the other fund reduces or
eliminates its otherwise applicable sales load. In these cases, the amount
of the sales load charged on the purchase of the original Class A shares, up
to the amount of the reduction of the sales load pursuant to the
Reinvestment Privilege or on the exchange, as the case may be, is not
included in the tax basis of those shares for purposes of computing gain or
loss and instead is added to the tax basis of the acquired shares.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
Internal Revenue Service ("IRS") distributions paid to such plans.
Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be
taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to
10% of the taxable portion of the distribution. The administrator, trustee
or custodian of a qualified retirement plan will be responsible for
reporting distributions from the plan to the IRS. Moreover, certain
contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not
elect to have the distribution paid directly from the plan to an retirement
plan in a "direct rollover," the distribution is subject to 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if the
shareholder fails to furnish a TIN to the Fund and certify that it is
correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income. A TIN is either the
Social Security number, IRS individual taxpayer identification number or
employer identification number of the record owner of an account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax imposed on the record owner and may be claimed as a credit on his or her
federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such distribution would be a
return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives any capital gain distributions with respect to
those shares, any loss incurred on the sale of those shares will be treated
as a long-term capital loss to the extent of those distributions.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
Federal alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that
would reduce the yield and/or total return on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate foreign taxes, however, and many foreign countries do not impose
taxes on capital gains in respect of investments by foreign investors.
Passive Foreign Investment Companies. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a
foreign corporation in which, on any day during its taxable year, more than
50% of the total voting power of all voting stock therein or the total value
of all stock therein is owned, directly, indirectly, or constructively, by
"U.S. shareholders," defined as U.S. persons that individually own,
directly, indirectly, or constructively, at least 10% of that voting power)
as to which the Fund is a U.S. shareholder -- that, in general, meets either of
the following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income.
Under certain circumstances, the Fund will be subject to federal income tax
on a portion of any "excess distribution" received on the stock of a PFIC or
of any gain on disposition of the stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a dividend
to its shareholders. The balance of the PFIC income will be included in the
Fund's investment company taxable income and, accordingly, will not be
taxable to it to the extent that it distributes income to its shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund would be required to include in income each
year its pro rata share of the QEF's annual ordinary earnings and net
capital gain -- which likely would have to be distributed by the Fund to
satisfy the Distribution Requirement and avoid imposition of the Excise Tax
- -- even if those earnings and gain were not distributed to the Fund by the
QEF. In most instances it will be very difficult, if not impossible, to
make this election because of certain requirements thereof.
The Fund may elect to "mark to market" its stock in any PFIC. "Marking-
to-market," in this context, means including in ordinary income each taxable
year the excess, if any, of the fair market value of a PFIC's stock over the
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not
capital, loss) the excess, if any, of its adjusted basis in PFIC stock over
the fair market value thereof as of the taxable year-end, but only to the
extent of any net mark-to-market gains with respect to that stock included
by the Fund for prior taxable years. The Fund's adjusted basis in each
PFIC's stock with respect to which it makes this election would be adjusted
to reflect the amounts of income included and deductions taken under the
election and under regulations proposed in 1992 that provided a similar
election with respect to the stock of certain PFIC(s).
Foreign Currency and Hedging Transactions. Gains from the sale or
other disposition of foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and gains from options, futures and
forward contracts derived by the Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gains and
losses from the disposition of foreign currencies and certain foreign-
currency-denominated instruments (including debt instruments and financial
forward and futures contracts and options) may be treated as ordinary income
or loss under Section 988 of the Code. In addition, all or a portion of any
gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as
capital gain may be treated as ordinary income. "Conversion transactions"
are defined to include certain option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund
on the exercise or lapse of, or closing transactions respecting, certain
options, futures and forward contracts ("Section 1256 Contracts") will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. In addition, any Section 1256 Contracts remaining unexercised
at the end of the Fund's taxable year will be treated as sold for their then
fair market value (a process known as "marking-to-market"), resulting in
additional gain or loss to the Fund characterized in the same manner.
Offsetting positions held by the Fund involving certain options,
futures or forward contracts may constitute "straddles", which are defined
to include "offsetting positions" in actively traded personal property.
Under Section 1092 of the Code, any loss from the disposition of a position
in a straddle generally may be deducted only to the extent the loss exceeds
the unrealized gain on the offsetting positions(s) of the straddle. In
addition, these rules may postpone the recognition of loss that otherwise
would be recognized under the mark-to-market rules discussed above. The
regulations under Section 1092 also provide certain "wash sale" rules, which
apply to transactions where a position is sold at a loss and a new
offsetting position is acquired within a prescribed period, and "short sale"
rules applicable to straddles. If the Fund makes certain elections
(including an election as to straddles that include a position in one or
more Section 1256 Contracts (so-called "mixed straddles')), the amount,
character, and timing of recognition of gains and losses from the affected
straddle positions would be determined under rules that vary according to
the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules, affect
the amount and timing of distributions to shareholders by using the Fund to
recognize income prior to the receipt of cash payments. For example, the
Fund would be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and could
need to distribute that income to satisfy the Distribution Requirement and
avoid the Excise Tax. In that case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the
Fund may be subject to the tax laws thereof. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder") depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed below. Special
U.S. federal income tax rules that differ from those described below may
apply to certain foreign persons who invest in the Fund, such as a foreign
shareholder entitled to claim the benefits of an applicable tax treaty.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain generally will not be subject to U.S. federal income tax unless
the foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable year.
In the case of certain foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
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 these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Dreyfus may use research services of and place brokerage transactions
with broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated
brokerage firms for similar services. During the fiscal years ended October
31, 1998, 1997 and 1996, the Fund paid brokerage commissions of $27,084,
$8,315 and $7,643, respectively, to affiliates of Dreyfus or Mellon Bank.
The amount paid to affiliated brokerage firms during the fiscal years ended
October 31, 1998, 1997 and 1996, was approximately 24%, 28% and 42%,
respectively, of the aggregate brokerage commissions paid by the Fund, for
transactions involving approximately 30%, 32% and 48%, respectively, of the
aggregate dollar volume of transactions for which the Fund paid brokerage
commissions. The difference in these percentages was due to the lower
commissions paid to affiliates of Dreyfus.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions amounting to $113,263, $29,323 and $18,186,
respectively.
Portfolio Turnover. While securities are purchased for the fund on the
basis of potential for high current income and possible capital appreciation
and not for short-term trading profits, the Fund's portfolio turnover rate
may exceed 100%. A portfolio turnover rate of 100% would occur, for
example, if all the securities held by the Fund were replaced once in a
period of one year. A higher rate of portfolio turnover involves
correspondingly greater brokerage commissions and other expenses that must
be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a higher rate of portfolio turnover may result in the realization
of larger amounts of short-term capital gains that, when distributed to the
Fund's shareholders, are taxable to them as ordinary income. Nevertheless,
securities transactions for the Fund will be based only upon investment
considerations and will not be limited by any other considerations when
Dreyfus deems its appropriate to make changes in the Fund's assets. The
portfolio turnover rate for the Fund is calculated by dividing the lesser of
the Fund's annual sales or purchases of portfolio securities (exclusive of
purchases and sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of
securities in the Fund during the year. Portfolio turnover may vary from
year to year as well as within a year. The portfolio turnover rates for the
fiscal years ended October 31, 1998 and 1997 were 81.27% and 37.17%,
respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for Class A
shares and Class R shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year Since Inception
Class A shares 12.97% 21.71% (9/14/94)
Class R shares 20.10% 23.73% (9/2/94)
Inception date appears in parentheses following the average annual total
return since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase
and the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price
in the case of Class A) per share with a hypothetical $1,000 payment made at
the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment,
taking the "n"th root of the quotient (where "n" is the number of years in
the period) and subtracting 1 from the result. The average annual total
return figures for a Class calculated in accordance with such formula assume
that, in the case of Class A, the maximum sales load has been deducted from
the hypothetical initial investment at the time of purchase or, in the case
of Class B or Class C, the maximum applicable CDSC has been paid upon
redemption at the end of the period.
The Fund's total return for Class A shares (formerly called Investor
shares) for the period from September 2, 1994 (inception date of Class A
shares) to October 31, 1998 was 126.41% (assuming deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase,
although no sales load was applicable to Class A shares or its predecessor
class until January 16, 1998). Without giving effect to the applicable
front-end sales load, the total return for Class A was 140.22% for this
period. The Fund's total return for Class R shares (formerly called
Restricted shares) for the period September 2, 1994 (inception date of Class
R shares) to October 31, 1998 was 142.50% for this period. Total return is
calculated by subtracting the amount of the Fund's NAV (maximum offering
price in the case of Class A) per share at the beginning of a stated period
from the NAV (maximum offering price in the case of Class A) per share at
the end of the period (after giving effect to the reinvestment of dividends
and other distributions during the period and any applicable CDSC), and
dividing the result by the NAV (maximum offering price in the case of Class
A) per share at the beginning of the period. Total return also may be
calculated based on the NAV per share at the beginning of the period instead
of the maximum offering price per share at the beginning of the period for
Class A shares or without giving effect to any applicable CDSC at the end of
the period for Class B or Class C shares. In such cases, the calculation
would not reflect the deduction of the sales load with respect to Class A
shares or any applicable CDSC with respect to Class B or C shares, which, if
reflected would reduce the performance quoted.
The aggregate total return (expressed as a percentage) for Class B
shares and Class C shares of the Fund for the period from inception of each
class (January 16, 1998) to October 31, 1998 was 9.76% and 12.70%,
respectively (assuming, assessment of the maximum CDSC). Without giving
effect to the applicable CDSC, the aggregate total return for Class B and
Class C was 13.76% and 13.70% respectively, for this period.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
S&P 500, the Dow Jones Industrial Average, or other appropriate unmanaged
domestic or foreign indices of performance of various types of investments
so that investors may compare the Fund's results with those of indices
widely regarded by investors as representative of the securities markets in
general; (ii) other groups of mutual funds tracked by Lipper Analytical
Services, Inc., a widely used independent research firm which ranks mutual
funds by overall performance, investment objectives and assets, or tracked
by other services, companies, publications, or persons who rank mutual funds
on overall performance or other criteria; (iii) the Consumer Price Index (a
measure of inflation) to assess the real rate of return from an investment
in the Fund or the Fund's performance against inflation to the performance
of other instruments against inflation; and (iv) products managed by a
universe of money managers with similar performance objectives. Unmanaged
indices may assume the reinvestment of dividends but generally do not
reflect deductions or administrative and management costs and expenses. From
time to time, advertising materials for the Fund may refer to Morningstar
ratings and related analyses supporting the rating.
From time to time, advertising material for the Fund may include: (i)
biographical information relating to its portfolio manager, including honors
and awards and may refer to, or include commentary by the Fund's portfolio
manager relating to investment strategy, asset growth, current or past
business, political, economic or financial conditions and other matters of
general interest to investors; (ii) statistical data or general discussions
about the growth and development of Dreyfus Retirement Services (in terms of
new customers, assets under management, market share, etc.) and its presence
in the defined contribution plan market; (iii) the approximate number of
then current Fund shareholders; (iv) references to the Fund's quantitative,
disciplined approach to stock market investing and the number of stocks
analyzed by Dreyfus; and (v) Lipper or Morningstar ratings and related
analysis supporting the ratings. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
The Fund is one of nineteen portfolios of the Company. Fund shares have no
preemptive, subscription or conversion rights and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they
vote separately by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
The Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
The Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 31, 1999, providing audit services including (1) examination of the
annual financial statements, (2) assistance, review and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. 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 AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial
markets and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Credit Rating Co. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
modest but
AA may vary slightly from time to time because of economic
conditions.
AA-
A+ Protection factors are average but adequate. However, risk
factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
for prudent
BBB investment. Considerable variability in risk during economic
cycles.
BBB-
BB+ Below investments grade but deemed likely to meet obligations when
due.
BB Present or prospective financial protection factors fluctuate
according to
BB- industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
not be met
B when due. Financial protection factors will fluctuate widely
according to
B- economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends.
Protection factors are narrow and risk can be substantial with
unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or
interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
____________________________________________________________________________
DREYFUS PREMIER SMALL CAP VALUE FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
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 Premier Small Cap Value 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 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Fund B-2
Management of the Fund B-17
Management Arrangements B-23
Purchase of Shares B-25
Distribution and Service Plans B-32
Redemption of Shares B-34
Shareholder Services B-38
Additional Information about Purchases,
Exchanges and Redemptions B-44
Determination of Net Asset Value B-45
Dividends, Other Distributions and Taxes B-46
Portfolio Transactions B-52
Performance Information B-54
Information About the Fund/Company B-56
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors B-57
Financial Statements B-57
Appendix B-58
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.
The Fund seeks investment returns that exceed those of the Russell 2000
Value Index. The Russell 2000 Value Index is an unmanaged index of those
companies in the Russell 2000r Index with lower price-to-book ratios and
lower forecasted growth values. The Russell 2000r Index measures the
performance of the 2,000 smallest companies in the Russell 3000r Index,
which in turn measures the performance of the 3,000 largest publicly traded
U.S. companies based on total market capitalization.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
American Depository Receipts ("ADRs") and New York Shares. The Fund
may invest in U.S. dollar-denominated ADRs and "New York Shares." ADRs
typically are issued by an American bank or trust company and evidence
ownership of underlying securities issued by foreign companies. New York
Shares are securities of foreign companies that are issued for trading in
the United States. ADRs and New York Shares are traded in the United States
on national securities exchanges or in the over-the-counter market.
Investment in securities of foreign issuers presents certain risks,
including those resulting from adverse political and economic developments
and the imposition of foreign governmental laws or restrictions. See
"Foreign Securities."
Corporate Obligations. The Fund may invest in corporate obligations
rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's Rating Services ("Standard & Poor's), or if unrated, of
comparable quality as determined by Dreyfus. Securities rated BBB by
Standard & Poor's or Baa by Moody's are considered by those rating agencies
to be "investment grade" securities, although Moody's considers securities
rated Baa to have speculative characteristics. Further, while bonds rated
BBB by Standard & Poor's exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and principal for debt in this category
than debt in higher rated categories. The Fund will dispose in a prudent
and orderly fashion of bonds whose ratings drop below these minimum ratings.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Fannie Mae.) No assurance can be given that the U.S.
Government will provide financial support to the agencies or
instrumentalities described in (b), (c) and (d) in the future, other than as
set forth above, since it is not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the Fund's credit guidelines. This technique
offers a method of earning income on idle cash. In a repurchase agreement,
the Fund buys a security from a seller that has agreed to repurchase the
same security at a mutually agreed upon date and price. The Fund's resale
price will be in excess of the purchase price, reflecting an agreed upon
interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate on
the underlying security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and
at no time will the Fund invest in repurchase agreements for more than one
year. The Fund will always receive as collateral securities whose market
value including accrued interest is, and during the entire term of the
agreement remains, at least equal to 100% of the dollar amount invested by
the Fund in each agreement, including interest, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the Custodian. If the seller defaults,
the Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the Fund's credit
guidelines.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's, Prime-1 by Moody's, F-1 by Fitch IBCA, Inc. or Duff-1 by
Duff & Phelps Credit Rating Co.
Bank Instruments. The Fund may purchase bankers' acceptances,
certificates of deposit, time deposits, and other short-term obligations
issued by domestic banks, foreign subsidiaries or foreign branches of
domestic banks, domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs"),
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are U.S. dollar-
denominated time deposits in a foreign branch of a U.S. bank or a foreign
bank. Yankee CDs are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States. The
Fund may also invest in Eurodollar bonds and notes, which are obligations
that pay principal and interest in U.S. dollars held in banks outside the
United States, primarily in Europe. All of these obligations are subject to
somewhat different risks than are the obligations of domestic banks or
issuers in the United States. See "Foreign Securities."
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal
of funds or other assets of the Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the yield on such securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holders.
Warrants. A warrant is an instrument issued by a corporation which
gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time.
The Fund may invest up to 5% of its net assets in warrants, except that this
limitation does not apply to warrants purchased by the Fund that are sold in
units with, or attached to, other securities.
Convertible Securities. The Fund may purchase convertible securities,
which are fixed-income securities such as bonds or preferred stock that may
be converted into or exchanged for a specified number of shares of common
stock of the same or a different issuer within a specified period of time
and at a specified price or formula. Convertible securities are senior to
common stock in a corporation's capital structure, but may be subordinated
to non-convertible debt securities. Before conversion, convertible
securities ordinarily provide a stable stream of income with yields
generally higher than those on common stock, but lower than those on non-
convertible debt securities of similar quality. In general, the market
value of a convertible security is the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., the value of the underlying shares of common stock if the security is
converted). As a fixed-income security, the market value of a convertible
security generally increases when interest rates decline and generally
decreases when interest rates rise. However, the price of a convertible
security also is influenced by the market value of the security's underlying
common stock. Thus, the price of a convertible security generally increases
as the market value of the underlying stock rises, and generally decreases
as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the
common stock of the same issuer.
Preferred Stock. The Fund may also purchase preferred stock, which is
a class of capital stock that typically pays dividends at a specified rate.
Preferred stock is generally senior to common stock, but subordinate to debt
securities, with respect to the payment of dividends and on liquidation of
the issuer. In general, the market value of preferred stock is its
"investment value," or its value as a fixed-income security. Accordingly,
the market value of preferred stock generally increases when interest rates
decline and decreases when interest rates rise, but, as with debt
securities, is also affected by the issuer's ability to make payments on the
preferred stock.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in the
Fund's Prospectus, the Fund also may engage in the investment techniques
described below. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
Borrowing. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues
of U.S. Treasury and Government securities are often offered on a
"when-issued" basis. This means that delivery and payment for the securities
normally will take place approximately 7 to 45 days after the date the buyer
commits to purchase them. The payment obligation and the interest rate that
will be received on securities purchased on a "when-issued" basis are each
fixed at the time the buyer enters into the commitment. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt securities
equal to the amount of the above commitments will be segregated on the
Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a "when-issued" basis and the securities held
by the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value
("NAV").
When payment for "when-issued" securities is due, the Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the "when-issued" securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
To secure advantageous prices or yields, the Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed
delivery basis involves the risk that the value of the securities purchased
will decline prior to the settlement date. The sale of securities for
delayed delivery involves the risk that the prices available in the market
on the delivery date may be greater than those obtained in the sale
transaction. The Fund will establish a segregated account consisting of
cash, U.S. Government Securities or other high-grade debt obligations in an
amount at least equal at all times to the amounts of its delayed delivery
commitments.
Loans of Fund Securities. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to
be entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities, which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed one-
third 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 securities involved including the right to
receive interest and principal payments. Cash or liquid high-grade debt
securities held by the Fund equal in value to the repurchase price including
any accrued interest will be maintained in a segregated account while a
reverse repurchase agreement is in effect.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
including financial futures contracts (such as index futures contracts) and
options (such as options on U.S. and foreign securities or indices of such
securities). The index Derivative Instruments which the Fund may use may be
based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or
spread or to facilitate or substitute for the sale or purchase of
securities.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments may be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability not only to forecast the direction of price fluctuations of
the investment involved in the transaction, but also to predict movements of
the overall securities and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities.
There can be no assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected,
may increase portfolio turnover rates, which results in correspondingly
greater commission expenses and transaction costs and may result in certain
tax consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value unless
the option is closed out in an offsetting transaction.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value and the Fund would experience losses to the extent of premiums
paid for them.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market. The Fund will not purchase put or call
options that are traded on a national exchange in an amount exceeding 5% of
its net assets.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the price at which the option can be
exercised). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write options on securities only if it covers the
transaction through: an offsetting option with respect to the security
underlying the option it has written, exercisable by it at a more favorable
price; ownership of (in the case of a call) or a short position in (in the
case of a put) the underlying security; or segregation of cash or certain
other assets sufficient to cover its exposure.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund writes a call, it assumes a short futures position. If
the Fund writes a put, it assumes a long futures position. When the Fund
purchases an option on a futures contract, it acquires the right, in return
for the premium it pays, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a
put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5%, the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts for hedging purposes.
The Fund will not enter into futures contracts to the extent that its
outstanding obligations under these contracts would exceed 25% of the Fund's
total assets.
Certain Investments. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting
of shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less. The
Fund may not:
1. Purchase any securities which would cause 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 contracts, 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.
Nonfundamental. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same investment objective, policies and limitations as the
Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund 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 its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements between the
Company, on behalf of the Fund, and those companies that furnish services to
the Fund. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of nine Directors. The following
lists the Directors and officers and their positions with the Company and
their present and principal occupations during the past five years. Each
Director who is an "interested person" of the Company (as defined in the
1940 Act) is indicated by an asterisk(*). Each of the Directors also serves
as a Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.) a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc (formerly Staffing
Resources) a temporary placement agency. 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 and CEO, The
Palladium Company; President and CEO, Himmel and Company, 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 of the Board and CEO,
LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years old.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; Member of Advisory Committee, Decedents
Estates Laws of Pennsylvania. Age: 67 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director,
Harvard/Pilgrim 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 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 Investment Services
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 and 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 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 and separately by the
Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31, 1998,
the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus for
serving as a Board member of the Company was $17,710. For the year ended
December 31, 1998, the aggregate amount of fees received by Mr. Fort for
serving as a Board member of all funds in the Dreyfus/Laurel Funds (including
the Company) and Dreyfus High Yield Strategies Fund (for which payment is made
directly by the fund) was $59,010. In addition, Dreyfus reimbursed Mr. Fort a
total of $733.11 for expenses attributable to the Company's Board meetings which
is not included in the $5,313.37 amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The 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.
Principal Shareholders. As of February 1, 1999, the following
shareholder(s) owned beneficially or of record 5% or more of Class A shares
of the Fund: MBCIC, c/o Mellon Bank, 919 N. Market Street, Wilmington, DE
19801-3023, 89.90%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class B shares of the Fund: MBCIC, c/o Mellon
Bank, 919 N. Market Street, Wilmington, DE 19801-3023, 54.17%; and MLPF&S
For The Sole Benefit Of Its Customers, 4800 Deer Lake Drive East,
Jacksonville, FL 32246-6484, 30.52%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class C shares of the Fund: MBCIC, c/o Mellon
Bank, 919 N. Market Street, Wilmington, DE 19801-3023, 77.14%; MLPF&S For
The Sole Benefit Of Its Customers, 4800 Deer Lake Drive East, Jacksonville,
FL 32246-6484, 12.42%; and Painwebber For the Benefit Of Painewebber CDN FD
71051, FBO James R. William Jr., P.O. Box 3321, Weehawken, NJ 07087-8154,
6.13%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class R shares of the Fund: MBCIC, c/o Mellon
Bank, 919 N. Market Street, Wilmington, DE 19801-3023, 88.20%; and Dreyfus
Investment Services Corporation, FBO 479225701, 2 Mellon Bank Center, Room
177, Pittsburgh, PA 15259, 11.52%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and
"Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the 25 largest bank holding
companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994, subject to the overall authority of the Company's Board of
Directors in accordance with Maryland law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus manages
the Fund by making investment decisions based on the Fund's investment
objective, policies and restrictions. The Management Agreement is subject
to review and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. The Company may terminate the
Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities
on 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; 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 1.25% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee by an
amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering
the expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other
expenses of the Company are allocated among its funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each fund.
For the period from April 1, 1998 (commencement of operations) through
October 31, 1998, the Fund paid Dreyfus $35,219 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 sub-administrator for the Fund and as distributor
for the other funds in the Dreyfus Family of Funds.
For the period April 1, 1998 (commencement of operations) through
October 31, 1998, the Distributor retained no sales loads on the Fund's
Class A shares. For the period April 1, 1998 (commencement of operations)
through October 31, 1998, the Distributor retained $560.00 from the
contingent deferred sales charge ("CDSC") on Class B shares for the Fund.
For the same period, the Distributor retained $2.00 from the CDSC on Class C
shares for the Fund.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most
beneficial to you depends on the amount and the intended length of your
investment. You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee, service fee
and CDSC, if any, on Class B or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares
purchased at the same time, and to what extent, if any, such differential
would be offset by the return on Class A shares. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution and service fees on
Class B or Class C shares may exceed the accumulated distribution fee and
initial sales charge on Class A shares during the life of the investment.
Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than
Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to ongoing distribution and service fees. Thus,
Class B shares may be more attractive than Class C shares to investors with
longer term investment outlooks. Generally, Class A shares may be more
appropriate for investors who invest $1,000,000 or more in Fund shares, but
will not be appropriate for investors who invest less than $50,000 in Fund
shares. The Fund reserves the right to reject any purchase order.
Class A shares, Class B shares and Class C shares may be purchased only
by clients of Agents, except that full-time or part-time employees of
Dreyfus or any of its affiliates or subsidiaries, directors of Dreyfus,
Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing may
purchase Class A shares directly through the Distributor. Subsequent
purchases may be sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates)
acting on behalf of customers having a qualified trust or investment account
or relationship at such institution, or to customers who have received or
hold shares of the Fund distributed to them by virtue of such an account or
relationship. Class R shares may be purchased for a retirement plan only by
a custodian, trustee, investment manager or other entity authorized to act
on behalf of such a plan. Institutions effecting transactions in Class R
shares for the accounts of their clients may charge their clients direct
fees in connection with such transactions.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum on subsequent purchases. The initial investment must be
accompanied by the Fund's Account Application. The Fund reserves the right
to offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to
certain qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value".
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined NAV. It is
the dealers' responsibility to transmit orders so that they will be received
by the Distributor or its designee before the close of its business day.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the Fund's Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by
Eligible Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares is the
NAV of that Class, plus a sales load as shown below:
Total Sales Load as a Dealers' Reallowance
Amount of Transaction % of Offering Price as a % of Offering
Per Share Price
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Sales Loads -- Class A. The scale of sales loads applies to purchases
of Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or for
the account of any minor children, or a trustee or other fiduciary
purchasing securities for a single trust estate or a single fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Code) although
more than one beneficiary is involved; or a group of accounts established by
or on behalf of the employees of an employer or affiliated employers
pursuant to an employee benefit plan or other program (including accounts
established pursuant to Sections 403(b), 408(k) and 457 of the Code); or an
organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the
purchases are made through a central administration or a single dealer, or
by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the NAV of a Class A share at the close of business on October 31, 1998:
NAV per share $10.45
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ .64
Per Share Offering Price to Public $11.09
There is no initial sale charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain
the same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by Dreyfus which are sold with a sales load, such as Class A shares.
In some instances, these incentives may be offered only to certain dealers
who have sold or may sell significant amounts of such shares. Dealers
receive a larger percentage of the sales load from the Distributor than they
receive for selling most other funds.
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in the Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class R Shares. The public offering price for Class R shares is the
NAV per share of that Class.
Right of Accumulation-Class A Shares. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier
Family of Funds, shares of certain other funds advised by Dreyfus which are
sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined above, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you previously purchased and
still hold Class A shares of the Fund, or shares of any other Eligible Fund
or combination thereof, with an aggregate current market value of $40,000
and subsequently purchase Class A shares of the Fund or shares of an
Eligible Fund having a current value of $20,000, the sales load applicable
to the subsequent purchase would be reduced to 4.5% of the offering price.
All present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the sales
load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the TeleTransfer Privilege if you have checked the appropriate box
and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained in a
domestic financial institution that is an Automated Clearing House ("ACH")
member may be so designated. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 p.m., New York time, on any
business day that Dreyfus Transfer, Inc., the Fund's transfer and dividend
disbursing agent (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 that the Transfer Agent and the NYSE are
open for business, or orders made on Saturday, Sunday or any Fund holiday
(e.g., when the NYSE is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the TeleTransfer Privilege, the initial
payment for purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares - TeleTransfer Privilege." The Fund may modify or terminate this
Privilege at any time or charge a service fee upon notice to shareholders.
No such fee currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the
shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule.
Distribution Plan--Class A Shares. The Company has adopted a
Distribution Plan pursuant to the Rule with respect to the Class A shares of
the Fund ("Class A Plan"), whereby Class A shares of the Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A Plan allows the Distributor to make payments from the
Rule 12b-1 fees it collects from the Fund to compensate Agents that have
entered into Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Class A shares of the Fund.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without approval of the Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Company or
the Distributor and who do not have any direct or indirect financial
interest in the operation of the Class A Plan, cast in person at a meeting
called for the purpose of considering such amendments. The Class A Plan is
subject to annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct or indirect
financial interest in the operation of the Class A Plan, by vote cast in
person at a meeting called for the purpose of voting on the Class A Plan.
The Class A Plan was so approved by the Directors at a meeting held on
February 4, 1999. The Class A Plan is terminable, as to the Fund's Class A
shares, at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B and Class C Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B and Class C shares, pursuant to which the Fund pays the
Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B and Class C
shares for the provision of certain services to the holders of Class B and
Class C shares. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and
providing services related to the maintenance of such shareholder accounts.
With regard to such services, each Agent is required to disclose to its
clients any compensation payable to it by the Fund and any other
compensation payable by its clients in connection with the investment of
their assets in Class B and Class C shares. The Distributor may pay one or
more Agents in respect of services for these Classes of shares. The
Distributor determines the amounts, if any, to be paid to Agents under the
Service Plan and the basis on which such payments are made. The Company's
Board of Directors has also adopted a Distribution Plan pursuant to the Rule
with respect to Class B and Class C shares (the "Distribution Plan")
pursuant to which the Fund pays the Distributor for distributing the Fund's
Class B and Class C shares at an aggregate annual rate of 0.75% of the value
of the average daily net assets of Class B and Class C shares. The
Company's Board of Directors believes that there is a reasonable likelihood
that the Distribution and Service Plans (the "Plans") will benefit the Fund
and the holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or Class
C shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be
approved by the Board of Directors and by the Directors who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. Each Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Directors at a meeting held on February 4, 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B and Class C
shares.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Class A Plan and the Distribution and
Service Plans are payable without regard to actual expenses incurred. The
Fund and the Distributor may suspend or reduce payments under the Class A
Plan and the Distribution and Service Plans at any time, and payments are
subject to the continuation of the Fund's Plans and the Agreements described
above. From time to time, the Agents, the Distributor and the Fund may
voluntarily agree to reduce the maximum fees payable under the Plans.
For the period from April 1, 1998 (commencement of operations) through
October 31, 1998, the Fund paid the Distributor and Dreyfus Service
Corporation $100 and $4,706, respectively, pursuant to the Class A Plan.
For the period from April 1, 1998 (commencement of operations) through
October 31, 1998, the Fund paid the Distributor $2,499 and $2,208 pursuant
to the Distribution Plan with respect to Class B and Class C shares,
respectively, and paid the Distributor and Dreyfus Service Corporation $63
and $770, respectively, pursuant to the Service Plan with respect to Class B
shares and paid Dreyfus Service Corporation $736 pursuant to the Service
Plan with respect to Class C shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the TeleTransfer Privilege. If you are a client of a
Selected Dealer, you may redeem shares through the Selected Dealer. Other
redemption procedures may be in effect for clients of certain Agents and
institutions. The Fund makes available to certain large institutions the
ability to issue redemption instructions through compatible computer
facilities. The Fund reserves the right to refuse any request made by
telephone, including requests made shortly after a change of address, and
may limit the amount involved or the number of such requests. The Fund may
modify or terminate any redemption privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs, or other retirement plans, and shares
for which certificates have been issued, are not eligible for the
TeleTransfer Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TeleTransfer
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus Touchr automated
telephone system) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers
may make redemption requests to their Selected Dealer. If the Selected
Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, your account will be credited with an amount
equal to the CDSC previously paid upon redemption of the Class A or Class B
shares reinvested. The Reinvestment Privilege may be exercised only once.
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, or at your request, paid by check
(maximum $150,000 per day) and mailed to your address. Holders of jointly
registered Fund or bank accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account only up to $250,000 within any
30-day period. Investors should be aware that if they have selected the
TeleTransfer Privilege, any request for a TeleTransfer transaction will be
effected through the ACH system unless more prompt transmittal specifically
is requested. See "Purchase of Shares-TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90 day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Company's Board
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect the Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years; then of amounts representing the cost
of shares purchased six years prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1%
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC - The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described below. If the Company's Board determines to discontinue the
waiver of the CDSC, the disclosure herein will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Prospectus or this Statement of Additional Information at the time of the
purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such other funds
purchased by exchange will be purchased on the basis of relative NAV per
share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
You also may exchange your Fund shares that are subject to a CDSC for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can
be made into certain other funds managed or administered by Dreyfus. No
CDSC is charged when an investor exchanges into an Exchange Account;
however, the applicable CDSC will be imposed when shares are redeemed from
an Exchange Account or other applicable Fund account. Upon redemption, the
applicable CDSC will be calculated without regard to the time such shares
were held in an Exchange Account. See "Redemption of Shares." Redemption
proceeds for Exchange Account shares are paid by Federal wire or check only.
Exchange Account shares also are eligible for the Auto-Exchange Privilege,
Dividend Sweep and the Automatic Withdrawal Plan.
To request an exchange, an investor or an investor's Agent acting on
the investor's behalf must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr automated telephone system) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class of certain other funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount $100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to
the schedule the investor has selected. This Privilege is available only
for existing accounts. With respect to Class R shares held by a Retirement
Plan, exchanges may be made only between the investor's Retirement Plan
account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV as described
above under "Fund Exchanges." Enrollment in or modification or cancellation
of this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier
Small Cap Value Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
The Fund may charge a service fee for the use of this Privilege. No such
fee currently is contemplated. For more information concerning this
Privilege and the funds in the Dreyfus Premier Family of Funds or the
Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free 1-
800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another in treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss. Shareholder Services Forms and prospectuses of the other
funds may be obtained by calling 1-800-554-4611. The Fund reserves the right to
reject any exchange request in whole or in part. The Fund Exchange service or
the Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builderr. Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to Dreyfus
Premier Small Cap Value Fund, P.O. Box 6587, Providence, Rhode Island 02940-
6587 and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or
charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A shares to
which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A shares where the sales load is imposed concurrently with
withdrawals of Class A shares generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from the Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this Privilege will be purchased on the basis of
relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Small
Cap Value Fund, P.O. Box 6587, Providence Rhode Island, 02940-6587. To
select a new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dreyfus Dividend Sweep. The Fund
may modify or terminate these privileges at any time or charge a service
fee. No such fee currently is contemplated. Shares held under Keogh Plans,
IRAs or other retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Letter of Intent-Class A Shares. By signing a Letter of Intent form,
which can be obtained by calling 1-800-554-4611, you become eligible for the
reduced sales load applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and conditions set
forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of
shares you hold (on the date of submission of the Letter of Intent) in any
Eligible Fund that may be used toward "Right of Accumulation" benefits
described above may be used as a credit toward completion of the Letter of
Intent. However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
shares of the Fund held in escrow to realize the difference. Signing a
Letter of Intent does not bind you to purchase, or the Fund to sell, the
full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales
load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter
of Intent will be made at the then-current NAV plus the applicable sales
load in effect at the time such Letter of Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is engaged in excessive
trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole
or part any purchase or exchange request, with respect to such investor's
account. Such investors also may be barred from purchasing other funds in
the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes
exchanges that appear to coincide with an active market-timing strategy may
be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may
refuse or restrict purchase or exchange requests by any person or group if,
in the judgment of the Fund's management, the Fund would be unable to invest
the money effectively in accordance with its investment objective and
policies or could otherwise be adversely affected or if the Fund receives or
anticipates receiving simultaneous orders that may significantly affect the
Fund (e.g., amounts equal to 1% or more of the Fund's total assets). If an
exchange request is refused, the Fund will take no other action with respect
to the shares until it receives further instructions from the investor. The
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount
of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy
on excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined NAV
but the purchase order would be effective only at the NAV next determined
after the fund being purchased receives the proceeds of the redemption,
which may result in the purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at
the last sale price on the securities exchange or national securities market
on which such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available. Where market
quotations are not readily available, the Fund's investments are valued
based on fair value as determined in good faith by the Company's Board.
Debt securities may be valued by an independent pricing service approved by
the Company's Board and are valued at fair value as determined by the
pricing service. Any assets or liabilities initially expressed in terms of
foreign currency will be translated into U.S. dollars at the midpoint of
the New York interbank market spot exchange rate as quoted on the day of
such translation or, if no such rate is quoted on such date, such other
quoted market exchange rate as may be determined to be appropriate by
Dreyfus. If the Fund has to obtain prices as of the close of trading on
various exchanges throughout the world, the calculation of NAV may not take
place contemporaneously with the determination of prices of certain of the
Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee,
are accrued daily and taken into account for the purpose of determining the
NAV of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors if it
believes that the discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and
Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income, if any, 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. Dividends and other distributions paid by each
Class are calculated at the same time and in the same manner and will be in
the same amount, except that the expenses attributable solely to a
particular Class are borne exclusively by that Class. Class B and Class C
shares will receive lower per share dividends than Class A shares, which
will in turn receive lower per share dividends than Class R shares, because
of the higher expenses borne by the respective Classes.
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. The Fund will be subject to a non-deductible 4% excise
tax ("Excise Tax"), to the extent it fails to distribute substantially all
of its taxable income and capital gains. If the Fund failed to qualify for
treatment as a RIC for any taxable year, (1) it would be taxed at corporate
rates on the full amount of its taxable income for that year without being
able to deduct the distributions it makes to its shareholders and (2) the
shareholders would treat all those distributions, including distributions of
net capital gain (the excess of net long-term capital gain over 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 distribution or redemption checks.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains, net realized gains
from certain foreign currency transactions and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), will be taxable to U.S.
shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess net of long-term capital gain over net short-term
capital loss) will be taxable to those shareholders as long-term capital
gains regardless of how long the shareholders have held their Fund shares
and whether the distributions are received in cash or reinvested in
additional Fund shares.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions, if any, paid
during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if a shareholder redeems those shares or exchanges
them for shares of another fund advised or administered by Dreyfus, within
90 days of purchase, and (1) in the case of a redemption, the shareholder
acquires other Fund Class A shares through exercise of the Reinvestment
Privilege or, (2) in the case of an exchange, the other fund reduces or
eliminates its otherwise applicable sales load. In these cases, the amount
of the sales load charged on the purchase of the original Class A shares, up
to the amount of the reduction of sales load pursuant to the Reinvestment
Privilege or on the exchange, as the case may be, is not included in the tax
basis of those shares for purposes of computing gain or loss and instead is
added to the tax basis of the acquired shares.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
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 will be subject to
a 20% income tax withholding.
The Fund must withhold and remit to the U.S. treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if such
shareholder fails to furnish a TIN to the Fund and to certify that it is
correct. Backup withholding at that rate also is required from dividends
and capital gain distributions payable to such a shareholder if (1) the
shareholder fails to certify that he or she has not received notice from the
IRS of being subject to backup withholding as a result of a failure properly
to report taxable dividend or interest income on a federal income tax return
or (2) the IRS notifies the Fund to institute backup withholding because the
IRS determines that the shareholder's TIN is incorrect or that the
shareholder has failed properly to report such income. A TIN is either the
Social Security number, individual taxpayer identification number or
employer identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an additional
tax and may be claimed as a credit on the record owner's Federal income tax
return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares
below the cost of his or her investment. Such distribution would be a
return on investment in an economic sense, although taxable as stated 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
alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that
would reduce the yield and/or return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors.
Passive Foreign Investment Companies. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a
foreign corporation in which, on any day during its taxable year, more than
50% of the total voting power of all voting stock therein or the total value
of all stock therein is owned, directly, indirectly, or constructively, by
"U.S. shareholders," defined as U.S. persons that individually own,
directly, indirectly, or constructively, at least 10% of that voting power)
as to which the Fund is a U.S. shareholder -- that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or
(2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, the Fund will
be subject to federal income tax on a portion of any "excess distribution"
received on the stock of a PFIC or of any gain on disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a dividend to its shareholders. The balance
of the PFIC income will be included in the Fund's investment company taxable
income and, accordingly, will not be taxable to it to the extent 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, 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
described above.
Offsetting positions held by the Fund involving certain options,
futures or forward contracts may constitute "straddles", which are defined
to include "offsetting positions" in actively traded personal property.
Under Section 1092 of the Code, any loss from the disposition of a position
in a straddle generally may be deducted only to the extent the loss exceeds
the unrealized gain on the offsetting position(s) of the straddle. In
addition, these rules may postpone the recognition of loss that otherwise
would be recognized under the mark-to-market rules discussed above. The
regulations under Section 1092 also provide certain "wash sale" rules, which
apply to transactions where a position is sold at a loss and a new
offsetting position is acquired within a prescribed period, and "short sale"
rules applicable to straddles. If the Fund makes certain elections
(including an election as to straddles that include a position in one or
more Section 1256 Contracts (so-called "mixed straddles")), the amount,
character, and timing of recognition of gains and losses from the affected
straddle positions would be determined under rules that vary according to
the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
If the Fund has an "appreciated financial position" - generally, an
interest (including an interest through an option, futures or forward
contract, or short sale) with respect to any stock, debt instrument (other
than "straight debt"), or partnership interest the fair market value of
which exceeds its adjusted basis - and enters into a "constructive sale" of
the same or substantially similar property, the Fund will be treated as
having made an actual sale thereof, with the result that gain will be
recognized at that time. A constructive sale generally consists of a short
sale, an offsetting notional principal contract, or futures or forward
contract entered into by the Fund or a related person with respect to the
same or substantially similar property. In addition, if the appreciated
financial position is itself a short sale or such a contract, acquisition of
the underlying property or substantially similar property will be deemed a
constructive sale. The foregoing will not apply, however, to any
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end
of that year and the Fund holds the appreciated financial position unhedged
for 60 days after that closing (i.e., at no time during that 60-day period
is the Fund's risk of loss regarding that position reduced by reason of
certain specified transactions with respect to substantially similar or
related property, such as having an option to sell, being contractually
obligated to sell, making a short sale, or granting an option to buy
substantially identical stock or securities).
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules, affect
the amount and timing of distributions to shareholders by causing the Fund
to recognize income prior to the receipt of cash payments. For example, the
Fund would be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and could
need to distribute that income to satisfy the Distribution Requirement and
avoid the Excise Tax. In that case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, 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 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 these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the period April, 1, 1998 (commencement of operations) through
October 31, 1998, the Fund paid brokerage commissions amounting to $6,503.
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 turnover rate may exceed 100%. A portfolio turnover
rate of 100% would occur, for example, if all the securities held by the
Fund were replaced once in a period of one year. A higher rate of portfolio
turnover involves correspondingly greater brokerage commissions and other
expenses that must be borne directly by the Fund and, thus, indirectly by
its shareholders. In addition, a high rate of portfolio turnover may result
in the realization of larger amounts of short-term capital gains that, when
distributed to the Fund's shareholders, are taxable to them as ordinary
income. Nevertheless, securities transactions for the Fund will be based
only upon investment considerations and will not be limited by any other
considerations when Dreyfus deems it appropriate to make changes in the
Fund's assets. 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 rate for
the period from April 1, 1998 (commencement of operations) through October
31, 1998 was 19.72%.
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 Class A for
the period April 1, 1998 (inception date) to October 31, 1998 was (21.19)%
(assuming deduction of the maximum sales load from the hypothetical initial
investment at the time of purchase). Based on NAV per share, the total
return for Class A was (16.40)% for this period. The aggregate total return
for Class B and Class C for the period April 1, 1998 (inception date) to
October 31, 1998 was (20.05)% and (17.55)%, respectively (assuming deduction
of the maximum CDSC to each hypothetical investment). Without giving effect
to the applicable CDSC, aggregate total return for Class B and Class C was
(16.72)% and (16.72)%, respectively. The aggregate total return for Class R
for the period April 1, 1998 (inception date) to October 31, 1998 was
(16.24)%.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price
in the case of Class A) per share with a hypothetical $1,000 payment made at
the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment,
taking the "n"th root of the quotient (where "n" is the number of years in
the period) and subtracting 1 from the result. The average annual total
return figures for a Class calculated in accordance with such formula assume
that, in the case of Class A, the maximum sales load has been deducted from
the hypothetical initial investment at the time of purchase or, in the case
of Class B or Class C, the maximum applicable CDSC has been paid upon
redemption at the end of the period.
Total return is calculated by subtracting the amount of the Fund's NAV
(maximum offering price in the case of Class A) per share at the beginning
of a stated period from the NAV (maximum offering price in the case of Class
A) per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period and any
applicable CDSC), and dividing the result by the NAV (maximum offering price
in the case of Class A) per share at the beginning of the period. Total
return also may be calculated based on the NAV per share at the beginning of
the period instead of the maximum offering price per share at the beginning
of the period for Class A shares or without giving effect to any applicable
CDSC at the end of the period for Class B or Class C shares. In such cases,
the calculation would not reflect the deduction of the sales load with
respect to Class A shares or any applicable CDSC with respect to Class B or
C shares, which, if reflected would reduce the performance quoted.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Russell 2000 Value Index, the Russell 2000 Growth Index, or the Russell 2000
Index; (ii) the Standard & Poor's 500 Composite Stock Price Index, the Dow
Jones Industrial Average, or other appropriate unmanaged domestic or foreign
indices of performance of various types of investments so that investors may
compare the Fund's results with those of indices widely regarded by
investors as representative of the securities markets in general; (iii)
other groups of mutual funds tracked by Lipper Analytical Services, Inc., a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall
performance or other criteria; (iv) the Consumer Price Index (a measure of
inflation) to assess the real rate of return from an investment in the Fund,
or the Fund's performance against inflation to the performance of other
instruments against inflation; and (v) products managed by a universe of
money managers with similar performance objectives. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions
or administrative and management costs and expenses.
From time to time, advertising material for the Fund may include (i)
biographical information relating to its portfolio manager, including honors
and awards received, 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; and (iv) 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 have no
preemptive, subscription or conversion rights and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they
vote separately by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
The Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
The Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 31, 1999, providing audit services including (1) examination of the
annual financial statements, (2) assistance, review and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal period ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. 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 AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Inc. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
____________________________________________________________________________
DREYFUS PREMIER TAX MANAGED GROWTH FUND
CLASS A, CLASS B, CLASS C AND CLASS T SHARES
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 Premier Tax Managed Growth 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 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Fund B-2
Management of the Fund B-10
Management Arrangements B-17
Purchase of Shares B-20
Distribution and Service Plans B-27
Redemption of Shares B-30
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," "Main
Risks" and "Management."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company
is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund.
The Fund is diversified, which means that, with respect to 75% of its total
assets, the Fund will not invest more than 5% of its assets in the
securities of any single issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager. Dreyfus has engaged Fayez Sarofim & Co. ("Sarofim") to serve as the
Fund's sub-investment adviser and to provide day-to-day management of the
Fund's investments, subject to the supervision of Dreyfus. Dreyfus and
Sarofim are referred to collectively as the "Advisers."
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's Prospectus.
American Depository Receipts and New York Shares. The Fund may invest
in U.S. dollar-denominated American Depository Receipts ("ADRs") and New
York Shares. ADRs typically are issued by an American bank or trust company
and evidence ownership of underlying securities issued by foreign companies.
New York Shares are securities of foreign companies that are issued for
trading in the United States. ADRs and New York Shares are traded in the
United States on national securities exchanges or in the over-the-counter
market. Investment in securities of foreign issuers presents certain
additional risks. See "Foreign Securities."
Bank Obligations. The Fund may purchase bankers' acceptances,
certificates of deposit, time deposits, and other short-term obligations
issued by domestic banks, foreign subsidiaries or foreign branches of
domestic banks, domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs"),
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are U.S. dollar-
denominated time deposits in a foreign branch of a U.S. bank or a foreign
bank. Yankee CDs are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States.
ECDs, ETDs and Yankee CDs are subject to somewhat different risks than are
the obligations of domestic banks or issuers in the United States. See
"Foreign Securities."
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the time of purchase at least A-1 by
Standard & Poor's Rating Services, a division of McGraw-Hill Companies, Inc.
("Standard & Poor's"), Prime-1 by Moody's Investors Service, Inc.
("Moody's"), F-1 by Fitch IBCA, Inc. or Duff-1 by Duff & Phelps Credit
Rating Co.
Convertible Securities. The Fund may purchase convertible securities,
which are fixed-income securities such as bonds or preferred stock that may
be converted into or exchanged for a specified number of shares of common
stock of the same or a different issuer within a specified period of time
and at a specified price or formula. Convertible securities are senior to
common stock in a corporation's capital structure, but may be subordinated
to non-convertible debt securities. Before conversion, convertible
securities ordinarily provide a stable stream of income with yields
generally higher than those on common stock, but lower than those on non-
convertible debt securities of similar quality. In general, the market
value of a convertible security is the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., the value of the underlying shares of common stock if the security is
converted). As a fixed-income security, the market value of a convertible
security generally increases when interest rates decline and generally
decreases when interest rates rise. However, the price of a convertible
security also is influenced by the market value of the security's underlying
common stock. Thus, the price of a convertible security generally increases
as the market value of the underlying stock rises, and generally decreases
as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the
common stock of the same issuer.
Corporate Obligations. The Fund may invest in short-term corporate
obligations rated at least Baa by Moody's or BBB by Standard & Poor's, or,
if unrated, of comparable quality as determined by the Advisers. Securities
rated BBB by Standard & Poor's or Baa by Moody's are considered by those
rating agencies to be "investment grade" securities, although Moody's
considers securities rated Baa to have speculative characteristics.
Further, while bonds rated BBB by Standard & Poor's exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and principal
for debt in this category than debt in higher rated categories. The Fund
will dispose in a prudent and orderly fashion of bonds whose ratings drop
below these minimum ratings.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Treasury to lend to such Government
agency or instrumentality, or (d) the credit of the instrumentality.
(Examples of agencies and instrumentalities are: Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Home Loan Banks, General Services Administration,
Maritime Administration, Small Business Administration, Tennessee Valley
Authority, District of Columbia Armory Board, Inter-American Development
Bank, Asian-American Development Bank, Student Loan Marketing Association,
International Bank for Reconstruction and Development and Fannie Mae). No
assurance can be given that the U.S. Government will provide financial
support to the agencies or instrumentalities described in (b), (c) and (d)
in the future, other than as set forth above, since it is not obligated to
do so by law.
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, 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 may invest up to 15% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale and certain privately negotiated, non-
exchange traded options and securities used to cover such options. As to
these securities, the Fund is subject to a risk that should the Fund desire
to sell them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Fund's net assets could be
adversely affected. When purchasing securities that have not been
registered under the Securities Act of 1933, and are not readily marketable,
the Fund will endeavor to obtain the right to registration at the expense of
the issuer. Generally, there will be a lapse of time between the Fund's
decision to sell any such security and the registration of the security
permitting the sale. During any such period, the price of the securities
will be subject to market fluctuations.
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 the Advisers
pursuant to guidelines established by the Board of Directors. The Board or
the Advisers will monitor carefully the Fund's investments in such
securities and consider the availability of reliable price information, the
existence of a substantial market of qualified institutional buyers, trading
activity 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.
Municipal Obligations. The Fund may invest in short-term, investment
grade municipal obligations. Municipal obligations generally include debt
obligations issued to obtain funds for various public purposes as well as
certain industrial development bonds issued by or on behalf of public
authorities. Municipal obligations are classified as general obligation
bonds, revenue bonds and notes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenue derived
from a particular facility or class of facilities or, in some cases, from
the proceeds of a special excise or other specific revenue source, but not
from the general taxing power. Industrial development bonds, in most cases,
are revenue bonds that generally do not carry the pledge of the credit of
the issuing municipality, but generally are guaranteed by the corporate
entity on whose behalf they are issued. Notes are short-term instruments
which are obligations of the issuing municipalities or agencies and are sold
in anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal obligations include municipal lease/purchase agreements
which are similar to installment purchase contracts for property or
equipment issued by municipalities.
Preferred Stock. The Fund may also purchase preferred stock, which is
a class of capital stock that typically pays dividends at a specified rate.
Preferred stock is generally senior to common stock, but subordinate to debt
securities, with respect to the payment of dividends and on liquidation of
the issuer. In general, the market value of preferred stock is its
"investment value," or its value as a fixed-income security. Accordingly,
the market value of preferred stock generally increases when interest rates
decline and decreases when interest rates rise, but, as with debt
securities, is also affected by the issuer's ability to make payments on the
preferred stock.
Warrants. A warrant is an instrument issued by a corporation which
gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time.
The Fund may invest up to 5% of its net assets in warrants, except that this
limitation does not apply to warrants purchased by the Fund that are sold in
units with, or attached to, other securities.
Derivatives. The Fund may invest, to a limited extent, in derivatives
("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Fund may invest in Derivatives for a variety of
reasons, including to hedge certain market risks, to provide a substitute
for purchasing or selling particular securities or to increase potential
income gain. Derivatives may provide a cheaper, quicker or more
specifically focused way for the Fund to invest than "traditional"
securities would. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio
is exposed in much the same way as the Fund can increase or decrease the
level of risk, or change the character of the risk, of its portfolio by
making investments in specific securities.
While Derivatives can be used effectively in furtherance of the Fund's
investment objective, under certain market conditions, they can be volatile
and increase the volatility of the Fund's net asset value ("NAV") per share,
decrease the liquidity of the Fund's portfolio and make more difficult the
accurate pricing of the Fund's portfolio. Derivatives involve various types
and degrees of risk, depending upon the characteristics of the particular
Derivative and the portfolio as a whole. Derivatives may entail investment
exposures that are greater than their cost would suggest, meaning that a
small investment in Derivatives could have a large potential impact on the
Fund's performance. If the Fund invests in Derivatives at inappropriate
times or judges market conditions incorrectly, such investments may lower
the Fund's return or result in a loss. The Fund also could experience losses
if it were unable to liquidate its position because of an illiquid secondary
market. The market for many Derivatives is, or suddenly can become,
illiquid. Changes in liquidity may result in significant, rapid and
unpredictable changes in the prices for Derivatives.
When required by the Securities and Exchange Commission ("SEC"), the
Fund will set aside permissible liquid assets in a segregated account to
cover its obligations relating to its transactions in Derivatives. To
maintain this required cover, the Fund may have to sell portfolio securities
at disadvantageous prices or times since it may not be possible to liquidate
a Derivative position at a reasonable price. Derivatives may be purchased
on established exchanges or through privately negotiated transactions
referred to as over-the-counter Derivatives. Exchange-traded Derivatives
generally are guaranteed by the clearing agency which is the issuer or
counterparty to such Derivatives. This guarantee usually is supported by a
daily payment system (i.e., variation margin requirements) operated by the
clearing agency in order to reduce overall credit risk. As a result, unless
the clearing agency defaults, there is relatively little counterparty credit
risk associated with Derivatives purchased on an exchange. By contrast, no
clearing agency guarantees over-the-counter Derivatives. Therefore, each
party to an over-the-counter Derivative bears the risk that the counterparty
will default. Accordingly, the Advisers will consider the creditworthiness
of counterparties to over-the-counter Derivatives in the same manner as they
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested in
bidding for it.
Options--In General. The Derivatives the Fund may use include options.
The Fund may write (i.e., sell) covered call option contracts with respect
to specific securities to the extent of 20% of the value of its net assets
at the time such option contracts are written. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell,
the underlying security or securities at the exercise price at any time
during the option period, or at a specific date.
A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. The principal reason
for writing covered call options is to realize through the receipt of
premiums a greater return than would be realized on the underlying
securities alone. The Fund receives a premium from writing covered call
options which it retains whether or not the option is exercised. A covered
call option exposes the Fund during the term of the option to possible loss
of opportunity to realize appreciation in the market price of the underlying
security or to possible continued holding of a security which might
otherwise have been sold to protect against depreciation in the market price
of the security.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen events,
at times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of order or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, the Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security
until the option expires or the Fund delivers the underlying security upon
exercise or it otherwise covers its position.
Successful use by the Fund of options will be subject to the Advisers'
ability to predict correctly movements in the prices of individual stocks or
the stock market generally. To the extent the Advisers' predictions are
incorrect the Fund may incur losses.
Other Investment Companies. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the advisory and other expenses that the Fund bears directly in connection
with its own operations.
Investment Techniques
In addition to the principal investment strategies discussed in the
Fund's Prospectus, the Fund also may engage in the investment techniques
described below. The Fund might not use, or may not have the ability to
use, any of these strategies and there can be no assurance that any strategy
that is used will succeed.
Borrowing. The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an
amount up to 33 1/3% of the value of its total assets. The Fund currently
intends to borrow money only for temporary or emergency (not leveraging)
purposes, in an amount up to 15% of the value of its total assets (including
the money borrowed) valued at the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made.
While borrowings exceed 5% of the Fund's total assets, the Fund will not
make any additional investments.
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 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 contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not be considered
to involve the borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and securities of other
investment companies) if, as a result, (a) more than 5% of the Fund's total
assets would be invested in the securities of that issuer, or (b) the Fund
would hold more than 10% of the outstanding voting securities of that
issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
the real estate business or invest or deal in real estate or interests
therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities, except that the Fund may enter into
options, forward contracts, and futures contracts, including those related
to indices, and options on futures contracts or indices.
The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a
single, open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the Fund.
Non-fundamental. The Fund has adopted the following additional
non-fundamental investment restrictions. These non-fundamental restrictions
may be changed without shareholder approval, in compliance with applicable
law and regulatory policy.
1. The Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days, and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include commercial paper issued pursuant to Section 4(2) of the Securities
Act of 1933 and securities which may be resold under Rule 144A under the
Securities Act of 1933, provided that the Board of Directors, or its
delegate, determines that such securities are liquid, based upon the trading
markets for the specific security.
2. The Fund will not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
3. The Fund will not purchase securities on margin, but the Fund may
make margin deposits in connection with transactions in options, forward
contracts, futures contracts, and options on futures contracts.
4. The Fund will not sell securities short, or purchase, sell or
write puts, calls or combinations thereof, except as described in the Fund's
Prospectus and this Statement of Additional Information.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in
the values of assets will not constitute a violation of such restriction,
except as otherwise required by the 1940 Act.
If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains
an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors and Officers
The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements between the
Company, on behalf of the Fund, and those companies that furnish services to
the Fund. These companies are as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of nine Directors. The following
lists the Directors and officers and their positions with the Company and
their present and principal occupations during the past five years. Each
Director who is an "interested person" of the Company (as defined in the
1940 Act) is indicated by an asterisk(*). Each of the Directors also serves
as a Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and the Dreyfus High Yield Strategies Fund.
Directors of the Company
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Company. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.), a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outservicing functions for small and
medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources) a temporary placement agency. 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 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. 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. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 26 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. 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 Investment Services
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 and 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
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
Joseph S. DiMartino* $17,710.00 $619,660
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 and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal year
ended October 31, 1998, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Company
was $17,710.00. For the year ended December 31, 1998, the aggregate
amount of fees received by Mr. Fort for serving as a Board member of all
funds in the Dreyfus/Laurel Funds (including the Company) and Dreyfus High
Yield Strategies Fund (for which payment is made directly by the fund) was
$59,010.00. In addition, Dreyfus reimbursed Mr. Fort a total of $733.11
for expenses attributable to the Company's Board meetings which is not
included in the $5,313.37 amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date
she was elected as a Board member) through October 31, 1998.
**** The 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.
Principal Shareholders. As of February 1, 1999, the following
shareholder(s) owned beneficially or of record 5% or more of Class A of the
Fund: MLPF&S For The Sole Benefit of Its Customers, 4800 Deer Lake Drive
East, Jacksonville, FL 32246-6484, 29.62% and Painewebber for the Benefit of
Harry & Jean Huizenga Limited Partnership, P.O. Box 50102, Henderson, NV
89016, 5.16%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class B of the Fund: MLPF&S for the Sole Benefit
of its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-6484,
35.63%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class C of the Fund: MLPF&S for the Sole Benefit
of its Customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-6484,
45.30%.
As of February 1, 1999, the following shareholder(s) owned beneficially
or of record 5% or more of Class T of the Fund: Dreyfus Trust Company
Custodian, FBO Mary E Lim MD Under 403(B)(7) Plan, 115 E. 87th Street Apt.
28E, New York, NY 10128-1171, 5.48%.
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.
Dreyfus has engaged Sarofim, located at Two Houston Center, Suite 2907,
Houston, Texas 77010, to serve as the Fund's sub-investment adviser.
Sarofim, a registered investment adviser, was formed in 1958. As of
December 31, 1998, Sarofim managed approximately $49 billion in assets for
five other registered investment companies and numerous discretionary
accounts and provided investment advisory services to six registered
investment companies having aggregate assets of approximately $6.1 billion.
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
supervises and monitors the performance of Sarofim in making investment
decisions for the Fund based on the Fund's investment objective, policies
and restrictions. The Management Agreement is subject to review and
approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on February
4, 1999 to continue until April 4, 2000. The Company may terminate the
Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities
on 60 days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon 60 days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman - Institutional and
a director; Lawrence S. Kash, Vice Chairman and a director; Ronald P.
O'Hanley III, Vice Chairman; J. David Officer, Vice Chairman and a director;
William T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice
President, General Counsel and Secretary; 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 Elliott, Martin C. McGuinn, Richard W. Sabo and
Richard F. Syron, directors.
Sub-Investment Advisory Agreement. Sarofim, subject to the supervision
and approval of Dreyfus, provides investment advisory assistance and day-to-
day management of the Fund's investments as well as investment research and
statistical information, pursuant to the Sub-Investment Advisory Agreement
(the "Sub-Advisory Agreement") dated October 23, 1997 between Sarofim and
Dreyfus, subject to the overall authority of the Company's Board in
accordance with Maryland law. The Sub-Advisory Agreement was approved by
the Company's Board, including a majority of the Board members who are not
"interested persons" of any party to the Sub-Advisory Agreement, at a
meeting held on February 4, 1999 and will continue in effect until April 4,
2000. The Sub-Advisory Agreement is subject to review and approval at least
annually by the Board of Directors.
The Sub-Advisory Agreement will continue from year to year provided
that a majority of the Directors who are not interested persons (as defined
in the 1940 Act) of the Company, Dreyfus, or Sarofim and either a majority
of all Directors or a majority (as defined in the 1940 Act) of the
shareholders of the Fund approve its continuance. The Sub-Advisory
Agreement is terminable without penalty (i) by Dreyfus on 60 days' notice,
(ii) by the Company's Board or by vote of the holders of a majority of the
Fund's shares on 60 days' notice, or (iii) by Sarofim on not less than 90
days' notice. The Sub-Advisory Agreement will terminate automatically in
the event of its assignment (as defined in the 1940 Act) or upon the
termination of the Management Agreement for any reason.
The following persons are officers and/or directors of Sarofim: Fayez
S. Sarofim, Chairman of the Board and President: Raye G. White, Executive
Vice President, Secretary, Treasurer and a director; Russell M. Frankel,
Russell B. Hawkins, William K. McGee, Jr., Charles E. Sheedy and Ralph
Thomas, Senior Vice Presidents; and Nancy Daniel and James A. Reynolds, III,
Vice Presidents.
Sarofim provides day-to-day management of the Fund's investments in
accordance with the stated policies of the Fund, subject to the supervision
of Dreyfus and the approval of the Company's Board. Dreyfus and Sarofim
provide the Fund with portfolio managers who are authorized by the Company's
Board to execute purchases and sales of securities. The Fund's principal
portfolio manager is Fayez S. Sarofim, who is assisted by Russell B. Hawkins
and Christopher Sarofim. Dreyfus and Sarofim also maintain research
departments with professional staffs of portfolio managers and securities
analysts who provide research services for the Fund and other funds advised
by Dreyfus and Sarofim.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.10% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee by an
amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering
the expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other
expenses of the Company are allocated among its funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each fund.
Under the Sub-Advisory Agreement, Dreyfus has agreed to pay Sarofim,
out of the fee received by Dreyfus from the Fund, an annual fee of 0.30% of
the value of the Fund's average daily net assets, payable monthly.
For the period from November 4, 1997 (commencement of operations)
through October 31, 1998, the Fund paid Dreyfus $753,307 pursuant to the
Management Agreement. For the same period, Dreyfus paid Sarofim $203,484
pursuant to the terms of the terms of the Sub-Advisory Agreement between
Dreyfus and Sarofim, on behalf of the Fund.
The Distributor. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109,
serves as the Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. Dreyfus may pay the Distributor for
shareholder services from Dreyfus' own assets, including past profits but
not including the management fee paid by the Fund. The Distributor may use
part or all of such payments to pay certain banks, securities brokers or
dealers and other financial institutions ("Agents") for these services. The
Distributor also acts as sub-administrator for the Fund and as distributor
for the other funds in the Dreyfus Family of Funds.
For the period November 14, 1997 (commencement of operations) through
October 31, 1998, the Distributor retained no sales load on the Fund's Class
A shares. For the period November 14, 1997 (commencement of operations)
through October 31, 1998, the Distributor retained $57,161 from the
contingent deferred sales charge ("CDSC") on Class B shares of the Fund.
For the same period, the Distributor retained $4,456 from the CDSC on Class
C shares of the Fund.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most
beneficial to you depends on the amount and the intended length of your
investment. You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee, service fee
and CDSC, if any, on Class B shares or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares or
the accumulated distribution fee, service fee and initial sales charge on
Class T shares, purchased at the same time, and to what extent, if any, such
differential would be offset by the return on Class A shares and Class T
shares, respectively. You may also want to consider whether, during the
anticipated life of your investment in the Fund, the accumulated
distribution fee, service fee, and initial sales charge on Class T shares
would be less than the accumulated distribution fee and higher initial sales
charge on Class A shares purchased at the same time, and to what extent, if
any, such differential could be offset by the return of Class A.
Additionally, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution and service fees on Class B or Class C shares and the
accumulated distribution fee, service fees and initial sales charge on Class
T shares may exceed the accumulated distribution fee and initial sales
charge on Class A shares during the life of the investment. Finally, you
should consider the effect of the CDSC period and any conversion rights of
the Classes in the context of your own investment time frame. For example,
while Class C shares have a shorter CDSC period than Class B shares, Class C
shares do not have a conversion feature and, therefore, are subject to
ongoing distribution and service fees. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares will be most appropriate for investors
who invest $1,000,000 or more in Fund shares, and Class A and Class T shares
will not be appropriate for investors who invest less than $50,000 in Fund
shares.
Shares of each class may be purchased only by clients of Agents, except
that full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, Board members of a fund advised by
Dreyfus, including members of the Company's Board, or the spouse or minor
child of any of the foregoing may purchase Class A shares directly through
the Distributor. Subsequent purchases may be sent directly to the Transfer
Agent or your Agent.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-
sponsored Keogh Plans, IRAs (including regular IRAs, Spousal IRAs for a non
working spouse, Roth IRAs, SEP-IRAs and Rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum for subsequent purchases, except that the no-minimum on
Education IRAs does not apply until after the first year. However, the Fund
is not designed for, and may not be suitable for, investors such as IRAs and
retirement plans, whose income is not subject to current Federal income
taxation. The initial investment must be accompanied by the Fund's Account
Application. The Fund reserves the right to offer Fund shares without
regard to minimum purchase requirements to employees participating in
certain qualified or non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner
and form acceptable to the Fund. The Fund reserves the right to vary
further the initial and subsequent investment minimum requirements at any
time.
Fund shares are sold on a continuous basis. NAV per share is
determined as of the close of trading on the floor of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the NYSE
is open for business. For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value".
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so
that they will be received by the Distributor or its designee before the
close of its business day. For certain institutions that have entered into
agreements with the Distributor, payment for the purchase of Fund shares may
be transmitted, and must be received by the Transfer Agent, within three
business days after the order is placed. If such payment is not received
within three business days after the order is placed, the order may be
canceled and the institution could be held liable for resulting fees and/or
losses.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in the Fund's Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution and Service Plans. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this
regard.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or programs
have a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by
Eligible Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares is the
NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class A shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of Fund shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children, at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for Dreyfus-
sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the
holding period, but did not actually pay on redemption, a deferred sales
charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
that Section).
Class B Shares. The public offering price for Class B shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described in the Fund's Prospectus. The Distributor compensates
certain Agents for selling Class B shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution
fee, in part, are used to defray these expenses.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and
distributions.
Class C Shares. The public offering price for Class C shares is the
NAV per share of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How
to Redeem Shares."
Class T Shares. The public offering price for Class T shares is the
NAV per share of that class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
Less than $50,000 4.50 4.00
$50,000 to less than $100,000 4.00 3.50
$100,000 to less than $250,000 3.00 2.50
$250,000 to less than $500,000 2.00 1.75
$500,000 to less than $1,000,000 1.50 1.25
$1,000,000 or more -0- -0-
There is no initial sales charge on purchases of $1,000,000 or more of
Class T shares. However, if you purchase Class T shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be assessed at the time of redemption. The Distributor may pay Agents
an amount up to 1% of the NAV of Class T shares purchased by their clients
that are subject to a CDSC. The terms contained below under "Redemption of
Shares - Contingent Deferred Sales Charge - Class B shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares - Waiver of
CDSC" are applicable to the Class T shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class T shares.
Because the expenses associated with Class A shares will be lower than those
associated with Class T shares, purchasers investing $1,000,000 or more in
the Fund will generally find it beneficial to purchase Class A shares rather
than Class T shares.
The dealer reallowance provided with respect to Class A and Class T
shares may be changed from time to time but will remain the same for all
dealers. The Distributor, at its own expense, may provide additional
promotional incentives to dealers that sell shares of funds advised by
Dreyfus which are sold with a sales load, such as Class A and Class T
shares. In some instances, these incentives may be offered only to certain
dealers who have sold or may sell significant amounts of such shares.
Dealers receive a larger percentage of the sales load from the Distributor
than they receive for selling most other funds.
Sales Loads -- Class A and Class T. The scale of sales loads applies
to purchases of Class A and Class T shares made by any "purchaser," which
term includes an individual and/or spouse purchasing securities for his, her
or their own account or for the account of any minor children, or a trustee
or other fiduciary purchasing securities for a single trust estate or a
single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under Section
401 of the Code) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457
of the Code); or an organized group which has been in existence for more
than six months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the NAV of a Class A share at the close of business on October 31, 1998:
NAV per share $14.77
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ .90
Per Share Offering Price to Public $15.67
Set forth below is an example of the method of computing the offering
price of the Fund's Class T shares. The example assumes a purchase of Class
T shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the NAV of a Class T share at the close of business on October 31, 1998:
NAV per share $14.74
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .69
Per Share Offering Price to Public $15.43
Right of Accumulation-Class A and Class T Shares. Reduced sales loads
apply to any purchase of Class A and Class T shares, shares of other funds
in the Dreyfus Premier Family of Funds, shares of certain other funds
advised by Dreyfus which are sold with a sales load and shares acquired by a
previous exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined above, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you previously purchased and still hold Class A and Class T shares
of the Fund, or shares of any other Eligible Fund or combination thereof,
with an aggregate current market value of $40,000 and subsequently purchase
Class A or Class T shares of the Fund, respectively, or shares of an
Eligible Fund having a current value of $20,000, the sales load applicable
to the subsequent purchase would be reduced to 4.5% of the offering price in
the case of Class A shares, or 4.00% of the offering price in the case of
Class T shares. All present holdings of Eligible Funds may be combined to
determine the current offering price of the aggregate investment in
ascertaining the sales load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
TeleTransfer Privilege. You may purchase Fund shares by telephone
through the TeleTransfer Privilege if you have checked the appropriate box
and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained in a
domestic financial institution that is an Automated Clearing House ("ACH")
member may be so designated. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 p.m., New York time, on any
business day that the Transfer Agent and the NYSE are open for business will
be credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New
York time, on any business day the Transfer Agent and the NYSE are open for
business, or orders made on Saturday, Sunday or any Fund holiday (e.g., when
the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order.
To qualify to use the TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to,
the same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Shares -
TeleTransfer Privilege." The Fund may modify or terminate this Privilege at
any time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the
shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual fees
for distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule.
Distribution Plan--Class A Shares. The Company has adopted a
Distribution Plan pursuant to the Rule with respect to the Class A shares of
the Fund ("Class A Plan"), whereby Class A shares of the Fund may spend
annually up to 0.25% of the average of its net assets to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A Plan allows the Distributor to make payments from the
Rule 12b-1 fees it collects from the Fund to compensate Agents that have
entered into Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Class A shares of the Fund.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without approval of the Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Company or
the Distributor and who do not have any direct or indirect financial
interest in the operation of the Class A Plan, cast in person at a meeting
called for the purpose of considering such amendments. The Class A Plan is
subject to annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct or indirect
financial interest in the operation of the Class A Plan, by vote cast in
person at a meeting called for the purpose of voting on the Class A Plan.
The Class A Plan was so approved by the Directors at a meeting held on
February 4, 1999. The Class A Plan is terminable, as to the Fund's Class A
shares, at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of such class of the Fund.
Service and Distribution Plans -- Class B, Class C and Class T Shares.
In addition to the above described current Class A Plan for Class A shares,
the Board of Directors has adopted a Service Plan (the "Service Plan") under
the Rule for Class B, Class C and Class T shares, pursuant to which the Fund
pays the Distributor and Dreyfus Service Corporation a fee at the annual
rate of 0.25% of the value of the average daily net assets of Class B, Class
C and Class T shares for the provision of certain services to the holders of
Class B, Class C and Class T shares, respectively. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and providing services related to the maintenance of such
shareholder accounts. With regard to such services, each Agent is required
to disclose to its clients any compensation payable to it by the Fund and
any other compensation payable by its clients in connection with the
investment of their assets in Class B, Class C and Class T shares. The
Distributor may pay one or more Agents in respect of services for these
Classes of shares. The Distributor determines the amounts, if any, to be
paid to Agents under the Service Plan and the basis on which such payments
are made. The Company's Board of Directors has also adopted a Distribution
Plan pursuant to the Rule with respect to Class B and Class C shares (the
"Class B and Class C Plan") and a separate Distribution Plan pursuant to the
Rule with respect to Class T shares (the "Class T Plan"). Pursuant to the
Class B and Class C Plan, the Fund pays the Distributor for distributing the
Fund's Class B and Class C shares at an aggregate annual rate of 0.75% of
the value of the average daily net assets of Class B and Class C shares,
respectively. Pursuant to the Class T Plan, the Fund pays the Distributor
for distributing the Fund's Class T shares at an annual rate of 0.25% of the
value of the average daily net assets of Class T shares. The Distributor
may pay one or more Agents in respect of advertising, marketing and other
distribution services for Class T shares, and determines the amounts, if
any, to be paid to Agents and the basis on which such payments are made.
The Company's Board of Directors believes that there is a reasonable
likelihood that the Service Plan, the Class B and Class C Plan and the Class
T Plan (each a "Plan" and collectively, the "Plans") will benefit the Fund
and the holders of Class B, Class C and Class T shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B, Class C
or Class T shares may bear pursuant to such Plans without the approval of
the holders of the affected Class and that other material amendments must be
approved by the Board of Directors and by the Directors who are not
interested persons of the Company and have no direct or indirect financial
interest in the operation of the applicable Plan or in any agreements
entered into in connection with such Plan, by vote cast in person at a
meeting called for the purpose of considering such amendments. Each Plan is
subject to annual approval by such vote of the Directors cast in person at a
meeting called for the purpose of voting on the Plan. The Service Plan with
respect to Class B and Class C shares and the Class B and Class C Plan were
so approved by the Directors at a meeting held on February 4, 1999. The
Service Plan with respect to Class T shares and the Class T Plan were so
approved by the Directors of a meeting held on February 4, 1999. Each Plan
may be terminated at any time by vote of a majority of the Directors who are
not interested persons and have no direct or indirect financial interest in
the operation of the Plan or in any agreements entered into in connection
with the Plan or by vote of the holders of a majority of Class B, Class C or
Class T shares, as applicable.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class
of shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan described above are payable
without regard to actual expenses incurred. The Fund and the Distributor
may suspend or reduce payments under any of the plans at any time, and
payments are subject to the continuation of the Fund's plans and the
Agreements described above. From time to time, the Agents, the Distributor
and the Fund may voluntarily agree to reduce the maximum fees payable under
the plans.
For the period from November 4, 1997 (commencement of operations)
through October 31, 1998, the Fund paid the Distributor and Dreyfus Service
Corporation $29,655 and $12,072, respectively, pursuant to the Class A Plan.
For the period from November 4, 1997 (commencement of operations) through
October 31, 1998, the Fund paid the Distributor $284,416 and $78,165,
pursuant to the Class B and Class C Plan with respect to Class B and Class C
shares, respectively, and paid the Distributor and Dreyfus Service
Corporation $12,092 and $82,713, respectively, pursuant to the Service Plan
with respect to Class B shares and $3,092 and $22,963 respectively, pursuant
to the Service Plan with respect to Class C shares. For the period from
November 4, 1997 (commencement of operations) through October 31, 1998, the
Fund paid the Distributor $8,619 pursuant to the Class T Plan and paid the
Distributor and Dreyfus Service Corporation $311 and $8,308, respectively,
pursuant to the Service Plan with respect to Class T shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
General. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the TeleTransfer Privilege. If you are a client of 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 TeleTransfer Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TeleTransfer
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus Touchr automated
Telephone System) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers
may make redemption requests to their Selected Dealer. If the Selected
Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received
by dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee prior to the close of
its business day (normally 5:15 p.m., New York time) are effected at the
price determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the Fund shares will be redeemed at the next determined
NAV. It is the responsibility of the Selected Dealer to transmit orders on
a timely basis. The Selected Dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A, Class B or Class T shares you have redeemed, within
45 days of redemption, at the then-prevailing NAV without a sales load, or
reinstate your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B, or Class A shares or Class T shares
if such shares were subject to a CDSC, your account will be credited with an
amount equal to the CDSC previously paid upon redemption of the shares
reinvested. The Reinvestment Privilege may be exercised only once.
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two days
after receipt of the redemption request or, at your request, paid by check
(maximum $150,000 per day) and mailed to your address. Investors should be
aware that if they have selected the TeleTransfer Privilege, any request for
a TeleTransfer transaction will be effected through the ACH system unless
more prompt transmittal specifically is requested. Holders of jointly
registered Fund or bank accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account only up to $250,000 within any
30-day period. See "Purchase of Shares-TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Company's Board
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its NAV is not reasonably practicable, or (c) for such
other periods as the SEC by order may permit to protect the Fund's
shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years; then of amounts representing the cost
of shares purchased six years prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV has appreciated
to $12 per share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1%
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B Shares"
above.
Waiver of CDSC. The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by
employees participating in Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70 1/2 in the
case of an IRA or Keogh plan or 403(b)(7), and (e) redemptions pursuant to
the Automatic Withdrawal Plan, as described below. If the Company's Board
determines to discontinue the waiver of the CDSC, the disclosure herein will
be revised appropriately. Any Fund shares subject to a CDSC which were
purchased prior to the termination of such waiver will have the CDSC waived
as provided in the Prospectus or this Statement of Additional Information at
the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus, except that Class T shares of the Fund may be
exchanged for Class A shares (or the equivalent) of such other funds.
Shares of the same Class of such other funds purchased by exchange (or of
Class A of such funds in the case of Class T shares of the Fund) will be
purchased on the basis of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject
to confirmation of an investor's holdings through a check of appropriate
records.
You also may exchange your Fund shares that are subject to a CDSC for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can
be made into certain other funds managed or administered by Dreyfus. No
CDSC is charged when an investor exchanges into an Exchange Account;
however, the applicable CDSC will be imposed when shares are redeemed from
an Exchange Account or other applicable Fund account. Upon redemption, the
applicable CDSC will be calculated without regard to the time such shares
were held in an Exchange Account. See "Redemption of Shares." Redemption
proceeds for Exchange Account shares are paid by Federal wire or check only.
Exchange Account shares also are eligible for the Auto-Exchange Privilege,
Dividend Sweep and the Automatic Withdrawal Plan.
To request an exchange, an investor or an investor's Agent acting on
the investor's behalf must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, also by
calling 1-800-554-4611. By using the Telephone Exchange Privilege, the
investor authorizes the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touchr Automated Telephone System) from any
person representing himself or herself to be the investor or a
representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
the same Class (or Class A in the case of Class T) of other funds in the
Dreyfus Premier Family of Funds or certain other funds 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. Shares
will be exchanged on the basis of relative NAV as described above under
"Fund Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRAs and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier Tax
Managed Growth Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
The Fund may charge a service fee for the use of this Privilege. No such
fee currently is contemplated. For more information concerning this
Privilege and the funds in the Dreyfus Premier Family of Funds or the
Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free 1-
800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. The exchange of
shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange and, therefore, an
exchanging shareholder (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Dreyfus-Automatic Asset Builderr. Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $50 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling 1-800-554-
4611. You may cancel your participation in this Privilege or change the
amount of purchase at any time by mailing written notification to Dreyfus
Premier Tax Managed Growth Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587 and the notification will be effective three business days
following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. An Automatic Withdrawal Plan may be established by filing
an Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling 1-
800-554-4611. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts
withdrawn under the plan do not exceed on an annual basis 12% of the account
value at the time the shareholder elects to participate in the Automatic
Withdrawal Plan. Withdrawals with respect to Class B shares under the
Automatic Withdrawal Plan that exceed on an annual basis 12% of the value of
the shareholder's account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Class C shares, and Class A or Class T
shares to which a CDSC applies, that are withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A and Class T shares where the sales load is imposed
concurrently with withdrawals of Class A shares and Class T shares generally
are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any,
from the Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder, except that dividends and other distributions, if
any, on Class T shares of the Fund may be invested in Class A shares (or the
equivalent) of such other funds. Shares of other funds purchased pursuant
to this Privilege will be purchased on the basis of relative NAV per share
as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Tax
Managed Growth Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
To select a new fund after cancellation, you must submit a new Dividend
Options Form. Enrollment in or cancellation of these privileges is
effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for Dreyfus Dividend
Sweep. The Fund may modify or terminate these privileges at any time or
charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for
Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect. You should consider whether Direct
Deposit of your entire payment into a fund with fluctuating NAV, such as
the Fund, may be appropriate for you. To enroll in Dreyfus Government
Direct Deposit, you must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that you desire to include in
this Privilege. The appropriate form may be obtained from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
Letter of Intent-Class A and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of
Eligible Fund shares purchased in a 13-month period pursuant to the terms
and conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter
of Intent) in any Eligible Fund that may be used toward "Right of
Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales load will be
applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount
specified, you will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load applicable to the
aggregate purchases actually made. If such remittance is not received
within 20 days, the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate number of Class A
or Class T shares, as applicable, held in escrow to realize the difference.
Signing a Letter of Intent does not bind you to purchase, or the Fund to
sell, the full amount indicated at the sales load in effect at the time of
signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A or Class T shares, you must
indicate your intention to do so under a Letter of Intent. Purchases
pursuant to a Letter of Intent will be made at the then-current NAV plus the
applicable sales load in effect at the time such Letter of Intent was
executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs
and Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans.
Plan support services also are available. You can obtain details on the
various plans by calling the following numbers toll free: for Keogh Plans,
please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts," please
call 1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is engaged in excessive
trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole
or part any purchase or exchange request, with respect to such investor's
account. Such investors also may be barred from purchasing other funds in
the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes
exchanges that appear to coincide with an active market-timing strategy may
be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may
refuse or restrict purchase or exchange requests by any person or group if,
in the judgment of the Fund's management, the Fund would be unable to invest
the money effectively in accordance with its investment objective and
policies or could otherwise be adversely affected or if the Fund receives or
anticipates receiving simultaneous orders that may significantly affect the
Fund (e.g., amounts equal to 1% or more of the Fund's total assets). If an
exchange request is refused, the Fund will take no other action with respect
to the shares until it receives further instructions from the investor. The
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount
of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy
on excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined NAV
but the purchase order would be effective only at the NAV next determined
after the fund being purchased receives the proceeds of the redemption,
which may result in the purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at
the last sale price on the securities exchange or national securities market
on which such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available. Where market
quotations are not readily available, the Fund's investments are valued
based on fair value as determined in good faith by the Company's Board.
Debt securities may be valued by an independent pricing service approved by
the Company's Board and are valued at fair value as determined by the
pricing service. Any assets or liabilities initially expressed in terms of
foreign currency will be translated into U.S. dollars at the midpoint of the
New York interbank market spot exchange rate as quoted on the day of such
translation or, if no such rate is quoted on such date, such other quoted
market exchange rate as may be determined to be appropriate by Dreyfus. If
the Fund has to obtain prices as of the close of trading on various
exchanges throughout the world, the calculation of NAV may not take place
contemporaneously with the determination of prices of certain of the Fund's
securities. Short-term investments are carried at amortized cost, which
approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV
of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board of Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors if it
believes that the discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and
Taxes."
General. The Fund annually declares and pays dividends from its net
investment income, if any, and distributions of its net realized capital
gains and gains from foreign currency transactions, if any, but it may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. 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. Dividends and other
distributions paid by each Class are calculated at the same time and in the
same manner and will be in the same amount, except that the expenses
attributable solely to a particular Class are borne exclusively by that
Class. Class B and Class C shares will receive lower per share dividends
than Class T shares, which will in turn receive lower per share dividends
than Class A shares, because of the higher expenses borne by the respective
Classes.
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) (the "Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
(the "Income Requirement"), and (3) must meet certain asset diversification
and other requirements. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency. If the Fund failed to qualify for treatment as a RIC
for any taxable year, (1) it would be taxed at corporate rates on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (2) the shareholders would
treat all those distributions, including distributions of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
as dividends (that is, ordinary income) to the extent of the Fund's earnings
and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment.
The Fund will be subject to a non-deductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute substantially all of its taxable
investment income and capital gains.
Distribution. 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.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the foreign investor claims the benefit of a lower rate specified in
a tax treaty. Distributions from net capital gain paid by the Fund to a non-
resident foreign investor, as well as the proceeds of any redemptions by
such an investor, regardless of the extent to which gain or loss may be
realized, generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account that will include information as to distributions paid during
the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A and Class T shares if a shareholder redeems those shares
or exchanges them for shares of another fund advised or administered by
Dreyfus, within 90 days of purchase, and (1) in the case of a redemption,
the shareholder acquires other fund Class A or Class T shares through
exercise of the Reinvestment Privilege or (2) in the case of an exchange,
the other fund reduces or eliminates its otherwise applicable sales load.
In these cases, the amount of the sales load charged on the purchase of the
original Class A or Class T shares, up to the amount of the reduction of the
sales load pursuant to the Reinvestment Privilege or on the exchange, as the
case may be, is not included in the tax basis of those shares for purposes
of computing gain or loss and instead is added to the tax basis of the
acquired shares.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the plans. The Fund will not report to the
Internal Revenue Service (the "IRS") distributions paid to such plans.
Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be
taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to 10%
of the taxable portion of the distribution. The administrator, trustee or
custodian of a qualified retirement plan will be responsible for reporting
distributions from the 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.
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 that December
of any year and payable to shareholders of record on a date in that month
are deemed to have been paid by the Fund and received by the shareholders on
December 31 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 that would reduce the
yield and/or total return on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate foreign
taxes, however, and many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors.
Passive Foreign Investment Companies. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a
foreign corporation in which, on any day during its taxable year, more than
50% of the total voting power of all voting stock therein or the total value
of all stock therein is owned, directly, indirectly, or constructively, by "
U.S. shareholders," defined as U.S. persons that individually own, directly,
indirectly, or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder -- that, in general, meets either of
the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, the Fund will
be subject to federal income tax on a portion of any "excess distribution
received on the stock of a PFIC or of any gain on disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a dividend to its shareholders. The balance
of the PFIC income will be included in the Fund's investment company taxable
income and, accordingly, will not be taxable to it to the extent that it
distributes income to its shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund would be required to include in income each
year its pro rata share of the QEF's annual ordinary earnings and net
capital gain -- which likely would have to be distributed by the Fund to
satisfy the Distribution Requirement and avoid imposition of the Excise Tax
- -- even if those earnings and gain were not distributed to the Fund by the
QEF. In most instances it will be very difficult, if not impossible, to
make this election because of certain requirements thereof.
The Fund may elect to "mark to market" its stock in any PFIC. "Marking-
to-market," in this context, means including in ordinary income each taxable
year the excess, if any, of the fair market value of a PFIC's stock over the
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not
capital, loss) the excess, if any, of its adjusted basis in PFIC stock over
the fair market value thereof as of the taxable year-end, but only to the
extent of any net mark-to-market gains with respect to that stock included
by the Fund for prior taxable years. The Fund's adjusted basis in each
PFIC's stock with respect to which it makes this election would be adjusted
to reflect the amounts of income included and deductions taken under the
election (and under regulations proposed in 1992 that provided a similar
election with respect to the stock of certain PFICs).
Options Transactions. Gains from options derived by the Fund with
respect to its business of investing in securities will qualify as
permissible income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, all or a portion of any
gain realized from engaging in "conversion transactions" that would
otherwise be treated as capital gain may be treated as ordinary income.
"Conversion transactions" are defined to include certain option and straddle
transactions.
Under Section 1256 of the Code, any gain or loss realized by the Fund
on the exercise or lapse of, or closing transactions respecting, certain
options ("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 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 (co-called
"mixed straddles")), the amount, character, and timing or 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 of the Fund of straddle transactions are not entirely
clear.
If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward
contract, or short sale) with respect to any stock, debt instrument (other
than "straight debt"), or partnership interest the fair market value of
which exceeds its adjusted basis -- and enters into a "constructive sale" of
the same or substantially similar property, the Fund will be treated as
having made an actual sale thereof, with the result that gain will be
recognized at that time. A constructive sale generally consists of a short
sale, an offsetting notional principal contract, or futures or forward
contract entered into by the fund or a related person with respect to the
same or substantially similar property. In addition, if the appreciated
financial position is itself a short sale or such a contract, acquisition of
the underlying property or substantially similar property will be deemed a
constructive sale. The foregoing will not apply, however, to any
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end
of that year and the Fund holds the appreciated financial position unhedged
for 60 days after that closing (i.e., at no time during that 60-day period
is the Fund's risk of loss regarding that position reduced by reason of
certain specified transactions with respect to substantially similar or
related property, such as having an option to sell, being contractually
obligated to sell, making a short sale, or granting an option to buy
substantially identical stock or securities).
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. Dividends and other
distributions may be subject to state and local taxes. Shareholders are
advised to consult their tax advisers concerning the application of state
and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder") depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed below.
Special U.S. federal income tax rules that differ from those described below
may apply to certain foreign persons who invest in the Fund, such as a
foreign shareholder entitled to claim the benefits of an applicable tax
treaty. Foreign shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in
the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose amount 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 U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
PORTFOLIO TRANSACTIONS
Dreyfus assumes general supervision over placing orders on behalf of
the Fund for the purchase or sale of investment securities. Debt securities
purchased and sold by the Fund are generally traded on a net basis (i.e.,
without commission) through dealers acting for their own account and not as
brokers, or otherwise involve transactions directly with the issuer of the
instrument. This means that a dealer (the securities firm or bank dealing
with the Fund) makes a market for securities by offering to buy at one price
and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through
brokers acting as agent. The Fund will pay a spread or commissions in
connection with such transactions. Dreyfus uses its best efforts to obtain
execution of portfolio transactions at prices which are advantageous to the
Fund and at spreads and commission rates, if any, which are reasonable in
relation to the benefits received. Dreyfus and Sarofim also place
transactions for other accounts that they provide with investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 under the 1940 Act.
Dreyfus 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 or Sarofim exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus or Sarofim in rendering investment management services to the Fund
and/or their other clients; and, conversely, such information provided by
brokers or dealers who have executed transaction orders on behalf of other
clients of Dreyfus or Sarofim may be useful to these organizations in
carrying out their obligations to the Fund. The receipt of such research
services does not reduce these organizations' normal independent research
activities; however, it enables these organizations to avoid the additional
expenses which might otherwise be incurred if these organizations were to
attempt to develop comparable information through their own staffs.
Although the Advisers manage other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus or Sarofim.
Simultaneous transactions may occur when several accounts are managed by the
same investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager, and Sarofim as sub-investment adviser, to the Fund outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
For the period from November 4, 1997 (commencement of operations)
through October 31, 1998, the Fund paid brokerage commissions amounting to
$87,512.
The aggregate amount of transactions for the period November 4, 1997
(commencement of operations) through October 31, 1998 in securities effected
on an agency basis through a broker dealer in consideration of, among other
things, research services provided was $57,503,610 and the commissions and
concessions related to such transactions were $49,657.
Portfolio Turnover. Because of the Fund's tax managed investment
approach, which is designed to minimize realized capital gains and taxable
investment income, it is anticipated that the annual portfolio turnover rate
for the Fund will generally not exceed 15%, and will exceed 25% only in the
event of extraordinary market conditions. High rates 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. In addition, a high 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.
Nevertheless, securities transactions for the Fund will be based only upon
investment considerations and will not be limited by other considerations
when the Advisers deem it appropriate to make changes in the Fund's
portfolio securities. 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
rate for the period from November 4, 1997 (commencement of operations)
through October 31, 1998 was .05%.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
The Fund's aggregate total return for the period from November 4, 1997
(commencement of operations) through October 31, 1998 for Class A and Class
T shares was 11.48% and 12.65%, respectively. Based on NAV per share, the
aggregate total return for Class A and Class T shares was 18.26% and 17.97%,
respectively for the same period.. The Fund's aggregate total return for
the period from November 4, 1997 (commencement of operations) through
October 31, 1998 for Class B and Class C shares was 13.36% and 16.36%,
respectively. Without giving effect to the applicable CDSC, the aggregate
total return for Class B and Class C shares was 17.36% and 17.36%,
respectively for the same period.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Standard & Poor's 500 Composite Stock Price Index, (ii) the Russell 1000
Index, the Dow Jones Industrial Average, or other appropriate unmanaged
domestic or foreign indices of performance of various types of investments
so that investors may compare the Fund's results with those of indices
widely regarded by investors as representative of the securities markets in
general; (iii) other groups of mutual funds tracked by Lipper Analytical
Services, Inc., a widely used independent research firm which ranks mutual
funds by overall performance, investment objectives and assets, or tracked
by other services, companies, publications, or persons who rank mutual funds
on overall performance or other criteria; (iv) the Consumer Price Index (a
measure of inflation) to assess the real rate of return from an investment
in the Fund or the Fund's performance against inflation to the performance
of other instruments against inflation; and (v) products managed by a
universe of money managers with similar 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 materials for the Fund may include (i)
biographical information relating to its portfolio manager, including honors
or awards received, 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) Lipper or Morningstar ratings and
related analysis supporting the ratings; (v) discussions of the risk and
reward potential of the securities markets and its comparative performance
in the overall securities markets; (vi) information concerning the after-tax
performance of the Fund, including comparisons to the after-tax and pre-tax
performance of other investment vehicles and indexes and comparisons of
after-tax and pre-tax performance of the Fund to such other investments; and
(vii) a discussion of portfolio management strategy and/or portfolio
composition.
From time to time, advertising materials for the Fund may refer to the
number of stocks analyzed by Dreyfus or Sarofim.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
The Fund is one of nineteen portfolios of the Company. Fund shares have no
preemptive, subscription or conversion rights and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company
to hold a special meeting of shareholders for purposes of removing a Board
member from office. Shareholders may remove a Board member by the
affirmative vote of a majority of the Company's outstanding voting shares.
In addition, the Board will call a meeting of shareholders for the purpose
of electing Board members if, at any time, less than a majority of the Board
members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they
vote separately by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
The Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
The Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 31, 1999, providing audit services including (1) examination of the
annual financial statements, (2) assistance, review and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report are included in the Annual Report to
shareholders. 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 AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `BB' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch IBCA, Inc.
Bond Ratings
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments. A `CC'
rating indicates that default of some kind appears probable. `C'
ratings signal imminent default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-
term ratings other than `F-1'.
Duff & Phelps Credit Ratings Co. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
The following post-effective amendment to the Registrant's Registration
Statement on Form N-1A relates only to 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
THE DREYFUS/LAUREL FUNDS, INC.
(formerly, The Laurel Funds, Inc.)
PART C
OTHER INFORMATION
Item 23. Exhibits
A(1) Articles of Incorporation dated July 31, 1987. Incorporated by reference
to Post- Effective Amendment No. 41 to the Registrant's Registration
Statement on Form N-1A ("Post-Effective Amendment No. 41").
A(2) Articles Supplementary dated October 15, 1993 increasing authorized
capital stock. Incorporated by reference to Post-Effective Amendment No.
39 to the Registrant's Registration Statement on Form N-1A ("Post
Effective Amendment No. 39").
A(3) Articles of Amendment dated March 31, 1994. Incorporated by
reference to Post-Effective Amendment No. 41.
A(4) Articles Supplementary dated March 31, 1994 reclassifying shares.
Incorporated by reference to Post-Effective Amendment No. 41.
A(5) Articles Supplementary dated May 24, 1994 designating and classifying
shares. Incorporated by reference to Post-Effective Amendment No. 39.
A(6) Articles of Amendment dated October 17, 1994. Incorporated by reference
to Post-Effective Amendment No. 31 to the Registrant's Registration
Statement on Form N-1A ("Post-Effective Amendment No. 31").
A(7) Articles Supplementary dated December 19, 1994 designating classes.
Incorporated by reference to Post-Effective Amendment No. 32 to the
Registrant's Registration Statement on Form N-1A ("Post-Effective
Amendment No. 32").
A(8) Articles of Amendment dated June 9, 1995. Incorporated by reference to
Post-Effective Amendment No. 39.
A(9) Articles of Amendment dated August 30, 1995. Incorporated by reference to
Post-Effective Amendment No. 39.
A(10) Articles Supplementary dated August 31, 1995 reclassifying shares.
Incorporated by reference to Post-Effective Amendment No. 39.
A(11) Articles of Amendment dated October 31, 1995 designating and classifying
shares. Incorporated by reference to Post-Effective Amendment No. 41.
A(12) Articles of Amendment dated November 22, 1995 designating and
reclassifying shares. Incorporated by reference to Post-Effective
Amendment No. 41.
A(13) Articles of Amendment dated July 15, 1996. Incorporated by reference to
Post-Effective Amendment No. 53 to the Registrant's Registration Statement
on Form N-1A ("Post-Effective Amendment No. 53").
A(14) Articles of Amendment dated February 27, 1997. Incorporated by reference
to Post-Effective Amendment No. 53.
A(15) Articles of Amendment dated August 13, 1997. Incorporated by reference to
Post-Effective Amendment No. 53.
A(16) Articles of Amendment dated October 30, 1997. Incorporated by reference
to Post-Effective Amendment No. 56 to the Registrant's Registration
Statement on Form N-1A.
A(17) Articles of Amendment dated March 25, 1998. Incorporated by reference to
Post-Effective Amendment No. 62 to the Registrant's Registration Statement
on Form N-1A.
A(18) Articles of Amendment dated July 30, 1998. Incorporated by reference to
Post-Effective Amendement No. 67.
B Bylaws. Incorporated by reference to Pre-Effective Amendment No. 53
D(1) Form of Investment Management Agreement between Mellon Bank, N.A. and the
Registrant. Incorporated by reference to Post-Effective Amendment No. 41.
D(2) Assignment and Assumption Agreement among Mellon Bank, N.A., The Dreyfus
Corporation and the Registrant (relating to Investment Management
Agreement). Incorporated by reference to Post-Effective Amendment No. 31.
D(3) Amended Exhibit A to Investment Management Agreement between Mellon Bank,
N.A. and the Registrant. Incorporated by reference to Post-Effective
Amendement No. 67.
D(4) Sub-Investment Advisory Agreement between The Dreyfus Corporation and Fayez
Sarofim & Co. with respect to Dreyfus Tax-Smart Growth Fund. Incorporated
by reference to Post-Effective Amendment No. 67.
E(1) Distribution Agreement between Premier Mutual Fund Services,
Inc. and the Registrant. Incorporated by reference to Post-Effective
Amendment No. 31.
E(2) Amended Exhibit A to Distribution Agreement between and Premier Mutual Fund
Services, Inc. and the Registrant. Incorporated by reference to Post-
Effective Amendment No. 67.
F Not Applicable.
G(1) Form of Custody Agreement between the Registrant and Mellon Bank, N.A.
Incorporated by reference to Post-Effective Amendment No. 41.
G(2) Sub-Custodian Agreement between Mellon Bank, N.A. and Boston Safe Deposit
and Trust Company. Incorporated by reference to Post-Effective Amendment
No. 67.
H Not Applicable.
I(1) Opinion of counsel. Incorporated by reference to the Registration
Statement and to Post-Effective Amendment No. 32 and Post-Effective
Amendment No. 56 and Post-Effective Amendment No. 67.
I(3) Consent of Counsel. Filed herewith.
J Consent of KPMG. 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 Assistant
Secretary
Patrick W. McKeont Vice President None
Joseph A. Vignonet 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 sixteen 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 BASIC S&P 500 Stock Index Fund
Dreyfus Bond Market Index Fund
Dreyfus Disciplined Intermediate Bond 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 Premier Balanced Fund
Dreyfus Premier Large Company Stock Fund
Dreyfus Premier Limited Term Income Fund
Dreyfus Premier Midcap Stock Fund
Dreyfus Premier Small Cap Value Fund
Dreyfus Premier Small Company Stock Fund
Dreyfus Premier Tax Managed Growth Fund
Dreyfus U.S. Treasury Reserves
KPMG LLP
New York, New York
February 26, 1999
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
