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. 76 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 76 [ X ]
(Check appropriate box or boxes.)
THE DREYFUS/LAUREL FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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X on March 1, 2000 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(i)
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on (date) pursuant to paragraph (a)(i)
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75 days after filing pursuant to paragraph (a)(ii)
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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.
----
<PAGE>
The following post-effective amendment to the Registrant's Registration
Statement on Form N-1A relates to the series listed below and does not affect
the Registration Statement of Dreyfus Tax-Smart Growth Fund.
DREYFUS BOND MARKET INDEX FUND
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
DREYFUS MONEY MARKET RESERVES
DREYFUS MUNICIPAL RESERVES
DREYFUS BASIC S&P 500 STOCK INDEX FUND
DREYFUS U.S. TREASURY RESERVES
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
DREYFUS PREMIER LIMITED TERM INCOME FUND
DREYFUS DISCIPLINED STOCK FUND
DREYFUS PREMIER TAX MANAGED GROWTH FUND
DREYFUS PREMIER BALANCED FUND
DREYFUS PREMIER LARGE COMPANY STOCK FUND
DREYFUS PREMIER MIDCAP STOCK FUND
DREYFUS PREMIER SMALL COMPANY STOCK FUND
DREYFUS PREMIER SMALL CAP VALUE FUND
DREYFUS DISCIPLINED SMALLCAP STOCK FUND
Dreyfus
BASIC S&P 500
Stock Index Fund
Investing in equity securities to match the total return of the Standard &
Poor's((reg.tm)) 500 Composite Stock Price Index
PROSPECTUS March 1, 2000
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
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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
- -------------------------------------------------------------------------------
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 ("S&P 500((reg.tm))"). This objective can be changed without
shareholder approval. To pursue this goal, the fund normally invests at least
95% of its 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((reg.tm))
500" and "S&P 500((reg.tm))" 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 tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table 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. Of course, past performance is no
guarantee of future results.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
0.83 36.82 22.76 33.02 28.38 20.62
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +21.32%
WORST QUARTER: Q3 '98 -9.99%
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Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year 5 Years (9/30/93)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
FUND 20.62% 28.18% 22.63%
S&P 500 21.03% 28.54% 22.95%
</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. 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.
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Fee table
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.20%
Other expenses 0.00%
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TOTAL 0.20%
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<TABLE>
<CAPTION>
Expense example
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
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$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 more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.20% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
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.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy' s preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
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>
<TABLE>
<CAPTION>
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, which is available upon request.
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
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PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 23.34 19.73 15.38 12.75 10.42
Investment operations:
Investment income -- net .34* .31 .30 .29 .26
Net realized and
unrealized gain (loss)
on investments 5.52 3.89 4.52 2.69 2.37
Total from investment operations 5.86 4.20 4.82 2.98 2.63
Distributions:
Dividends from investment
income -- net (.35) (.31) (.28) (.30) (.26)
Dividends from net realized
gains on investments (.09) (.28) (.19) (.05) (.04)
Total distributions (.44) (.59) (.47) (.35) (.30)
Net asset value, end of period 28.76 23.34 19.73 15.38 12.75
Total return (%) 25.34 21.68 31.87 23.78 25.75
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .20 .20 .20 .20 .37
Ratio of net investment income
to average net assets (%) 1.23 1.45 1.72 2.16 2.36
Portfolio turnover rate (%) 16.58 16.76 3.75 4.75 1.03
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,747,282 1,133,147 803,142 449,123 204,278
* BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
</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.
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Minimum investments
Initial Additional
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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 (REDEEM) 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.
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Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
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CHECK NO MINIMUM $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $10,000 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 it has realized once a year.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
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Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
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INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at right 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.
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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.
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 SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one Dreyfus fund into another. You can request your exchange in writing or
by phone. Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
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 1-800-645-656
(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 & 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 & 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 & 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 COMPANY, 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) 2000 Dreyfus Service Corporation 713P0300
<PAGE>
Dreyfus
Bond Market Index Fund
Investing in bonds to match the total return of the Lehman Brothers Aggregate
Bond Index
PROSPECTUS March 1, 2000
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
- --------------------------------------------------------------------
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
--------------------------------------------------------
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 its 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 tables below show some of the risks of investing in the fund. The first
table shows you how the performance of the fund's BASIC shares has varied from
year to year. The second table 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. Of
course, past performance is no guarantee of future results.
* PRIOR TO NOVEMBER 14, 1997, THE FUND USED A DIFFERENT BENCHMARK INDEX WHICH
DID NOT INCLUDE CERTAIN MORTGAGE- AND ASSET-BACKED SECURITIES.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
BASIC SHARES
-3.45 18.52 2.20 9.42 8.93 -1.06
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q2 '95 +6.30%
WORST QUARTER: Q1 '94 -2.71%
--------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception Since
date 1 Year 5 Years inception
--------------------------------------------------------------------------------------------
BASIC SHARES 11/30/93 -1.06% 7.39% 5.45%
INVESTOR SHARES 4/28/94 -1.24% 7.10% 6.22%
LEHMAN BROTHERS
AGGREGATE BOND INDEX -0.82% 7.73% 5.89%**
** 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.
<PAGE 3>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. 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
BASIC Investor
shares shares
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.15% 0.15%
Rule 12b-1 fee none 0.25%
Other expenses 0.00% 0.00%
--------------------------------------------------------
TOTAL 0.15% 0.40%
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------
BASIC SHARES $15 $48 $85 $192
INVESTOR SHARES $40 $128 $224 $505
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 for distribution 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 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 more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.15% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
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.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
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 of the fund
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, which is available upon
request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
BASIC SHARES 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 10.27 10.00 9.80 9.94 9.15
Investment operations:
Investment income -- net .59 .61 .60 .59 .58
Net realized and unrealized
gain (loss) on investments (.56) .32 .20 (.14) .79
Total from investment operations .03 .93 .80 .45 1.37
Distributions:
Dividends from investment
income -- net (.59) (.61) (.60) (.59) (.58)
Dividends from net realized gain
on investments (.07) (.05) -- -- --
Total distributions (.66) (.66) (.60) (.59) (.58)
Net asset value, end of period 9.64 10.27 10.00 9.80 9.94
Total return (%) 0.29 9.69 8.46 4.69 15.41
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .15 .15 .35 .40 .40
Ratio of net investment income
to average net assets (%) 5.96 6.06 6.12 6.02 6.10
Portfolio turnover rate (%) 73.14 43.39 48.86 42.65 40.16
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 64,232 55,852 33,234 32,986 6,824
<PAGE 6>
YEAR ENDED OCTOBER 31,
INVESTOR SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 10.26 9.99 9.78 9.93 9.15
Investment operations:
Investment income -- net .56 .59 .57 .57 .55
Net realized and unrealized
gain (loss) on investments (.56) .32 .21 (.15) .78
Total from investment operations -- .91 .78 .42 1.33
Distributions:
Dividends from investment
income -- net (.56) (.59) (.57) (.57) (.55)
Dividends from net realized gain
on investments (.07) (.05) -- -- --
Total distributions (.63) (.64) (.57) (.57) (.55)
Net asset value, end of period 9.63 10.26 9.99 9.78 9.93
Total return (%) .03 9.43 8.29 4.36 15.01
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .40 .40 .60 .65 .65
Ratio of net investment income
to average net assets (%) 5.72 5.79 5.82 5.80 5.77
Portfolio turnover rate (%) 73.14 43.39 48.86 42.65 40.16
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 33,699 1,552 120 80 207
</TABLE>
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
THE FUND OFFERS TWO SHARE CLASSES -- BASIC shares and Investor shares. Both
classes of 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.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
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
--------------------------------------------------------
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 investments are generally valued by using
available market quotations or at fair value, which may be determined by one or
more pricing services approved by the fund's 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 authorized entity.
Selling shares
YOU MAY SELL (REDEEM) 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 $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $10,000 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 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:
--------------------------------------------------------
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. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at right also can provide a guide for your potential tax liability
when selling or exchanging fund shares. "Short-term capital gains" applies to
fund shares sold or exchanged up to 12 months after buying them. "Long-term
capital gains" applies to shares sold or exchanged after 12 months.
Your Investment
<PAGE 11>
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
--------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
--------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
--------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
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 SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one Dreyfus fund into another. You can request your exchange in writing or
by phone. Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
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 1-800-645-656
(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 & Trust Co., with these instructions:
* ABA# 011001234
* 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 & Trust Co.,
with these instructions:
* ABA# 011001234
* 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 & Trust Co.,
with these instructions:
* ABA# 011001234
* 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 COMPANY, 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) 2000 Dreyfus Service Corporation 310P0300
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
Investing in bonds for investment returns that exceed the Lehman Brothers
Aggregate Bond Index
PROSPECTUS March 1, 2000
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
- --------------------------------------------------------------------
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:
* U.S. government and agency bonds
* corporate bonds
* mortgage-related securities
* 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). Although the portfolio manager may invest in
individual bonds with different remaining maturities, the fund's dollar-weighted
average maturity is generally between 3 and 10 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 securities held by
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.
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. 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:
* 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 fund's share price
* 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
* 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 this to avoid losses, it
could reduce the benefit from any upswing in the market. During such periods,
the fund may not achieve its investment objective.
Other potential risks
The fund, at times, 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.
<PAGE 2>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows you how the performance of the fund's Investor shares has varied
from year to year. The second table 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. Of
course, past performance is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
INVESTOR SHARES
2.35 8.97 8.35 -2.10
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q3 '98 +4.13%
WORST QUARTER: Q1 '96 -2.25%
--------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year (11/1/95)
- -------------------------------------------------------------------------------
INVESTOR SHARES -2.10% 4.71%
RESTRICTED SHARES -1.79% 4.95%
LEHMAN BROTHERS
AGGREGATE
BOND INDEX -0.82% 5.71%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 10/31/95 IS USED AS THE
BEGINNING VALUE ON 11/1/95.
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. 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
Investor Restricted
shares shares
- ------------------------------------------------------------------------------
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%
-------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
INVESTOR SHARES $82 $255 $444 $990
RESTRICTED SHARES $56 $176 $307 $689
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 for distribution and shareholder service. 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.
<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 more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.55% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion in assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
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.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
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
These tables describe the performance of each share class of the fund 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, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
INVESTOR SHARES 1999 1998 1997 1996*
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.87 12.52 12.29 12.50
Investment operations:
Investment income -- net .70 .72 .74 .71
Net realized and unrealized gain (loss)
on investments (.79) .35 .23 (.21)
Total from investment operations (.09) 1.07 .97 .50
Distributions:
Dividends from investment income -- net (.70) (.72) (.74) (.71)
Dividends from net realized gain
on investments (.16) -- -- --
Total distributions (.86) (.72) (.74) (.71)
Net asset value, end of period 11.92 12.87 12.52 12.29
Total return (%) (.69) 8.80 8.21 4.18
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .80 .80 .80 .79
Ratio of net investment income
to average net assets (%) 5.74 5.68 6.01 5.61
Portfolio turnover rate (%) 114.24 106.93 143.91 198.16
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 2,244 1,438 317 126
* FROM NOVEMBER 1, 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996.
<PAGE 6>
YEAR ENDED OCTOBER 31,
RESTRICTED SHARES 1999 1998 1997 1996*
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.85 12.52 12.29 12.50
Investment operations:
Investment income -- net .73 .76 .77 .74
Net realized and unrealized gain (loss)
on investments (.78) .32 .23 (.21)
Total from investment operations (.05) 1.08 1.00 .53
Distributions:
Dividends from investment income -- net (.73) (.75) (.77) (.74)
Dividends from net realized gain
on investments (.16) -- -- --
Total distributions (.89) (.75) (.77) (.74)
Net asset value, end of period 11.91 12.85 12.52 12.29
Total return (%) (.37) 8.90 8.49 4.45
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .55 .55 .55 .55
Ratio of net investment income
to average net assets (%) 5.99 5.95 6.31 6.29
Portfolio turnover rate (%) 114.24 106.93 143.91 198.16
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 256,477 169,585 108,688 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 investments are generally valued by using
available market quotations or at fair value, which may be determined by one or
more pricing services approved by the fund's board.
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) 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 $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
General policies
IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's total
assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS DIVIDENDS from its net investment income
once a month and distributes any net capital gains it has realized once a year.
Your distributions will be reinvested in 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. Of
course, withdrawals or distributions from tax-deferred accounts are taxable when
received.
The table at right can provide a guide for your potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
Your Investment
<PAGE 11>
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
--------------------------------------------------------
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.
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 SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one Dreyfus fund into another. You can request your exchange in writing or
by phone. Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:
* for traditional, rollover, Roth and Education IRAs, call 1-800-645-656
* 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# 011001234
* 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# 011001234
* 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# 011001234
* 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 COMPANY, 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) 2000 Dreyfus Service Corporation 302P0300
<PAGE>
Dreyfus
Disciplined Smallcap
Stock Fund
Investing in small-cap stocks for investment returns that surpass the Standard
& Poor's SmallCap 600((reg.tm)) Index
PROSPECTUS March 1, 2000
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
- -------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES
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 Disciplined Smallcap Stock Fund
- -------------------------------
Ticker Symbol: DDSSX
GOAL/APPROACH
The fund seeks total investment returns (consisting of capital appreciation and
income) that surpass the Standard & Poor's SmallCap 600((reg.tm)) Index ("S&P
SmallCap 600"). This objective may be changed without shareholder approval. To
pursue its goal, the fund invests in a blended portfolio of growth and value
stocks of small-capitalization companies chosen through a disciplined process
that combines computer modeling techniques, fundamental analysis and risk
management.
In selecting securities, Dreyfus uses a computer model to identify and rank
stocks within an industry, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Dreyfus then uses fundamental analysis to select the most attractive of the
top-ranked securities and to determine those issues that should be sold. Dreyfus
uses information technology as well as Wall Street sources and company
management to stay abreast of current developments.
Dreyfus manages risk by diversifying across companies and industries, limiting
the potential adverse impact from any one stock or industry. The fund is
structured so that its sector weightings and risk characteristics are similar to
those of the S&P SmallCap 600.
Concepts to understand
SMALL-CAPITALIZATION COMPANIES: new and often entrepreneurial companies.
Small-cap companies tend to grow faster than larger-cap companies and typically
use any profits for expansion rather than for paying dividends. They are also
more volatile than larger companies and fail more often. The fund generally
invests in companies having market capitalizations from $100 million to $2
billion, and may purchase securities of companies in initial public offerings or
shortly thereafter.
S&P SMALLCAP 600: an unmanaged index consisting of the stocks of 600 publicly
traded U.S. companies chosen for market size, liquidity and industry-group
representation. The stocks comprising the S&P SmallCap 600 index have market
capitalizations ranging from $50 million to $2 billion.
<PAGE 2>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money. Small companies carry
additional risks because their earnings are less predictable, their share prices
more volatile and their securities less liquid than those of large, established
companies. The prices of securities purchased in initial public offerings or
shortly thereafter may be very volatile. Some of the fund's investments will
rise and fall based on investor perception rather than economics.
By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
Under adverse market conditions, the fund could invest some or all of its assets
in money market securities. Although the fund would do this to avoid losses, it
could reduce the benefit from any upswing in the market. During such periods,
the fund may not achieve its investment objective.
Other potential risks
The fund may invest in options, futures and foreign currencies to hedge the
fund's portfolio and also to increase returns. There is the risk that such
practices may reduce returns or increase volatility.
The fund may invest in securities of foreign issuers, which carry additional
risks such as less liquidity, changes in currency exchange rates, a lack of
comprehensive company information and political instability.
The fund is not an index fund. The fund may hold securities not listed in the S&
P SmallCap 600 and may hold fewer securities than the index, either of which
could cause the fund to underperform the index.
At times, the fund may engage in short-term trading, which could produce higher
brokerage costs and taxable distributions.
<PAGE 3>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the fund's performance for calendar year 1999. The second table
compares the fund's performance over time to that of the S&P SmallCap 600, an
unmanaged index of small-cap stock performance. Both tables assume reinvestment
of dividends. Of course, past performance is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
29.10
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '99 +25.05%
WORST QUARTER: Q1 '99 -4.86%
--------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year (9/30/98)
--------------------------------------------------------
FUND 29.10% 40.50%
S&P SMALLCAP 600 12.41% 25.01%
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
<PAGE 4>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load).
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT
Maximum redemption 1.00%
FOR REDEMPTIONS OR EXCHANGES OF SHARES
MADE WITHIN SIX MONTHS OF THEIR ISSUANCE
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fee 1.25%
Rule 12b-1 fee 0.25%
Other expenses 0.00%
--------------------------------------------------------
TOTAL 1.50%
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------
$153 $474 $818 $1,791
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 for distribution and shareholder service. Because
this fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
The Fund
<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 more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 1.25% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
Gene F. Cervi, CFA, has been employed by Dreyfus as the fund's portfolio manager
since its inception. Mr. Cervi is also director of investment research for
Laurel Capital Advisors, an affiliate of Dreyfus, and a vice president of Mellon
Bank, which he joined in 1982.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
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, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 31,
1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 13.06 12.50
Investment operations:
Investment income (loss) -- net (.09)(2) --
Net realized and unrealized gain (loss) on investments 3.42 .56
Total from investment operations 3.33 .56
Net asset value, end of period 16.39 13.06
Total return (%) 25.50 4.48(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.50 3.13(3)
Ratio of net investment (loss) to average net assets (%) (.56) (.02)(3)
Portfolio turnover rate (%) 76.14 2.58(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 23,582 5,429
(1) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are generally valued based on market
value or, where market quotations are not readily available, based on fair value
as determined in good faith by the fund's board.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST
YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
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.
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME. Your shares will be sold at the next
NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. Any certificates representing fund shares being sold
must be returned with your redemption request. Your order will be processed
promptly and you will generally receive the proceeds within a week.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that:
* if the fund has not yet collected payment for the shares you are selling,
it may delay sending the proceeds for up to eight business days or until it
has collected payment
* if you are selling or exchanging shares within six months of their
issuance, the fund may deduct a 1% redemption fee (not charged on shares
sold through the Automatic Withdrawal Plan or Dreyfus Auto-Exchange
Privilege, or on shares acquired through dividend reinvestment
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
General policies
IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's total
assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS DIVIDENDS from its net investment income,
and distributes any net capital gains it has realized, once a year. Your
distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
--------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
--------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at right can provide a guide for your potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
Your Investment
<PAGE 11>
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
--------------------------------------------------------
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.
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 SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one Dreyfus fund into another. You can request your exchange in writing or
by phone. Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). Other than the redemption fee described under "Account Policies --
Selling Shares," there is currently no fee for exchanges, although you may be
charged a sales load when exchanging into any fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:
* for traditional, rollover, Roth and Education IRAs, call 1-800-645-656
* 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 & Trust Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust
Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "4000" before your account number.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 14>
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE 15>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check (see "To Open an Account" at left).
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust
Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but insert "4000" before your account number.
TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).
Automatically
WITHOUT ANY INITIAL INVESTMENT Call us
to request a Dreyfus Step Program form. Complete and return the form along with
your application.
ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
All contributions will count as current year.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 16>
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required.
Mail in your request (see "To Open an Account" at left).
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS TRUST COMPANY, CUSTODIAN
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE 17>
For More Information
Dreyfus Disciplined Smallcap Stock Fund
A series of The Dreyfus/Laurel Funds, Inc.
-----------------------------
SEC file number: 811-5270
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal period.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 2000 Dreyfus Service Corporation 041P0300
<PAGE>
Dreyfus
Disciplined
Stock Fund
Investing in large-cap stocks for investment returns that exceed the Standard &
Poor's((reg.tm) ) 500( )Composite Stock Price Index
PROSPECTUS March 1, 2000
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
7 Financial Highlights
YOUR INVESTMENT
- --------------------------------------------------------------------
8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
16 Instructions for IRAs
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus Disciplined Stock Fund
- -------------------------------
Ticker Symbol: DDSTX
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's((reg.tm)) 500
Composite Stock Price Index (S&P 500). This objective may be changed without
shareholder approval. To pursue its goal, the fund invests at least 65% of total
assets in a blended portfolio of growth and value stocks chosen through a
disciplined investment process that combines computer modeling techniques,
fundamental analysis and risk management. Consistency of returns and stability
of the fund's share price compared to the S&P 500 are primary goals of the
process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Dreyfus then manages risk by diversifying across companies and industries,
limiting the potential adverse impact from any one stock or industry. The fund
is structured so that its sector weightings and risk characteristics, such as
growth, size, quality and yield, are similar to those of the S&P 500.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks. The model screens each stock for relative attractiveness
within its economic sector and industry. To ensure that the model remains
effective, Dreyfus reviews each of the screens on a regular basis. Dreyfus also
maintains the flexibility to adapt the screening criteria to changes in market
conditions.
S&P 500: an unmanaged index of 500 common stocks chosen to reflect the
industries of the U.S. economy. The S&P 500 is often considered a proxy for the
stock market in general.
<PAGE 1>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile very similar to the S&P 500, the fund is
expected to hold fewer securities than the index. Owning fewer securities and
the ability to purchase companies not listed in the index can cause the fund to
underperform the index.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the fund may sometimes outperform other types of
funds (such as those emphasizing only growth stocks or value stocks) and
sometimes underperform them. By investing in growth and value stocks, the fund
could be affected less by the underperformance of either style, although this
may also result in more modest gains during certain periods than those for funds
that utilize only one investment style.
Other potential risks
Growth companies are expected to increase their earnings at a certain rate. When
these expectations are not met, investors can punish the stocks inordinately --
even if earnings showed an absolute increase. In addition, growth stocks
typically lack the dividend yield that can cushion stock prices in market
downturns.
Value companies are subject to the risk that their intrinsic value may never be
realized by the market, or that their prices may go down. While the fund's
investments in value stocks may limit the downside risk of the fund over time,
the fund may produce more modest gains than riskier stock funds as a trade-off
for this potentially lower risk.
<PAGE 2>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table compares the fund's performance over time to that of the S&P 500, a widely
recognized, unmanaged index of stock performance. Both tables assume
reinvestment of dividends and distributions. Of course, past performance is no
guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
0.23 33.64 7.58 11.83 -1.03 36.86 24.88 31.94 36.62 18.21
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +22.56%
WORST QUARTER: Q3 '90 -13.11%
--------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average annual total return AS OF 12/31/99
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------------
FUND 18.21% 27.54% 18.33%
S&P 500 21.03% 28.54% 18.19%
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
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. 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
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.90%
Rule 12b-1 fee 0.10%
Other expenses 0.00%
--------------------------------------------------------
TOTAL 1.00%
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
$102 $318 $552 $1,225
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 for distribution 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 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 more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.90% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
Bert Mullins has managed the fund since its inception and has been employed by
Dreyfus as portfolio manager since October 1994. Mr. Mullins has been employed
as a portfolio manager by Laurel Capital Advisors, an affiliate of Dreyfus,
since October 1990. He is also a vice president, portfolio manager and senior
securities analyst for Mellon Bank, N.A.
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
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
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>
MANAGEMENT (CONTINUED)
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
On December 1, 1997, a class action lawsuit was filed in the U.S. District Court
for the Southern District of New York, asserting that the adoption of the fund's
Rule 12b-1 plan with respect to certain fund shares violated federal securities
laws and common law. On March 29, 1999, the trial court dismissed the lawsuit
with prejudice, but the plaintiffs filed an appeal. On December 23, 1999, the
Court of Appeals for the Second Circuit affirmed the dismissal.
<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, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 34.68 32.78 26.65 22.09 18.54
Investment operations:
Investment income -- net 0.11(1) 0.20 0.25 0.28 0.30
Net realized and unrealized
gain (loss) on investments 7.97 5.31 7.92 5.13 4.02
Total from investment operations 8.08 5.51 8.17 5.41 4.32
Distributions:
Dividends from investment
income -- net (0.15) (0.24) (0.26) (0.29) (0.30)
Dividends from net realized
gain on investments (1.65) (3.37) (1.78) (0.56) (0.47)
Total distributions (1.80) (3.61) (2.04) (0.85) (0.77)
Net asset value, end of period 40.96 34.68 32.78 26.65 22.09
Total return (%) 24.01 18.37 32.32 25.14 24.33
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) 1.00 0.99 0.90 0.90 0.90
Ratio of net investment income
to average net assets (%) 0.28 0.61 0.87 1.23 1.61
Portfolio turnover rate (%) 57.23 54.45 68.87 64.47 60.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
($ x 1,000) 3,289,549 2,436,164 1,482,176 807,680 382,646
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
</TABLE>
FINANCIAL HIGHLIGHTS FOR YEARS ENDED PRIOR TO DECEMBER 15, 1997, DO NOT REFLECT
THE FUND'S RULE 12B-1 FEE OF 0.10%, WHICH WAS IMPLEMENTED ON THAT DATE.
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are generally valued based on market
value or, where market quotations are not readily available, based on fair value
as determined in good faith by the fund's board.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
TRADITIONAL IRA: an individual retirement account. Your contributions may or may
not be deductible depending on your circumstances. Assets grow tax-deferred;
withdrawals and distributions are taxable in the year made.
SPOUSAL IRA: an IRA funded by a working spouse in the name of a nonworking
spouse.
ROTH IRA: an IRA with non-deductible contributions, and tax-free growth of
assets and distributions to pay retirement expenses, provided certain conditions
are met.
EDUCATION IRA: an IRA with nondeductible contributions, and tax-free growth of
assets and distributions, if used to pay certain educational expenses.
FOR MORE COMPLETE IRA INFORMATION, CONSULT DREYFUS OR YOUR TAX PROFESSIONAL.
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) 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 $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
General policies
IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's total
assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS DIVIDENDS from its net investment income
quarterly and distributes any net capital gains it has realized once a year.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
--------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
--------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at right 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.
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 SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one Dreyfus fund into another. You can request your exchange in writing or
by phone. Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:
* for traditional, rollover, Roth and Education IRAs, call 1-800-645-656
* for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
Your Investment
<PAGE 13>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to The Boston Safe Deposit & Trust Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "4050" before your account number.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 14>
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE 15>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check (see "To Open an Account" at left).
By Telephone
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but insert "4050" before your account number.
TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).
Automatically
WITHOUT ANY INITIAL INVESTMENT Call us
to request a Dreyfus Step Program form. Complete and return the form along with
your application.
ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
All contributions will count as current year.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 16>
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required.
Mail in your request (see "To Open an Account" at left).
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS TRUST COMPANY, CUSTODIAN
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE 17>
For More Information
Dreyfus Disciplined Stock Fund A series of The
Dreyfus/Laurel Funds, Inc.
-----------------------------
SEC file number: 811-5270
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 2000 Dreyfus Service Corporation 728P0300
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, 2000
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>
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 U.S. 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 tables below show some of the risks of investing in the fund. The first
table shows how the fund's performance has varied from year to year. The second
table averages the fund's performance over time. Both tables assume reinvestment
of dividends and distributions. Of course, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
8.30 6.10 3.76 3.01 4.05 5.84 5.27 5.47 5.38 5.00
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q2 '90 +2.03%
WORST QUARTER: Q2 '93 +0.72%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
5.00% 5.39% 5.21%
The fund's 7-day yield on 12/31/99 was 5.31%. For the fund's current yield, call
toll-free 1-800-645-6561.
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. 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
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>
<S> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
$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 tables below show some of the risks of investing in the fund. The first
table shows how the fund's performance has varied from year to year. The second
table averages the fund's performance over time. Both tables assume reinvestment
of dividends and distributions. Of course, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
8.12 5.89 3.61 2.94 4.01 5.76 5.18 5.32 5.25 4.83
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q3 '90 +1.99%
WORST QUARTER: Q2 '93 +0.72%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
4.83% 5.27% 5.08%
The fund's 7-day yield on 12/31/99 was 5.03%. For the fund's current yield, call
toll-free 1-800-645-6561.
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. 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
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>
<S> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
$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.
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
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 tables below show some of the risks of investing in the fund. The first
table shows how the fund's performance has varied from year to year. The second
table averages the fund's performance over time. Both tables assume reinvestment
of dividends and distributions. Of course, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
8.09 5.95 3.55 2.89 3.90 5.67 5.08 5.21 5.12 4.62
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q2 '90 +1.98%
WORST QUARTER: Q1 '94 +0.71%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
4.62% 5.14% 5.00%
The fund's 7-day yield on 12/31/99 was 4.72%. For the fund's current yield, call
toll-free 1-800-645-6561.
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. 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
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>
<S> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
$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 more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, each fund
paid Dreyfus a management fee at the annual rate of 0.15% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: 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
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
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 respective fund's annual report, which is available upon
request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations: Investment income -- net .048 .053 .053 .052 .056
Distributions: Dividends from investment income -- net (.048) (.053) (.053) (.052) (.056)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 4.91 5.47 5.42 5.33 5.77
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .30 .30 .30 .30 .30
Ratio of net investment income to average net assets (%) 4.81 5.34 5.27 5.25 5.61
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 584,471 479,866 533,154 575,700 773,602
YEAR ENDED OCTOBER 31,
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations: Investment income -- net .046 .052 .052 .051 .056
Distributions: Dividends from investment income -- net (.046) (.052) (.052) (.051) (.056)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 4.74 5.36 5.28 5.25 5.71
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .30 .30 .30 .30 .30
Ratio of net investment income to average net assets (%) 4.64 5.22 5.14 5.14 5.55
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 236,532 343,988 191,853 295,434 515,812
The Funds
<PAGE 9>
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED OCTOBER 31,
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations: Investment income -- net .047 .051 .050 .051 .054
Distributions: Dividends from investment income -- net (.047) (.051) (.050) (.051) (.054)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 4.58 5.22 5.16 5.17 5.57
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .30 .30 .30 .30 .30
Ratio of net investment income to average net assets (%) 4.45 5.10 5.04 5.06 5.44
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 473,341 645,297 776,726 666,360 767,948
</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 3:00 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:
00 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 authorized entity. 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 (REDEEM) 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 authorized entity. 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 $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 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 5:00 p.m., Eastern time, will
receive the dividend declared that day if federal funds are received by 6:00
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 3:00 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 it has realized, once a
year. Dividends and distributions will be reinvested in 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 federally taxable as
follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, an investor should always consult a
tax professional about federal, state and local tax consequences.
SERVICES FOR FUND INVESTORS
Exchange privilege
INVESTORS CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement
accounts) from one Dreyfus fund into another. 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 before investing. 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
<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) 2000 Dreyfus Service Corporation LFISTP0300
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, 2000
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 AND HOLDINGS 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 tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table averages the performance of each share class over time. Both tables
assume reinvestment of dividends and distributions. Of course, past performance
is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
8.30 5.92 3.59 2.82 3.89 5.65 5.09 5.30 5.28 4.88
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q1 '90 +2.08%
WORST QUARTER: Q3 '93 +0.68%
--------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Average annual total return AS OF 12/31/99
Inception Since
date 1 Year 5 Years 10 Years inception
----------------------------------------------------------------------------------------
CLASS R
SHARES (11/18/87) 4.88% 5.24% 5.06% --
INVESTOR
SHARES (4/6/94) 4.68% 5.03% -- 4.90%
</TABLE>
The fund' s 7-day yield on 12/31/99 was 5.19% for Class R shares and 5.00% for
Investor shares. For the fund's current yield, call toll-free 1-800-645-6561.
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. 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
--------------------------------------------------------
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>
<S> <C> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------
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 for distribution 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.
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 tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table averages the performance of each share class over time. Both tables
assume reinvestment of dividends and distributions. Of course, past performance
is no guarantee of future results.
--------------------------------------------------------
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 4.55
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q2 '95 +1.37%
WORST QUARTER: Q2 '93 +0.67%
--------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average annual total return AS OF 12/31/99
Inception Since
date 1 Year 5 Years inception
-----------------------------------------------------------------------------------------
CLASS R SHARES (2/4/91) 4.55% 4.99% 4.48%
INVESTOR SHARES (4/18/94) 4.34% 4.78% 4.66%
</TABLE>
The fund' s 7-day yield on 12/31/99 was 4.65% for Class R shares and 4.45% for
Investor shares. For the fund's current yield, call toll-free 1-800-645-6561.
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. 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
--------------------------------------------------------
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>
<S> <C> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------------------------------
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 for distribution 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.
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 tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table averages the performance of each share class over time. Both tables
assume reinvestment of dividends and distributions. Of course, past performance
is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
5.79 4.31 2.66 2.09 2.50 3.52 3.16 3.24 3.07 2.84
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '90 +1.46%
WORST QUARTER: Q1 '93 +0.49%
--------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Average annual total return AS OF 12/31/99
Inception Since
date 1 Year 5 Years 10 Years inception
-----------------------------------------------------------------------------------------
CLASS R
SHARES (12/10/87) 2.84% 3.17% 3.31% --
INVESTOR
SHARES (4/20/94) 2.64% 2.96% -- 2.91%
</TABLE>
The fund' s 7-day yield on 12/31/99 was 3.91% for Class R shares and 3.71% for
Investor shares. For the fund's current yield, call toll-free 1-800-645-6561.
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. 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
--------------------------------------------------------
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>
<S> <C> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------
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 for distribution 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.
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 $127 billion in over 160
mutual fund portfolios. For the past fiscal year, each fund paid Dreyfus a
management fee at the annual rate of 0.50% of the fund's average daily net
assets. Dreyfus is the primary mutual fund business of Mellon Financial
Corporation, a global financial services company with approximately $2.5
trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy' s preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: 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
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
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 14>
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
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 tables describe the performance for each share class of the fund
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, which is available upon
request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS R SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .047 .052 .051 .050 .053
Distributions:
Dividends from
investment income -- net (.047) (.052) (.051) (.050) (.053)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 4.84 5.34 5.25 5.16 5.44
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to
average net assets (%) .50 .50 .50 .50 .50
Ratio of net investment income to
average net assets (%) 4.74 5.21 5.13 5.01 5.40
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 300,386 249,415 232,032 170,409 139,787
<PAGE 16>
YEAR ENDED OCTOBER 31,
INVESTOR SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .045 .050 .049 .048 .052
Distributions:
Dividends from
investment income -- net (.045) (.050) (.049) (.048) (.052)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 4.64 5.13 5.04 4.94 5.28
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .70 .70 .70 .70 .70
Ratio of net investment income
to average net assets (%) 4.54 5.01 4.95 4.84 5.25
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 347,596 301,473 204,851 144,168 161,819
Financial Highlights
<PAGE 17>
FINANCIAL HIGHLIGHTS
Dreyfus U.S. Treasury Reserves
The following tables describe the performance for each share class of the fund
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, which is available upon
request.
YEAR ENDED OCTOBER 31,
CLASS R SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .044 .050 .050 .048 .051
Distributions:
Dividends from investment
income -- net (.044) (.050) (.050) (.048) (.051)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 4.48 5.16 5.10 4.94 5.23
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average
net assets (%) .50 .50 .50 .50 .50
Ratio of net investment income
to average net assets (%) 4.40 5.03 4.98 4.79 5.14
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 564,774 614,053 522,178 464,303 399,873
<PAGE 18>
YEAR ENDED OCTOBER 31,
INVESTOR SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .042 .048 .048 .046 .049
Distributions:
Dividends from investment
income -- net (.042) (.048) (.048) (.046) (.049)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 4.27 4.95 4.89 4.74 5.02
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .70 .70 .70 .70 .70
Ratio of net investment income
to average net assets (%) 4.16 4.85 4.81 4.64 4.92
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 36,375 115,622 112,900 21,826 21,386
Financial Highlights
<PAGE 19>
FINANCIAL HIGHLIGHTS
Dreyfus Municipal Reserves
The following tables describe the performance for each share class of the fund
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, which is available upon
request.
YEAR ENDED OCTOBER 31,
CLASS R SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .027 .031 .032 .031 .034
Distributions:
Dividends from investment
income -- net (.027) (.031) (.031) (.031) (.034)
Dividends from net realized
gain on investments -- (.000)(1) (.001) -- --
Total distributions (.027) (.031) (.032) (.031) (.034)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 2.77 3.21 3.21 3.17 3.48
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .50 .50 .52 .50 .50
Ratio of net investment income
to average net assets (%) 2.74 3.11 3.10 3.11 3.41
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 287,117 227,639 194,158 221,178 205,373
(1) AMOUNT REPRESENTS LESS THAN $.001 PER SHARE.
<PAGE 20>
YEAR ENDED OCTOBER 31,
INVESTOR SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .025 .029 .030 .029 .032
Distributions:
Dividends from investment
income -- net (.025) (.029) (.029) (.029) (.032)
Dividends from net realized
gain on investments -- (.000)(1) (.001) -- --
Total distributions (.025) (.029) (.030) (.029) (.032)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 2.57 3.00 3.00 2.96 3.28
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to
average net assets (%) .70 .70 .72 .70 .70
Ratio of net investment income
to average net assets (%) 2.54 2.90 2.92 2.92 3.33
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 30,689 27,301 19,486 14,074 17,764
(1) AMOUNT REPRESENTS LESS THAN $.001 PER SHARE.
</TABLE>
Financial Highlights
<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
through such account or relationship. Investor shares are offered primarily to
investors who have certain accounts with financial institutions that have
entered into 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 12:00 noon and 4:00 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 (REDEEM) 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 $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $10,000 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 it has realized once a year.
Your dividends and distributions will be reinvested in 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 usually 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.
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 SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one Dreyfus fund into another. You can request your exchange in writing or
by phone. Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
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 1-800-645-656
(pound) for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
Your Investment
<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 &
Trust Co., 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 & Trust Co.,
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 write a 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 $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 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 & Trust Co.,
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) 2000 Dreyfus Service Corporation LMMKTP0300
Dreyfus Premier Balanced Fund
Investing in stocks and bonds for total return
PROSPECTUS March 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Balanced Fund
---------------------------------
Ticker Symbols CLASS A: PRBAX
CLASS B: PRBBX
CLASS C: DPBCX
CLASS R: PDBLX
CLASS T: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 3
Management 4
Financial Highlights 5
Your Investment
- --------------------------------------------------------------------------------
Account Policies 8
Distributions and Taxes 11
Services for Fund Investors 12
Instructions for Regular Accounts 13
Instructions for IRAs 14
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks to outperform an unmanaged hybrid index, 60% of which is the
Standard & Poor's((reg.tm)) 500 Composite Stock Price Index ("S&P 500") and 40%
of which is the Lehman Brothers Intermediate Government/Corporate Bond Index
("Intermediate Index"). This objective may be changed without shareholder
approval. To pursue its goal, the fund invests in a diversified mix of stocks
and investment grade bonds of both U.S. and foreign issuers.
The fund's normal asset allocation is around 60% stocks and 40% bonds. However,
the fund is permitted to invest up to 75% and as little as 40% of its assets in
stocks, and up to 60% and as little as 25% of its assets in bonds.
In allocating assets between stocks and bonds, the portfolio managers assess the
relative return and risks of each asset class using a model which analyzes
several factors, including interest-rate-adjusted price/ earnings ratio, the
valuation and volatility levels of stocks relative to bonds, and other economic
factors, such as interest rates.
In selecting stocks, Dreyfus uses a valuation model to identify and rank stocks
within an industry or sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic
worth
* GROWTH, in this case the sustainability or growth
of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities. Dreyfus then manages risk by diversifying across
companies and industries and by maintaining sector weightings and 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.
Although the portfolio managers seek to manage the risk of the equity portion of
the fund's portfolio 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.
Prices of bonds tend to move inversely with changes in interest rates. When
rates rise, bond prices and the fund's share price usually drop. The fund's
share price could also be hurt if it holds bonds of issuers that default on
payments of interest or principal or if there is a decline in the credit quality
of a bond it holds, or the perception of a decline.
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.
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 comprehensive company information and political instability.
Other potential risks
The fund may, at times, invest some of its assets in options and futures to
hedge its portfolio and to increase returns. These practices, when employed, may
lower returns or increase volatility. The fund may also engage in short-term
trading. This could increase the fund's transaction costs and taxable
distributions, lowering its after-tax performance accordingly.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
<PAGE 1>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table compares the performance of Class A, B, C and R shares over time to
that of the listed indexes. These returns reflect any applicable sales loads.
Both tables assume the reinvestment of dividends. Of course, past performance is
no guarantee of future results. Since Class T shares have less than one calendar
year of performance, past performance information for that class is not included
in this section of the prospectus. Performance for Class T shares will vary from
the performance of the fund's other share classes due to differences in charges
and expenses.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
-1.31 29.63 18.18 24.90 22.58 7.55
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +14.53%
WORST QUARTER: Q1 '94 -4.24%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
Inception date 1 Year 5 Years inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (4/14/94) 1.03% 18.59% 16.60%
CLASS B (12/19/94) 2.49% 18.93% 18.96%
CLASS C (12/19/94) 5.47% 19.19% 19.11%
CLASS R (9/15/93) 7.55% 20.33% 15.93%
S&P 500 21.03% 28.54% 22.48%*
HYBRID INDEX 12.77% 19.97% 15.68%*
INTERMEDIATE INDEX 0.39% 7.10% 5.34%*
</TABLE>
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF EACH INDEX ON
8/31/93 IS USED AS THE BEGINNING VALUE ON 9/15/93.
Concepts to understand
S&P 500: a widely recognized unmanaged index of stock market performance.
INTERMEDIATE INDEX: a widely accepted unmanaged index of government and
corporate bond market performance composed of U.S. government, Treasury and
agency securities, fixed-income securities and nonconvertible investment grade
corporate debt, with an average maturity of one to ten years.
HYBRID INDEX: an unmanaged index composed of 60% S&P 500 and 40% Intermediate
Index.
2
<PAGE 2>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
Fee table
CLASS A CLASS B CLASS C CLASS R CLASS T
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
<S> <C> <C> <C> <C> <C>
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE NONE*
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.00 1.00 1.00 1.00 1.00
Rule 12b-1 fee .25 1.00 1.00 NONE .50
Other expenses .00 .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.25 2.00 2.00 1.00 1.50
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1 MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF
REDEEMED WITHIN ONE YEAR.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $695 $949 $1,222 $1,999
CLASS B
WITH REDEMPTION $603 $927 $1,278 $1,956**
WITHOUT REDEMPTION $203 $627 $1,078 $1,956**
CLASS C
WITH REDEMPTION $303 $627 $1,078 $2,327
WITHOUT REDEMPTION $203 $627 $1,078 $2,327
CLASS R $102 $318 $552 $1,225
CLASS T $596 $903 $1,232 $2,160
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
The Fund 3
<PAGE 3>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 1.00% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
The asset allocation and equity portion of the fund's portfolio are managed by
Ron Gala. Mr. Gala has managed the fund since its inception and has been
employed by Dreyfus as a portfolio manager since October 1994. Mr. Gala is a
senior vice president and portfolio manager at Mellon Bank and has been employed
there since 1982.
The bond portion of the fund's portfolio is managed by Laurie Carroll. Ms.
Carroll has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Ms. Carroll is a senior vice
president and portfolio manager at Mellon Bank. Ms. Carroll has been employed by
Mellon Bank since 1986.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
In addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
4
<PAGE 4>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of 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, which is available upon
request.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS A 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 14.88 15.17 13.71 11.91 10.08
Investment operations: Investment income -- net .36(1) .33 .34 .31 .28
Net realized and unrealized
gain (loss) on investments 1.68 1.81 2.77 1.88 1.82
Total from investment operations 2.04 2.14 3.11 2.19 2.10
Distributions: Dividends from investment
income -- net (.30) (.37) (.28) (.31) (.27)
Dividends from net realized
gain on investments (.93) (2.06) (1.37) (.08) --
Total distributions (1.23) (2.43) (1.65) (.39) (.27)
Net asset value, end of period 15.69 14.88 15.17 13.71 11.91
Total return (%) (2) 14.39 16.06 25.24 18.71 21.17
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.25 1.25 1.25 1.25
Ratio of net investment income to average net assets (%) 2.31 2.44 2.21 2.39 2.65(
Portfolio turnover rate (%) 104.42 69.71 98.88 85.21 53.20
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 213,362 40,780 14,687 6,275 1,650
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) EXCLUSIVE OF SALES CHARGE.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS B 1999 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 14.83 15.12 13.68 11.89 9.76
Investment operations: Investment income -- net .24(2) .24 .23 .21 .14
Net realized and unrealized
gain (loss) on investments 1.69 1.79 2.77 1.87 2.11
Total from investment operations 1.93 2.03 3.00 2.08 2.25
Distributions: Dividends from investment
income -- net (.18) (.26) (.19) (.21) (.12)
Dividends from net realized
gain on investments (.93) (2.06) (1.37) (.08) --
Total distributions (1.11) (2.32) (1.56) (.29) (.12)
Net asset value, end of period 15.65 14.83 15.12 13.68 11.89
Total return (%)(3) 13.64 15.20 24.27 17.76 23.19(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.00 2.00 2.00 2.00 1.73(4)
Ratio of net investment income to average net assets (%) 1.55 1.70 1.47 1.65 2.16(4)
Portfolio turnover rate (%) 104.42 69.71 98.88 85.21 53.20
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 205,491 62,324 28,940 9,141 3,118
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
</TABLE>
The Fund 5
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS C 1999 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 14.87 15.16 13.70 11.90 9.76
Investment operations: Investment income -- net .24(2) .22 .24 .25 .11
Net realized and unrealized
gain (loss) on investments 1.71 1.81 2.78 1.84 2.15
Total from investment operations 1.95 2.03 3.02 2.09 2.26
Distributions: Dividends from investment
income -- net (.19) (.26) (.19) (.21) (.12)
Dividends from net realized
gain on investments (.93) (2.06) (1.37) (.08) --
Total distributions (1.12) (2.32) (1.56) (.29) (.12)
Net asset value, end of period 15.70 14.87 15.16 13.70 11.90
Total return (%) (3) 13.59 15.24 24.41 17.83 23.29(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.00 2.00 2.00 2.00 1.73(4)
Ratio of net investment income to average net assets (%) 1.57 1.69 1.47 1.62 2.16(4)
Portfolio turnover rate (%) 104.42 69.71 98.88 85.21 53.20
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 55,723 8,004 2,017 237 6
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.(
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS R 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 14.88 15.18 13.72 11.92 10.09
Investment operations: Investment income -- net .40(1) .38 .36 .34 .31
Net realized and unrealized
gain (loss) on investments 1.69 1.79 2.79 1.88 1.81
Total from investment operations 2.09 2.17 3.15 2.22 2.12
Distributions: Dividends from investment
income -- net (.34) (.41) (.32) (.34) (.29)
Dividends from net realized
gain on investments (.93) (2.06) (1.37) (.08) --
Total distributions (1.27) (2.47) (1.69) (.42) (.29)
Net asset value, end of period 15.70 14.88 15.18 13.72 11.92
Total return (%) 14.76 16.37 25.56 18.99 21.46
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.00 1.00 1.00 1.00 1.00
Ratio of net investment income to average net assets (%) 2.54 2.71 2.44 2.68 2.89
Portfolio turnover rate (%) 104.42 69.71 98.88 85.21 53.20
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 397,234 207,132 148,605 129,744 97,881
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
</TABLE>
6
<PAGE 6>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
CLASS T 1999(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C>
Net asset value, beginning of period 15.43
Investment operations: Investment income -- net .08(2)
Net realized and unrealized
gain (loss) on investments .17
Total from investment operations .25
Net asset value, end of period 15.68
Total return (%) (3) 1.62(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .32(4)
Ratio of net investment income to average net assets (%) .40(4)
Portfolio turnover rate (%) 104.42
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 26
(1) FROM AUGUST 16, 1999 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.(
(3) EXCLUSIVE OF SALES CHARGE.
(4) NOT ANNUALIZED.
</TABLE>
The Fund 7
<PAGE 7>
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
contingent deferred sales charge (CDSC).
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institutions on behalf of their
clients (individuals may not purchase these shares directly)
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any shares you own in this
fund, any other Dreyfus Premier fund, or any other fund that is advised by
Founders Asset Management LLC ("Founders"), an affiliate of Dreyfus, sold with a
sales load, 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.
8
<PAGE 8>
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay or may qualify for a reduced sales charge to buy or sell shares. Consult
your financial representative or the SAI to see if this may apply to you.
Shareholders holding Class A shares since December 19, 1994 are not subject to
any front-end sales loads. Shareholders owning Class A shares since November 30,
1996 are subject to reduced loads. See the SAI. Because Class A has lower
expenses than Class T, if you invest $1 million or more in the fund you should
consider buying Class A shares.
- --------------------------------------------------------------------------------
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
<TABLE>
<CAPTION>
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ------------------------------------------------------------------------------------------------------------------------------------
Class Class Class Class
A T A T
- ------------------------------------------------------------------------------------------------------------------------------------
<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%
</TABLE>
* A 1.00% CDSC may be charged on any shares sold within one year of purchase
(except shares bought through dividend reinvestment).
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
CDSC as a % of your initial
Years since purchase investment or your redemption
was made (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are 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 and Class T shares are offered to the public at NAV plus a sales charge.
Classes B, C and R are offered at NAV, but Classes B and C generally are subject
to higher annual operating expenses and a CDSC.
Your Investment 9
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult 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.
General policies
IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who, in
the fund's view, is likely to engage in excessive trading (usually defined
as more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or during
unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 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.
10
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS quarterly dividends from its net
investment income, and distributes any net capital gains it has realized once a
year. Each share class will generate a different dividend because each has
different expenses. Your distributions will be reinvested in the fund unless you
instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at left also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
Your Investment 11
<PAGE 11>
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
the fund into another Dreyfus fund
or certain Founders-advised funds
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges from
EXCHANGE PRIVILEGE the fund into another Dreyfus fund
or certain Founders-advised funds.
- --------------------------------------------------------------------------------
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
or Founders-advised fund. You can also exchange Class T shares into Class A
shares of certain Dreyfus Premier fixed-income 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.
12
<PAGE 12>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional
Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4130" for
Class A, "4140" for Class B, "4150" for Class C, "4160" for Class R, or "5600"
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 10)
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.
Your Investment 13
<PAGE 13>
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 the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4130" for
Class A, "4140" for Class B, "4150" for Class C, "4160" for Class R, or "5600"
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 10).
Mail 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.
14
<PAGE 14>
[Application p1]
<PAGE>
[Application p2]
<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) 2000 Dreyfus Service Corporation
342P0300
<PAGE>
Dreyfus Premier Limited Term Income Fund
Investing in fixed-income securities for high current income
PROSPECTUS March 1, 2000
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 its 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 tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table compares the performance of each of the fund's share classes over
time to that of the 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. Of
course, past performance is no guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
6.18 8.00 -1.85 14.66 3.18 9.08 7.92 -1.93
90 91 92 93 94 95 96 97 98 99
CLASS R SHARES
BEST QUARTER: Q2 '95 +4.92%
WORST QUARTER: Q1 '94 -1.93%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
Inception date 1 Year 5 Years inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (4/7/94) -5.12% 5.52% 4.85%
CLASS B (12/19/94) -5.41% 5.53% 5.68%
CLASS C (12/19/94) -3.44% 5.37% 5.36%
CLASS R (7/11/91) -1.93% 6.43% 6.31%
LEHMAN BROTHERS
AGGREGATE BOND INDEX -0.82% 7.73% 7.46%*
</TABLE>
* 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.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
<PAGE 1>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
Fee table
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
<S> <C> <C> <C> <C>
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
</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 $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
</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 distribution expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
<PAGE 2>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.60% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
The fund is managed by Laurie Carroll. Ms. Carroll has managed the fund since
its inception and has been employed by Dreyfus as a portfolio manager since
October 1994. Ms. Carroll is a senior vice president and portfolio manager at
Mellon Bank. Ms. Carroll has been employed by Mellon Bank since 1986.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy' s preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
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, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS A 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 11.31 10.96 10.78 10.84 10.22
Investment operations: Investment income -- net .57 .58 .62 .58 .56
Net realized and unrealized gain (loss)
on investments (.71) .35 .19 (.07) .62
Total from investment operations (.14) .93 .81 .51 1.18
Distributions: Dividends from investment income -- net (.57) (.58) (.63) (.57) (.56)
Net asset value, end of period 10.60 11.31 10.96 10.78 10.84
Total return (%) (1) (1.26) 8.73 7.80 4.85 11.83
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .85 .85 .85 .85 .85
Ratio of net investment income to average net assets (%) 5.22 5.20 5.80 5.38 5.33
Portfolio turnover rate (%) 161.28 149.08 129.94 153.63 73.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 5,044 5,349 1,169 1,001 1,150
(1) EXCLUSIVE OF SALES CHARGE.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS B 1999 1998 1997 1996 1995(1)
- -------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 11.35 11.00 10.78 10.84 10.15
Investment operations: Investment income -- net .52 .52 .56 .52 .47
Net realized and unrealized gain (loss)
on investments (.71) .35 .23 (.07) .69
Total from investment operations (.19) .87 .79 .45 1.16
Distributions: Dividends from investment income -- net (.52) (.52) (.57) (.51) (.47)
Net asset value, end of period 10.64 11.35 11.00 10.78 10.84
Total return (%)(2) (1.73) 8.14 7.56 4.33 11.32
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.35 1.35 1.35 1.35 1.35(3)
Ratio of net investment income to average net assets (%) 4.72 4.49 5.06 4.86 4.85(3)
Portfolio turnover rate (%) 161.28 149.08 129.94 153.63 73.00
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 10,056 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>
<PAGE 4>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS C 1999 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 11.20 10.84 10.73 10.84 10.15
Investment operations: Investment income (loss) -- net .51 .52 (1.98) 3.05 .48
Net realized and unrealized gain (loss)
on investments (.70) .35 2.65 (2.65) .69
Total from investment operations (.19) .87 .67 .40 1.17
Distributions: Dividends from investment income -- net (.51) (.51) (.56) (.51) (.48)
Net asset value, end of period 10.50 11.20 10.84 10.73 10.84
Total return (%)(2) (1.74) 8.25 6.49 3.83 11.32
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.35 1.35 1.35 1.41 --
Ratio of net investment income to average net assets (%) 4.72 4.61 4.98 5.50 --
Portfolio turnover rate (%) 161.28 149.08 129.94 153.63 73.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,812 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 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 11.31 10.96 10.78 10.84 10.22
Investment operations: Investment income -- net .60 .61 .65 .60 .58
Net realized and unrealized gain (loss)
on investments (.70) .35 .19 (.06) .62
Total from investment operations (.10) .96 .84 .54 1.20
Distributions: Dividends from investment income -- net (.60) (.61) (.66) (.60) (.58)
Net asset value, end of period 10.61 11.31 10.96 10.78 10.84
Total return (%) (.91) 9.02 8.09 5.12 12.11
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets (%) .60 .60 .60 .60 .60
Ratio of net investment income to average net assets (%) 5.47 5.51 6.06 5.62 5.58
Portfolio turnover rate (%) 161.28 149.08 129.94 153.63 73.00
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 37,207 41,988 47,532 49, 664 69,924
</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 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.
- --------------------------------------------------------------------------------
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
<TABLE>
<CAPTION>
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%
* A 1.00% CDSC may be charged on any shares sold within one year of purchase
(except shares bought through dividend reinvestment).
</TABLE>
Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
CDSC as a % of your initial
Years since purchase investment or your redemption
was made (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 shares you own in this
fund, any other Dreyfus Premier fund, or any other fund that is advised by
Founders Asset Management LLC ("Founders"), an affiliate of Dreyfus, sold with a
sales load, 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
authorized entity. The fund' s investments are generally valued by using
available market quotations or at fair value, which may be determined by one or
more pricing services approved 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 generally are subject to higher annual
operating expenses and a CDSC.
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult 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 $10,000 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 USUALLY PAYS ITS SHAREHOLDERS monthly dividends from its net investment
income, and distributes any net capital gains it has realized once a year. Each
share class will generate a different dividend because each has different
expenses. Your distributions will be reinvested in the fund unless you instruct
the fund otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
<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
the fund into another Dreyfus fund or certai
Founders-advised funds
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges from
EXCHANGE PRIVILEGE the fund into another Dreyfus fund or certai
Founders-advised funds.
- --------------------------------------------------------------------------------
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
or Founders-advised 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 "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.
<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 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 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 12>
<PAGE>
NOTES
<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) 2000 Dreyfus Service Corporation
345P0300
<PAGE>
Dreyfus Premier Large Company Stock Fund
Investing in large-cap stocks for investment returns that exceed the Standard &
Poor's((reg.tm)) 500 Composite Stock Price Index
PROSPECTUS March 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Large Company Stock Fund
---------------------------------
Ticker Symbols CLASS A: DRDEX
CLASS B: DRLBX
CLASS C: DLCCX
CLASS R: DEIRX
CLASS T: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 7
Distributions and Taxes 10
Services for Fund Investors 11
Instructions for Regular Accounts 12
Instructions for IRAs 13
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's((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 its
total assets in a blended portfolio of growth and value stocks chosen through a
disciplined investment process that combines computer modeling techniques,
fundamental analysis and risk management. Consistency of returns and stability
of the fund's share price compared to the S&P 500 are primary goals of the
process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Dreyfus then manages risk by diversifying across companies and industries,
limiting the potential adverse impact from any one stock or industry. The fund
is structured so that its sector weightings and risk characteristics, such as
growth, size, quality and yield, are similar to those of the S&P 500.
Concepts to understand
S&P 500: an unmanaged index of 500 common stocks chosen to reflect the
industries of the U.S. economy.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks, screening each stock for relative attractiveness within
its economic sector and industry. To ensure that the model remains effective,
Dreyfus reviews each of the screens on a regular basis, and maintains the
flexibility to adapt the screening criteria to changes in market conditions.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile very similar to the S&P 500, the fund holds
fewer securities than the index. Owning fewer securities and the ability to
purchase companies not listed in the index can cause the fund to underperform
the index.
By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
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.
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table compares the performance of Class A, B, C and R shares over time to
that of the S&P 500, a widely recognized, unmanaged index of stock performance.
These returns reflect any applicable sales loads. Both tables assume the
reinvestment of dividends. Of course, past performance is no guarantee of future
results. Since Class T shares have less than one calendar year of performance,
past performance information for that class is not included in this section of
the prospectus. Performance for Class T shares will vary from the performance of
the fund's other share classes due to differences in charges and expenses.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
35.77 22.51 34.93 26.46 18.36
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +22.70%
WORST QUARTER: Q3 '98 -12.28%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Since
Inception date 1 Year 5 Years inception
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A (9/2/94) 11.23% 25.63% 23.08%
CLASS B (1/16/98) 13.13% -- 21.55%
CLASS C (1/16/98) 16.18% -- 23.23%
CLASS R (9/2/94) 18.36% 27.42% 24.75%
S&P 500 21.03% 28.54% 25.97%*
* BASED ON THE LIFE OF CLASS A AND CLASS R. FOR COMPARATIVE PURPOSES, THE
VALUE OF THE INDEX ON 8/31/94 IS USED AS THE BEGINNING VALUE ON 9/2/94.
</TABLE>
The Fund 1
<PAGE 1>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below.
Fee table
CLASS A CLASS B CLASS C CLASS R CLASS T
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE NONE*
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees .90 .90 .90 .90 .90
Rule 12b-1 fee .25 1.00 1.00 NONE .50
Other expenses .00 .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.15 1.90 1.90 .90 1.40
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1 MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF
REDEEMED WITHIN ONE YEAR.
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A $685 $919 $1,172 $1,892
CLASS B
WITH REDEMPTION $593 $897 $1,226 $1,848**
WITHOUT REDEMPTION $193 $597 $1,026 $1,848**
CLASS C
WITH REDEMPTION $293 $597 $1,026 $2,222
WITHOUT REDEMPTION $193 $597 $1,026 $2,222
CLASS R $92 $287 $498 $1,108
CLASS T $586 $873 $1,181 $2,054
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
2
<PAGE 2>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.90% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
Bert Mullins has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Mr. Mullins has been employed
as a portfolio manager by Laurel Capital Advisors, an affiliate of Dreyfus,
since October 1990. He is also a vice president, portfolio manager and senior
securities analyst for Mellon Bank, N.A.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
In addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
The Fund 3
<PAGE 3>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
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, which is available upon request.
YEAR ENDED OCTOBER 31,
CLASS A 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 20.45 18.23 14.49 12.00 9.95
Investment operations: Investment income -- net .03(1) .07 .20 .27 .22
Net realized and unrealized gain (loss)
on investments 4.68 3.39 4.26 2.54 2.05
Total from investment operations 4.71 3.46 4.46 2.81 2.27
Distributions: Dividends from investment income -- net (.04) (.15) (.20) (.20) (.22)
Dividends from net realized gain
on investments (1.15) (1.09) (.52) (.12) --
Total distributions (1.19) (1.24) (.72) (.32) (.22)
Net asset value, end of period 23.97 20.45 18.23 14.49 12.00
Total return (%) 23.86(2) 19.85(2) 32.01 23.87 23.20
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.15 1.15 1.15 1.15 1.15
Ratio of net investment income to average net assets (%) .13 .52 1.23 1.81 2.32
Portfolio turnover rate (%) 49.42 81.27 37.17 44.33 37.57
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 51,926 25,421 6,456 4,599 1,714
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) EXCLUSIVE OF SALES CHARGE.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS B 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 20.38 17.93
Investment operations: Investment income (loss) -- net (.14)(2) (.02)
Net realized and unrealized gain (loss) on investments 4.66 2.48
Total from investment operations 4.52 2.46
Distributions: Dividends from investment income -- net -- (.01)
Dividends from net realized gain on investments (1.15) --
Total distributions (1.15) (.01)
Net asset value, end of period 23.75 20.38
Total return (%)(3) 22.91 13.76(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.90 1.51(4)
Ratio of net investment income (loss) to average net assets (%) (.63) (.24)(4)
Portfolio turnover rate (%) 49.42 81.27
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 55,289 14,410
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE.
(4) NOT ANNUALIZED.
4
<PAGE 4>
YEAR ENDED OCTOBER 31,
CLASS C 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 20.38 17.93
Investment operations: Investment income (loss) -- net (.15)(2) (.02)
Net realized and unrealized gain (loss) on investments 4.67 2.48
Total from investment operations 4.52 2.46
Distributions: Dividends from investment income -- net -- (.01)
Dividends from net realized gain on investments (1.15) --
Total distributions (1.15) (.01)
Net asset value, end of period 23.75 20.38
Total return (%)(3) 22.97 13.70(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.90 1.51(4)
Ratio of net investment income (loss) to average net assets (%) (.64) (.24)(4)
Portfolio turnover rate (%) 49.42 81.27
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 23,249 3,154
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE.
(4) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS R 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 20.44 18.23 14.49 12.00 9.95
Investment operations: Investment income -- net .09(1) .17 .23 .21 .28
Net realized and unrealized gain (loss)
on investments 4.67 3.33 4.27 2.63 2.02
Total from investment operations 4.76 3.50 4.50 2.84 2.30
Distributions: Dividends from investment income -- net (.08) (.20) (.24) (.23) (.25)
Dividends from net realized gain
on investments (1.15) (1.09) (.52) (.12) --
Total distributions (1.23) (1.29) (.76) (.35) (.25)
Net asset value, end of period 23.97 20.44 18.23 14.49 12.00
Total return (%) 24.16 20.10 32.25 24.18 23.48
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .90 .90 .90 .90 .90
Ratio of net investment income to average net assets (%) .40 .85 1.46 2.06 2.57
Portfolio turnover rate (%) 49.42 81.27 37.17 44.33 37.57
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 31,503 29,933 28,224 13,387 4,509
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
</TABLE>
The Fund 5
<PAGE 5>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
OCTOBER 31,
CLASS T 1999(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 23.57
Investment operations: Investment income (loss) -- net (.01)(2)
Net realized and unrealized gain (loss) on investments .40
Total from investment operations .39
Net asset value, end of period 23.96
Total return (%)(3) 1.66(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .30(4)
Ratio of net investment income (loss) to average net assets (%) (.11)(4)
Portfolio turnover rate (%) 49.42
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 40
(1) FROM AUGUST 16, 1999 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE.
(4) NOT ANNUALIZED.
</TABLE>
6
<PAGE 6>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from those
described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a
contingent deferred sales charge (CDSC).
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institu- tions on behalf of their
clients; individuals may not purchase these shares directly (this share
class is not available for new accounts)
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any shares you own in this
fund, any other Dreyfus Premier fund, or any other fund that is advised by
Founders Asset Management LLC ("Founders"), an affiliate of Dreyfus, sold with a
sales load, 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.
Your Investment 7
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders holding Class A shares
since January 15, 1998 are not subject to any front-end sales loads. Because
Class A has lower expenses than Class T, if you invest $1 million or more in the
fund you should consider buying Class A shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ------------------------------------------------------------------------------------------------------------------------------------
Class Class Class Class
A T A T
- ------------------------------------------------------------------------------------------------------------------------------------
Up to $49,999 5.75% 4.50% 6.10% 4.70%
$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%
$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%
$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%
$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%
$1 million or more* 0.00% 0.00% 0.00% 0.00%
* A 1.00% CDSC may be charged on any shares sold within one year of purchase (except shares bought through
dividend reinvestment).
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
CDSC as a % of your initial
Years since purchase investment or your redemption
was made (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are 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 and Class T shares are offered to the public at NAV plus a sales charge.
Classes B, C and R are offered at NAV, but Classes B and C generally are subject
to higher annual operating expenses and a CDSC.
8
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult 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.
General policies
IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's total
assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment 9
<PAGE 9>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS quarterly dividends from its net
investment income and distributes any net capital gains it has realized once a
year. Each share class will generate a different dividend because each has
different expenses. Your distributions will be reinvested in the fund unless you
instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at left also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
10
<PAGE 10>
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
the fund into another Dreyfus fund
or certain Founders-advised funds
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from the fund into another
Dreyfus fund or certain
Founders-advised funds.
- --------------------------------------------------------------------------------
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
or Founders-advised fund. You can also exchange Class T shares into Class A
shares of certain Dreyfus Premier fixed-income 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 11
<PAGE 11>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional
Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4070" for
Class A, "4680" for Class B, "4690" for Class C, "4910" for Class R, or "5610"
for Class T.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
WIRE Call us or your financial representative to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be wired
to your bank.
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
CHECK Call us or your financial representative to request your transaction. A
check will be sent to the address of record.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
12
<PAGE 12>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4070" for
Class A, "4680" for Class B, "4690" for Class C, "4910" for Class R, or "5610"
for Class T.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials. All contributions
will count as current year.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail your request to: The Dreyfus Trust Company P.O. Box 6427, Providence, RI
02940-6427 Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 13
<PAGE 13>
NOTES
<PAGE>
[Application p1]
<PAGE>
[Application p2]
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Large Company Stock Fund
A series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 2000 Dreyfus Service Corporation
318P0300
Dreyfus Premier Midcap Stock Fund
Investing in midcap stocks for investment returns that exceed the S&P
400((reg.tm))
PROSPECTUS March 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Midcap Stock Fund
----------------------------------
Ticker Symbols CLASS A: DPMAX
CLASS B: DMSBX
CLASS C: N/A
CLASS R: DDMRX
CLASS T: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 3
Management 4
Financial Highlights 5
Your Investment
- --------------------------------------------------------------------------------
Account Policies 8
Distributions and Taxes 11
Services for Fund Investors 12
Instructions for Regular Accounts 13
Instructions for IRAs 14
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's 400 MidCap Index
(S&P 400). This objective may be changed without shareholder approval. To pursue
its goal, the fund invests at least 65% of total assets in a blended portfolio
of growth and value stocks of medium- size companies, those whose market values
range between $200 million and $10 billion. Stocks are chosen through a
disciplined process combining computer modeling techniques, fundamental analysis
and risk management. Consistency of returns and stability of the fund's share
price compared to the S&P 400 are primary goals of the process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Dreyfus then manages risk by diversifying across companies and industries,
limiting the potential adverse impact from any one stock or industry. The fund
is structured so that its sector weightings and risk characteristics such as
growth, size, quality and yield are similar to those of the S&P 400.
Concepts to understand
MIDCAP COMPANIES: established companies that may not be well known. Midcap
companies have the potential to grow faster than large-cap companies, but may
lack the resources to weather economic shifts, and are more volatile than large
companies.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks. Dreyfus reviews each of the screens on a regular basis.
Dreyfus also maintains the flexibility to adapt the screening criteria to
changes in market conditions.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Midsize companies carry additional risks because their earnings tend to be less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies. Some of the fund's investments will
rise and fall based on investor perception rather than economics.
Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile very similar to the S&P 400, the fund holds
fewer securities than the index. Owning fewer securities and the ability to
purchase companies not listed in the S&P 400 can cause the fund to underperform
the index.
By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
Other potential risks
The fund may, at times, invest in options and futures to hedge the fund's
portfolio and also to increase returns. There is the risk that such practices,
when employed, may reduce returns or increase volatility.
The fund may invest in securities of foreign issuers, which carry additional
risks such as less liquidity, changes in currency exchange rates, a lack of
comprehensive company information and political instability.
The Fund 1
<PAGE 1>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table compares the performance of Class A, B, C and R shares over time to
that of the S&P 400, a widely recognized, unmanaged index of midcap stock
performance. These returns reflect any applicable sales loads. Both tables
assume the reinvestment of dividends. Of course, past performance is no
guarantee of future results. Since Class T shares have less than one calendar
year of performance, past performance information for that class is not included
in this section of the prospectus. Performance for Class T shares will vary from
the performance of the fund's other share classes due to differences in charges
and expenses.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
-6.71 38.00 26.70 36.10 8.90 10.84
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +22.30%
WORST QUARTER: Q3 '98 -16.74%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average annual total return AS OF 12/31/99
Since
Inception date 1 Year 5 Years inception
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A (4/6/94) 4.30% 21.74% 17.43%
CLASS B (1/16/98) 5.74% -- 9.56%
CLASS C (1/16/98) 8.79% -- 11.48%
CLASS R (11/12/93) 10.84% 23.50% 17.63%
S&P 400 14.72% 23.05% 18.04%*
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON
10/31/93 IS USED AS THE BEGINNING VALUE ON 11/12/93.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
2
<PAGE 2>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fee table
CLASS A CLASS B CLASS C CLASS R CLASS T
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE NONE*
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.10 1.10 1.10 1.10 1.10
Rule 12b-1 fee .25 1.00 1.00 NONE .50
Other expenses .00 .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.35 2.10 2.10 1.10 1.60
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1 MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF
REDEEMED WITHIN ONE YEAR.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A $705 $978 $1,272 $2,105
CLASS B
WITH REDEMPTION $613 $958 $1,329 $2,064**
WITHOUT REDEMPTION $213 $658 $1,129 $2,064**
CLASS C
WITH REDEMPTION $313 $658 $1,129 $2,431
WITHOUT REDEMPTION $213 $658 $1,129 $2,431
CLASS R $112 $350 $606 $1,340
CLASS T $605 $932 $1,282 $2,265
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
The Fund 3
<PAGE 3>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 1.10% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
John O'Toole has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Mr. O'Toole is a senior vice
president and a portfolio manager for Mellon Equity Associates. He has been
employed by Mellon Bank since 1979.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
In addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
4
<PAGE 4>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of 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, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS A 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.24 17.02 14.36 11.92 9.75
Investment operations: Investment income (loss) -- net (.03)(1) (.01) .02 .04 .09
Net realized and unrealized
gain (loss) on investments 2.48 (.29) 4.79 2.98 2.17
Total from investment operations 2.45 (.30) 4.81 3.02 2.26
Distributions: Dividends from investment
income -- net -- (.01) (.01) (.05) (.09)
Dividends from net realized
gain on investments -- (2.47) (2.14) (.53) --
Total distributions -- (2.48) (2.15) (.58) (.09)
Net asset value, end of period 16.69 14.24 17.02 14.36 11.92
Total return (%) (2) 17.21 (2.16) 38.40 26.29 23.39
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.35 1.35 1.35 1.35 1.35
Ratio of net investment income (loss) to average net assets (%) (.17) (.19) .16 .28 .86(
Portfolio turnover rate (%) 80.15 78.02 81.87 90.93 71.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 83,674 38,267 6,847 3,205 1,417
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) EXCLUSIVE OF SALES CHARGE.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS B 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.16 14.65
Investment operations: Investment income (loss) -- net (.15)(2) (.06)
Net realized and unrealized gain (loss) on investments 2.45 (.43)
Total from investment operations 2.30 (.49)
Net asset value, end of period 16.46 14.16
Total return (%)(3) 16.32 (3.41)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.10 1.66(4)
Ratio of net investment income (loss) to average net assets (%) (.92) (.77)(4
Portfolio turnover rate (%) 80.15 78.02
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 25,724 16,867
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
The Fund 5
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED OCTOBER 31,
CLASS C 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.17 14.65
Investment operations: Investment income (loss) -- net (.15)(2) (.06)
Net realized and unrealized gain (loss) on investments 2.46 (.42)
Total from investment operations 2.31 (.48)
Net asset value, end of period 16.48 14.17
Total return (%)(3) 16.30 (3.28)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.10 1.66(4)
Ratio of net investment income (loss) to average net assets (%) (.92) (.77)(4)
Portfolio turnover rate (%) 80.15 78.02
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 5,473 3,485
(1) FROM JANUARY 16, 1998 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS R 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.28 17.03 14.36 11.92 9.76
Investment operations: Investment income -- net .01(1) .01 .05 .07 .12
Net realized and unrealized
gain (loss) on investments 2.48 (.26) 4.80 2.98 2.16
Total from investment operations 2.49 (.25) 4.85 3.05 2.28
Distributions: Dividends from investment
income -- net -- (.03) (.04) (.08) (.12)
Dividends from net realized
gain on investments -- (2.47) (2.14) (.53) --
Total distributions -- (2.50) (2.18) (.61) (.12)
Net asset value, end of period 16.77 14.28 17.03 14.36 11.92
Total return (%) 17.44 (1.88) 38.88 26.61 23.57
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.10 1.10 1.10 1.10 1.10
Ratio of net investment income to average net assets (%) .09 .05 .42 .57 1.11(
Portfolio turnover rate (%) 80.15 78.02 81.87 90.93 71.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 94,455 53,888 31,769 15,644 12,129
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PERIOD ENDED
OCTOBER 31,
CLASS T 1999(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 16.84
Investment operations: Investment income (loss) -- net (.01)(2)
Net realized and unrealized gain (loss) on investments (.15)
Total from investment operations (.16)
Net asset value, end of period 16.68
Total return (%)(3) (.95)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .34(4)
Ratio of net investment income (loss) to average net assets (%) (.06)(4)
Portfolio turnover rate (%) 80.15
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 2
(1) FROM AUGUST 16, 1999 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE
(4) NOT ANNUALIZED.
</TABLE>
The Fund 7
<PAGE 7>
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
contingent deferred sales charge (CDSC).
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institutions on behalf of their
clients (individuals may not purchase these shares directly)
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any shares you own in this
fund, any other Dreyfus Premier fund, or any other fund that is advised by
Founders Asset Management LLC ("Founders"), an affiliate of Dreyfus, sold with a
sales load, 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.
8
<PAGE 8>
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders holding Class A shares
since January 15, 1998 are not subject to any front-end sales loads. Because
Class A has lower expenses than Class T, if you invest $1 million or more in the
fund, you should consider buying Class A shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ------------------------------------------------------------------------------------------------------------------------------------
Class Class Class Class
A T A T
- ------------------------------------------------------------------------------------------------------------------------------------
Up to $49,999 5.75% 4.50% 6.10% 4.70%
$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%
$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%
$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%
$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%
$1 million or more* 0.00% 0.00% 0.00% 0.00%
* A 1.00% CDSC may be charged on any shares sold within one year of purchase
(except shares bought through dividend reinvestment).
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
CDSC as a % of your initial
Years since purchase investment or your redemption
was made (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are 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 and Class T shares are offered to the public at NAV plus a sales charge.
Classes B, C and R are offered at NAV, but Classes B and C generally are subject
to higher annual operating expenses and a CDSC.
Your Investment 9
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult 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:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
General policies
IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's total
assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
10
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
and distributes any net capital gains it has realized once a year. Each share
class will generate a different dividend because each has different expenses.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND OTHER DISTRIBUTIONS ARE TAXABLE to most investors (unless
your investment is in an IRA or other tax-advantaged account). The tax status of
any distribution is the same regardless of how long you have been in the fund
and whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at left also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
Your Investment 11
<PAGE 11>
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
the fund into another Dreyfus fund
or certain Founders-advised funds
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges from
EXCHANGE PRIVILEGE the fund into another Dreyfus fund
or certain Founders-advised funds.
- --------------------------------------------------------------------------------
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
or Founders-advised fund. You can also exchange Class T shares into Class A
shares of certain Dreyfus Premier fixed-income 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.
12
<PAGE 12>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4040" for
Class A, "4700" for Class B, "4710" for Class C, "4030" for Class R, or "5630"
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 10)
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
WIRE Call us or your financial representative to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be wired
to your bank.
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
CHECK Call us or your financial representative to request your transaction. A
check will be sent to the address of record.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment 13
<PAGE 13>
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 the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044210
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4040" for
Class A, "4700" for Class B, "4710" for Class C, "4030" for Class R, or "5630"
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 10).
Mail 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.
14
<PAGE 14>
[Application p1]
<PAGE>
[Application p2]
<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) 2000 Dreyfus Service Corporation 330P0300
<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, 2000
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.
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
CLASS T: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 3
Management 4
Financial Highlights 5
Your Investment
- --------------------------------------------------------------------------------
Account Policies 7
Distributions and Taxes 10
Services for Fund Investors 11
Instructions for Regular Accounts 12
Instructions for IRAs 13
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Russell 2000((reg.tm)) Value Index
("Russell 2000 Value"). This objective may be changed without shareholder
approval. To pursue its goal, the fund normally invests at least 80% of its
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.
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: 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 midsize 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, 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 to avoid losses, it
could reduce the benefit from any upswing in the market. During such periods,
the fund may not achieve its investment objective.
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
comprehensive company information and political instability.
The Fund 1
<PAGE 1>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the performance of the fund's Class A shares for calendar year 1999.
These performance figures do not reflect sales loads, and would be lower if they
did. The second table compares the performance of Class A, B, C and R shares
over time to that of the Russell 2000 Value, a widely recognized, unmanaged
index of small-cap value stock performance. These returns reflect any applicable
sales loads. Both tables assume reinvestment of dividends. Of course, past
performance is no guarantee of future results. Since Class T shares are new,
past performance information is not available for that class as of the date of
this prospectus. Performance for Class T shares will vary from the performance
of the fund's other share classes due to differences in charges and expenses.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS A SHARES
-4.72
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q2 '99 +13.19%
WORST QUARTER: Q1 '99 -12.50%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/99
Inception Since
date 1 Year inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (4/1/98) -10.22% -10.45%
CLASS B (4/1/98) -9.13% -10.13%
CLASS C (4/1/98) -6.29% -8.01%
CLASS R (4/1/98) -4.46% -7.10%
RUSSELL 2000 VALUE -1.49% -8.83%
</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 2>
<TABLE>
<CAPTION>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
Fee table
CLASS A CLASS B CLASS C CLASS R CLASS T
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
<S> <C> <C> <C> <C> <C>
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE NONE*
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.25 1.25 1.25 1.25 1.25
Rule 12b-1 fee .25 1.00 1.00 NONE .50
Other expenses .00 .00 .00 .00 .00**
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.50 2.25 2.25 1.25 1.75
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1 MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF
REDEEMED WITHIN ONE YEAR.
** "OTHER EXPENSES" FOR CLASS T SHARES ARE ESTIMATED FOR THE CURRENT FISCAL YEAR BASED ON THE APPLICABLE AMOUNTS FOR CLASS A, B, C
AND R SHARES FOR THE FUND'S LAST FISCAL YEAR.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $719 $1,022 $1,346 $2,263
CLASS B
WITH REDEMPTION $628 $1,003 $1,405 $2,223***
WITHOUT REDEMPTION $228 $703 $1,205 $2,223***
CLASS C
WITH REDEMPTION $328 $703 $1,205 $2,585
WITHOUT REDEMPTION $228 $703 $1,205 $2,585
CLASS R $127 $397 $686 $1,511
CLASS T $620 $976 $1,356 $2,420
*** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
The Fund
<PAGE 3>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 1.25% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
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, an affiliate of Dreyfus. He has been with Mellon Bank
since 1973.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
In addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
4
<PAGE 4>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of Classes A, B, C and R for the
fiscal periods indicated. "Total return" shows how much your investment in the
fund would have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These financial highlights have been
independently audited by KPMG LLP, whose report, along with the fund's financial
statements, is included in the annual report, which is available upon request.
Since Class T shares are new, financial highlights information is not available
for that class as of the date of this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
CLASS A 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C>
Net asset value, beginning of period 10.45 12.50
Investment operations: Investment income (loss) -- net .01(2) .03
Net realized and unrealized gain (loss) on investments .20 (2.08)
Total from investment operations .21 (2.05)
Distributions: Dividends from investment income -- net (.03) --
Net asset value, end of period 10.63 10.45
Total return (%)(3) 2.01 (16.40)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.50 .88(4)
Ratio of net investment income (loss) to average net assets (%) .12 .24(4)
Portfolio turnover rate (%) 53.87 19.72(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 4,432 3,169
(1) FROM APRIL 1, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
YEAR ENDED OCTOBER 31,
CLASS B 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 10.41 12.50
Investment operations: Investment income (loss) -- net (.07)(2) (.02)
Net realized and unrealized gain (loss) on investments .20 (2.07)
Total from investment operations .13 (2.09)
Distributions: Dividends from investment income -- net -- --
Net asset value, end of period 10.54 10.41
Total return (%)(3) 1.25 (16.72)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.25 1.32(4)
Ratio of net investment income (loss) to average net assets (%) (.63) (.20)(4)
Portfolio turnover rate (%) 53.87 19.72(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 990 639
(1) FROM APRIL 1, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
The Fund 5
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED OCTOBER 31,
CLASS C 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 10.41 12.50
Investment operations: Investment income (loss) -- net (.07)(2) (.02)
Net realized and unrealized gain (loss) on investments .21 (2.07)
Total from investment operations .14 (2.09)
Distributions: Dividends from investment income -- net -- --
Net asset value, end of period 10.55 10.41
Total return (%)(3) 1.34 (16.72)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.25 1.32(4)
Ratio of net investment income (loss) to average net assets (%) (.63) (.19)(4)
Portfolio turnover rate (%) 53.87 19.72(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 660 621
(1) FROM APRIL 1, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
YEAR ENDED OCTOBER 31,
CLASS R 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 10.47 12.50
Investment operations: Investment income (loss) -- net .04(2) .04
Net realized and unrealized gain (loss) on investments .20 (2.07)
Total from investment operations .24 (2.03)
Distributions: Dividends from investment income -- net (.06)
Net asset value, end of period 10.65 10.47
Total return (%) 2.26 (16.24)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 .73(3)
Ratio of net investment income (loss) to average net assets (%) .36 .38(3)
Portfolio turnover rate (%) 53.87 19.72(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 509 420
(1) FROM APRIL 1, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
6
<PAGE 6>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a
contingent deferred sales charge (CDSC).
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter term investment horizon
* CLASS R shares are designed for eligible institu-
tions on behalf of their clients (individuals may not purchase these shares
directly)
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a shorter term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any shares you own in this
fund, any other Dreyfus Premier fund, or any other fund that is advised by
Founders Asset Management LLC ("Founders"), an affiliate of Dreyfus, sold with a
sales load, 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.
Your Investment 7
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
<TABLE>
<CAPTION>
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.
- --------------------------------------------------------------------------------
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ------------------------------------------------------------------------------------------------------------------------------------
Class Class Class Class
A T A T
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 dividend reinvestment)
..
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
CDSC as a % of your initial
Years since purchase investment or your redemption
was made (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are 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 and Class T shares are offered to the public at NAV plus a sales charge.
Classes B, C and R are offered at NAV, but Classes B and C generally are subject
to higher operating expenses and a CDSC.
8
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult your financial
representative the SAI for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
General policies
IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 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:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who, in the
fund's view, is likely to engage in excessive trading (usually defined as more
than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or during
unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment 9
<PAGE 9>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
and distributes any net capital gains it has realized once a year. Each share
class will generate a different dividend because each has different expenses.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at left also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
10
<PAGE 10>
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
the fund into another Dreyfus fund
or certain Founders-advised funds
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from the fund into another
Dreyfus fund or certain
Founders-advised funds.
- --------------------------------------------------------------------------------
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
or Founders-advised fund. You can also exchange Class T shares into Class A
shares of certain Dreyfus Premier fixed-income 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
<PAGE 11>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4620" for
Class A, "4630" for Class B, "4650" for Class C, "4660" for Class R, or "5670"
for Class T
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
<PAGE 12>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail 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, "4660" for Class R or "5670"
for Class T.
Automatically
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials. All contributions
will count as current year.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see page 9).
Mail your request to: The Dreyfus Trust Company P.O. Box 6427, Providence, RI
02940-6427 Attn: Institutional Processing
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN.
Your Investment 13
<PAGE 13>
NOTES
<PAGE>
[Application p1]
<PAGE>
[Application p2]
<PAGE>
NOTES
<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) 2000 Dreyfus Service Corporation
148P0300
<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, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Small Company Stock Fund
---------------------------------
Ticker Symbols CLASS A: DPSAX
CLASS B: DPSBX
CLASS C: DPSCX
CLASS R: DPSRX
CLASS T: N/A
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 3
Management 4
Financial Highlights 5
Your Investment
- --------------------------------------------------------------------------------
Account Policies 8
Distributions and Taxes 11
Services for Fund Investors 12
Instructions for Regular Accounts 13
Instructions for IRAs 14
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 midsize U.S.
companies, whose market values generally range between $1 billion and $5
billion. The fund may purchase securities of companies in initial public
offerings or shortly thereafter.
Stocks are chosen through a disciplined process combining computer modeling
techniques, fundamental analysis and risk management. Consistency of returns and
stability of the fund's share price compared to the Russell 2500 are primary
goals of the investment process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.
Dreyfus then manages risk by diversifying across companies and industries,
limiting the potential adverse impact from any one stock or industry. The fund
is structured so that its sector weightings and risk characteristics, such as
growth, size, quality and yield, are similar to those of the Russell 2500.
Concepts to understand
SMALL COMPANIES: new and often entrepreneurial companies. Small companies tend
to grow faster than large-cap companies, but are also more volatile and have a
higher failure rate.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks. Dreyfus reviews each of the screens on a regular basis and
maintains the flexibility to adapt the screening criteria to changes in market
conditions.
<PAGE>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.
Small and midsize companies carry additional risks because their operating
histories tend to be more limited, their earnings less predictable, their share
prices more volatile and their securities less liquid than those of larger, more
established companies. The prices of securities purchased in initial public
offerings or shortly thereafter may be very volatile. 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 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
comprehensive company information and political instability.
The Fund 1
<PAGE 1>
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class R performance from year to year. The
second table compares the performance of each of the fund's share classes over
time to that of the Russell 2500, a widely recognized, unmanaged index of
small-cap stock performance. These returns reflect any applicable sales loads.
Both tables assume the reinvestment of dividends. Of course, past performance is
no guarantee of future results. Since Class T shares have less than one calendar
year of performance, past performance information for that class is not included
in this section of the prospectus. Performance for Class T shares will vary from
the performance of the fund's other share classes due to differences in charges
and expenses.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS R SHARES
40.43 22.13 22.01 -5.85 10.04
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +16.40%
WORST QUARTER: Q3 '98 -21.81%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average annual total return AS OF 12/31/99
Since
Inception date 1 Year 5 Years inception
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A (9/2/94) 3.51% 15.11% 13.82%
CLASS B (12/19/94) 4.96% 15.39% 16.27%
CLASS C (12/19/94) 7.95% 15.63% 16.39%
CLASS R (9/2/94) 10.04% 16.74% 15.35%
RUSSELL 2500 24.15% 19.43% 17.72%*
* BASED ON THE LIFE OF CLASS A AND CLASS R. FOR COMPARATIVE PURPOSES, THE
VALUE OF THE INDEX ON 8/31/94 IS USED AS THE BEGINNING VALUE ON 9/2/94.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
2
<PAGE 2>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fee table
CLASS A CLASS B CLASS C CLASS R CLASS T
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 5.75 NONE NONE NONE 4.50
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE NONE*
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees 1.25 1.25 1.25 1.25 1.25
Rule 12b-1 fee .25 1.00 1.00 NONE .50
Other expenses .00 .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1.50 2.25 2.25 1.25 1.75
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1 MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF
REDEEMED WITHIN ONE YEAR.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A $719 $1,022 $1,346 $2,263
CLASS B
WITH REDEMPTION $628 $1,003 $1,405 $2,223**
WITHOUT REDEMPTION $228 $703 $1,205 $2,223**
CLASS C
WITH REDEMPTION $328 $703 $1,205 $2,585
WITHOUT REDEMPTION $228 $703 $1,205 $2,585
CLASS R $127 $397 $686 $1,511
CLASS T $620 $976 $1,356 $2,420
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
The Fund 3
<PAGE 3>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 1.25% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
The fund is co-managed by James C. Wadsworth and Anthony J. Galise. Mr.
Wadsworth has been employed by Dreyfus as a portfolio manager since October 1994
and is also chief investment officer at Laurel Capital Advisors, an affiliate of
Dreyfus. He is also chief equity officer and senior vice president of Mellon
Private Asset Management. He has been employed by Mellon Bank since 1977. Mr.
Galise has been employed by Dreyfus as a portfolio manager since April 1996. He
is also a portfolio manager at Laurel Capital Advisors and a vice president and
portfolio manager at Mellon Bank. He joined Mellon in 1993 with over 20 years of
equity investment experience.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000. Dreyfus
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
In addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
4
<PAGE 4>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of 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, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS A 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 15.18 18.89 15.13 13.09 10.07
Investment operations: Investment income (loss) -- net (.04)(1) (.02) (.04) (.02) .02
Net realized and unrealized
gain (loss) on investments 1.53 (2.78) 4.52 2.48 3.03
Total from investment operations 1.49 (2.80) 4.48 2.46 3.05
Distributions: Dividends from investment
income -- net -- -- -- -- (.03)
Dividends from net realized
gain on investments -- (.91) (.72) (.42) --
Total distributions -- (.91) (.72) (.42) (.03)
Net asset value, end of period 16.67 15.18 18.89 15.13 13.09
Total return (%)(2) 9.81 (15.42) 30.73 19.22 30.31
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.50 1.50 1.50 1.50 1.50
Ratio of net investment income (loss) to average net assets (%) (.25) (.32) (.35) (.16) .10(
Portfolio turnover rate (%) 43.32 47.44 39.18 49.03 56.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 15,688 113,462 9,190 3,884 1,359
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) EXCLUSIVE OF SALES CHARGE.
YEAR ENDED OCTOBER 31,
CLASS B 1999 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.75 18.51 14.95 13.05 9.49
Investment operations: Investment income (loss) -- net (.16)(2) (.11) (.03) (.07) (.03)
Net realized and unrealized gain
(loss) on investments 1.47 (2.74) 4.31 2.39 3.59
Total from investment operations 1.31 (2.85) 4.28 2.32 3.56
Distributions: Dividends from net realized gain
on investments -- (.91) (.72) (.42) --
Net asset value, end of period 16.06 14.75 18.51 14.95 13.05
Total return (%)(3) 8.88 (16.10) 29.72 18.17 37.51(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.25 2.25 2.25 2.24 1.95(4)
Ratio of net investment income (loss) to average net assets (%) (.99) (1.07) (1.02) (.93) (.56)(4)
Portfolio turnover rate (%) 43.32 47.44 39.18 49.03 56.00(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 23,918 25,183 19,257 4,633 1,025
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
The Fund 5
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED OCTOBER 31,
CLASS C 1999 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.75 18.52 14.95 13.04 9.49
Investment operations: Investment income (loss) -- net (.16)(2) (.14) .01 (.09) (.01)
Net realized and unrealized gain
(loss) on investments 1.48 (2.72) 4.28 2.42 3.56
Total from investment operations 1.32 (2.86) 4.29 2.33 3.55
Distributions: Dividends from net realized gain
on investments -- (.91) (.72) (.44) --
Net asset value, end of period 16.07 14.75 18.52 14.95 13.04
Total return (%)(3) 8.88 (16.08) 29.79 18.27 37.41(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.25 2.25 2.25 2.25 1.14(4)
Ratio of net investment income (loss) to average net assets (%) (.99) (1.08) (1.01) (.93) (.33)(4)
Portfolio turnover rate (%) 43.32 47.44 39.18 49.03 56.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 3,906 4,323 3,647 514 147
(1) FROM DECEMBER 19, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31, 1995.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
YEAR ENDED OCTOBER 31,
CLASS R 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 15.27 18.96 15.15 13.10 10.07
Investment operations: Investment income (loss) -- net .00(1,2) (.01) .00(2) .01 .04
Net realized and unrealized gain
(loss) on investments 1.54 (2.77) 4.53 2.48 3.04
Total from investment operations 1.54 (2.78) 4.53 2.49 3.08
Distributions: Dividends from investment
income -- net -- -- -- (.02) (.05)
Dividends from net realized gain
on investments -- (.91) (.72) (.42) --
Total distributions -- (.91) (.72) (.44) (.05)
Net asset value, end of period 16.81 15.27 18.96 15.15 13.10
Total return (%) 10.08 (15.31) 31.04 19.43 30.70
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.25 1.25 1.25 1.25
Ratio of net investment income (loss) to average net assets (%) -- (.07) .02 .09 .35
Portfolio turnover rate (%) 43.32 47.44 39.18 49.03 56.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 314,005 238,953 244,292 112,209 44,091
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) AMOUNT REPRESENTS LESS THAN $.01.
</TABLE>
6
<PAGE 6>
<TABLE>
<CAPTION>
<S> <C>
PERIOD ENDED
OCTOBER 31,
CLASS T 1999(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 16.70
Investment operations: Investment income (loss) -- net (.02)(2)
Net realized and unrealized gain
(loss) on investments (.01)
Total from investment operations (.03)
Distributions:
Net asset value, end of period 16.67
Total return (%)(3) (.18)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .35(4)
Ratio of net investment income (loss) to average net assets (%) (.14)(4)
Portfolio turnover rate (%) 43.32
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1
(1) FROM AUGUST 16, 1999 (COMMENCEMENT OF INITIAL OFFERING) TO OCTOBER 31,
1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE. (4) NOT ANNUALIZED.
</TABLE>
The Fund 7
<PAGE 7>
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
contingent deferred sales charge (CDSC).
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institu- tions on behalf of their
clients (individuals may not purchase these shares directly)
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any shares you own in this
fund, any other Dreyfus Premier fund, or any other fund that is advised by
Founders Asset Management LLC ("Founders"), an affiliate of Dreyfus, sold with a
sales load, 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.
8
<PAGE 8>
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay or may qualify for a reduced sales charge to buy or sell shares. Consult
your financial representative or the SAI to see if this may apply to you.
Shareholders holding Class A shares since December 19, 1994 are not subject to
any front-end sales loads. Shareholders holding Class A shares since November
30, 1996 are subject to reduced loads. Because Class A has lower expenses than
Class T, if you invest $1 million or more in the fund you should consider buying
Class A shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ------------------------------------------------------------------------------------------------------------------------------------
Class Class Class Class
A T A T
- ------------------------------------------------------------------------------------------------------------------------------------
Up to $49,999 5.75% 4.50% 6.10% 4.70%
$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%
$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%
$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%
$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%
$1 million or more* 0.00% 0.00% 0.00% 0.00%
* A 1.00% CDSC may be charged on any shares sold within one year of purchase (except shares bought through
dividend reinvestment).
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
CDSC as a % of your initial
Years since purchase investment or your redemption
was made (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are 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 and Class T shares are offered to the public at NAV plus a sales charge.
Classes B, C and R are offered at NAV, but Classes B and C generally are subject
to higher annual operating expenses and a CDSC.
Your Investment 9
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult 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.
General policies
IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's total
assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 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.
10
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
and distributes any net capital gains it has realized once a year. Each share
class will generate a different dividend because each has different expenses.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at left also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
Your Investment 11
<PAGE 11>
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
the fund into another Dreyfus fund
or certain Founders-advised funds
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges from
EXCHANGE PRIVILEGE the fund into another Dreyfus fund
or certain Founders-advised funds.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals from most
WITHDRAWAL PLAN 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
or Founders-advised fund. You can also exchange Class T shares into Class A
shares of certain Dreyfus Premier fixed-income 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.
12
<PAGE 12>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional
Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4410" for
Class A, "4420" for Class B, "4430" for Class C, "4960" for Class R, or "5640"
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 10)
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.
Your Investment 13
<PAGE 13>
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 the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your investment to Boston Safe Depost & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4410" for
Class A, "4420" for Class B, "4430" for Class C, "4960" for Class R, or "5640"
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 10).
Mail 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.
14
<PAGE 14>
[Application p1]
<PAGE>
[Application p2]
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Small Company Stock Fund
A series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 2000 Dreyfus Service Corporation 385P0300
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, 2000
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: DPMTX
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 5
Your Investment
- --------------------------------------------------------------------------------
Account Policies 7
Distributions and Taxes 10
Services for Fund Investors 11
Instructions for Regular Accounts 12
Instructions for IRAs 13
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks 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).
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 to avoid losses, it
could reduce the benefit from any upswing in the market. During such periods,
the fund may not achieve its investment objective.
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 comprehensive 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 tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class A performance from year to year.
These performance figures do not reflect sales loads, and would be lower if they
did. The second table compares the performance of each of the fund's share
classes over time to that of the Standard & Poor's 500((reg.tm) )Composite Stock
Price Index (S&P 500), a widely recognized, unmanaged index of stock
performance. These returns reflect any applicable sales loads. Both tables
assume the reinvestment of dividends. Of course, past performance is no
guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS A SHARES
29.14 10.58
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +20.53%
WORST QUARTER: Q3 '98 -9.73%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average annual total return AS OF 12/31/99
Since
Inception date 1 Year inception
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A (11/4/97) 4.24% 15.77%
CLASS B (11/4/97) 5.81% 16.96%
CLASS C (11/4/97) 8.82% 18.09%
CLASS T (11/4/97) 5.42% 16.21%
S&P 500 21.03% 26.18%*
* 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 1>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
Fee table
CLASS A CLASS B CLASS C CLASS T
- ------------------------------------------------------------------------------------------------------------------------------------
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*
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
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>
<S> <C> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
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 distribution expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
2
<PAGE 2>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 1.10% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. 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, 1999, Sarofim managed approximately $7.7 billion
in assets for five other registered investment companies and provided investment
advisory services to discretionary accounts having aggregate assets of
approximately $48.5 billion.
Fayez Sarofim, president and chairman of Sarofim, is the fund's primary
portfolio manager. Mr. Sarofim founded Fayez Sarofim & Co. in 1958.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Related performance information
This section contains performance information derived from historical composite
performance of Equity Fund Private Accounts currently managed by Fayez Sarofim &
Co. This information can be useful to investors in deciding whether to purchase
fund shares. THE PERFORMANCE OF THE PRIVATE ACCOUNTS SHOULD NOT BE USED AS A
SUBSTITUTE FOR THE FUND'S OWN PERFORMANCE, NOR BE CONSIDERED INDICATIVE OF THE
FUTURE PERFORMANCE OF THE FUND.
The Private Accounts composing the Equity Fund Composite have investment
objectives, policies, and strategies substantially similar to those of the fund.
The fund seeks long-term capital appreciation by investing mainly in high
quality, low-dividend-yielding domestic companies that do business globally. The
fund also seeks to minimize taxable distributions to shareholders annually. In
seeking to achieve each objective, Sarofim employs its "buy-and-hold" investment
strategy, which entails minimizing annual portfolio turnover (generally, to 15%
or less annually). The "buy-and-hold" approach can be expected to minimize
taxable distributions arising from the frequent purchase and sale of portfolio
securities.
The Equity Fund Composite consists of 282 fee-paying, tax-exempt portfolios
managed by Sarofim or its affiliates. While these Private Accounts are not
expressly managed to minimize distributions, the same "buy-and-hold" investment
strategy used for the fund is employed in managing the Private Accounts.
Although the "buy-and-hold" strategy is the primary means by which the fund
seeks to achieve its tax-managed objective, the fund may also seek to achieve
that objective by selling higher-priced securities to realize a lower gain when
it does sell securities, or by selling securities at a loss to offset previously
realized gains. Because the Private Accounts are not subject to the same express
tax-managed objective as the fund, Sarofim may or may not take these latter
considerations into account in selling securities from the Private Accounts.
However, if Sarofim is successful in maintaining very low portfolio turnover
annually, the Private Accounts, like the funds, can be expected to achieve a
relatively high "tax-efficiency."
The Fund 3
<PAGE 3>
MANAGEMENT (CONTINUED)
The Private Accounts are not registered under the Investment Company Act of
1940, so they are not subject to the same securities and tax law restrictions as
the fund. If the Private Accounts were subject to these restrictions, their
performance might have been adversely affected. The performance results of the
Private Accounts have been prepared and are presented in accordance with
Performance Presentation Standards of the Association for Investment Management
and Research. The performance results of the Private Accounts would have been
lower had applicable management fees been reflected or had they been subject to
the fees and expenses incurred by the fund.
For comparative purposes, because the Equity Fund Composite is calendar-year
based, this section also includes the fund's performance (i) adjusted for
maximum applicable sales loads and (ii) at net asset value, each as of December
31, 1999.
Related performance information -- Fayez Sarofim Equity Fund Composite
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPOSITE PERFORMANCE COMPARISON
ANNUAL RETURNS 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY FUND COMPOSITE 2.0% 39.0% 5.0% 1.4% 4.8% 39.2% 28.0% 31.7% 28.6% 7.4%
S&P 500* -3.1% 30.4% 7.6% 10.1% 1.3% 37.5% 22.9% 33.3% 28.6% 21.0%
*( )THE S&P 500 IS A WIDELY RECOGNIZED, UNMANAGED INDEX OF STOCK PERFORMANCE.
</TABLE>
Average annual total returns for the fund
AS OF DECEMBER 31, 1999
Since
inception
1 Year (11/4/97)
- --------------------------------------------------------------------------------
CLASS A (NAV) 10.58% 18.98%
CLASS A (5.75% max. load) 4.24% 15.77%
CLASS B (NAV) 9.81% 18.12%
CLASS B (4.0% max. CDSC) 5.81% 16.96%
CLASS C (NAV) 9.82% 18.09%
CLASS C (1.0% max. CDSC) 8.82% 18.09%
CLASS T (NAV) 10.37% 18.72%
CLASS T (4.50% max load) 5.42% 16.21%
S&P 500** 21.03% 26.18%
** FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 10/31/97 IS USED AS THE
BEGINNING VALUE ON 11/4/97.
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
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers.
In addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
4
<PAGE 4>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of 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, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS A 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.77 12.50
Investment operations: Investment income (loss) -- net .09(2) .05
Net realized and unrealized gain (loss) on investments 2.81 2.23
Total from investment operations 2.90 2.28
Distributions: Dividends from investment income -- net -- (.01)
Net asset value, end of period 17.67 14.77
Total return (%)(3) 19.64 18.26(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.35 1.34(4)
Ratio of net investment income (loss) to average net assets (%) .15 .52(4)
Portfolio turnover rate (%) 1.26 .05(4)
- --------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 82,943 30,428
(1) FROM NOVEMBER 4, 1997 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE.
(4) NOT ANNUALIZED.
YEAR ENDED OCTOBER 31,
CLASS B 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.67 12.50
Investment operations: Investment income (loss) -- net (.15)(2) (.02)
Net realized and unrealized gain (loss) on investments 2.91 2.19
Total from investment operations 2.76 2.17
Distributions: Dividends from investment income -- net -- --
Net asset value, end of period 17.43 14.67
Total return (%)(3) 18.81 17.36(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.10 2.09(4)
Ratio of net investment income (loss) to average net assets (%) (.60) (.27)(4)
Portfolio turnover rate (%) 1.26 .05(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 192,196 72,347
(1) FROM NOVEMBER 4, 1997 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE.
(4) NOT ANNUALIZED.
The Fund 5
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED OCTOBER 31,
CLASS C 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.66 12.50
Investment operations: Investment income (loss) -- net (.14)(2) (.02)
Net realized and unrealized gain (loss) on investments 2.90 2.18
Total from investment operations 2.76 2.16
Distributions: Dividends from investment income -- net -- --
Net asset value, end of period 17.42 14.66
Total return (%)(3) 18.74 17.36(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 2.10 2.09(4)
Ratio of net investment income (loss) to average net assets (%) (.60) (.26)(4
Portfolio turnover rate (%) 1.26 .05(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 62,533 21,244
(1) FROM NOVEMBER 4, 1997 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE.
(4) NOT ANNUALIZED.
YEAR ENDED OCTOBER 31,
CLASS T 1999 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.74 12.50
Investment operations: Investment income (loss) -- net .12(2) .03
Net realized and unrealized gain (loss) on investments 2.74 2.22
Total from investment operations 2.86 2.25
Distributions: Dividends from investment income -- net -- (.01)
Net asset value, end of period 17.60 14.74
Total return (%)(3) 19.40 17.97(4)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.60 1.59(4)
Ratio of net investment income (loss) to average net assets (%) (.10) .25(4)
Portfolio turnover rate (%) 1.26 .05(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 8,457 4,501
(1) FROM NOVEMBER 4, 1997 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) EXCLUSIVE OF SALES CHARGE.
(4) NOT ANNUALIZED.
</TABLE>
6
<PAGE 6>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a
contingent deferred sales charge (CDSC).
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
* CLASS T shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A and Class T sales charge
LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.
RIGHT OF ACCUMULATION: lets you add the value of any shares you own in this
fund, any other Dreyfus Premier fund, or any other fund that is advised by
Founders Asset Management LLC ("Founders"), an affiliate of Dreyfus, sold with a
sales load, 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.
Your Investment 7
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. 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>
<S> <C> <C> <C> <C>
Sales charges
CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- ------------------------------------------------------------------------------------------------------------------------------------
Class Class Class Class
A T A T
- ------------------------------------------------------------------------------------------------------------------------------------
Up to $49,999 5.75% 4.50% 6.10% 4.70%
$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%
$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%
$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%
$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%
$1 million or more* 0.00% 0.00% 0.00% 0.00%
* A 1.00% CDSC may be charged on any shares sold within one year of purchase (except shares bought through dividend
reinvestment).
</TABLE>
Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
CDSC as a % of your initial
Years since purchase investment or your redemption
was made (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.
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are 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 and Class T shares are offered to the public at NAV plus a sales charge.
Classes B and C are offered at NAV, but generally are subject to higher annual
operating expenses and a CDSC.
8
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult 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.
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:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar
year)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment 9
<PAGE 9>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
and distributes any net capital gains it has realized once a year. Each share
class will generate a different dividend because each has different expenses.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
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-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at left also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
10
<PAGE 10>
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
the fund into another Dreyfus fund
or certain Founders-advised funds
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges from
EXCHANGE PRIVILEGE the fund into another Dreyfus fund
or certain Founders-advised funds.
- --------------------------------------------------------------------------------
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
or Founders-advised 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 11
<PAGE 11>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "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 9).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
12
<PAGE 12>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail 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 9).
Mail 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.
Concepts to understand
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.
Your Investment 13
<PAGE 13>
NOTES
<PAGE>
[Application p1]
<PAGE>
[Application p2]
<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) 2000 Dreyfus Service Corporation 149P0300
- --------------------------------------------------------------------------------
DREYFUS BASIC S&P 500 STOCK INDEX FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
- --------------------------------------------------------------------------------
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, 2000, as it
may be revised from time to time. The Fund is a separate, diversified portfolio
of The Dreyfus/Laurel Funds, Inc., (the "Company"), an open-end management
investment company, known as a mutual fund, that is registered with the
Securities and Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
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.
TABLE OF CONTENTS
Page
Description of the Fund/Company............................................B-2
Management of the Fund.....................................................B-17
Management Arrangements....................................................B-22
Purchase of Shares.........................................................B-24
Redemption of Shares.......................................................B-27
Shareholder Services.......................................................B-30
Additional Information About Purchases,
Exchanges and Redemptions..................................................B-35
Determination of Net Asset Value...........................................B-36
Dividends, Other Distributions and Taxes...................................B-37
Portfolio Transactions.....................................................B-42
Performance Information....................................................B-43
Information About the Fund/Company.........................................B-45
Counsel and Independent Auditors...........................................B-46
<PAGE>
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. 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. 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
("Standard & Poor's"), a division of the McGraw-Hill Companies, Inc., 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.
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.
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 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 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 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.
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.
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.
Nonfundamental. 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
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
The Company has a Board composed of eight 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 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 and Century Business Services,
Inc. (formerly, International Alliance Services, Inc.), a provider of
various outsourcing functions for small and medium sized companies. For
more than five years prior to January 1995, he was President, a director
and, until August, 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus and until August 24, 1994 the Fund's
distributor. From August 1994 until December 31, 1994, he was a director of
Mellon Financial Corporation. Age: 56 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, former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw &
McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board and
Director, Rexene Corporation. Age: 78 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, each an affiliate of Dreyfus. Age: 53 years
old. Address: 625 Madison Avenue, New York, New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and CEO,
LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years old.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures, Inc.;
Director, American Express Centurion Bank; Director, Ontario Hydro Services
Company; Director, the Hyams Foundation, Inc. Age: 50 years old. Address:
25 Braddock Park, Boston, Massachusetts 02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation of
African Americans in positions of leadership, influence and decision-making
in Boston, MA; Trustee, Boston College; Trustee, WGBH Educational
Foundation; Trustee, Children's Hospital; Director, The Greater Boston
Chamber of Commerce; Director, The First Albany Companies, Inc.; from April
1995 to March 1998, Director, TBC. Age: 53 years old. Address: 334 Boylston
Street, Suite 400, Boston, Massachusetts 02146.
--------------------------------
* "Interested person" of the Company, as
defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 40 years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant Secretary of
the Company. Vice President of New Business Development of Funds
Distributor Inc. Age: 38 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, he was Assistant Counsel at Forum
Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc. From
July 1994 to November 1995, she was a Fund Accountant for Investors Bank &
Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc.
Age: 35 years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company. Executive
Vice President and Client Service Director of Funds Distributor, Inc. From
June 1995 to March 1998, he was Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he was
Director of Business Development for First Data Corporation. Age: 45 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. Age: 37 years old.
#ELBAVASQUEZ. 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: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company. Vice
President and Senior Counsel of Funds Distributor Inc. since February 1997.
From June 1994 to January 1996, she was Manager of SEC Registration at
Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all other funds in the Dreyfus Family of Funds for which such person is a Board
member (the number of which is set forth in parenthesis next to each Board
members total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,177 (189)
James M. Fitzgibbons $20,000 $74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $80,989 (28)
Kenneth A. Himmel $16,666 $62,489 (28)
Stephen J. Lockwood $18,333 $68,989 (28)
Roslyn M. Watson $20,000 $80,989 (28)
Benaree Pratt Wiley $20,000 $80,989 (28)
- ----------------------------
# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
***J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1999, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $20,000. For the year ended
December 31, 1999, 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 $80,989. In addition, Dreyfus reimbursed Mr.
Fort a total of $2,799.33 for expenses attributable to the Company's Board
meetings which is not included in the $5,639.39 amount in note # above.
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, 2000.
As of February 1, 2000, 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, 33.02%; Putnam
Fiduciary Trust Custodian, FBO MCI Master Trust Plan, 859 Willard Street,
Quincy, MA 02169-7428, 12.57% and MAC & Co. A/C # MLCF8548692, Mutual Funds
Operations, P.O. Box 3198, Pittsburgh PA, 15230-3198, 10.86%.
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 Financial 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 (the
"Management Agreement"), 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 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; Ronald P. O'Hanley III, Vice Chairman; J. David Officer,
Vice Chairman and a director; William T. Sandalls, Jr., Executive Vice
President; Stephen R. Byers, Senior Vice President; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Diane P. Durnin, Vice
President-Product Development; Patrice M. Kozlowski, Vice President-Corporate
Communications; Mary Beth Leibig, Vice President-Human Resources; Ray Van Cott,
Vice-President-Information Systems; Theodore A. Schachar, Vice President-Tax;
Wendy Strutt, Vice President; Richard Terres, Vice President; William H.
Maresca, Controller; James Bitetto, Assistant Secretary; Steven F. Newman,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G.
Elliott, Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio manager and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of .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,
-------------------------------------
1999 1998 1997
---- ---- ----
Management fees $3,159,300 $2,119,347 $1,246,259
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.
Transfer and Dividend Disbursing Agent and Custodian. 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.
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
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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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(Registered Mark) automated telephone system) from any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used. During the delay,
the Fund's NAV may fluctuate.
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. Holders of
jointly registered Fund or bank accounts may have redemptions proceeds of only
up to $500,000 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 contracting a TRT Cables operator at 1-800-654-7171,
toll free. Investors should advise the operator that the above transmittal code
must be used and should also inform the operator of the Transfer Agent's answer
back sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily two
days after receipt of the redemption request. Holders of jointly registered Fund
or bank accounts may redeem through the Dreyfus TeleTransfer Privilege for
transfer to their bank account not more than $500,000 within any 30-day period.
Investors should be aware that if they have selected the Dreyfus TeleTransfer
Privilege, any request for a wire redemption will be effected as a Dreyfus
TeleTransfer transaction through the ACH system unless more prompt transmittal
specifically is requested. See "Purchase of Shares--Dreyfus TeleTransfer
Privilege."
Stock Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus or shares of
certain funds advised by Founders Asset Management LLC ("Founders"), an
affiliate of Dreyfus, to the extent such shares are offered for sale in your
state of residence. 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 Touch(R) 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. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, shares of another fund in the Dreyfus Family of
Funds or shares of certain funds advised by Founders, of which you are a
shareholder. The amount the investor designates, which can be expressed either
in terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule the investor has selected. This Privilege is available only for
existing accounts. With respect to Fund shares held by a Retirement Plan,
exchanges may be made only between the investor's Retirement Plan account in one
fund and such investor's Retirement Plan account in another fund. Shares will be
exchanged on the basis of relative NAV as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this Privilege is
effective three business days following notification by the investor. An
investor will be notified if the investor's account falls below the amount
designated to be exchanged under this Privilege. In this case, an investor's
account will fall to zero unless additional investments are made in excess of
the designated amount prior to the next Dreyfus Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and from
regular accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only among
those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge a
service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as a
sale of 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(Registered Mark). Dreyfus-Automatic Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you. 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 you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of another fund in the Dreyfus Family of Funds or
shares of certain funds advised by Founders, of which you are 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.
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, 1997, 1998 and 1999, the Fund paid
brokerage commissions of $44,307, $49,094 and $210,248, respectively. The
increase in brokerage commissions for the recent fiscal year end resulted from
certain large subscriptions and redemptions.
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.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the Fund's NAV per
share at the beginning of a stated period from the NAV per share at the end of
the period (after giving effect to the reinvestment of dividends and other
distributions during the period), and dividing the result by the NAV per share
at the beginning of the period.
Average annual total return (expressed as a percentage) for shares of the
Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1999
1 Year 5 Years Since Inception
------ ------- ---------------
25.34% 25.64% 21.74% (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, 1999 was 231.43%.
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.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund".
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock. Each Fund share has one vote and, when issued and paid
for in accordance with the terms of the offering, is fully paid and
non-assessable. The Fund is one of nineteen portfolios of the Company. Fund
shares 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.
COUNSEL AND INDEPENDENT AUDITORS
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, 2000, 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.
- --------------------------------------------------------------------------------
DREYFUS BOND MARKET INDEX FUND
INVESTOR HARES AND BASIC SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
- --------------------------------------------------------------------------------
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, 2000, as it may be
revised from time to time. The Fund is a separate, diversified portfolio of The
Dreyfus/Laurel Funds, Inc. (the "Company"), an open-end management investment
company, known as a mutual fund, that is registered with the Securities and
Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
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.
TABLE OF CONTENTS
Page
Description of the Fund/Company.....................................B-2
Management of the Fund.............................................B-14
Management Arrangements............................................B-19
Purchase of Shares.................................................B-22
Distribution Plan..................................................B-25
Redemption of Shares...............................................B-26
Shareholder Services...............................................B-30
Additional Information About Purchases, Exchanges and Redemptions..B-35
Determination of Net Asset Value...................................B-36
Dividends, Other Distributions and Taxes...........................B-37
Portfolio Transactions.............................................B-41
Performance Information............................................B-43
Information About the Fund/Company.................................B-45
Counsel and Independent Auditors...................................B-46
Appendix...........................................................B-47
<PAGE>
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. 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 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,
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 October 31, 1999, over
5,521 issues were included in the Aggregate Bond Index, representing $5,453,302
trillion in market value, distributed as follows: 42.23% governments; 21.0%
corporates; and 36.68% 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 ("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 (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. ("Fitch") or, Duff-1 by Duff & Phelps Credit Rating Co. ("Duff
& Phelps").
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.
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.
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.
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.
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.
Nonfundamental. 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
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
The Company has a Board composed of eight 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
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 and
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus and, until August 24, 1994, the Fund's Distributor. From
August 1994 until December 31, 1994, he was a director of Mellon
Financial Corporation. Age: 56 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; former Chairman of the Board and CEO
of Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 78 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Director of the Company; President & CEO, The
Palladium Company; President & CEO, Himmel and Company, Inc.; CEO,
American Food Management; former Director, The Boston Company, Inc.
("TBC") and Boston Safe Deposit and Trust Company, each an affiliate
of Dreyfus. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and
CEO, LDG Reinsurance Corporation; Vice Chairman, HCCH, Age: 52 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Ontario
Hydro Services Company; Director, the Hyams Foundation, Inc. Age: 50
years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the
representation of African Americans in positions of leadership,
influence and decision-making in Boston, MA; Trustee, Boston College;
Trustee, WGBH Educational Foundation; Trustee, Children's Hospital;
Director, The Greater Boston Chamber of Commerce; Director, The First
Albany Companies, Inc.; from April 1995 to March 1998, Director, TBC.
Age: 53 years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant
General Counsel for Loomis, Sayles & Company, L.P. From January 1986
to July 1996, she was an associate with the law firm of Ropes & Gray.
Age: 40 years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of
the Distributor and Funds Distributor, Inc., the ultimate parent of
which is Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDERICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor Inc. Industries, Inc. Age: 38 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, he was Assistant
Counsel at Forum Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 45 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. Age: 37
years old.
#ELBAVASQUEZ. 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: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor Inc. since
February 1997. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all other funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parentheses, next to each Board
member's total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $ 80,989 (28)
Kenneth A. Himmel $16,666 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $20,000 $ 80,989 (28)
Benaree Pratt Wiley $20.000 $ 80,989 (28)
- ----------------------------
# 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
$5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Company, for which the
Board member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds
on January 1, 1999.
***J.Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Company and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal
year ended October 31, 1999, the aggregate amount of fees received by
J. Tomlinson Fort from Dreyfus for serving as a Board member of the
Company was $20,000. For the year ended December 31, 1999, 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 $80,989. In addition, Dreyfus
reimbursed Mr. Fort a total of $2,799.33 for expenses attributable to
the Company's Board meetings which is not included in the $5,639.39
amount in note # above.
The officers and Directors of the Company as a group owned beneficially
less than 2% of the total shares of the Fund outstanding as of February 1, 2000.
Principal Shareholders. As of February 1, 2000, 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, 15.7608%; Resources Trust Co., P.O. Box 3865,
Englewood, CO 80155-3865, 34.4636%; Calhoun & Co, c/o Commerica Bank, Attn: 401K
Mutual Funds, P.O. Box 75000 MC 3446 Detroit, MI 48275-3446, 24.4595%; Dr.
Phillips Inc., P.O. Box 3753 Orlando, FL 32802-3753.
As of February 1, 2000 the following shareholder(s) owned of record 5% or
more of BASIC shares of the Fund; MAC & CO, P.O. Box 3198, Pittsburgh, PA
15230-3198, 38.7356%; Boston Safe Deposit & Trust Co., Trustee As Agent -
Omnibus Account, 1 Cabot Road, Medford, MA 02155-5141, 13.8067%; St Anthony's
Medical Center Foundation c/o Norbert A. Siegfried, 10010 Kennerly Rd. Saint
Louis, MO 63128-2106, 15.0287; Charles Schwab & Co. Inc. Special Custody Acct.
For the Benefit Customers Attn: Mutual Fund 101 Montgomery Street San Francisco,
CA 94104-4122, 14.0021%.
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 Financial 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 (the
"Management Agreement"), 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 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 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" (as defined in the
1940 Act) 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 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; Ronald P. O'Hanley III, Vice Chairman; J. David Officer,
Vice Chairman and a director; William T. Sandalls, Jr., Executive Vice
President; Stephen R. Byers, Senior Vice President; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Diane P. Durnin, Vice
President-Product Development; Patrice M. Kozlowski, Vice President-Corporate
Communications; Mary Beth Leibig, Vice President-Human Resources; Ray Van Cott,
Vice-President-Information Systems; Theodore A. Schachar, Vice President-Tax;
Wendy Strutt, Vice President; Richard Terres, Vice President; William H.
Maresca, Controller; James Bitetto, Assistant Secretary; Steven F. Newman,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G.
Elliott, Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the policy. In
that regard, Dreyfus portfolio manager and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. 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,
1999 1998 1997
---- ---- ----
Management fees $114,907 $69,550 $114,334
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.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc., a nce, 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.
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 except the no
minimum on Education IRAs does not apply until after the first year. 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 Builder(R), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program (described under "Shareholder Services"). These
services enable you to make regularly scheduled investments and may provide you
with a convenient way to invest for long-term financial goals. You should be
aware, however, that periodic investment plans do not guarantee a profit and
will not protect an investor against loss in a declining market.
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 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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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 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 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, 1999, the Fund paid the Distributor
and Dreyfus Service Corporation: $35,798 and $12,078, 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 Touch(R) 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 $500,000 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 $500,000 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. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus or shares of
certain funds advised by Founders Assets Management LLC ("Founders"), and
affiliate of Dreyfus, to the extent such shares are offered for sale in your
state of residence. 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 Touch(R) Automated
Telephone System) from any person representing himself or herself to be the
investor or a representative of the investor's Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.
Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase on a semi-monthly, monthly, quarterly
or annual basis, in exchange for shares of the Fund, shares of another fund in
the Dreyfus Family of Funds or shares of certain funds advised by Founders, 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(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671 and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
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 another fund in the Dreyfus Family of Funds or
shares of certain funds advised by Founders, 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
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.
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, 1997, 1998 and 1999, the Fund paid
$0, $28,985, and $0 in brokerage commissions on portfolio transactions,
respectively. For the fiscal year ended October 31, 1999, the Fund paid no
brokerage concessions. For the fiscal year ended October 31, 1998, the Fund paid
brokerage concessions amounting to $15,063.
The aggregate amount of transactions for the fiscal year ended October 31,
1999 in securities effected on an agency basis through a broker dealer in
consideration of, among other things, research services provided was $250,000
and the commission and concessions related to such transactions were $39.
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. In periods in which extraordinary market conditions prevail,
Dreyfus will not be deterred from changing the Fund's investment strategy as
rapidly as needed, in which case higher turnover rates can be anticipated.
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, 1999
1 Year 5 Year Since Inception
------ ------ ---------------
BASIC shares 0.29% 7.59% 5.70% (11/30/93)
- ------------
Inception date appears in parentheses following the average annual total return
since inception.
The 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, 1999 was 38.87%.
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, 1999
1 Year 5 Year Since Inception
------ ------ ---------------
Investor shares 0.03% 7.31% 6.52% (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, 1999 was 41.63%.
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, 1999 was 6.51% for BASIC shares and 6.31%
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.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. The Fund is
one of nineteen portfolios of the Company. Fund shares have equal rights 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, or, where matters affect different classes of a portfolio
differently, by class.
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.
COUNSEL AND INDEPENDENT AUDITORS
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, 2000, 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.
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH
AND DUFF & PHELPS RATINGS
Standard & Poor's
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard & Poor's. 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
Standard & Poor's 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
A Standard & Poor's 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 Standard & Poor's 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 characteristics 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:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o 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
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
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
A are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- 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 not
B be met when due. Financial protection factors will fluctuate widely
B- 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 DISCIPLINED INTERMEDIATE BOND FUND
INVESTOR SHARES AND RESTRICTED SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
- ------------------------------------------------------------------------------
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, 2000, as
it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc. (the "Company"), an open-end
management investment company, known as a mutual fund, that is registered with
the Securities and Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
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.
TABLE OF CONTENTS
Page
Description of the Fund/Company...............................B-2
Management of the Fund.......................................B-26
Management Arrangements......................................B-31
Purchase of Shares...........................................B-34
Distribution Plan............................................B-37
Redemption of Shares.........................................B-39
Shareholder Services.........................................B-42
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
Counsel and Independent Auditors.............................B-60
Appendix.....................................................B-61
<PAGE>
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. 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 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., or 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.
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.
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.
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.
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.
Nonfundamental. 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
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
The Company has a Board composed of eight 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
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 and
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a director
of Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus
and, until August 24, 1994, the Fund's Distributor. From August 1994
until December 31, 1994, he was a director of Mellon Financial
Corporation. Age: 56 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; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 78 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 & CEO, Himmel and Company, Inc.; CEO,
American Food Management; former Director, The Boston Company, Inc.
("TBC") and Boston Safe Deposit and Trust Company, each an affiliate of
Dreyfus. Age: 53 years old. Address: 625 Madison Avenue, New York, New
York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and
CEO, LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Ontario Hydro
Services Company; Director, the Hyams Foundation, Inc. Age: 50 years
old. Address: 25 Braddock Park, Boston, Massachusetts 02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development of
Funds Distributor Inc. Age: 38 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, he was Assistant
Counsel at Forum Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for Investors
Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for First
Data Corporation. Age: 45 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. Age: 37 years
old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor Inc. since
February 1997. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all other funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parentheses next to each Board
members total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,177 (189)
James M. Fitzgibbons $20,000 $74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $80,989 (28)
Kenneth A. Himmel $16,666 $62,489 (28)
Stephen J. Lockwood $18,333 $68,989 (28)
Roslyn M. Watson $20,000 $80,989 (28)
Benaree Pratt Wiley $20,000 $80,989 (28)
- ----------------------------
# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Company, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1999, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $20,000. For the year ended
December 31, 1999, 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 $80,989. In addition, Dreyfus reimbursed Mr.
Fort a total of $2,799.33 for expenses attributable to the Company's Board
meetings which is not included in the $5,639.39 amount in note # above.
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, 2000.
Principal Shareholders. As of February 1, 2000, the following shareholders
owned beneficially or of record 5% or more of Investor shares of the Fund: Mary
C. Spalding, Residencia La Fuente 12A, 29650 Mijas, Malaga Spain, 10.3734%; Bost
& Co, P.O. Box 534005, Pittsburgh, PA 15253, 13.4691%; Bost & Co, P.O. Box
534005, Pittsburgh, PA 15253; 9.2930%; Munfy & Co, C/O The Muncy Bank & Trust, 2
N Main St, Muncy , PA 17756-1004; 8.89277%; Bost & Co, P.O. Box 534005,
Pittsburgh, PA 15253; 8.4603%; Bost & Co, P.O. Box 534005, Pittsburgh, PA 15253;
6.4285%; and Mac & Co, Mellon Private Asset Management, P.O. Box 534005,
Pittsburgh, PA 15253-4005; 5.7783%.
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 Financial 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 (the
"Management Agreement"), 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 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" (as defined in the
1940 Act) 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 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; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Diane P. Durnin, Vice President-Product Development; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Ray Van Cott, Vice-President-Information Systems;
Theodore A. Schachar, Vice President-Tax; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James
Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott, Martin C. McGuinn,
Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.55% 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,
1999 1998 1997
---- ---- ----
Management fees $1,194,794 $823,224 $426,110
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.
Transfer and Dividend Disbursing Agent and Custodian. 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.
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 except the no minimum on Education IRAs does not
apply until after the first year. The initial investment must be accompanied by
the Fund's Account Application. 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 Builder(R), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program (described under "Shareholder Services"). These
services enable you to make regularly scheduled investments and may provide you
with a convenient way to invest for long-term financial goals. You should be
aware, however, that periodic investment plans do not guarantee a profit and
will not protect an investor against loss in a declining market.
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 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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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
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, 1999, the Fund paid the Distributor
and Dreyfus Service Corporation: $1,425 and $3,090, 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 Touch(R) 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 $500,000 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 $500,000 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. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus or shares of
certain funds advised by Founders Asset Management LLC ("Founders"), an
affiliate of Dreyfus, to the extent such shares are offered for sale in your
state of residence. 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 Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor or a representative of the investor's Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC
Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase on a semi-monthly, monthly, quarterly
or annual basis, in exchange for shares of the Fund, shares of another fund in
the Dreyfus Family of Funds or shares of certain funds advised by Founders, 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(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671 and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and 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 another fund in the Dreyfus Family of Funds or
shares of certain funds advised by Founders, 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 dividend or other 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 received a capital gain distribution with respect to those
shares, any loss incurred on the sale of those shares will be treated as a
long-term capital loss to the extent of the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
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.
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, 1999, 1998 and 1997, the Fund did
not pay any brokerage commissions.
The aggregate amount of transactions for the fiscal year ended October 31,
1999, in securities effected on an agency basis through a broker dealer in
consideration of, among other things, research services provided was
$20,465,564.93 and the commission and concessions related to such transactions
were $6,801.74.
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. In
periods in which extraordinary market conditions prevail, Dreyfus will not be
deterred from changing the Fund's investment strategy as rapidly as needed, in
which case higher turnover rates can be anticipated.
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, 1999
1 Year Since Inception
------ ---------------
Investor shares (0.69)% 5.05% (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, 1999 was 21.80%.
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, 1999
1 Year Since Inception
------ ---------------
Restricted shares (0.37)% 5.30% (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, 1999 was 22.94%.
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.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. The Fund is
one of nineteen portfolios of the Company. Fund shares have equal rights 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, or, where matters effect different classes of a portfolio
differently, by class.
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.
COUNSEL AND INDEPENDENT AUDITORS
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 fiscal year ending
October 31, 2000, 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.
<PAGE>
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA, INC.
AND DUFF & PHELPS CREDIT RATINGS, CO. RATINGS
Standard & Poor's
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard & Poor's. 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 Standard & Poor's 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
A Standard & Poor's 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 Standard & Poor's 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 characteristics 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:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
o 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.
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
AA but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk factors
A are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- 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 not
B be met when due. Financial protection factors will fluctuate widely
B- 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 DISCIPLINED SMALLCAP STOCK FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of Dreyfus Disciplined Smallcap Stock Fund (the "Fund"), dated March
1, 2000, as it may be revised from time to time. The Fund is a separate,
diversified portfolio of The Dreyfus/Laurel Funds, Inc. (the "Company"), an
open-end management investment company, known as a mutual fund, that is
registered with the Securities and Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
including notes to the financial statements and financial highlights and the
Independent Auditors Report, are included in the Annual Report to shareholders.
A copy of the Annual Report accompanies this SAI. The financial statements
included in the Annual Report, and the Independent Auditors' Report thereon
contained therein, and related notes, are incorporated herein by reference.
TABLE OF CONTENTS
Page
Description of the Fund/Company............................................B-2
Management of the Fund....................................................B-19
Management Arrangements...................................................B-24
Purchase of Shares........................................................B-26
Distribution Plan.........................................................B-29
Redemption of Shares......................................................B-30
Shareholder Services......................................................B-34
Additional Information About Purchases, Exchanges and Redemptions.........B-39
Determination of Net Asset Value..........................................B-40
Dividends, Other Distributions And Taxes..................................B-41
Portfolio Transactions....................................................B-47
Performance Information...................................................B-49
Information About the Fund/Company........................................B-50
Counsel and Independent Auditors..........................................B-51
Appendix..................................................................B-52
<PAGE>
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. The
Company is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund. The
Fund is diversified, which means that, with respect to 75% of its total assets,
the Fund will not invest more than 5% of its assets in the securities of any
single issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year or
less, (b) U.S. Treasury notes have maturities of one to ten years, and (c)
U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full faith
and credit of the U.S. Treasury, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury, (c) the
discretionary authority of the U.S. Treasury to lend to such Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Inter-American Development Bank, Asian-American Development Bank, Student Loan
Marketing Association, International Bank for Reconstruction and Development and
Fannie Mae). No assurance can be given that the U.S. Government will provide
financial support to the agencies or instrumentalities described in (b), (c) and
(d) in the future, other than as set forth above, since it is not obligated to
do so by law.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed only
by the credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The Fund
will only invest in commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's 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. ("Fitch") or Duff-1
by Duff & Phelps Credit Rating Co. ("Duff & Phelps").
Repurchase Agreements. The Fund may enter into repurchase agreements with
U.S. Government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System, or with such other brokers or
dealers that meet the Fund's credit guidelines. This technique offers a method
of earning income on idle cash. In a repurchase agreement, the Fund buys a
security from a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. The Fund's resale price will be in excess
of the purchase price, reflecting an agreed upon interest rate. This interest
rate is effective for the period of time the Fund is invested in the agreement
and is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive as
collateral securities whose market value including accrued interest is, and
during the entire term of the agreement remains, at least equal to 100% of the
dollar amount invested by the Fund in each agreement, including interest, and
the Fund will make payment for such securities only upon physical delivery or
upon evidence of book entry transfer to the account of the custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is the
subject of a repurchase agreement, realization upon the collateral by the Fund
may be delayed or limited. The Fund seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligors under
repurchase agreements, in accordance with the Fund's credit guidelines.
Foreign Securities. The Fund may purchase securities of foreign issuers
and may invest in foreign currencies and obligations of foreign branches of
domestic banks and domestic branches of foreign banks. Investment in such
foreign currencies, securities and obligations presents certain risks, including
those resulting from fluctuations in currency exchange rates, revaluation of
currencies, adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, and
the fact that foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with respect to
certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities may
be subject to foreign government taxes that would reduce the return on such
securities.
American Depository Receipts ("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."
Illiquid Securities. The Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities that
have readily available market quotations are not deemed illiquid for purposes of
this limitation (irrespective of any legal or contractual restrictions on
resale). The Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by section
4(2) of the Securities an Exchange Act of 1933 as amended ("Section 4(2) paper")
The Fund may also purchase securities that are not registered under the
Securities Act of 1933, as amended, but that can be sold to qualified
institutional buyers in accordance with Rule 144A under that Act ("Rule 144A
securities"). Liquidity determinations with respect to Section 4(2) paper and
Rule 144A securities will be made by the Board of Directors or by Dreyfus
pursuant to guidelines established by the Board of Directors. The Board or
Dreyfus will consider availability of reliable price information and other
relevant information in making such determinations. Section 4(2) paper is
restricted as to disposition under the Federal securities laws and generally is
sold to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be pursuant to registration or an exemption
therefrom. Section 4(2) paper normally is resold to other institutional
investors like the Fund through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. Rule 144A securities generally must be sold to other qualified
institutional buyers. If a particular investment in Section 4(2) paper or Rule
144A securities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities. The
ability to sell Rule 144A securities to qualified institutional buyers is a
recent development, and it is not possible to predict how this market will
mature. Investing in Rule 144A securities could have the effect of increasing
the level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from the Fund or
other holders.
Initial Public Offerings ("IPOs"). The Fund may invest in an IPO, a
corporation's first offering of stock to the public. Shares are given a
market value reflecting expectations for the corporation's future growth.
Special rules of the National Association of Securities Dealers, Inc. apply
to the distribution of IPOs. Corporations offering IPOs generally have a
limited operating history and may involve greater risk.
Other Investment Companies. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the
Investment Company Act of 1940, as amended ("1940 Act"). As a shareholder of
another investment company, the Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
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.
Investment Techniques
In addition to the principal investment strategies discussed in the Fund's
prospectus, the Fund also may engage in the investment techniques described
below. The Fund might not use, or may not have the ability to use, any of these
strategies and there can be no assurance that any strategy that is used will
succeed.
Borrowing. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues of
U.S. Treasury and Government securities are often offered on a when-issued
basis. This means that delivery and payment for the securities normally will
take place approximately 7 to 45 days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at the
time the buyer enters into the commitment. The Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the commitment
before the settlement date if it is deemed advisable as a matter of investment
strategy. Cash or marketable high-grade debt securities equal to the amount of
the above commitments will be segregated on the Fund's records. For the purpose
of determining the adequacy of these securities the segregated securities will
be valued at market. If the market value of such securities declines, additional
cash or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Fund.
Securities purchased on a when-issued basis and the securities held by the
Fund are subject to changes in market value based upon the public's perception
of changes in the level of interest rates. Generally, the value of such
securities will fluctuate inversely to changes in interest rates -- i.e., they
will appreciate in value when interest rates decline and decrease in value when
interest rates rise. Therefore, if in order to achieve higher interest income
the Fund remains substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be a greater possibility
of fluctuation in the Fund's net asset value ("NAV").
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated securities,
the sale of other securities and/or, although it would not normally expect to do
so, from the sale of the when-issued securities themselves (which may have a
market value greater or less than the Fund's payment obligation). The sale of
securities to meet such obligations carries with it a greater potential for the
realization of capital gains, which are subject to federal income taxes.
To secure advantageous prices or yields, the Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed delivery
basis involves the risk that the value of the securities purchased will decline
prior to the settlement date. The sale of securities for delayed delivery
involves the risk that the prices available in the market on the delivery date
may be greater than those obtained in the sale transaction. The Fund will
establish a segregated account consisting of cash, U.S. Government securities or
other high-grade debt obligations in an amount at least equal at all times to
the amounts of its delayed delivery commitments.
Loans of Fund Securities. The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of the Fund's
total assets and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. These loans are terminable by the Fund at any time upon
specified notice. The Fund might experience loss if the institution to which it
has lent its securities fails financially or breaches its agreement with the
Fund. In addition, it is anticipated that the Fund may share with the borrower
some of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the Fund
considers all relevant factors and circumstances including the creditworthiness
of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by Dreyfus to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (1) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (2) agrees to repurchase the securities at a
future date by repaying the cash with interest. The Fund retains record
ownership of the security involved including the right to receive interest and
principal payments. Cash or liquid high-grade debt securities held by the Fund
equal in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is in
effect.
Futures, Options and Other Derivative Instruments. The Fund may purchase
and sell various financial instruments ("Derivative Instruments"), including
financial futures contracts (such as index futures contracts) and options (such
as options on U.S. and foreign securities or indices of such securities),
forward currency contracts and interest rate, equity index and currency swaps,
caps, collars and floors. The index Derivative Instruments the Fund may use may
be based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or spread,
to lock in unrealized market value gains or losses, to facilitate or substitute
for the sale or purchase of securities, to manage the duration of securities, to
alter the exposure of a particular investment or portion of the Fund's portfolio
to fluctuations in interest rates or currency rates, to uncap a capped security
or to convert a fixed rate security into a variable rate security or a variable
rate security into a fixed rate security.
Hedging strategies can be broadly categorized as "short hedges" and "long
hedges." A short hedge is a purchase or sale of a Derivative Instrument intended
partially or fully to offset potential declines in the value of one or more
investments held in the Fund's portfolio. Thus, in a short hedge the Fund takes
a position in a Derivative Instrument whose price is expected to move in the
opposite direction of the price of the investment being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential increases in the acquisition
cost of one or more investments that the Fund intends to acquire. Thus, in a
long hedge the Fund takes a position in a Derivative Instrument whose price is
expected to move in the same direction as the price of the prospective
investment being hedged. A long hedge is sometimes referred to as an
anticipatory hedge. In an anticipatory hedge transaction, the Fund does not own
a corresponding security and, therefore, the transaction does not relate to a
security the Fund owns. Rather, it relates to a security that the Fund intends
to acquire. If the Fund does not complete the hedge by purchasing the security
it anticipated purchasing, the effect on the Fund's portfolio is the same as if
the transaction were entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that the Fund
owns or intends to acquire. Derivative Instruments on indices, in contrast,
generally are used to attempt to hedge against price movements in market sectors
in which the Fund has invested or expects to invest. Derivative Instruments on
debt securities may be used to hedge either individual securities or broad debt
market sectors.
The use of Derivative Instruments is subject to applicable regulations of
the SEC, the several options and futures exchanges upon which they are traded,
the Commodity Futures Trading Commission ("CFTC") and various state regulatory
authorities. In addition, the Fund's ability to use Derivative Instruments may
be limited by tax considerations. See "Dividends, Other Distributions and
Taxes."
In addition to the instruments, strategies and risks described below and
in the Prospectus, Dreyfus expects to discover additional opportunities in
connection with other Derivative Instruments. These new opportunities may become
available as Dreyfus develops new techniques, as regulatory authorities broaden
the range of permitted transactions and as new techniques are developed. Dreyfus
may utilize these opportunities to the extent that they are consistent with the
Fund's investment objective and permitted by the Fund's investment policies and
applicable regulatory authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks pertaining
to particular Derivative Instruments are described in the sections that follow.
(1) Successful use of most Derivative Instruments depends upon Dreyfus'
ability not only to forecast the direction of price fluctuations of the
investment involved in the transaction, but also to predict movements of the
overall securities, currency, and interest rate markets, which requires
different skills than predicting changes in the prices of individual securities.
There can be no assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between
price movements of a Derivative Instrument and price movements of the
investments being hedged. For example, if the value of a Derivative Instrument
used in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of correlation
might occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which
Derivative Instruments are traded. The effectiveness of hedges using Derivative
Instruments on indices will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.
Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that the standardized contracts available will
not match the Fund's current or anticipated investments exactly. The Fund may
invest in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. The Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in the Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of loss
by wholly or partially offsetting the negative effect of unfavorable price
movements. However, such strategies can also reduce opportunity for gain by
offsetting the positive effect of favorable price movements. For example, if the
Fund entered into a short hedge because Dreyfus projected a decline in the price
of a security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the Derivative Instrument. Moreover, if the price of the
Derivative Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss. In either such case, the Fund would have
been in a better position had it not attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(i.e., Derivative Instruments other than purchased options). If the Fund were
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair the
Fund's ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The Fund's ability to close out a
position in a Derivative Instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a time
and price that is favorable to the Fund.
(5) The purchase and sale of Derivative Instruments could result in a loss
if the counterparty to the transaction does not perform as expected and may
increase portfolio turnover rates, which results in correspondingly greater
commission expenses and transaction costs, and may result in certain tax
consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund will
not enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, futures, options, currencies, or forward
contracts or (2) cash and short-term liquid debt securities with a value
sufficient at all times to cover its potential obligations to the extent not
covered as provided in (1) above. The Fund will comply with SEC guidelines
regarding cover for Derivative Instruments and will, if the guidelines so
require, set aside cash, U.S. Government securities or other liquid, high-grade
debt securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Derivative Instrument is open, unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of the Fund's assets to cover segregated accounts could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
Options. A call option gives the purchaser the right to buy, and obligates
the writer to sell, the underlying investment at the agreed upon exercise price
during the option period. A put option gives the purchaser the right to sell,
and obligates the writer to buy, the underlying investment at the agreed upon
exercise price during the option period. A purchaser of an option pays an
amount, known as the premium, to the option writer in exchange for rights under
the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes in
the index in question rather than on price movements in individual securities or
currencies.
The purchase of call options can serve as a long hedge, and the purchase
of put options can serve as a short hedge. Writing put or call options can
enable the Fund to enhance income or yield by reason of the premiums paid by the
purchasers of such options. However, if the market price of the security or
other instrument underlying a put option declines to less than the exercise
price on the option, minus the premium received, the Fund would expect to suffer
a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the investment depreciates to a
price lower than the exercise price of the put option, it can be expected that
the put option will be exercised and the Fund will be obligated to purchase the
investment at more than its market value unless the option is closed out in an
offsetting transaction.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value.
The Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Fund to realize profits or
limit losses on an option position prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-counter
("OTC") options. Exchange-traded options in the United States are issued by a
clearing organization that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund will enter into only those option contracts that are listed on a
national securities or commodities exchange or traded in the OTC market for
which there appears to be a liquid secondary market.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the Fund,
taken at market value. However, if an OTC option is sold by the Fund to a
primary U.S. Government securities dealer recognized by the Federal Reserve Bank
of New York and the Fund has the unconditional contractual right to repurchase
such OTC option from the dealer at a predetermined price, then the Fund will
treat as illiquid such amount of the underlying securities as is equal to the
repurchase price less the amount by which the option is "in-the-money" (the
difference between the current market value of the underlying securities and the
price at which the option can be exercised). The repurchase price with primary
dealers is typically a formula price that is generally based on a multiple of
the premium received for the option plus the amount by which the option is
"in-the-money."
Generally, the OTC debt and foreign currency options used by the Fund are
European-style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American-style
options, which are exercisable at any time prior to the expiration date of the
option.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. However, there can be no
assurance that such a market will exist at any particular time. Closing
transactions can be made for OTC options only by negotiating directly with the
counterparty, or by a transaction in the secondary market if any such market
exists. Although the Fund will enter into OTC options only with major dealers in
unlisted options, there is no assurance that the Fund will in fact be able to
close out an OTC option position at a favorable price prior to expiration. In
the event of insolvency of the counterparty, the Fund might be unable to close
out an OTC option position at any time prior to its expiration.
If the Fund were unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by the Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.
The Fund may write options on securities only if it covers the transaction
through: an offsetting option with respect to the security underlying the option
it has written, exercisable by it at a more favorable price; ownership of (in
the case of a call) or a short position in (in the case of a put) the underlying
security; or segregation of cash or certain other assets sufficient to cover its
exposure.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of the
obligation underlying the futures contract at a specified time in the future for
an agreed upon price. With respect to index futures, no physical transfer of the
securities underlying the index is made. Rather, the parties settle by
exchanging in cash an amount based on the difference between the contract price
and the closing value of the index on the settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund writes a call, it assumes a short futures position. If the
Fund writes a put, it assumes a long futures position. When the Fund purchases
an option on a futures contract, it acquires the right, in return for the
premium it pays, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve as a
limited short hedge, using a strategy similar to that used for writing call
options on securities or indices. Similarly, writing put options on futures
contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract the Fund is required to deposit "initial margin"
consisting of cash or U.S. Government securities in an amount generally equal to
10% or less of the contract value. Margin must also be deposited when writing a
call or put option on a futures contract, in accordance with applicable exchange
rules. Unlike margin in securities transactions, initial margin on futures
contracts does not represent a borrowing, but rather is in the nature of a
performance bond or good-faith deposit that is returned to the Fund at the
termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
Fund may be required by an exchange to increase the level of its initial margin
payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker. When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the Fund purchases
or sells a futures contract or writes a call or put option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If the Fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. Positions in futures and options on futures may be
closed only on an exchange or board of trade that provides a secondary market.
Although the Fund intends to enter into futures and options on futures only on
exchanges or boards of trade where there appears to be a liquid secondary
market, there can be no assurance that such a market will exist for a particular
contract at a particular time. In such event, it may not be possible to close a
futures contract or options position.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures or an option on a futures contract can
vary from the previous day's settlement price; once that limit is reached, no
trades may be made that day at a price beyond the limit. Daily price limits do
not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the future or option or to maintain cash or securities in a segregated
account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money" at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into. This policy does
not limit to 5% the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts.
Foreign Currency Strategies - Special Considerations. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in the
values of the foreign currencies in which the Fund's securities are denominated.
Such currency hedges can protect against price movements in a security that the
Fund owns or intends to acquire that are attributable to changes in the value of
the currency in which it is denominated. Such hedges do not, however, protect
against price movements in the securities that are attributable to other causes.
The Fund might seek to hedge against changes in the value of a particular
currency when no Derivative Instruments on that currency are available or such
Derivative Instruments are more expensive than certain other Derivative
Instruments. In such cases, the Fund may hedge against price movements in that
currency by entering into transactions using Derivative Instruments on another
currency or a basket of currencies, the values of which Dreyfus believes will
have a high degree of positive correlation to the value of the currency being
hedged. The risk that movements in the price of the Derivative Instrument will
not correlate perfectly with movements in the price of the currency being hedged
is magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on the
value of the underlying currency relative to the U.S. dollar. Because foreign
currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of foreign currency
Derivative Instruments, the Fund could be disadvantaged by having to deal in the
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market.
Settlement of transactions involving foreign currencies might be required
to take place within the country issuing the underlying currency. Thus, the Fund
might be required to accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign regulations regarding the maintenance of
foreign banking arrangements by U.S. residents and might be required to pay any
fees, taxes and charges associated with such delivery assessed in the issuing
country.
Forward Contracts. A forward foreign currency exchange contract ("forward
contract") is a contract to purchase or sell a currency at a future date. The
two parties to the contract set the number of days and the price. Forward
contracts are used as a hedge against future movements in foreign exchange
rates. The Fund may enter into forward contracts to purchase or sell foreign
currencies for a fixed amount of U.S. dollars or other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund may
purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Fund intends to acquire. Forward
contracts may also serve as short hedges -- for example, the Fund may sell a
forward contract to lock in the U.S. dollar equivalent of the proceeds from the
anticipated sale of a security denominated in a foreign currency or from
anticipated dividend or interest payments denominated in a foreign currency.
Dreyfus may seek to hedge against changes in the value of a particular currency
by using forward contracts on another foreign currency or basket of currencies,
the value of which Dreyfus believes will bear a positive correlation to the
value of the currency being hedged.
The cost to the Fund of engaging in forward contracts varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. Because forward contracts are usually entered into
on a principal basis, no fees or commissions are involved. When the Fund enters
into a forward contract, it relies on the counterparty to make or take delivery
of the underlying currency at the maturity of the contract. Failure by the
counterparty to do so would result in the loss of any expected benefit of the
transaction.
Buyers and sellers of forward contracts can enter into offsetting closing
transactions by selling or purchasing, respectively, an instrument identical to
the instrument purchased or sold. Secondary markets generally do not exist for
forward contracts, with the result that closing transactions generally can be
made for forward contracts only by negotiating directly with the counterparty.
Thus, there can be no assurance that the Fund will in fact be able to close out
a forward contract at a favorable price prior to maturity. In addition, in the
event of insolvency of the counterparty, the Fund might be unable to close out a
forward contract at any time prior to maturity. In either event, the Fund would
continue to be subject to market risk with respect to the position, and would
continue to be required to maintain a position in the securities or currencies
that are the subject of the hedge or to maintain cash or securities in a
segregated account.
The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities measured in the foreign currency will change after the forward
contract has been established. Thus, the Fund might need to purchase or sell
foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest rate
and currency swaps, caps, collars and floors, may be individually negotiated and
structured to include exposure to a variety of different types of investments or
market factors. Swaps involve two parties exchanging a series of cash flows at
specified intervals. In the case of an interest rate swap, the parties exchange
interest payments based on an agreed upon principal amount (referred to as the
"notional principal amount"). Under the most basic scenario, Party A would pay a
fixed rate on the notional principal amount to Party B, which would pay a
floating rate on the same notional principal amount to Party A. Depending on
their structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors. Swap
agreements can take many different forms and are known by a variety of names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate exceeds
an agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a swap
agreement on a net basis (that is, the two payment streams are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments), the Fund will maintain cash or liquid assets with a daily value at
least equal to the excess, if any, of the Fund's accrued obligations under the
swap agreement over the accrued amount the Fund is entitled to receive under the
agreement. If the Fund enters into a swap agreement on other than a net basis or
writes a cap, collar or floor, it will maintain cash or liquid assets with a
value equal to the full amount of the Fund's accrued obligations under the
agreement.
The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that determine
the amounts of payments due to and from the Fund. If a swap agreement calls for
payments by the Fund, the Fund must be prepared to make such payments when due.
In addition, if the counterparty's creditworthiness declines, the value of a
swap agreement would likely decline, potentially resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with banks
and recognized securities dealers believed by Dreyfus to present minimal credit
risks. If there is a default by the other party to such a transaction, the Fund
will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreement relating to
the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments. See "Illiquid
Investments."
Master/Feeder Option. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's net investable assets
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Company's Board of Directors determines it to be in the best interest of the
Fund and its shareholders. In making that determination, the Company's Board of
Directors will consider, among other things, the benefits to shareholders and/or
the opportunity to reduce costs and achieve operational efficiency. Although the
Fund believes that the Company's Board of Directors will not approve an
arrangement that is likely to result in higher costs, no assurance is given that
risks will be materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
state or municipal governments and their political subdivisions are not
considered members of any industry.)
2. Borrow money or issue senior securities as defined in the 1940 Act,
except that (a) the Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowing, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of options, forward
contacts, futures contracts, including those relating to indices, and options on
futures contracts or indices shall not be considered to involve the borrowing of
money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities of
any issuer (other than securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities) if, as a result, (a) more than 5% of the
Fund's total assets would be invested in the securities of that issuer, or (b)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall not
be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in the real estate
business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.
7. Purchase or sell commodities, except that the Fund may enter into
options, forward contracts, and futures contracts, including those related to
indices, and options on futures contracts or indices.
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a single,
open-end management investment company with substantially the same investment
objective, policies, and limitations as the Fund.
Non-fundamental. The Fund has adopted the following additional
non-fundamental investment restrictions. These non-fundamental restrictions
may be changed without shareholder approval, in compliance with applicable
law and regulatory policy.
1. The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess of
seven days, and other securities that are not readily marketable. For purposes
of this limitation, illiquid securities shall not include commercial paper
issued pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
securities that may be resold under Rule 144A under that Act, provided that the
Board of Directors, or its delegate, determines that such securities are liquid,
based upon the trading markets for the specific security.
2. The Fund will not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or acquisition
of assets and except to the extent otherwise permitted by the 1940 Act.
3. The Fund will not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.
4. The Fund will not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in futures contracts and options are not
deemed to constitute selling short.
5. The Fund will not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction, except as
otherwise required by the 1940 Act.
If the Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position and
needs.
MANAGEMENT OF THE FUND
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
The Company has a Board composed of eight 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
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 and
Century Business Services, Inc. (formerly International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus and, until August 24, 1994, the Fund's Distributor. From
August 1994 until December 31, 1994, he was a director of Mellon
Financial Corporation. Age: 56 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; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 78 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 & CEO, Himmel & Company, Inc.; CEO,
American Food Management; former Director, The Boston Company, Inc.
("TBC") and Boston Safe Deposit and Trust Company, each an affiliate of
Dreyfus. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and
CEO, LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Ontario
Hydro Services Company; Director, the Hyams Foundation, Inc. Age: 50
years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor, Inc. Age: 38 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, he was Assistant
Counsel at Forum Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Manager of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 45 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. Age: 37
years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor, Inc. since
February 1997. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amount of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all other funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parentheses next to each Board
member's total compensation)* during the year ended December 31, 1999, were as
follows:
Total Compensation
From the Company
Total Compensation
Aggregate and Fund Complex
Name of Board Compensation Paid to Board
Member From the Company# Member
Joseph S. DiMartino** $25,000 $ 642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $ 80,989 ( 28)
Kenneth A. Himmel $16,666 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $20,000 $ 80,989 (28)
Benaree Pratt Wiley $20,000 $ 80,989 (28)
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# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Company, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
***J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1999, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $20,000. For the year ended
December 31, 1999, 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 $80,989. In addition, Dreyfus reimbursed Mr.
Fort a total of $2,799.33 for expenses attributable to the Company's Board
meetings which is not included in the $5,639.39 amount in note # above.
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, 2000.
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 Financial Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the 25 largest bank holding companies in the United States based
on total assets.
Management Agreement. Dreyfus serves as investment manager for the Fund
pursuant to an Investment Management Agreement with the Company (the "Management
Agreement"), 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 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" (as defined in the
1940 Act) 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 Company may terminate the Management Agreement upon the vote of
a majority of the Board of Directors or upon the vote of a majority of the
Fund's outstanding voting securities on sixty (60) days' written notice to
Dreyfus. Dreyfus may terminate the Management Agreement upon sixty (60) days'
written notice to the Company. The Management Agreement will terminate
immediately and automatically upon its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman; Ronald P.O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Diane P. Durnin, Vice President -Product Development; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Ray Van Cott, Vice President-Information Systems;
Theodore A. Schachar, Vice President-Tax; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James
Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott, Martin C. McGuinn,
Richard N. Sabo and Richard F. Syron, directors.
Under Dreyfus's personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in funds(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.25% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
Directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. In addition, the Fund is subject
to a distribution plan under which the Fund spends annually up to .25% of its
average daily net assets for distribution and shareholder servicing activities.
See "Distribution Plan." Expenses attributable to the Fund are charged against
the Fund's assets; other expenses of the Company are allocated among its funds
on the basis determined by the Board, including, but not limited to,
proportionately in relation to the net assets of each fund.
For the fiscal year ended October 31, 1999, the Fund paid Dreyfus $194,972
pursuant to the terms of the Management Agreement. From September 30, 1998
(commencement of operations) to October 31, 1998 the Fund paid Dreyfus $5,340.
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.
Transfer and Dividend Disbursing Agent and Custodian. 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.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. The Fund reserves the right to reject any purchase order. The
minimum initial investment is $2,500, or $1,000 if you are a client of an Agent
that maintains an omnibus account in the Fund and has made an aggregate minimum
initial purchase for its customers of $2,500. Subsequent investments must be at
least $100. However, the minimum initial investment is $750 for
Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs, with no
minimum for subsequent purchases except the no minimum on Education IRAs does
not apply until after the first year. The initial investment must be accompanied
by the Account Application. For full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing, the minimum initial investment is
$1,000. For full-time or part-time employees of Dreyfus or any of its affiliates
or subsidiaries who elect to have a portion of their pay directly deposited into
their Fund accounts, the minimum initial investment is $50. The Fund reserves
the right to offer Fund shares without regard to minimum purchase requirements
to employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information can
be transmitted in a manner and form acceptable to the Fund. The Fund reserves
the right to vary further the initial and subsequent investment minimum
requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.
Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builder(R), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect an investor against loss in a declining market.
Management understands that some Agents may impose certain conditions on
their clients which are different from those described in the Fund's Prospectus
and this SAI, and, to the extent permitted by applicable regulatory authority,
may charge their clients direct fees. Each Agent has agreed to transmit to its
clients a schedule of such fees. You should consult your Agent in this regard.
See "Distribution Plan."
Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share is
computed by dividing the value of the Fund's net assets (i.e., the value of its
assets less liabilities) by the total number of the Fund shares outstanding. For
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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.
Dreyfus TeleTransfer Privilege. You may purchase shares by telephone
through the Dreyfus TeleTransfer Privilege if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House ("ACH") member may be so
designated. Dreyfus TeleTransfer purchase orders may be made at any time.
Purchase orders received by 4:00 p.m. New York time, on any business day that
Transfer Agent and the NYSE are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m. New York time, on any business day
the Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second bank
business day following such purchase order. To qualify to use the Dreyfus
TeleTransfer Privilege, the initial payment for purchase of Fund shares must be
drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on file. If
the proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares - Dreyfus TeleTransfer Privilege." The Fund may modify or
terminate this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAV of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Expenses."
Fund shares are subject to fees for distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule") regulating
the circumstances under which investment companies such as the Company may,
directly or indirectly, bear the expenses of distributing their shares. The Rule
defines distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.
Distribution Plan. Fund shares are subject to a Distribution Plan (the
"Plan") adopted pursuant to the Rule. The Plan allows the Fund to spend annually
up to 0.25% of its average daily net assets to compensate Mellon Bank and its
affiliates (including but not limited to Dreyfus and Dreyfus Service
Corporation) for shareholder servicing activities and the Distributor for
shareholder servicing activities and expenses primarily intended to result in
the sale of Fund shares. The Plan allows the Distributor to make payments from
the Rule 12b-1 fees it collects from the Fund to compensate Agents that have
entered into Agreements with the Distributor for distribution related services
and/or shareholder services. Under the Agreements, the Agents are obligated to
provide distribution related services with regard to the Fund and/or shareholder
services to the Agent's clients that own Fund shares. The fees are payable
pursuant to the Plan without regard to expenses incurred.
The Fund and the Distributor may suspend or reduce payments under the Plan
at any time, and payments are subject to the continuation of the Fund's Plan and
the Agreements described above. Potential investors should read the Fund's
Prospectus in light of the terms governing Agreements with their Agents.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to the
Company's Directors for their review at least quarterly. In addition, the Plan
provides that it may not be amended to increase materially the costs which the
Fund may bear for distribution pursuant to the Plan without approval of the
Fund's shareholders, and that other material amendments of the Plan must be
approved by the vote of a majority of the Directors and of the Directors who are
not "interested persons" of the Company or Dreyfus (as defined in the 1940 Act)
and who do not have any direct or indirect financial interest in the operation
of the Plan, cast in person at a meeting called for the purpose of considering
such amendments. The Plan is subject to annual approval by the entire Board of
Directors and by the Directors who are neither interested persons nor have any
direct or indirect financial interest in the operation of the Plan, by vote cast
in person at a meeting called for the purpose of voting on the Plan. The Plan is
terminable at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or by vote of the holders of a majority (as defined in the
1940 Act) of the outstanding shares of the Fund.
For the fiscal year ended October 31, 1999, the Fund paid the Distributor
and Dreyfus Service Corporation $838 and $38,156, respectively, pursuant to the
Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."
Redemption Fee. The Fund will deduct a redemption fee equal to 1% of the
NAV of Fund shares redeemed (including redemptions through the use of the Fund
exchange service) less than 6 months following the issuance of such shares. The
redemption fee will be deducted from the redemption proceeds and retained by the
Fund.
No redemption fee will be charged on the redemption or exchange of shares
(1) through the Fund's Automatic Withdrawal Plan or Dreyfus Auto-Exchange
Privilege, (2) through accounts that are reflected on the records of the
Transfer Agent as omnibus accounts approved by Dreyfus Service Corporation, (3)
through accounts established by Agents approved by Dreyfus Service Corporation
that utilize the National Securities Clearing Corporation's networking system,
or (4) acquired through the reinvestment of dividends or capital gain
distributions. The redemption fee may be waived, modified or terminated at any
time.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege, which is granted automatically unless you specifically refuse it by
checking the applicable "No" box on the Account Application. The Telephone
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form or by oral request from any of the authorized
signatories on the account by calling 1-800-645-6561. You also may redeem shares
through the Wire Redemption Privilege or the Dreyfus TeleTransfer Privilege if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. If you are a client of certain Agents ("Selected Dealers"), you
can also redeem Fund shares through the Selected Dealer. Other redemption
procedures may be in effect for clients of certain Agents and institutions. The
Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate any redemption
privilege at any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated. Shares held under Keogh Plans, IRAs, or
other retirement plans, and shares for which certificates have been issued, are
not eligible for the Wire Redemption, Telephone Redemption or Dreyfus
TeleTransfer Privilege.
The Telephone Redemption Privilege, Dreyfus TeleTransfer Privilege or
Telephone Exchange Privilege authorizes the Transfer Agent to act on telephone
instructions (including over The Dreyfus Touch(R) automated telephone system)
from any person representing himself or herself to be you, or a representative
of your Agent, and reasonably believed by the Transfer Agent to be genuine. The
Fund will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Fund or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Fund nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used. During the delay,
the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on each day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.
In addition, the Distributor will accept orders from Selected Dealers with
which it has sales agreements for the repurchase of Fund shares held by
shareholders. Repurchase orders received by dealers by the close of trading on
the floor of the NYSE on any business day and transmitted to the Distributor or
its designee prior to the close of its business day (normally 5:15 p.m., New
York time) are effected at the price determined as of the close of trading on
the floor of the NYSE on that day. Otherwise, the Fund shares will be redeemed
at the next determined NAV. It is the responsibility of the Selected Dealer to
transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Ordinarily, the Fund will initiate payment for
shares redeemed pursuant to this Privilege on the next business day after
receipt if the Transfer Agent receives the redemption request in proper form.
Redemption proceeds ($1,000 minimum) will be transferred by Federal Reserve wire
only to the commercial bank account specified by the investor on the Account
Application or Shareholder Services Form, or a correspondent bank if the
investor's bank is not a member of the Federal Reserve System. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of only up
to $500,000 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 contracting a TRT Cables operator at 1-800-654-7171,
toll free. Investors should advise the operator that the above transmittal code
must be used and should also inform the operator of the Transfer Agent's answer
back sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily two
days after receipt of the redemption request. Holders of jointly registered Fund
or bank accounts may redeem through the Dreyfus TeleTransfer Privilege for
transfer to their bank account not more than $500,000 within any 30-day period.
Investors should be aware that if they have selected the Dreyfus TeleTransfer
Privilege, any request for a wire redemption will be effected as a Dreyfus
TeleTransfer transaction through the ACH system unless more prompt transmittal
specifically is requested. See "Purchase of Shares--Dreyfus TeleTransfer
Privilege."
Stock Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus or shares of
certain funds advised by Founders Asset Management LLC ("Founders"), an
affiliate of Dreyfus, to the extent such shares are offered for sale in your
state of residence. Shares of such other funds purchased by exchange will be
purchased on the basis of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify the
Transfer Agent of their prior ownership of fund shares and their account number.
Any such exchange is subject to confirmation of an investor's holdings through a
check of appropriate records.
To request an exchange, an investor or an investor's Agent acting on the
investor's behalf, must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically, unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account also by calling 1-800-645-6561. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably believed
by the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange.
Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.
To establish a new account by exchange the shares of the fund being
exchanged must have a value of at least the minimum initial investment required
for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase on a semi-monthly, monthly, quarterly
or annual basis, in exchange for shares of the Fund, shares of another fund in
the Dreyfus Family of Funds or shares of certain funds advised by Founders, of
which the investor is a shareholder. This Privilege is available only for
existing accounts. The amount the investor designates, which can be expressed
either in terms of a specific dollar or share amount ($100 minimum), will be
exchanged automatically on the first and/or fifteenth day of the month according
to the schedule the investor has selected. Shares will be exchanged on the basis
of relative NAV as described above under "Fund Exchanges." Enrollment in or
modification or cancellation of this Privilege is effective three business days
following notification by the investor. An investor will be notified if the
investor's account falls below the amount designated to be exchanged under this
Privilege. In this case, an investor's account will fall to zero unless
additional investments are made in excess of the designated amount prior to the
next Dreyfus Auto-Exchange transaction. Shares held under IRA and other
retirement plans are eligible for this Privilege. Exchanges of IRA shares may be
made between IRA accounts and from regular accounts to IRA accounts, but not
from IRA accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to the Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge a
service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for federal income tax purposes as a
sale of shares given in exchange and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchange service or Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to the Dreyfus Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671 and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-645-6561.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement Plans,
may permit certain participants to establish an automatic withdrawal plan from
such Retirement Plans. Participants should consult their Retirement Plan sponsor
and tax adviser for details. Such a withdrawal plan is different from the
Automatic Withdrawal Plan.
Dreyfus Dividend Options. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and other distributions, if
any, from the Fund in shares of another fund in the Dreyfus Family of Funds or
shares of certain funds advised by Founders, of which the investor is a
shareholder. Shares of the other funds purchased pursuant to this Privilege will
be purchased on the basis of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any reduced
loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a designated
bank account. Only an account maintained at a domestic financial institution
which is an ACH member may be so designated. Banks may charge a fee for this
service.
For more information concerning these Privileges, or to request a Dreyfus
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these Privileges by mailing written notification to Dreyfus Family Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. To select a new fund after
cancellation, you must submit a new Dreyfus Dividend Options Form. Enrollment in
or cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.
Dreyfus Step Program. Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-Automatic Asset Builder(R), Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program
account, you must supply the necessary information on the Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary authorization
form(s), please call toll free 1-800-782-6620. You may terminate your
participation in this Program at any time by discontinuing participation in
Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s). The Fund reserves the right to redeem your account if you
have terminated your participation in the Program and your account's NAV is $500
or less. See "Account Policies - General Polices" in the Fund's Prospectus. The
Fund may modify or terminate this Program at any time. Investors who wish to
purchase Fund shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs ( including regular
IRAs and spousal IRAs for a non-working spouse), Roth IRAs, SEP-IRAs and IRA
"Rollover Accounts."
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Fund, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-645-6561. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days' notice
to you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum $100 per transaction) automatically on a regular
basis. Depending upon your employer's direct deposit program, you may have part
or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side of
the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary authorization
form by calling 1-800-645-6561. You may change the amount of purchase or cancel
the authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, your Agent, Dreyfus, the
Fund, the Transfer Agent or any other person, to arrange for transactions under
the Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, and Rollover IRAs)
401(k) Salary Reduction Plan and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the following
numbers toll free: for Keogh Plans, please call 1-800-358-5566; for IRAs and IRA
"Rollover Accounts," please cal 1-800-645-6561; for SEP-IRAs, 401(k) Salary
Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares. All
fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may not
be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund Exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined NAV but the purchase
order would be effective only at the NAV next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at the
last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee and
fees pursuant to the Plan, are accrued daily and taken into account for the
purpose of determining the NAV of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Board of Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board if it believes that the discount no longer reflects
the value of the restricted securities. Restricted securities not of the same
class as securities for which a public market exists usually will be valued
initially at cost. Any subsequent adjustment from cost will be based upon
considerations deemed relevant by the Board.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled " Distributions and Taxes."
The term regulated investment company does not imply the supervision of
management or investment practices or policies by any government agency.
General. The Fund ordinarily declares and pays dividends from its net
investment income and distributes net realized capital gains and gains from
foreign currency transactions if any, once a year, but it may make distributions
on a more frequent basis to comply with the distribution requirements of the
Internal Revenue Code of 1986, as amended the ("Code"), in all events in a
manner consistent with the 1940 Act. All expenses are accrued daily and deducted
before declaration of dividends to investors. The Fund will not make
distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Investors other than
qualified retirement plans may choose whether to receive dividends and other
distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both dividends
and other distributions in additional Fund shares at NAV; dividends and other
distributions paid to qualified retirement plans are reinvested automatically in
additional Fund shares at NAV.
It is expected that the Fund will continue to qualify for treatment as a
regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such qualification
will relieve the Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with the applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, the
Fund -- which is treated as a separate corporation for federal tax purposes --
(1) must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions) ("Distribution Requirement"), (2) must derive at least 90% of its
annual gross income from specified sources ("Income Requirement") and (3) must
meet certain asset diversification and other requirements. If the Fund failed to
qualify for treatment as a RIC for any taxable year, (1) it would be taxed at
corporate rates on the full amount of its taxable income for that year without
being able to deduct the distributions it makes to its shareholders and (2) the
shareholders would treat all those distributions, including distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), as dividends (that is, ordinary income) to the extent of the
Fund's earnings and profits. In addition, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying for RIC treatment.
Distributions. If you elect to receive dividends and other distributions
in cash, and your distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest that
distribution and all future distributions payable to you in additional Fund
shares at NAV. No interest will accrue on amounts represented by uncashed
distributions or redemptions checks.
Dividends derived from net investment income, together with distributions
from net realized short-term capital gains, net realized gains from certain
foreign currency transactions, and all or a portion of any gains realized from
the sale or other disposition of certain market discount bonds (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions from net capital gain (the excess of net
long-term capital gain over net short-term capital loss) are taxable to those
shareholders as long-term capital gains regardless of how long the shareholders
have held their Fund shares and whether the distributions are received in cash
or reinvested in additional Fund shares.
Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to distributions paid during the year.
Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the plans. The Fund will not report to the Internal Revenue
Service ("IRS") distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. The
administrator, trustee or custodian of a qualified retirement plan will be
responsible for reporting distributions from the plan to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the distribution paid directly from the plan to an eligible retirement
plan in a "direct rollover," the distribution is subject to 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if the
shareholder fails to furnish a TIN to the Fund and certify that it is correct.
Backup withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) the shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income. A TIN is either the Social Security number, IRS individual
taxpayer identification number, or employer identification number of the record
owner of an account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner and may be claimed as a
credit on his or her federal income tax return.
The Fund will be subject to a non-deductible 4% excise tax ("Excise Tax"),
to the extent it fails to distribute substantially all of its taxable investment
income and capital gains.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as stated in
the Fund's Prospectus. In addition, if a shareholder sells shares of the Fund
held for six months or less and received a capital gain distribution with
respect to those shares, any loss incurred on the sale of those shares will be
treated as a long-term capital loss to the extent of the capital gain
distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of a year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-received
deduction allowed to corporations. The eligible portion may not exceed the
aggregate dividends received by the Fund from U.S. corporations. However,
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 (the
excess of net long-term capital gain over net short-term capital loss) -- which
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of a 4% excise Tax -- even if those earnings
and gains were not received by the Fund from the QEF. In most instances it will
be very difficult, if not impossible, to make this election because of certain
requirements thereof.
The Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock over
the Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included by the Fund for
prior taxable years. The Fund's adjusted basis in each PFIC's stock with respect
to which it makes this election would be adjusted to reflect the amounts of
income included and deductions taken under the election.
Foreign Currency, Futures, Forwards and Hedging Transactions. Gains from
the sale or other disposition of foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and gains from options,
futures and forward contracts derived by the Fund with respect to its business
of investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, a portion of the gains and losses
from the disposition of foreign currencies and certain
foreign-currency-denominated instruments (including debt instruments and
financial forward and futures contracts and options) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion of
any gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as capital
gain may be treated as ordinary income. "Conversion transactions" are defined to
include certain option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund on
the exercise or lapse of, or closing transactions respecting certain options,
future and forward contracts ("Section 1256 Contracts") will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. In
addition, any Section 1256 Contracts remaining unexercised at the end of the
Fund's taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss to
the Fund characterized in the same manner.
Offsetting positions held by the Fund involving certain options, future or
forward contracts may constitute "straddles," which are defined to include
"offsetting positions" in actively traded personal property. Under Section 1092
of the Code, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on the
offsetting position(s) of the straddle. In addition, these rules may postpone
the recognition of loss that otherwise would be recognized under the
mark-to-market rules discussed above. The regulations under Section 1092 also
provide certain "wash sale" rules, which apply to transactions where a position
is sold at a loss and a new offsetting position is acquired within a prescribed
period, and "short sale" rules applicable to straddles. If the Fund makes
certain elections (including an election as to straddles that included a
position in one or more Section 1256 Contracts (so-called "mixed straddles")),
the amount, character, and timing of recognition of gains and losses from the
affected straddle positions would be determined under rules that vary according
to the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward contract,
or short sale) with respect to any stock, debt instrument (other than "straight
debt"), or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the same or
substantially similar property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract, or futures or forward contract entered into by the Fund or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale.
Investment by the Fund in securities issued or acquired at a discount (for
example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
would be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and could need to
distribute such income to satisfy the Distribution Requirement and avoid the
Excise Tax. In that case, the Fund may have to dispose of securities it might
otherwise have continued to hold in order to generate cash to satisfy these
requirements.
Foreign Currency Gains and Losses. Gains and losses attributable to
fluctuations in foreign currency exchange rates that occur between the time the
Fund accrues dividends, interest or other receivables, or expenses or other
liabilities, denominated in a foreign currency and the time the Fund actually
collects the receivables or pays the liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on the disposition of a debt
security denominated in a foreign currency, or of an option or forward contract
on a foreign currency, gains or losses attributable to fluctuations in the value
of the foreign currency between the date of acquisition of the security, option
or contract and the date of disposition also are treated as ordinary income or
loss. These gains or losses may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its shareholders.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, it may be
subject to the tax laws thereof. Shareholders are advised to consult their tax
advisers concerning the application of state and local taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at
the rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder certifies his or her foreign
status to the Fund.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all distributions
to that shareholder and any gains realized by that shareholder on the
disposition of the Fund shares will be subject to U.S. federal income tax at the
graduated rates applicable to U.S. citizens and domestic corporations, as the
case may be. Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares of
the Fund, that they own at the time of their death. Certain credits against that
tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the Fund are generally traded on
a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commissions in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions on
behalf of the Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Dreyfus may use research services of and place
brokerage transactions with broker-dealers affiliated with it or Mellon Bank if
the commissions are reasonable, fair and comparable to commissions charged by
non-affiliated brokerage firms for similar services. Any spread, commission, fee
or other remuneration paid to an affiliated broker-dealer is paid pursuant to
the Company's procedures adopted in accordance with Rule 17e-1 under the 1940
Act.
Brokers or dealers may be selected who provide brokerage and/or research
services to the Fund and/or other accounts over which Dreyfus or its affiliates
exercise investment discretion. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its other
clients; and, conversely, such information provided by brokers or dealers who
have executed transaction orders on behalf of other clients of Dreyfus may be
useful to Dreyfus in carrying out its obligations to the Fund. The receipt of
such research services does not reduce the normal independent research
activities of Dreyfus, however, it enables to avoid the additional expenses
which might otherwise be incurred if it were to attempt to develop comparable
information through its own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made for
these other accounts. It sometimes happens that the same security is held by
more than one of the accounts managed by Dreyfus. Simultaneous transactions may
occur when several accounts are managed by the same investment manager,
particularly when the same investment instrument is suitable for the investment
objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. It is the present opinion of the
Directors that the desirability of retaining the Dreyfus as investment manager
to the Fund outweighs any disadvantages that may be said to exist from exposure
to simultaneous transactions.
For the fiscal year ended October 31, 1999, the Fund paid brokerage
commissions amounting to $44,639, and brokerage concessions amounting to
$143,320.
Portfolio Turnover. While securities are purchased for the Fund on the
basis of potential for capital appreciation and not for short-term trading
profits, the Fund's profile turnover rate may exceed 100%. A portfolio turnover
rate of 100% would occur, for example, if all the securities held by the Fund
were replaced once in a period of one year. A higher rate of portfolio turnover
involves correspondingly greater brokerage commissions and other expenses that
must be borne directly by the Fund and thus, indirectly by its shareholders. In
addition, a higher rate of portfolio turnover may result in the realization of
larger amounts of short-term capital gains that, when distributed to the Fund's
shareholders, are taxable to them as ordinary income. Nevertheless, securities
transactions for the Fund will be based only upon investment considerations and
will not be limited by any other considerations when Dreyfus deems its
appropriate to make changes in the Fund's assets. The portfolio turnover rate
for the Fund is calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities (exclusive of purchases and sales of
securities whose maturities at the time of acquisition were one year or less) by
the monthly average value of securities in the Fund during the year. Portfolio
turnover may vary from year to year as well as within a year. In periods in
which extraordinary market conditions prevail, Dreyfus will not be deterred from
changing the Fund's investment strategy as rapidly as needed, in which case
higher turnover rates can be anticipated.
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 Fund shares
for the periods rated were:
Average Annual Total Return for the
Period Ended October 31, 1999.
1 year Since Inception
------ ---------------
25.50% 28.22% (9/30/98)
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result.
The Fund's total return for the period from September 30, 1998 (the Fund's
incpetion date) to October 31, 1999 was 31.12%. Total return is calculated by
subtracting the amount of the Fund's net asset value per share at the beginning
of a stated period from the net asset value per share at the end of the period
(after giving effect to the reinvestment of dividends and other distributions
during the period), and dividing the result by the net asset value per share at
the beginning of the period.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Standard & Poor's Smallcap 600(R) Index, the Standard & Poor's 500 Composite
Stock Price Index, the Russell 2000(R) Value Index, the Russell 2000(R) Growth
Index, or the Russell 2000(R) Stock Index; (ii) the Dow Jones Industrial
Average; (iii) other appropriate unmanaged domestic or foreign indices of
performance of various types of investments so that investors may compare the
Fund's results with those of indices widely regarded by investors as
representative of the securities markets in general; (iv) other groups of mutual
funds tracked by Lipper Analytical Services, Inc., a widely used independent
research firm which ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies, publications, or
persons who rank mutual funds on overall performance or other criteria; (v) the
Consumer Price Index (a measure of inflation) to assess the real rate of return
from an investment in the Fund; and (vi) products managed by a universe of money
managers with similar performance objectives. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses. From time to time advertising
materials for the Fund may refer to Morningstar ratings and related analyses
supporting the rating.
From time to time, advertising materials for the Fund may 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) reference to the Fund's quantitative, disciplined approach to
stock market investing and the number of stocks analyzed by Dreyfus; (v)
discussions of the risk and reward potential of the securities markets and the
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.
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.
COUNSEL AND INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this SAI.
KPMG LLP, 757 Third Avenue, New York, NY 10017 was appointed by the
Directors to serve as the Fund's independent auditors for the fiscal year ending
October 31, 2000, 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.
<PAGE>
APPENDIX
DESCRIPTION OF STANDARD & POOR'S, MOODY'S,
FITCH AND DUFF & PHELPS RATINGS
STANDARD & POOR'S
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard & Poors. 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.
Standard & Poor's letter ratings may be modified by the addition of a plus
(+) or a minus (-) sign designation, which is used to show relative standing
within the major rating categories, except in the AAA (Prime Grade) category.
Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. Issues assigned an A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
MOODY'S
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
FITCH
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for
timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated `F-1+'.
DUFF & PHELPS
Commercial Paper Ratings
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor.
- ------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
- ------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus Disciplined Stock Fund (the "Fund"), dated March 1, 2000, as it may be
revised from time to time. The Fund is a separate, diversified portfolio of The
Dreyfus/Laurel Funds, Inc., (the "Company"), an open-end management investment
company, known as a mutual fund that is registered with the Securities and
Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
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.
TABLE OF CONTENTS
Page
Description of The Fund/Company...........................................B-2
Management of The Fund....................................................B-16
Management Arrangements...................................................B-22
Purchase of Shares........................................................B-24
Distribution Plan.........................................................B-27
Redemption of Shares......................................................B-28
Shareholder Services......................................................B-32
Additional Information About Purchases, Exchanges and Redemptions.........B-37
Determination of Net Asset Value..........................................B-38
Dividends, Other Distributions and Taxes..................................B-39
Portfolio Transactions....................................................B-45
Performance Information...................................................B-47
Information About the Fund/Company........................................B-49
Counsel and Independent Auditors..........................................B-50
Appendix..................................................................B-51
<PAGE>
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. The
Company is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund. The
Fund is diversified, which means that, with respect to 75% of its total assets,
the Fund will not invest more than 5% of its assets in the securities of any
single issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
The Fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's 500 Composite
Stock Price Index(R) ("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.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year or
less, (b) U.S. Treasury notes have maturities of one to ten years, and (c)
U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the U.S. Treasury, (c) the
discretionary authority of the U.S. Treasury to lead to such Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Inter-American Development Bank, Asian-American Development Bank, Student Loan
Marketing Association, International Bank for Reconstruction and Development and
Fannie Mae). No assurance can be given that the U.S. Government will provide
financial support to the agencies or instrumentalities described in (b), (c) and
(d) in the future, other than as set forth above, since it is not obligated to
do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements with
U.S. Government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System, or with other brokers or dealers
that meet the Fund's credit guidelines. This technique offers a method of
earning income on idle cash. In a repurchase agreement, the Fund buys a security
from a seller that has agreed to repurchase the same security at a mutually
agreed upon date and price. The Fund's resale price will be in excess of the
purchase price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and is
not related to the coupon rate on the underlying security. Repurchase agreements
may also be viewed as a fully collateralized loan of money by the Fund to the
seller. The period of these repurchase agreements will usually be short, from
overnight to one week, and at no time will the Fund invest in repurchase
agreements for more than one year. The Fund will always receive as collateral
securities whose market value including accrued interest is, and during the
entire term of the agreement remains, at least equal to 100% of the dollar
amount invested by the Fund in each agreement, including interest, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the custodian. If the seller
defaults, the Fund might incur a loss if the value of the collateral securing
the repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is the
subject of a repurchase agreement, realization upon the collateral by the Fund
may be delayed or limited. The Fund seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligors under
repurchase agreements, in accordance with the Fund's credit guidelines.
Foreign Securities. The Fund may purchase securities of foreign issuers
and may invest in foreign currencies and obligations of foreign branches of
domestic banks and domestic branches of foreign banks. Investment in such
foreign currencies, securities and obligations presents certain risks, including
those resulting from fluctuations in currency exchange rates, revaluation of
currencies, adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, and
the fact that foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with respect to
certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities may
be subject to foreign government taxes that would reduce the return on such
securities.
Illiquid Securities. The Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities that
have readily available market quotations are not deemed illiquid for purposes of
this limitation (irrespective of any legal or contractual restrictions on
resale). The Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). The Fund
may also purchase securities that are not registered under the Securities Act of
1933, as amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A securities will
be made by the Board of Directors or by Dreyfus pursuant to guidelines
established by the Board of Directors. The Board or Dreyfus will consider
availability of reliable price information and other relevant information in
making such determinations. Section 4(2) paper is restricted as to disposition
under the Federal securities laws and generally is sold to institutional
investors, such as the Fund, that agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be pursuant to registration or an exemption therefrom. Section
4(2) paper normally is resold to other institutional investors like the Fund
through or with the assistance of the issuer or investment dealers who make a
market in the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development, and it is not possible
to predict how this market will mature. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities from the Fund or other holders.
Other Investment Companies. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the
Investment Company Act of 1940, as amended ("1940 Act"). As a shareholder of
another investment company, the Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed only
by the credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The Fund
will only invest in commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's Investors
Service. Inc.("Moody's"), F-1 by Fitch IBCA, Inc. ("Fitch") or Duff-1 by Duff &
Phelps Credit Rating Co. ("Duff & Phelps").
Money Market Instruments. The Fund may invest in money market instruments,
including U.S. Government securities, repurchase agreements, bank obligations
and commercial paper, to meet liquidity needs in amounts not generally expected
to exceed 20%.
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.
Investment Techniques
In addition to the principal investment strategies discussed in the Fund's
prospectus, the Fund also may engage in the investment techniques described
below. The Fund might not use, or may not have the ability to use, any of these
strategies and there can be no assurance that any strategy that is used will
succeed.
Borrowing. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues of
U.S. Treasury and Government securities are often offered on a when-issued
basis. This means that delivery and payment for the securities normally will
take place approximately 7 to 45 days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at the
time the buyer enters into the commitment. The Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the commitment
before the settlement date if it is deemed advisable as a matter of investment
strategy. Cash or marketable high-grade debt securities equal to the amount of
the above commitments will be segregated on the Fund's records. For the purpose
of determining the adequacy of these securities the segregated securities will
be valued at market. If the market value of such securities declines, additional
cash or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Fund.
Securities purchased on a when-issued basis and the securities held by the
Fund are subject to changes in market value based upon the public's perception
of changes in the level of interest rates. Generally, the value of such
securities will fluctuate inversely to changes in interest rates -- i.e., they
will appreciate in value when interest rates decline and decrease in value when
interest rates rise. Therefore, if in order to achieve higher interest income
the Fund remains substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be a greater possibility
of fluctuation in the Fund's net asset value ("NAV").
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated securities,
the sale of other securities, and/or although it would not normally expect to do
so, from the sale of the when-issued securities themselves (which may have a
market value greater or less than the Fund's payment obligation). The sale of
securities to meet such obligations carries with it a greater potential for the
realization of capital gains, which are subject to federal income taxes.
To secure advantageous prices or yields, the Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed delivery
basis involves the risk that the value of the securities purchased will decline
prior to the settlement date. The sale of securities for delayed delivery
involves the risk that the prices available in the market on the delivery date
may be greater than those obtained in the sale transaction. The Fund will
establish a segregated account consisting of cash, U.S. Government securities or
other high-grade debt obligations in an amount at least equal at all times to
the amounts of its delayed delivery commitments.
Loans of Fund Securities. The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of the Fund's
total assets and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. These loans are terminable by the Fund at any time upon
specified notice. The Fund might experience loss if the institution to which it
has lent its securities fails financially or breaches its agreement with the
Fund. In addition, it is anticipated that the Fund may share with the borrower
some of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the Fund
considers all relevant factors and circumstances including the creditworthiness
of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by Dreyfus to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (1) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (2) agrees to repurchase the securities at a
future date by repaying the cash with interest. The Fund retains record
ownership of the security involved including the right to receive interest and
principal payments. Cash or liquid high-grade debt securities held by the Fund
equal in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is in
effect.
Futures, Options and Other Derivative Instruments. The Fund may purchase
and sell various financial instruments ("Derivative Instruments"), such as
financial futures contracts (such as index futures contracts) and options (such
as options on U.S. and foreign securities or indices of such securities). The
index Derivative Instruments the Fund may use may be based on indices of U.S. or
foreign equity securities. These Derivative Instruments may be used, for
example, to preserve a return or spread or to facilitate or substitute for the
sale or purchase of securities. The Fund may invest in futures contracts and
options to a limited extent but does not currently intend to invest more than 5%
of its assets in such instruments.
Hedging strategies can be broadly categorized as "short hedges" and "long
hedges." A short hedge is a purchase or sale of a Derivative Instrument intended
partially or fully to offset potential declines in the value of one or more
investments held in the Fund's portfolio. Thus, in a short hedge the Fund takes
a position in a Derivative Instrument whose price is expected to move in the
opposite direction of the price of the investment being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential increases in the acquisition
cost of one or more investments that the Fund intends to acquire. Thus, in a
long hedge the Fund takes a position in a Derivative Instrument whose price is
expected to move in the same direction as the price of the prospective
investment being hedged. A long hedge is sometimes referred to as an
anticipatory hedge. In an anticipatory hedge transaction, the Fund does not own
a corresponding security and, therefore, the transaction does not relate to a
security the Fund owns. Rather, it relates to a security that the Fund intends
to acquire. If the Fund does not complete the hedge by purchasing the security
it anticipated purchasing, the effect on the Fund's portfolio is the same as if
the transaction were entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that the Fund
owns or intends to acquire. Derivative Instruments on indices, in contrast,
generally are used to attempt to hedge against price movements in market sectors
in which the Fund has invested or expects to invest.
The use of Derivative Instruments is subject to applicable regulations of
the SEC, the several options and futures exchanges upon which they are traded,
the Commodity Futures Trading Commission ("CFTC") and various state regulatory
authorities. In addition, the Fund's ability to use Derivative Instruments will
be limited by tax considerations. See "Dividends, Other Distributions and
Taxes."
In addition to the instruments, strategies and risks described below and
in the Prospectus, Dreyfus expects to discover additional opportunities in
connection with other Derivative Instruments. These new opportunities may become
available as Dreyfus develops new techniques, as regulatory authorities broaden
the range of permitted transactions and as new techniques are developed. Dreyfus
may utilize these opportunities to the extent that they are consistent with the
Fund's investment objective, and permitted by the Fund's investment policies and
applicable regulatory authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks pertaining
to particular Derivative Instruments are described in the sections that follow.
(1) Successful use of most Derivative Instruments depends upon Dreyfus'
ability not only to forecast the direction of price fluctuations of the
investment involved in the transaction, but also to predict movements of the
overall securities and interest rate markets, which requires different skills
than predicting changes in the prices of individual securities. There can be no
assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between
price movements of a Derivative Instrument and price movements of the
investments being hedged. For example, if the value of a Derivative Instrument
used in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of correlation
might occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which
Derivative Instruments are traded. The effectiveness of hedges using Derivative
Instruments on indices will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.
Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that the standardized contracts available will
not match the Fund's current or anticipated investments exactly. The Fund may
invest in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. The Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in the Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of loss
by wholly or partially offsetting the negative effect of unfavorable price
movements. However, such strategies can also reduce opportunity for gain by
offsetting the positive effect of favorable price movements. For example, if the
Fund entered into a short hedge because Dreyfus projected a decline in the price
of a security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the Derivative Instrument. Moreover, if the price of the
Derivative Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss. In either such case, the Fund would have
been in a better position had it not attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(i.e., Derivative Instruments other than purchased options). If the Fund were
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair the
Fund's ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The Fund's ability to close out a
position in a Derivative Instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a time
and price that is favorable to the Fund.
(5) The purchase and sale of Derivative Instruments could result in a loss if
the counterparty to the transaction does not perform as expected and may
increase portfolio turnover rates, which results in correspondingly greater
commission expenses and transaction costs, and may result in certain tax
consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund will
not enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, futures or options, or (2) cash and
short-term liquid debt securities with a value sufficient at all times to cover
its potential obligations to the extent not covered as provided in (1) above.
The Fund will comply with SEC guidelines regarding cover for Derivative
Instruments and will, if the guidelines so require, set aside cash, U.S.
Government securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Derivative Instrument is open, unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of the Fund's assets to cover or segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
Options. A call option gives the purchaser the right to buy, and obligates
the writer to sell, the underlying investment at the agreed upon exercise price
during the option period. A put option gives the purchaser the right to sell,
and obligates the writer to buy, the underlying investment at the agreed upon
exercise price during the option period. A purchaser of an option pays an
amount, known as the premium, to the option writer in exchange for rights under
the option contract.
Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the purchase
of put options can serve as a short hedge. Writing put or call options can
enable the Fund to enhance income or yield by reason of the premiums paid by the
purchasers of such options. However, if the market price of the security or
other instrument underlying a put option declines to less than the exercise
price on the option, minus the premium received, the Fund would expect to suffer
a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the investment depreciates to a
price lower than the exercise price of the put option, it can be expected that
the put option will be exercised and the Fund will be obligated to purchase the
investment at more than its market value unless the option is closed out in an
offsetting transaction.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value.
The Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Fund to realize profits or
limit losses on an option position prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-counter
("OTC") options. Exchange-traded options in the United States are issued by a
clearing organization that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund will enter into only those option contracts that are listed on a
national securities or commodities exchange or traded in the OTC market for
which there appears to be a liquid secondary market.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the Fund,
taken at market value. However, if an OTC option is sold by the Fund to a
primary U.S. Government securities dealer recognized by the Federal Reserve Bank
of New York and the Fund has the unconditional contractual right to repurchase
such OTC option from the dealer at a predetermined price, then the Fund will
treat as illiquid such amount of the underlying securities as is equal to the
repurchase price less the amount by which the option is "in-the-money" (the
difference between the current market value of the underlying securities and the
price at which the option can be exercised). The repurchase price with primary
dealers is typically a formula price that is generally based on a multiple of
the premium received for the option plus the amount by which the option is
"in-the-money."
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. However, there can be no
assurance that such a market will exist at any particular time. Closing
transactions can be made for OTC options only by negotiating directly with the
counterparty, or by a transaction in the secondary market if any such market
exists. Although the Fund will enter into OTC options only with major dealers in
unlisted options, there is no assurance that the Fund will in fact be able to
close out an OTC option position at a favorable price prior to expiration. In
the event of insolvency of the counterparty, the Fund might be unable to close
out an OTC option position at any time prior to its expiration.
If the Fund were unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by the Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.
The Fund may write options on securities only if it covers the
transactions through: an offsetting option with respect to the security
underlying the option it has written, exercisable by it at a more favorable
price; ownership of (in the case of a call) or a short position in (in the case
of a put) the underlying security; or segregation of cash or certain other
assets sufficient to cover its exposure.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of the
obligation underlying the futures contract at a specified time in the future for
an agreed upon price. With respect to index futures, no physical transfer of the
securities underlying the index is made. Rather, the parties settle by
exchanging in cash an amount based on the difference between the contract price
and the closing value of the index on the settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund has written a call, it assumes a short futures position. If
the Fund has written a put, it assumes a long futures position. When the Fund
purchases an option on a futures contract, it acquires the right, in return for
the premium it pays, to assume a position in a futures contract (a long position
if the option is a call and a short position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve as a
limited short hedge, using a strategy similar to that used for writing call
options on securities or indices. Similarly, writing put options on futures
contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract the Fund is required to deposit "initial margin"
consisting of cash or U.S. Government securities in an amount generally equal to
10% or less of the contract value. Margin must also be deposited when writing a
call or put option on a futures contract, in accordance with applicable exchange
rules. Unlike margin in securities transactions, initial margin on futures
contracts does not represent a borrowing, but rather is in the nature of a
performance bond or good-faith deposit that is returned to the Fund at the
termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
Fund may be required by an exchange to increase the level of its initial margin
payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker. When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the Fund purchases
or sells a futures contract or writes a call or put option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If the Fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. Positions in futures and options on futures may be
closed only on an exchange or board of trade that provides a secondary market.
Although the Fund intends to enter into futures and options on futures only on
exchanges or boards of trade where there appears to be a liquid secondary
market, there can be no assurance that such a market will exist for a particular
contract at a particular time. In such event, it may not be possible to close a
futures contract or options position.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures or an option on a futures contract can
vary from the previous day's settlement price; once that limit is reached, no
trades may be made that day at a price beyond the limit. Daily price limits do
not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the future or option or to maintain cash or securities in a segregated
account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money" at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into. This policy does
not limit to 5% the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts for hedging purposes.
Master/Feeder Option. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's net investable assets
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Company's Board of Directors determines it to be in the best interest of the
Fund and its shareholders. In making that determination, the Company's Board of
Directors will consider, among other things, the benefits to shareholders and/or
the opportunity to reduce costs and achieve operational efficiency. Although the
Fund believes that the Company's Board of Directors will not approve an
arrangement that is likely to result in higher costs, no assurance is given that
costs will be materially reduced if this option is implemented.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities, and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowings, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
shares of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall not
be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in real estate business
or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward investing contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same investment
objective, policies and limitations as the Fund.
Non-fundamental. The Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law and
regulatory policy.
1. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in futures contracts and options are not
deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance of
transactions and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer if
the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such issuer,
together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in operation
for less than three years, if by reason thereof, the value of the Fund's
investment in such securities would exceed 5% of the Fund's total assets. For
purposes of this limitation, sponsors, general partners, guarantors and
originators of underlying assets may be treated as the issuer of a security.
6. The Fund will invest no more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining maturities
in excess of seven days, time deposits with maturities in excess of seven days
and other securities which are not readily marketable. For purposes of this
limitation, illiquid securities shall not include Section 4(2) paper and
securities which may be resold under Rule 144A under the Securities Act of 1933,
provided that the Board of Directors, or its delegate, determines that such
securities are liquid based upon the trading markets for the specific security.
7. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or acquisition
of assets and except to the extent otherwise permitted by the 1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would be
invested in warrants that are not listed on the New York or American Stock
Exchange (for purposes of this limitation, warrants acquired by the Fund in
units or attached to securities will be deemed to have no value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities would exceed 5% of its total assets except that
(a) this limitation shall not apply to standby commitments and (b) this
limitation shall not apply to the Fund's transactions in futures contracts and
options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks. The
Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by the
Board of Directors.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction, except as
otherwise required by the 1940 Act.
If the Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position and
needs.
MANAGEMENT OF THE FUND
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
The Company has a Board composed of eight 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
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 and
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and director
of Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus
and until August 24, 1994, the Fund's distributor. From August 1994
until December 31, 1994, he was a director of Mellon Financial
Corporation. Age: 56 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; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 78 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, each an affiliate of
Dreyfus. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and
CEO, LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Ontario
Hydro Services Company; Director, the Hyams Foundation, Inc. Age: 50
years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor, Inc. Age: 38 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, he was Assistant
Counsel at Forum Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Management of Treasury Services Administration of Funds
Distributor, Inc. From July 1994 to November 1995, she was a Fund
Accountant for Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and Funds
Distributor, Inc. From April 1997 to March 1998, she was employed as a
Relationship Manager with Citibank, NA. From August 1995 to April
1997, she was an Assistant Vice President with Hudson Valley Bank, and
from September 1990 to August 1995 she was a Second Vice President with
Chase Manhattan Bank. Age: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 45 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. Age: 37
years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor, Inc. since
February 1997. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all other funds in the Dreyfus Family of Funds for which such person is a Board
member (the number of which is set forth in parenthesis next to each Board
members total compensation)* during the year ended December 31, 1999, were as
follows:
Total Compensation From the
Aggregate Compensation Company and Fund Complex
Name of Board Member From the Company# Paid to Board Member
- -------------------- ----------------------- --------------------
Joseph S. DiMartino** $25,000 $642,177 (189)
James M. Fitzgibbons $20,000 $74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $80,989 (28)
Total Compensation From the
Aggregate Compensation Company and Fund Complex
Name of Board Member From the Company# Paid to Board Member
- -------------------- ----------------------- --------------------
Kenneth A. Himmel $16,666 $62,489 (28)
Stephen J. Lockwood $18,333 $68,989 (28)
Roslyn M. Watson $20,000 $80,989 (28)
Benaree Pratt Wiley $20,000 $80,989 (28)
- -------------------------
# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Company and the funds in the Dreyfus/Laurel Funds and
separately by Dreyfus High Yield Strategies Fund. For the fiscal
year ended October 31, 1999, the aggregate amount of fees received by
J. Tomlinson Fort from Dreyfus for serving as a Board member of the
Company was $20,000. For the year ended December 31, 1999, 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 $80,989. In addition, Dreyfus
reimbursed Mr. Fort a total of $2,799.33 for expenses attributable to
the Company's Board meetings which is not included in the $5,639.39
amount noted in # above.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the Fund's total shares outstanding as of February 1, 2000.
As of February 1, 2000, the following shareholder(s) owned beneficially
or of record 5% or more of Fund shares: Boston Safe Deposit & Trust Co. as
Agent-Omnibus Account, 1 Cabot Road, Medford, MA 02155-5141: 11.38%.
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 Financial 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 (the
"Management Agreement"), 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 Company may terminate
the Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities on
sixty (60) days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon sixty (60) days' written notice to the Company. The Management
Agreement will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President, Mark N. Jacobs, Vice President, General Counsel and Secretary;
Diane P. Durnin, Vice President-Product Development; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Ray Van Cott, Vice President-Information Systems;
Theodore A. Schachar, Vice President-Tax; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James
Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott, Martin C. McGuinn,
Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of .90% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. In addition, the Fund is subject
to a distribution plan under which the Fund spends annually up to .10% of its
average daily net assets for distribution and shareholder servicing activities.
See "Distribution Plan." Expenses attributable to the Fund are charged against
the Fund's assets; other expenses of the Company are allocated among its funds
on the basis determined by the Board, including, but not limited to,
proportionately in relation to the net assets of each fund.
For the last three fiscal years, the Fund has had the following expenses:
For the Fiscal Years Ended October 31,
1999 1998 1997
---- ---- ----
Management fees $26,998,354 $18,808,035 $10,968,122
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.
Transfer and Dividend Disbursing Agent and Custodian. 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.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions For Regular Accounts" and
"Instructions for IRAs."
General. The Fund reserves the right to reject any purchase order. The
minimum initial investment is $2,500, or $1,000 if you are a client of an Agent
which maintains an omnibus account in the Fund and has made an aggregate minimum
initial purchase for its customers of $2,500. Subsequent investments must be at
least $100. However, the minimum initial investment is $750 for
Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs, with no
minimum for subsequent purchases except the no minimum on Education IRAs does
not apply until after the first year. The initial investment must be accompanied
by the Account Application. For full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing, the minimum initial investment is
$1,000. For full-time or part-time employees of Dreyfus or any of its affiliates
or subsidiaries who elect to have a portion of their pay directly deposited into
their Fund accounts, the minimum initial investment is $50. The Fund reserves
the right to offer Fund shares without regard to minimum purchase requirements
to employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information can
be transmitted in a manner and form acceptable to the Fund. The Fund reserves
the right to vary further the initial and subsequent investment minimum
requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.
Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builder(R), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect an investor against loss in a declining market.
Management understands that some Agents may impose certain conditions on
their clients which are different from those described in the Fund's Prospectus
and this Statement of Additional Information and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees which
would be in addition to any amounts which might be received under the
Distribution Plan. Each Agent has agreed to transmit to its clients a schedule
of such fees. You should consult your Agent in this regard.
Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share is
computed by dividing the value of the Fund's net assets (i.e., the value of its
assets less liabilities) by the total number of Fund shares outstanding. For
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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.
Dreyfus TeleTransfer Privilege. You may purchase shares by telephone
through the Dreyfus TeleTransfer Privilege if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House ("ACH") member may be so
designated. Dreyfus TeleTransfer purchase orders may be made at any time.
Purchase orders received by 4:00 p.m. New York time, on any business day that
the Transfer Agent and the NYSE are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m. New York time, on any business day
the Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second bank
business day following such purchase order. To qualify to use the Dreyfus
TeleTransfer Privilege, the initial payment for purchase of Fund shares must be
drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on file. If
the proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Fund Shares - Dreyfus TeleTransfer Privilege." The Fund may
modify or terminate this Privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAV of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Expenses."
Fund shares are subject to fees for distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule") regulating
the circumstances under which investment companies such as the Company may,
directly or indirectly, bear the expenses of distributing their shares. The Rule
defines distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.
Distribution Plan. Fund shares are subject to a Distribution Plan (the
"Plan") adopted pursuant to the Rule. The Plan allows the Fund to spend annually
up to 0.10% of its average daily net assets to compensate Mellon Bank and its
affiliates (including but not limited to Dreyfus and Dreyfus Service
Corporation) for shareholder servicing activities and the Distributor for
shareholder servicing activities and expenses primarily intended to result in
the sale of Fund shares. The Plan allows the Distributor to make payments from
the Rule 12b-1 fees it collects from the Fund to compensate Agents that have
entered into Selling Agreements ("Agreements") with the Distributor for
distribution related services and/or shareholder services. Under the Agreements,
the Agents are obligated to provide distribution related services with regard to
the Fund and/or shareholder services to the Agent's clients that own Fund
shares. The fees are payable pursuant to the Plan without regard to expenses
incurred.
The Fund and the Distributor may suspend or reduce payments under the Plan
at any time, and payments are subject to the continuation of the Fund's Plan and
the Agreements described above. Potential investors should read the Fund's
Prospectus and this Statement of Additional Information in light of the terms
governing Agreements with their Agents.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to the
Company's Directors for their review at least quarterly. In addition, the Plan
provides that it may not be amended to increase materially the costs which the
Fund may bear for distribution pursuant to the Plan without approval of the
Fund's shareholders, and that other material amendments of the Plan must be
approved by the vote of a majority of the Directors and of the Directors who are
not "interested persons" of the Company or Dreyfus (as defined in the 1940 Act)
and who do not have any direct or indirect financial interest in the operation
of the Plan, cast in person at a meeting called for the purpose of considering
such amendments. The Plan is subject to annual approval by the entire Board of
Directors and by the Directors who are neither interested persons nor have any
direct or indirect financial interest in the operation of the Plan, by vote cast
in person at a meeting called for the purpose of voting on the Plan. The Plan is
terminable at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or by vote of the holders of a majority of the outstanding
shares of the Fund.
For the fiscal year-ended October 31, 1999, the Fund paid the Distributor
and Dreyfus Service Corporation $242,392 and $2,757,425, respectively, pursuant
to the Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions For Regular Accounts" and
"Instructions For IRAs."
General. The Fund imposes no charges when shares are redeemed. Agents may
charge their clients a fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted with the
redemption request. The value of the shares redeemed may be more or less than
their original cost, depending upon the Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege, which is granted automatically unless you specifically refuse it by
checking the applicable "No" box on the Account Application. The Telephone
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form or by oral request from any of the authorized
signatories on the account by calling 1-800-645-6561. You also may redeem shares
through the Wire Redemption Privilege or the Dreyfus TeleTransfer Privilege if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. If you are a client of certain Agents ("Selected Dealers"), you
can also redeem Fund shares through the Selected Dealer. Other redemption
procedures may be in effect for clients of certain Agents and institutions. The
Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate any redemption
privilege at any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated. Shares held under Keogh Plans, IRAs, or
other retirement plans, and shares for which certificates have been issued, are
not eligible for the Wire Redemption, Telephone Redemption or Dreyfus
TeleTransfer Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including over
The Dreyfus Touch(R) automated telephone system) from any person representing
himself or herself to be you, or a representative of your Agent, and reasonably
believed by the Transfer Agent to be genuine. The Fund will require the Transfer
Agent to employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions reasonably
believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used. During the delay,
the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 pm., New
York Time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.
In addition, the Distributor will accept orders from Selected Dealers with
which it has sales agreements for the repurchase of Fund shares held by
shareholders. Repurchase orders received by dealers by the close of trading on
the floor of the NYSE on any business day and transmitted to the Distributor or
its designee prior to the close of its business day (normally 5:15 p.m., New
York time) are effected at the price determined as of the close of trading on
the floor of the NYSE on that day. Otherwise, the Fund shares will be redeemed
at the next determined NAV. It is the responsibility of the Selected Dealer to
transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Ordinarily, the Fund will initiate payment for
shares redeemed pursuant to this Privilege on the next business day after
receipt by the Transfer Agent of the redemption request in proper form.
Redemption proceeds ($1,000 minimum) will be transferred by Federal Reserve wire
only to the commercial bank account specified by the investor on the Account
Application or Shareholder Services Form, or a correspondent bank if the
investor's bank is not a member of the Federal Reserve System. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of only up
to $500,000 wired within any 30-day period. Fees ordinarily are imposed by such
bank and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. Investors should advise the operator that the above transmittal code must
be used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily two
days after receipt of the redemption request. Holders of jointly registered Fund
or bank accounts may redeem through the Dreyfus TeleTransfer Privilege for
transfer to their bank account only up to $500,000 within any 30-day period.
Investors should be aware that if they have selected the Dreyfus TeleTransfer
Privilege, any request for a wire redemption will be effected as a Dreyfus
TeleTransfer transaction through the ACH system unless more prompt transmittal
specifically is requested. See "Purchase of Fund Shares--Dreyfus TeleTransfer
Privilege."
Stock Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus or shares of
certain funds advised by Founders Asset Management LLC ("Founders"), an
affiliate of Dreyfus, to the extent such shares are offered for sale in your
state of residence. Shares of such other funds purchased by exchange will be
purchased on the basis of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify the
Transfer Agent of their prior ownership of fund shares and their account number.
Any such exchange is subject to confirmation of an investor's holdings through a
check of appropriate records.
To request an exchange, an investor or an investor's Agent acting on the
investor's behalf, must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically, unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-645-6561. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) 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. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, shares of another fund in the Dreyfus Family of
Funds or shares of certain funds advised by Founders, of which you are a
shareholder. This Privilege is available only for existing accounts. The amount
the investor designates, which can be expressed either in terms of a specific
dollar or share amount ($100 minimum), will be exchanged automatically on the
first and/or fifteenth day of the month according to the schedule the investor
has selected. With respect to Fund shares held by a Retirement Plan, exchanges
may be made only between the investor's Retirement Plan account in one fund and
such investor's Retirement Plan account in another fund. Shares will be
exchanged on the basis of relative NAV as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this Privilege is
effective three business days following notification by the investor. An
investor will be notified if the investor's account falls below the amount
designated to be exchanged under this Privilege. In this case, an investor's
account will fall to zero unless additional investments are made in excess of
the designated amount prior to the next Dreyfus Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and from
regular accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only among
those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to the Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge a
service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as a
sale of shares given in exchange and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to the Dreyfus Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671 and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-645-6561.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement Plans,
may permit certain participants to establish an automatic withdrawal plan from
such Retirement Plans. Participants should consult their Retirement Plan sponsor
and tax adviser for details. Such a withdrawal plan is different from the
Automatic Withdrawal Plan.
Dreyfus Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of another fund in the Dreyfus Family of Funds or
shares of certain funds advised by Founders, of which you are a shareholder.
Shares of the other funds purchased pursuant to this Privilege will be purchased
on the basis of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any reduced
loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a designated
bank account. Only an account maintained at a domestic financial institution
which is an ACH member may be so designated. Banks may charge a fee for this
service.
For more information concerning these Privileges, or to request a Dreyfus
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these Privileges by mailing written notification to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new fund after
cancellation, you must submit a new Dreyfus Dividend Options Form. Enrollment in
or cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.
Dreyfus Step Program. Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-Automatic Asset Builder(R), Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program
account, you must supply the necessary information on the Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary authorization
form(s), please call toll free 1-800-782-6620. You may terminate your
participation in this Program at any time by discontinuing participation in
Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s). The Fund reserves the right to redeem your account if you
have terminated your participation in the Program and your account's NAV is $500
or less. See "Account Policies-General Policies" in the Fund's Prospectus. The
Fund may modify or terminate this Program at any time. Investors who wish to
purchase Fund shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs (including regular
IRAs and spousal IRA's for a non-working spouse), Roth IRAs, SEP-IRAs and IRA
"Rollover Accounts."
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Fund, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-645-6561. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days' notice
to you.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum $100 per transaction) automatically on a regular
basis. Depending upon your employer's direct deposit program, you may have part
or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side of
the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary authorization
form by calling 1-800-645-6561. You may change the amount of purchase or cancel
the authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, your Agent, Dreyfus, the
Fund, the Transfer Agent or any other person, to arrange for transactions under
the Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, and Rollover IRAs),
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please cal 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares. All
fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may not
be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders.
Accordingly, if the Fund's management determines that an investor is
engaged in excessive trading, the Fund, with or without prior notice, may
temporarily or permanently terminate the availability of Fund Exchanges, or
reject in whole or part any purchase or exchange request, with respect to such
investor's account. Such investors also may be barred from purchasing other
funds in the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes exchanges
that appear to coincide with an active market-timing strategy may be deemed to
be engaged in excessive trading. Accounts under common ownership or control will
be considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if, in the judgment of the Fund's management,
the Fund would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected or if
the Fund receives or anticipates receiving simultaneous orders that may
significantly affect the Fund (e.g., amounts equal to 1% or more of the Fund's
total assets). If an exchange request is refused, the Fund will take no other
action with respect to the shares until it receives further instructions from
the investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if the
amount of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined NAV but the purchase
order would be effective only at the NAV next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at the
last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee and
fees pursuant to the Current Plan, are accrued daily and taken into account for
the purpose of determining the NAV of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making its good faith
valuation of restricted securities, the Board of Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if it believes that the discount no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and Taxes".
General. The Fund ordinarily declares and pays dividends from its net
investment income quarterly and distributes net realized capital gains and gains
from foreign currency transactions, if any, once a year, but it may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the 1940
Act. All expenses are accrued daily and deducted before declaration of dividends
to investors. The Fund will not make distributions from net realized capital
gains unless all capital loss carryovers, if any, have been utilized or have
expired. Investors other than qualified retirement plans may choose whether to
receive dividends and other distributions in cash, to receive dividends in cash
and reinvest other distributions in additional Fund shares at NAV, or to
reinvest both dividends and other distributions in additional Fund shares at
NAV; dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV.
It is expected that the Fund will continue to qualify for treatment as a
regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such qualification
will relieve the Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, the
Fund--which is treated as a separate corporation for federal tax purposes--(1)
must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions) ("Distribution Requirement"), (2) must derive at least 90% of its
annual gross income from specified sources ("Income Requirement") and (3) must
meet certain asset diversification and other requirements. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency. If the Fund failed to qualify
for treatment as a RIC for any taxable year, (1) it would be taxed at corporate
rates on the full amount of its taxable income for that year without being able
to deduct the distributions it makes to its shareholders and (2) the
shareholders would treat all those distributions, including distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), as dividends (that is, ordinary income) to the extent of the
Fund's earnings and profits. In addition, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying for RIC treatment.
The Fund will be subject to a non-deductible 4% excise tax ("Excise Tax"),
to the extent it fails to distribute substantially all of its taxable investment
income and capital gains.
If you elect to receive dividends and other distributions in cash, and
your distribution check is returned to the Fund as undeliverable or remains
uncashed for six months, the Fund reserves the right to reinvest that
distribution and all future distributions payable to you in additional Fund
shares at NAV. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Dividends derived from net investment income, together with distributions
from net realized short-term capital gains, net realized gains from certain
foreign currency transactions, and all or a portion of any gains realized from
the sale or other disposition of certain market discount bonds (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions from net capital gain (the excess of net
long-term capital gain over net short-term capital loss) are taxable to those
shareholders as long-term capital gains regardless of how long the shareholders
have held their Fund shares and whether the distributions are received in cash
or reinvested in additional Fund shares.
Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to distributions paid during the year.
Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the plans. The Fund will not report to the Internal Revenue
Service ("IRS") distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. The
administrator, trustee or custodian of a qualified retirement plan will be
responsible for reporting distributions from the plan to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the distribution paid directly from the plan to an eligible retirement
plan in a "direct rollover," the distribution is subject to 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if the
shareholder fails to furnish a TIN to the Fund and certify that it is correct.
Backup withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) shareholder fails to certify
that he or she has not received notice from the IRS of being subject to backup
withholding as a result of a failure properly to report taxable dividend or
interest income on a federal income tax return or (2) the IRS notifies the Fund
to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income. A TIN is either the Social Security number, IRS individual
taxpayer identification number or employer identification number of the record
owner of an account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner and may be claimed as a
credit on his or her federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a distribution would be a return on
investment in an economic sense, although taxable as discussed above. In
addition, if a shareholder sells shares of the Fund held for six months or less
and receives any capital gain distributions with respect to those shares, any
loss incurred on the sale of those shares will be treated as a long-term capital
loss to the extent of those distributions.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-received
deduction allowed to corporations. The eligible portion may not exceed the
aggregate dividends received by the Fund from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the federal alternative
minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes imposed
by foreign countries and U.S. possessions ("foreign taxes") that would reduce
the yield and/or total return on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate foreign taxes, however,
and many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors.
If more than 50% of the value of the Fund's total assets at the close of
its taxable year consists of securities of foreign corporations, it will be
eligible to, and may, file an election ("Election") with the IRS that would
enable its shareholders, in effect, to receive the benefit of the foreign tax
credit with respect to any foreign income taxes paid by it. Pursuant to the
Election, the Fund would treat those taxes as dividends paid to its shareholders
and each shareholder would be required to (1) include in gross income, and treat
as paid by him or her, his or her proportionate share of those taxes, (2) treat
his or her share of those taxes and of any dividend paid by the Fund that
represents income from foreign or U.S. possession sources as his or her own
income from those sources, and (3) either deduct the taxes deemed paid by him or
her in computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her federal
income tax. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Generally, a credit for foreign taxes may not
exceed the portion of the shareholder's federal income tax attributable to his
total foreign source taxable income. The Fund will report to its shareholders
shortly after each taxable year their respective shares of its income from
sources within foreign countries and U.S. possessions and foreign taxes it paid
if it makes the Election.
Foreign Currency, Futures, Forwards and Hedging Transactions. Gains from
the sale or other disposition of foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and gains from options,
futures and forward contracts derived by the Fund with respect to its business
of investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain and loss. However, a portion of the gains and losses
from the disposition of foreign currencies and certain foreign currency
denominated instruments (including debt instruments and financial forward and
futures and option) may be treated as ordinary income or loss under Section 988
of the Code. In addition, all or a portion of any gain realized from the
disposition of certain market discount bonds and from engaging in "conversion
transactions" that would otherwise be treated as capital gain may be treated as
ordinary income. "Conversion transactions" are defined to include certain
forward, futures, option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund on
the exercise or lapse of, or closing transactions respecting, certain options,
futures and forward contracts ("Section 1256 Contracts") will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. In
addition, any Section 1256 Contracts remaining unexercised at the end of the
Fund's taxable year will be treated as sold for their then fair market value ( a
process known as "marking-to-market"), resulting in additional gain or loss to
the Fund characterized in the same manner.
Offsetting positions held by the Fund involving certain options, futures
or forward contracts may constitute "straddles, which are defined to include
"offsetting positions" in actively traded personal property. Under Section 1092
of the Code, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on the
offsetting position(s) of the straddle. In addition, these rules may postpone
the recognition of loss that otherwise would be recognized under the
mark-to-market rules discussed above. The regulations under Section 1092 also
provide certain "wash sale" rules, which apply to transactions where a position
is sold at a loss and a new offsetting position is acquired within a prescribed
period, and "short sale" rules applicable to straddles. If the Fund makes
certain elections (including an election as to straddles that include a position
in one or more Section 1256 contracts (so-called "mixed straddles")), the
amount, character, and timing of recognition of gains and losses from the
affected straddle positions would be determined under rules that vary according
to the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
Investment by the Fund in securities issued or acquired at a discount (for
example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
would be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and could need to
distribute that income to satisfy the Distribution Requirement and avoid the
Excise Tax. In that case, the Fund may have to dispose of securities it might
otherwise have continued to hold in order to generate cash to satisfy these
requirements.
Passive Foreign Investment Companies The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a foreign
corporation which, on any day during its taxable year, more than 50% of the
total voting power of all voting stock therein or the total value of all stock
therein is owned, directly, indirectly, or constructively, by "U.S.
shareholders", defined as U.S. persons that individually own, directly,
indirectly, or constructively, at least 10% of that voting power) as to which
the Fund is a U.S. shareholder -- that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a dividend to its shareholders. The balance of the PFIC income will be included
in the Fund's investment company taxable income and, accordingly, will not be
taxable to it to the extent that it distributes income to its shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain -- which
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not distributed to the Fund by the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
The Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock over
the Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included by the Fund for
prior taxable years. The Fund's adjusted basis in each PFIC's stock with respect
to which it makes this election would be adjusted to reflect the amounts of
income included and deductions taken under the election, and under regulations
proposed in 1992 that provided a similar election with respect to the stock of
certain PFICs.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes to them.
Foreign Shareholders -- U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder"), depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. Federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all distributions
to that shareholder and any gains realized by that shareholder on the
disposition of the Fund shares will be subject to U.S. federal income tax at the
graduated rates applicable to U.S. citizens and domestic corporations, as the
case may be. Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares of
the Fund, that they own at the time of their death. Certain credits against that
tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the Fund are generally traded on
a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commissions in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions on
behalf of the Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or research
services to the Fund and/or other accounts over which Dreyfus or its affiliates
exercise investment discretion. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its other
clients; and, conversely, such information provided by brokers or dealers who
have executed transaction orders on behalf of other clients of Dreyfus may be
useful to Dreyfus in carrying out its obligation to the Fund. The receipt of
such research services does not reduce the normal independent research
activities of Dreyfus; however, it enables Dreyfus to avoid the additional
expenses which might otherwise be incurred if it were to attempt to develop
comparable information through its own staff.
Dreyfus may use research services of and place brokerage transactions with
broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated
brokerage firms for similar services. During the fiscal years ended October 31,
1997, 1998 and 1999, the Fund paid to Dreyfus Brokerage Services, Inc., ("DBS"),
an affiliate of Dreyfus brokerage commissions of $232,780, $481,959 and
$212,149, respectively. The amounts paid to DBS during the fiscal years ended
October 31, 1997, 1998 and 1999 were approximately 12%, 17% and 6%, respectively
of the aggregate brokerage commissions paid by the Fund, for transactions
involving approximately 14%, 25% and 10%, respectively of the aggregate dollar
volume of transactions for which the Fund paid brokerage commissions. The
difference in these percentages was due to the lower commissions paid to
affiliates of Dreyfus.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made for
these other accounts. It sometimes happens that the same security is held by
more than one of the accounts managed by Dreyfus. Simultaneous transactions may
occur when several accounts are managed by the same investment manager,
particularly when the same investment instrument is suitable for the investment
objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
The brokerage commissions paid by the Fund for fiscal years ended October
31, 1999, 1998 and 1999 were $1,995,335, $2,861,837 and $3,423,345,
respectively. The principal reason for the increase in the Fund's brokerage
commissions for the most recent fiscal year was an increase in assets. The Fund
did not pay any brokerage concessions for the fiscal years ended October 31,
1997, 1998 and 1999.
Portfolio Turnover. While securities are purchased for the Fund on
the basis of potential for capital appreciation and not for short-term trading
profits, the Fund's portfolio turnover rate may exceed 100%. A portfolio
turnover rate of 100% would occur, for example, if all the securities held by
the Fund were replaced once in a period of one year. A higher rate of portfolio
turnover involves correspondingly greater brokerage commissions and other
expenses that must be borne directly by the Fund and, thus, indirectly by its
shareholders. In addition, a higher rate of portfolio turnover may result in the
realization of larger amounts of short-term capital gains that, when distributed
to the Fund's shareholders, are taxable to them as ordinary income.
Nevertheless, securities transactions for the Fund will be based only upon
investment considerations and will not be limited by any other considerations
when Dreyfus deems it appropriate to make changes in the Fund's assets. The
portfolio turnover rate for the Fund is calculated by dividing the lesser of the
Fund's annual sales or purchases of portfolio securities (exclusive of purchases
and sales of securities whose maturities at the time of acquisition were one
year or less) by the monthly average value of securities in the Fund during the
year. Portfolio turnover may vary from year to year as well as within a year.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the Fund's NAV per
share at the beginning of a stated period from the NAV per share at the end of
the period (after giving effect to the reinvestment of dividends and other
distributions during the period), and dividing the result by the NAV per share
at the beginning of the period.
Average annual total return (expressed as a percentage) for shares of the
Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1999
1 Year 5 Years 10 Years
------ ------- --------
24.01% 24.76% 18.07%
The Fund's total return for the period from December 31, 1987 (the Fund's
inception date) to October 31, 1999 was 641.68%.
Effective December 15, 1997, the Fund's "Institutional" and "Retail"
designations were eliminated and the Fund became a single class fund without any
separate class designation.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the Morgan
Stanley European Index; (ii) the S&P 500, the Dow Jones Industrial Average, or
other appropriate unmanaged domestic or foreign indices of performance of
various types of investments so that investors may compare the Fund's results
with those of indices widely regarded by investors as representative of the
securities markets in general; (iii) other groups of mutual funds tracked by
Lipper Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds on overall performance or other criteria; (iv) the Consumer Price Index (a
measure of inflation) to assess the real rate of return from an investment in
the Fund; and (v) products managed by a universe of money managers with similar
country allocation and performance objectives. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses. From time to time, advertising
materials for the Fund may refer to Morningstar ratings and related analyses
supporting the rating.
From time to time, advertising material for the Fund may include: (i)
biographical information relating to its portfolio manager and may refer to, or
include commentary by the Fund's portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors; (ii)
information concerning retirement and investing for retirement, including
statistical data or general discussions about the growth and development of
Dreyfus Retirement Services (in terms of new customers, assets under management,
market share, etc.) and its presence in the defined contribution plan market;
(iii) the approximate number of then current Fund shareholders; (iv) references
to the Fund's quantitative, disciplined approach to stock market investing and
the number of stocks analyzed by Dreyfus; and (v) Lipper or Morningstar ratings
and related analysis supporting the ratings. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
the "The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock. Each Fund share has one vote and, when issued and paid
for in accordance with the terms of the offering, is fully paid and
non-assessable. The Fund is one of nineteen portfolios of the Company. Fund
shares 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.
COUNSEL AND INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional Information.
KPMG LLP, 757 Third Avenue, New York, New York 10017, was appointed by the
Directors to serve as the Fund's independent auditors for the year ending
October 31, 2000, 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.
<PAGE>
APPENDIX
DESCRIPTION OF STANDARD & POOR'S, MOODY'S, FITCH AND DUFF RATINGS
STANDARD & POOR'S
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard & Poor's. 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.
Standard & Poor's letter ratings may be modified by the addition of a plus
(+) or a minus (-) sign designation, which is used to show relative standing
within the major rating categories, except in the AAA (Prime Grade) category.
Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Issues assigned an A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
MOODY'S
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
FITCH
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for
timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated `F-1+'.
DUFF & PHELPS
Commercial Paper Ratings
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor.
- ------------------------------------------------------------------------------
THE DREYFUS/LAUREL FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 2000
- ------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus dated
March 1, 2000, 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., (the
"Company"), an open-end management investment company, known as a mutual fund
that is registered with the Securities and Exchange Commission ("SEC").
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
The financial statements for the fiscal year ended October 31, 1999,
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.
<PAGE>
TABLE OF CONTENTS
Page
Description of the Funds/Company...........................................B-3
Management of the Funds...................................................B-17
Management Arrangements...................................................B-23
Purchase of Shares........................................................B-26
Distribution Plan and Shareholder Servicing Plan..........................B-29
Redemption of Shares......................................................B-32
Shareholder Services......................................................B-36
Determination of Net Asset Value..........................................B-40
Dividends, Other Distributions and Taxes..................................B-41
Portfolio Transactions....................................................B-46
Performance Information...................................................B-48
Information About the Funds/Company.......................................B-50
Counsel and Independent Auditors..........................................B-51
Appendix..................................................................B-52
<PAGE>
DESCRIPTION OF THE FUNDS/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. 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.
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: (i) are
backed by the full faith and credit of the United States, (ii) are rated in the
two highest short-term rating categories by at least two nationally recognized
statistical rating organizations (or by one organization if only one
organization has rated the security), (iii) if not rated, are obligations of an
issuer whose other outstanding short-term debt obligations are so rated, or (iv)
if not rated, are of comparable quality, as determined by Dreyfus under
procedures established by the Board of Directors.
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 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 Investors Service, Inc. ("Moody's") or AA by Standard &
Poor's Ratings Services ("S&P"), 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.
("Fitch") or Duff-1 by Duff & Phelps Credit Rating Co. ("Duff & Phelps"), 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 S&P. 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.
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.
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.
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
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
The Company has a Board composed of eight 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
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 and
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus and until August 24, 1994, the Fund's Distributor. From August
1994 until December 31, 1994, he was a director of Mellon Financial
Corporation. Age: 56 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.; former Chairman of the Board and CEO of
Fieldrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 78 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, each an affiliate of
Dreyfus. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and
CEO, LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Ontario
Hydro Services Company, Director, the Hyams Foundation, Inc. Age: 50
years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor Inc. Age: 38 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, he was Assistant
Counsel at Forum Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 45 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. Age: 37
years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor Inc. since
February 1997. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all other funds in the Dreyfus Family of Funds for which such person is a Board
member (the number of which is set forth in parenthesis next to each Board
members total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $ 80,989 (28)
Kenneth A. Himmel $16,666 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $20,000 $ 80,989 (28)
Benaree P. Wiley $20,000 $ 80,989 (28)
- ----------------------------
# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
***J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1999, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $20,000. For the year ended
December 31, 1999, 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 $80,989. In addition, Dreyfus reimbursed Mr.
Fort a total of $2,799.33 for expenses attributable to the Company's Board
meetings which is not included in the $5,639.39 amount in note # above.
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,
2000.
Principal Shareholders. As of February 1, 2000, 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, 6.76%.
As of February 1, 2000, the following shareholders owned beneficially
or of record 5% or more of Class R shares of the Money Market Reserves:
Boston & Co., c/o Boston Safe Deposit & Trust Co., P.O. Box 534005,
Pittsburgh, PA 15253-4005, 47.32% and Dreyfus Investment Services Inc., Two
Mellon Bank Center, Pittsburgh, PA 15259, 35.63%.
As of February 1, 2000 the following shareholders owned beneficially or
of record 5% or more of Investor shares of the U.S. Treasury Reserves Fund:
Daniel Rappaport, 32 Sylvan Road N., Westport, CT 06880-2947, 7.52% and
Dreyfus Investment Services, Inc., 2 Mellon Bank Center, Pittsburgh, PA
15259-0001, 5.76%.
As of February 1, 2000, 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, 31.23%; Mellon Bank N/A Western Region Cust,
Cash Transfer A/C Client #1995264, P.O. Box 7899, Philadelphia, PA 19101-7899,
25.00%; Boston & Co., c/o Mellon Bank, P.O. Box 534005, Pittsburgh, PA 15253,
14.08%; Mellon Bank, DE-National Associate, As Custodian for Cash Transfer, P.O.
Box 7899, Philadelphia, PA 19101-7899, 6.59%; Dreyfus Investment Services Inc.,
Two Mellon Bank Center, Pittsburgh, PA 15259-0001, 5.33%; and Mellon Bank, N.A.,
Northeastern Region Custodian, Cash Transfer A/C Clients #1995264, P.O. Box
7899, Philadelphia, PA 19101-7899, 5.18%.
As of February 1, 2000, the following shareholders owned beneficially or
of record 5% or more of Investor shares of the Municipal Reserves: Dreyfus
Investment Services, Inc., Two Mellon Bank Center, Pittsburgh, PA 15259-0001,
6.68%; and John Sharon, Joseph Sherman JT-TEN, P.O. Box 7168, Alhambra, CA
91802-7168, 5.86%.
As of February 1, 2000, the following shareholders owned beneficially or
of record 5% or more of Class R shares of the Municipal Reserves: Boston & Co.,
c/o Mellon Bank, P.O. Box 534005, Pittsburgh, PA 15253-4005, 70.56%; Boston &
Co., 3 Mellon Bank Center, Pittsburgh, PA 15259, 11.26%; Mellon Bank, NA, #14 as
Agent for Capital Markets Customers, One Mellon Bank Center, Room 151-0440,
Pittsburgh, PA 15258-0001, 6.79%.
As of February 1, 2000, the following shareholders owned beneficially or
of record 5% or more of the Institutional Prime Fund: Boston & Co., 2 Mellon
Bank Center, Pittsburgh, PA 15259, 49.84%; MAC & Co. A/C MLCF8548662, Mutual
Funds Operations, P.O. Box 3198, Pittsburgh, PA 15230-3198, 10.29%; Boston &
Co., c/o Mellon Bank, P.O. Box 534005, Pittsburgh, PA 15253-4005, 9.17%; Boston
& Co., 3 Mellon Bank Center, Pittsburgh, PA 15259, 6.35%; Mellon Bank, AIS PL
In-Process Account, Dawn Tinsley, 3 Mellon Bank Center Rm 153-2502, Pittsburgh,
PA 15259, 5.89%; and Dreyfus Investment Services Inc., Two Mellon Bank Center,
Pittsburgh, PA 15259-0001, 5.35%.
As of February 1, 2000, 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, 68.60%; Boston & Co., Three
Mellon Bank Center, Pittsburgh, PA 15259, 14.31%; and Boston & Co., c/o
Mellon Bank, P.O. Box 534005, Pittsburgh, PA 15253-4005, 13.33%.
As of February 1, 2000, the following shareholders owned beneficially
or of record 5% or more of the Institutional U.S. Treasury Fund: Boston &
Co., c/o Mellon Bank, P.O. Box 534005, 32.64%; Boston & Co., Three Mellon
Bank Center, Pittsburgh, PA 15259, 28.19%; Boston & Co., Three Mellon Bank
Center, Pittsburgh, PA 15259, 22.06%; and The Chase Manhattan Bank, 450 W.
33rd Street, New York, NY 10001-2603, 6.11%.
A shareholder who beneficially owns, directly or indirectly more than 25%
of the Fund's voting securities may be deemed a "control person" (as defined in
the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Expenses" and
"Management."
Dreyfus is a wholly-owned subsidiary of Mellon Financial 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, (the "Management Agreement"), 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 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; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Diane P. Durnin, Vice President-Product Development; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Ray Van Cott, Vice-President-Information Systems;
Theodore A. Schachar, Vice President-Tax; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James
Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott, Martin C. McGuinn,
Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, 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,
--------------------------------------
1999 1998 1997
---- ---- ----
Money Market Reserves $3,215,858 $2,507,548 $1,931,340
U.S. Treasury Reserves $3,386,551 $3,499,709 $2,571,553
Municipal Reserves $1,429,824 $1,197,439 $1,080,023
Institutional Prime Fund $ 795,421 $ 897,957 $ 848,936
Institutional Government Fund $ 382,231 $ 331,234 $ 382,114
Institutional U.S. Treasury Fund $ 876,496 $1,025,270 $1,097,044
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 acts as sub-administrator for the Funds
and as distributor for the other funds in the Dreyfus Family of Funds.
Transfer and Dividend Disbursing Agent and Custodian. 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.
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
authorized entity 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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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. 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, 1999, 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 $682,603 $8,152
Municipal Reserves $ 56,340 $ 640
U.S. Treasury Reserves $191,798 $ 333
For the fiscal year ended October 31, 1999, the service fees by the Funds
subject to the Institutional Plan were:
Institutional Prime Fund $795,421
Institutional Government Fund $382,231
Institutional U.S. Treasury Fund $876,496
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, Teletransfer Privilege or Telephone
Exchange Privilege authorizes the Transfer Agent to act on telephone
instructions (including over The Dreyfus Touch(R) 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 $500,000 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 $500,000
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. You may purchase, in exchange for shares of a Fund, shares
of certain other funds managed or administered by Dreyfus or shares of certain
funds advised by Founders Asset Management LLC ("Founders"), an affiliate of
Dreyfus, to the extent such shares are offered for sale in your state of
residence. 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 Touch(R) 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. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of a Fund, shares of another fund in the Dreyfus Family of
Funds or shares of certain funds advised by Founders, of which you are 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 Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to the Dreyfus Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671 and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and 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 you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from a Fund in shares of another fund in the Dreyfus Family of Funds or
shares of certain funds advised by Founders, of which you are 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.
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, 1997, 1998 and 1999.
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, 1999:
Current Yield Effective Yield
InvestorClass R InvestorClass R
Money Market Reserves 4.79% 4.98% 4.90% 5.10%
U.S. Treasury Reserves 4.36% 4.56% 4.45% 4.66%
Municipal Reserves 2.87% 3.07% 2.91% 3.12%
Current Yield Effective Yield
Institutional Prime Fund 5.30% 5.44%
Institutional Government Fund 5.07% 5.20%
Institutional U.S. Treasury Fund 4.76% 4.87%
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, 1999:
Investor Class R
Tax-Equivalent Yield 4.75% 5.08%
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.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUNDS/COMPANY
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Each Fund is
one of nineteen portfolios of the Company. Fund shares have equal rights 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 or, where matters affect different classes of a portfolio
differently, by class.
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.
COUNSEL AND INDEPENDENT AUDITORS
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, 2000, 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.
<PAGE>
APPENDIX
DESCRIPTION OF S&P, MOODY'S, FITCH IBCA
AND DUFF RATINGS
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:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o 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
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
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
AA- economic 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 PREMIER LIMITED TERM INCOME FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
DREYFUS PREMIER BALANCED FUND
CLASS A, CLASS B, CLASS C, CLASS R AND CLASS T SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
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,
2000, as they may be revised from time to time. The Funds are separate,
diversified portfolios of The Dreyfus/Laurel Funds, Inc. (the "Company"), an
open-end management investment company, known as a mutual fund that is
registered with the Securities and Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in each Fund's Annual Report to
shareholders. Copies 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.
<PAGE>
TABLE OF CONTENTS
Page
Description of the Funds/Company...........................................B-3
Management of the Funds...................................................B-20
Management Arrangements...................................................B-26
Purchase of Shares........................................................B-29
Distribution and Service Plans............................................B-39
Redemption of Shares......................................................B-42
Shareholder Services......................................................B-46
Additional Information About Purchases,
Exchanges and Redemptions.................................................B-52
Determination of Net Asset Value..........................................B-53
Dividends, Other Distributions and Taxes..................................B-54
Portfolio Transactions....................................................B-59
Performance Information...................................................B-61
Information About the Funds/Company.......................................B-64
Counsel and Independent Auditors..........................................B-65
Appendix..................................................................B-66
<PAGE>
DESCRIPTION OF THE FUNDS/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. 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. 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(R) 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 Rating Services, a division of McGraw Hill Companies
("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, 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 & Phelps Credit Ratings, Co. ("Duff & Phelps").
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.
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.
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 SEC, the several options and futures exchanges upon which they are traded,
the Commodity Futures Trading Commission ("CFTC") and various state regulatory
authorities. In addition, the Fund's ability to use Derivative Instruments may
be limited by tax considerations. See "Dividends, Other Distributions and
Taxes."
In addition to the instruments, strategies and risks described below and
in the Prospectus, Dreyfus expects to discover additional opportunities in
connection with other Derivative Instruments. These new opportunities may become
available as Dreyfus develops new techniques, as regulatory authorities broaden
the range of permitted transactions and as new techniques are developed. Dreyfus
may utilize these opportunities to the extent that they are consistent with the
Fund's investment objective, and permitted by the Fund's investment policies and
applicable regulatory authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks pertaining
to particular Derivative Instruments are described in the sections that follow.
(1) Successful use of most Derivative Instruments depends upon Dreyfus'
ability not only to forecast the direction of price fluctuations of the
investment involved in the transaction, but also to predict movements of the
overall securities, currency and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities. There can
be no assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between
price movements of a Derivative Instrument and price movements of the
investments being hedged. For example, if the value of a Derivative Instrument
used in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of correlation
might occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which
Derivative Instruments are traded. The effectiveness of hedges using Derivative
Instruments on indices will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.
Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that the standardized contracts available will
not match the Fund's current or anticipated investments exactly. The Fund may
invest in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. The Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in the Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of loss
by wholly or partially offsetting the negative effect of unfavorable price
movements. However, such strategies can also reduce opportunity for gain by
offsetting the positive effect of favorable price movements. For example, if the
Fund entered into a short hedge because Dreyfus projected a decline in the price
of a security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the Derivative Instrument. Moreover, if the price of the
Derivative Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss. In either such case, the Fund would have
been in a better position had it not attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(i.e., Derivative Instruments other than purchased options). If the Fund were
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair the
Fund's ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The Fund's ability to close out a
position in a Derivative Instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a time
and price that is favorable to the Fund.
(5) The purchase and sale of Derivative Instruments could result in a loss
if the counterparty to the transaction does not perform as expected, may
increase portfolio turnover rates, which results in correspondingly greater
commission expenses and transaction costs, and may result in certain tax
consequences.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund will
not enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, futures or options, or (2) cash and
short-term liquid debt securities with a value sufficient at all times to cover
its potential obligations to the extent not covered as provided in (1) above.
The Fund will comply with SEC guidelines regarding cover for Derivative
Instruments and will, if the guidelines so require, set aside cash, U.S.
Government securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Derivative Instrument is open, unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of the Fund's assets to cover or segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
Options. A call option gives the purchaser the right to buy, and obligates
the writer to sell, the underlying investment at the agreed upon exercise price
during the option period. A put option gives the purchaser the right to sell,
and obligates the writer to buy, the underlying investment at the agreed upon
exercise price during the option period. A purchaser of an option pays an
amount, known as the premium, to the option writer in exchange for rights under
the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes in
the index in question rather than on price movements in individual securities or
currencies.
The purchase of call options can serve as a long hedge, and the purchase
of put options can serve as a short hedge. Writing put or call options can
enable the Fund to enhance income or yield by reason of the premiums paid by the
purchasers of such options. However, if the market price of the security or
other instrument underlying a put option declines to less than the exercise
price on the option, minus the premium received, the Fund would expect to suffer
a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the investment depreciates to a
price lower than the exercise price of the put option, it can be expected that
the put option will be exercised and the Fund will be obligated to purchase the
investment at more than its market value unless the option is closed out in an
offsetting transaction.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value and the Fund would experience losses to the extent of premiums paid for
them.
The Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Fund to realize profits or
limit losses on an option position prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-counter
("OTC") options. Exchange-traded options in the United States are issued by a
clearing organization that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund will enter into only those option contracts that are listed on a
national securities or commodities exchange or traded in the OTC market for
which there appears to be a liquid secondary market. The Fund will not purchase
put or call options that are traded on a national exchange in an amount
exceeding 5% of its net assets.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the Fund,
taken at market value. However, if an OTC option is sold by the Fund to a
primary U.S. Government securities dealer recognized by the Federal Reserve Bank
of New York and the Fund has the unconditional contractual right to repurchase
such OTC option from the dealer at a predetermined price, then the Fund will
treat as illiquid such amount of the underlying securities as is equal to the
repurchase price less the amount by which the option is "in-the-money" (the
difference between the current market value of the underlying securities and the
price at which the option can be exercised). The repurchase price with primary
dealers is typically a formula price that is generally based on a multiple of
the premium received for the option plus the amount by which the option is
"in-the-money."
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. However, there can be no
assurance that such a market will exist at any particular time. Closing
transactions can be made for OTC options only by negotiating directly with the
counterparty, or by a transaction in the secondary market if any such market
exists. Although the Fund will enter into OTC options only with major dealers in
unlisted options, there is no assurance that the Fund will in fact be able to
close out an OTC option position at a favorable price prior to expiration. In
the event of insolvency of the counterparty, the Fund might be unable to close
out an OTC option position at any time prior to its expiration.
If the Fund were unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by the Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.
The Fund may write options on securities only if it covers the transaction
through: an offsetting option with respect to the security underlying the option
it has written, exercisable by it at a more favorable price; ownership of (in
the case of a call) or a short position in (in the case of a put) the underlying
security; or segregation of cash or certain other assets sufficient to cover its
exposure.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of the
obligation underlying the futures contract at a specified time in the future for
an agreed upon price. With respect to index futures, no physical transfer of the
securities underlying the index is made. Rather, the parties settle by
exchanging in cash an amount based on the difference between the contract price
and the closing value of the index on the settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund writes a call, it assumes a short futures position. If the
Fund writes a put, it assumes a long futures position. When the Fund purchases
an option on a futures contract, it acquires the right, in return for the
premium it pays, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve as a
limited short hedge, using a strategy similar to that used for writing call
options on securities or indices. Similarly, writing put options on futures
contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of the
Fund's fixed income portfolio. If Dreyfus wishes to shorten the average duration
of the Fund's fixed income portfolio, the Fund may sell an interest rate futures
contract or a call option thereon, or purchase a put option on that futures
contract. If Dreyfus wishes to lengthen the average duration of the Fund's fixed
income portfolio, the Fund may buy an interest rate futures contract or a call
option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract the Fund is required to deposit "initial margin"
consisting of cash or U.S. Government securities in an amount generally equal to
10% or less of the contract value. Margin must also be deposited when writing a
call or put option on a futures contract, in accordance with applicable exchange
rules. Unlike margin in securities transactions, initial margin on futures
contracts does not represent a borrowing, but rather is in the nature of a
performance bond or good-faith deposit that is returned to the Fund at the
termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
Fund may be required by an exchange to increase the level of its initial margin
payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker. When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the Fund purchases
or sells a futures contract or writes a call or put option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If the Fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. Positions in futures and options on futures may be
closed only on an exchange or board of trade that provides a secondary market.
Although the Fund intends to enter into futures and options on futures only on
exchanges or boards of trade where there appears to be a liquid secondary
market, there can be no assurance that such a market will exist for a particular
contract at a particular time. In such event, it may not be possible to close a
futures contract or options position.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures or an option on a futures contract can
vary from the previous day's settlement price; once that limit is reached, no
trades may be made that day at a price beyond the limit. Daily price limits do
not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the future or option or to maintain cash or securities in a segregated
account.
To the extent that the Fund enters into futures contracts or options on
futures contracts on an exchange regulated by the CFTC, in each case other than
for bona fide hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums required to establish those positions (excluding the amount
by which options are "in-the-money" at the time of purchase) will not exceed 5%
of the liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has entered
into. This policy does not limit to 5% the percentage of the Fund's assets that
are at risk in futures contracts and options on futures contracts for hedging
purposes.
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.
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.
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.
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
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
The Company has a Board composed of eight 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
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 and
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August, 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus and until August 24, 1994 the Funds distributor. From August
1994 until December 31, 1994, he was a director of Mellon Financial
Corporation. Age: 56 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; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 78 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, each an affiliate of
Dreyfus. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and
CEO, LDG Reinsurance Corporation, Vice Chairman, HCCH. Age 52 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Ontario
Hydro Services Company; Director, the Hyams Foundation, Inc. Age: 50
years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
# MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor, Inc. Age: 38 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, he was Assistant
Counsel at Forum Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 45 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. Age: 37
years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor, Inc. From June
1994 to January 1996, she was Manager of SEC Registration at Scudder,
Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all other funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parenthesis next to each Board
member's total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $ 80,989 (28)
Kenneth A. Himmel $16,666 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $20,000 $ 80,989 (28)
Benaree Pratt Wiley $20,000 $ 80,989 (28)
- ----------------------------
# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Company and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal year
ended October 31, 1999, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Company
was $20,000. For the year ended December 31, 1999, 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
$80,989. In addition, Dreyfus reimbursed Mr. Fort a total of $2,799.33 for
expenses attributable to the Company's Board meetings which is not
included in the $5,639.39 amount in note # above.
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,
2000.
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, 2000.
Principal Shareholders. As of February 1, 2000, the following
shareholders(s) owned beneficially or of record 5% or more of Class A shares of
the Balanced Fund: MLPF & S For The Sole Benefit Of It's Customers, 4800 Deer
Lake Drive East, Jacksonville, FL 33246-6484; 42.27%, Prudential Trust, FBO Its
DC Customers, 30 Scranton Office Park, Scranton, PA 18507-1755; 12.77%, and 1525
W. WT Harris Blvd. CMG NC 1151, Charlotte, NC 28288; 6.30%.
As of February 1, 2000, 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; 21.09%.
As of February 1, 2000, 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; 41.47%.
As of February 1, 2000, 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., As Agent-Omnibus Account, 1 Cabot Road, Medford, MA 02155-5141;
63.11%, MLPF & S For The Sole Benefit of Its Customers, 4800 Deer Lake Drive
East, Jacksonville, FL 32246-6484; 14.62, and MAC & Co., Mutual Fund Operations,
P.O. Box 3198, Pittsburgh, PA 15230-3198; 6.19%.
As of February 1, 2000, the following shareholder(s) owned beneficially
or of record 5% or more of Class T shares of the Balanced Fund: A. G.
Edwards & Sons Inc. Custodian, FBO Josie P. Thompson, 3901 E. Pinnacle Peak
Road, Phoenix, AZ 85050-8103; 44.77%, Charles L. Matthews & Marilyn K.
Matthews JTWROS, 12055 185th Avenue SE Unit 156, Big Lake, MN 55309-8230;
21.07%, A.G. Edwards & Sons Inc. C/F, Camille J. Thompson, 1000 E. Alpine
Drive, Payson, AZ 85541-4136; 11.21%, A.G. Edwards & Sons Inc. Custodian, FBO
Charles V. Thompson, 1000 E. Alpine Drive, Payson, AZ 85541-4136; 11.19%, and
Barbara L. Berglund, 3807 Blackhawk Ridge Pl., Eagan, MN 55122-1263; 8.64%.
As of February 1, 2000, the following shareholder(s) owned beneficially or
of record 5% or more of Class A shares of the Limited Term Income Fund: Wachovia
Bank NA for Unicare, P.O. Box 3073, 301 North Main Street, MC NC-31057,
Winston-Salem, NC 27150; 20.94%, NFSC FEBO #C1B - 310808, Local 803 Health and
Welfare Fund, 91-01 80th Street, Woodhaven, NY 11421; 11.80%, and Wachovia Bank
NA, Prince William Pension Plan, P.O. Box 3073, 301 North Main Street, MC
NC-31013, Winston-Salem, NC 27150; 10.46%
As of February 1, 2000, 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; 52.46%.
As of February 1, 2000, 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; 19.81%, MLPF & S For The Sole Benefit of It's Customers,
4800 Deer Lake Drive East, Jacksonville, FL 32246-6484; 11.90%, First Clearing
Corporation, Amanda N. Sprenger IRA, FCC As Custodian, 50 Wolfe Street
Alexandria, VA 22314-3865; 5.72%, and Firstserv Securities, Inc., One Commerce
Square, 2005 Market Street Suite 1200, Philadelphia, PA 19103; 5.35%.
As of February 1, 2000, 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; 28.32%, and MAC
& Co. A/C LTDF 1747222, P.O. Box 3198, Pittsburgh, PA 15230-3198; 5.16%.
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 Financial 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 (the "Management Agreement"), 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 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; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Diane P. Durnin, Vice President-Product Development; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Ray Van Cott, Vice-President-Information Systems;
Theodore A. Schachar, Vice President-Tax; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James
Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott, Martin C. McGuinn,
Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, Balanced Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.00% of the value of Balanced
Fund's average daily net assets and Limited Term Income Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.60% of the value of Limited Term
Income Fund's average daily net assets. Dreyfus pays all of the Funds' expenses,
except brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to each Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Funds, which would have the effect of lowering the expense ratio
of the Funds and increasing return to investors. Expenses attributable to the
Funds are charged against the respective Fund's assets; other expenses of the
Company are allocated among its funds on the basis determined by the Board,
including, but not limited to, proportionately in relation to the net assets of
each fund.
For the last three years, each Fund had the following management fees:
For the Fiscal Year Ended October 31,
1999 1998 1997
---- ---- ----
Balanced Fund $6,008,517 $2,497,384 $1,690,361
Limited Term Income Fund $ 354,037 $ 309,714 $ 301,794
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, 1999, the Distributor retained
$228,796.61 and $2,114.81 from the sales loads on Balanced Fund's and Limited
Term Income Fund's Class A shares, respectively. For the same period the
Distributor retained $247,314 and $41,374 from the contingent deferred sales
charge ("CDSC") on Class B shares for Balanced Fund and Limited Term Income
Fund, respectively and retained $16,309 and $3,335 from the CDSC on Class C
shares of Balanced Fund and Limited Term Income Fund, respectively. For the
period from August 16, 1999 (initial offering of Class T shares) through October
31, 1999, the Distributor retained no sales loads on Balanced Fund's Class T
shares. For the fiscal year ended October 31, 1998, the Distributor retained no
sales loads on Balanced Fund's and Limited Term Income Fund's Class A shares.
For the same period, the Distributor retained $62,048 and $22,162 from the CDSC
on Class B shares for Balanced Fund and Limited Term Income Fund, respectively,
and $1,394 and $1,047 from the CDSC on Class C shares of Balanced Fund and
Limited Term Income Fund, respectively.
Transfer and Dividend Disbursing Agent and Custodian. 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.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. The Limited Term Income Fund offers Class A, Class B, Class C and Class
R shares. The Balanced Fund offers Class A, Class B, Class C, Class R and Class
T shares.
When purchasing Fund shares, you must specify which Class is being
purchased. The decision as to which Class of shares is most beneficial to you
depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in a Fund, the
accumulated distribution fee, service fee and CDSC, if any, on Class B or Class
C shares would be less than the accumulated distribution fee and initial sales
charge on Class A shares or the accumulated distribution fee, service fee and
initial sales charge on Class T shares purchased at the same time, and to what
extent, if any, such differential would be offset by the return on Class A
shares and Class T shares, respectively. You may also want to consider whether,
during the anticipated life of your investment in the Fund, the accumulated
distribution fee, service fee, and initial sales charge on Class T shares would
be less than the accumulated distribution fee and higher initial sales charge on
Class A shares purchased at the same time, and to what extent, if any, such
differential could be offset by the return of Class A. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution and service fees on Class
B or Class C shares and the accumulated distribution fee, service fee and
initial sales charge on Class T shares may exceed the accumulated distribution
fee and initial sales charge on Class A shares during the life of the
investment. Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class B
shares, Class C shares do not have a conversion feature and, therefore, are
subject to ongoing distribution and service fees. Thus, Class B shares may be
more attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares will be most appropriate for investors who
invest $1,000,000 or more in Fund shares, and Class A and Class T shares will
not be appropriate for investors who invest less than $50,000 in the case of
Balanced Fund and $100,000 in the case of Limited Term Income Fund, in Fund
shares. Each Fund reserves the right to reject any purchase order.
Class A, Class B, Class C and Class T shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. Subsequent purchases may be sent directly to the
Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates) acting on
behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of a Fund distributed to them by virtue of such an account or
relationship. In addition, holders of Restricted shares of a Fund who have held
their shares since April 4, 1994, may continue to purchase Class R shares of
that Fund whether or not they would otherwise be eligible to do so. Class R
shares may be purchased for a retirement plan only by a custodian, trustee,
investment manager or other entity authorized to act on behalf of such a plan.
Institutions effecting transactions in Class R shares for the accounts of their
clients may charge their clients direct fees in connection with such
transactions.
The minimum initial investment is $1,000. Subsequent investments must be
at least $100. The minimum initial investment is $750 for Dreyfus-sponsored
Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non working
spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one
participant and $500 for Dreyfus-sponsored Education IRAs, with no minimum on
subsequent purchases except the no minimum on Education IRAs does not apply
until after the first year. The initial investment must be accompanied by the
respective Fund's Account Application. Each Fund reserves the right to offer
shares without regard to minimum purchase requirements to employees
participating in certain qualified or non-qualified employee benefit plans or
other programs where contributions or account information can be transmitted in
a manner and form acceptable to such Fund. Each Fund reserves the right to vary
further the initial and subsequent investment minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in a Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.
Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the 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 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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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
respective Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to a Fund could subject you to a
$50 penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares of Balanced
Fund is the NAV per share of that Class, plus, except for shareholders
beneficially owning Class A shares of Balanced Fund on November 30, 1996, a
sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
For shareholders who opened Balanced Fund accounts after December 19,
1994, and who beneficially owned Class A shares of Balanced Fund on November 30,
1996, the public offering price for Class A shares of Balanced Fund is the NAV
per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $50,000 4.50 4.25
$50,000 to less than $100,000 4.00 3.75
$100,000 to less than $250,000 3.00 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Holders of Class A accounts of Balanced Fund as of December 19, 1994 may
continue to purchase Class A shares of Balanced Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be subject to
any applicable front-end sales load.
The public offering price of Class A shares of Limited Term Income Fund is
the NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $100,000 3.00 2.75
$100,000 to less than $250,000 2.75 2.50
$250,000 to less than $500,000 2.25 2.00
$500,000 to less than $1,000,000 2.00 1.75
Holders of Class A accounts of Limited Term Income Fund as of December 19,
1994 may continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be subject to
any applicable front-end sales load.
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those shares within one year of purchase, a CDSC of 1.00% will be
assessed at the time of redemption. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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, the Dreyfus Family of Funds, certain funds advised by Founders Asset
Management LLC ("Founders"), an affiliate of Dreyfus, 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, certain funds in
the Dreyfus Family of Funds, certain funds advised by Founders 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, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
Class T Shares (Balanced Fund only). The public offering price for Class T
shares is the NAV per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $50,000 4.50 4.00
$50,000 to less than $100,000 4.00 3.50
$100,000 to less than $250,000 3.00 2.50
$250,000 to less than $500,000 2.00 1.75
$500,000 to less than $1,000,000 1.50 1.25
$1,000,000 or more -0- -0-
There is no initial sales charge on purchases of $1,000,000 or more of
Class T shares. However, if you purchase Class T shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those shares within one year of purchase, a CDSC of 1.00% will be
assessed at the time of redemption. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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.
Class T shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class T 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, at the time of such
distribution, such qualified retirement plan or Dreyfus-sponsored 403(b)(7) plan
(a) met the requirements of an Eligible Benefit Plan and all or a portion of
such plan's assets were invested in funds in the Dreyfus Premier Family of
Funds, the Dreyfus Family of Funds, certain funds advised by Founders or certain
other products made available by the Distributor to such plans, or (b) invested
all of its assets in funds in the Dreyfus Premier Family of Funds, certain funds
in the Dreyfus Family of Funds, certain funds advised by Founders or certain
other products made available by the Distributor to such plans.
Class T 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 T 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.
Dealer Reallowance -- Class A and Class T Shares. The Dealer Reallowance
provided with respect to Class A and Class T shares may be changed from time to
time but will remain the same for all dealers. The Distributor, at its own
expense, may provide additional promotional incentives to dealers that sell
shares of funds advised by Dreyfus which are sold with a sales load, such as
Class A and Class T shares. In some instances, these incentives may be offered
only to certain dealers who have sold or may sell significant amounts of such
shares.
Sales Loads -- Class A and Class T Shares. The scale of sales loads
applies to purchases of Class A and Class T shares made by any "purchaser,"
which term includes an individual and/or spouse purchasing securities for his,
her or their own account or for the account of any minor children, or a trustee
or other fiduciary purchasing securities for a single trust estate or a single
fiduciary account (including a pension, profit-sharing or other employee benefit
trust created pursuant to a plan qualified under Section 401 of the Code)
although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k) and 457 of the Code);
or an organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares for each Fund aggregating less than $50,000 with respect to
Balanced Fund and less than $100,000 with respect to Limited Term Income Fund
subject to the schedule of sales charges set forth in each Fund's Prospectus at
a price based upon the NAV of a Class A share for each Fund at the close of
business on October 31, 1999:
For Balanced Fund
NAV per share $15.69
Per Share Sales Charge - 5.75%* of offering price
(6.10% of NAV per share) $ .96
Per Share Offering Price to Public $16.65
- ---------------
* 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 $10.60
Per Share Sales Charge - 3.00% of offering price
(3.10% of NAV per share) $ .33
Per Share Offering Price to Public $10.93
Set forth below is an example of the method of computing the offering
price of the Balanced Fund's Class T shares. The example assumes a purchase of
Class T shares of the Balanced Fund aggregating less than $50,000 subject to the
schedule of sales charges set forth in the Fund's Prospectus at a price based
upon the NAV of a Class T share of the Balanced Fund at the close of business on
October 31, 1999:
NAV per share $15.68
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .74
Per Share Offering Price to Public $16.42
Right of Accumulation -- Class A and Class T Shares. Reduced sales loads
apply to any purchase of Class A and T shares, shares of other funds in the
Dreyfus Premier Family of Funds which are sold with a sales load, shares of
certain other funds advised by Dreyfus or Founders, which are sold with a sales
load and shares acquired by a previous exchange of such shares (hereinafter
referred to as "Eligible Funds"), by you and any related "purchaser" as defined
above, where the aggregate investment, including such purchase, is $50,000 or
more in the case of Balanced Fund and $100,000 or more in the case of Limited
Term Income Fund. If, for example, you previously purchased and still hold Class
A or Class T shares of Balanced Fund, or shares of any other Eligible Fund or
combination thereof, with an aggregate current market value of $40,000 and
subsequently purchase Class A or Class T shares of Balanced Fund or shares of an
Eligible Fund having a current value of $20,000, the sales load applicable to
the subsequent purchase would be reduced to 4.50% of the offering price in the
case of Class A shares or 4.00% of the offering price in the case of Class T
shares. Class A shares purchased by shareholders beneficially owning Balanced
Fund shares on November 30, 1996, but who opened their Fund accounts after
December 19, 1994, are subject to a different sales load schedule, as described
above. Similarly, if you previously purchased and still hold Class A shares of
Limited Term Income Fund or shares of any other Eligible Fund or combination
thereof, with an aggregate market value of $80,000 and subsequently purchase
Class A shares of Limited Term Income Fund or shares of an Eligible Fund having
a current value of $40,000, the sales load applicable to the subsequent purchase
would be reduced to 2.75% of the offering price. All present holdings of
Eligible Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the Transfer
Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
Class B Shares. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in each Fund's Prospectus.
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 B and C Shares. Pursuant to an agreement with the Distributor,
Dreyfus Service Corporation compensates certain Agents for selling Class B and
Class C shares at the time of purchase from its own assets. The proceeds of the
CDSC and the distribution fee, in part, are used to defray these expenses.
Class R Shares. The public offering price for Class R shares is the
NAV per share of that Class.
TeleTransfer Privilege. You may purchase Fund shares by telephone through
the TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred between
the bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution that is an
Automated Clearing House ("ACH") member may be so designated. TeleTransfer
purchase orders may be made at any time. Purchase orders received by 4:00 p.m.,
New York time, on any business day that the Transfer Agent and the NYSE are open
for business will be credited to the shareholder's Fund account on the next bank
business day following such purchase order. Purchase orders made after 4:00
p.m., New York time, on any business day the Transfer Agent and the NYSE are
open for business, or orders made on Saturday, Sunday or any Fund holiday (e.g.,
when the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order. To
qualify to use the TeleTransfer Privilege, the initial payment for purchase of
Fund shares must be drawn on, and redemption proceeds paid to, the same bank and
account as are designated on the Account Application or Shareholder Services
Form on file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and
signature-guaranteed. See "Redemption of Shares - TeleTransfer Privilege." Each
Fund may modify or terminate this Privilege at any time or charge a service fee
upon notice to shareholders. No such fee currently is contemplated by either
Fund.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, a Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the applicable Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least equal to $25,000. Shares purchased in exchange for
securities generally cannot be redeemed for fifteen days following the exchange
in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the shares
purchased and securities exchanged. Securities accepted by a Fund will be valued
in the same manner as the Fund values its assets. Any interest earned on the
securities following their delivery to a Fund and prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription or
other rights attached to the securities become the property of the Fund, along
with the securities. For further information about "in-kind" purchases, call
1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual fees
for distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule") regulating
the circumstances under which investment companies such as the Company may,
directly or indirectly, bear the expenses of distributing their shares. The Rule
defines distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.
Distribution Plan--Class A Shares. With respect to the Class A shares of
each Fund, the Company has adopted a Distribution Plan pursuant to the Rule (the
"Class A Plan"), whereby Class A shares of a Fund may spend annually up to 0.25%
of the average of its net assets to compensate Dreyfus Service Corporation, an
affiliate of Dreyfus, for shareholder servicing activities and the Distributor
for shareholder servicing activities and expenses primarily intended to result
in the sale of Class A shares of the Fund. The Class A Plan allows the
Distributor to make payments from the Rule 12b-1 fees it collects from a Fund to
compensate Agents that have entered into Selling Agreements ("Agreements") with
the Distributor. Under the Agreements, the Agents are obligated to provide
distribution related services with regard to the Funds and/or shareholder
services to the Agent's clients that own Class A shares of the Funds. The
Company's Board of Directors believes that there is a reasonable likelihood that
the Class A Plan will benefit each Fund and the holders of its Class A shares.
The Class A Plan provides that a report of the amounts expended under the
Class A Plan, and the purposes for which such expenditures were incurred, must
be made to the Company's Directors for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which a Fund may bear for distribution pursuant to the
Class A Plan without approval of the holders of the Fund's Class A shares, and
that other material amendments of the Class A Plan must be approved by the vote
of a majority of the Directors and of the Directors who are not "interested
persons" (as defined in the 1940 Act) of the Company or the Distributor and who
do not have any direct or indirect financial interest in the operation of the
Class A Plan, cast in person at a meeting called for the purpose of considering
such amendments. The Class A Plan is subject to annual approval by the entire
Board of Directors and by the Directors who are neither interested persons nor
have any direct or indirect financial interest in the operation of the Class A
Plan, by vote cast in person at a meeting called for the purpose of voting on
the Class A Plan. The Class A Plan is terminable, as to a Fund's Class A shares,
at any time by vote of a majority of the Directors who are not interested
persons and have no direct or indirect financial interest in the operation of
the Class A Plan or by vote of the holders of a majority of the outstanding
shares of such class of the Fund.
Distribution and Service Plans -- Class B, Class C and Class T Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan with respect to Class B and Class
C shares of each Fund and Class T shares of Balanced Fund (the "Service Plan")
under the Rule pursuant to which each Fund pays the Distributor and Dreyfus
Service Corporation a fee at the annual rate of 0.25% of the value of the
average daily net assets of Class B, Class C and Class T shares for the
provision of certain services to the holders of Class B, Class C and Class T
shares, respectively. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding a Fund and providing reports and other information, and providing
services related to the maintenance of such shareholder accounts. With regard to
such services, each Agent is required to disclose to its clients any
compensation payable to it by a Fund and any other compensation payable by its
clients in connection with the investment of their assets in Class B, Class C
and Class T shares. The Distributor may pay one or more Agents in respect of
services for these Classes of shares. The Distributor determines the amounts, if
any, to be paid to Agents under the Service Plan and the basis on which such
payments are made. With respect to Class B and Class C shares of each Fund, the
Company's Board of Directors has also adopted a Distribution Plan pursuant to
the Rule (the "Class B and Class C Plan") and a separate Distribution Plan
pursuant to the Rule with respect to Class T shares of Balanced Fund (the "Class
T Plan"). Pursuant to the Class B and Class C Plan, the Balanced Fund pays the
Distributor for distributing the Balanced Fund's Class B and Class C shares at
an aggregate annual rate of 0.75% of the value of the average daily net assets
of Class B and Class C shares of Balanced Fund. Pursuant to the Class T Plan,
the Balanced Fund pays the Distributor for distributing the Balanced Fund's
Class T shares at an annual rate of 0.25% of the value of the average daily net
assets of Class T shares. The Distributor may pay one or more Agents in respect
of advertising, marketing and other distribution services for Class T shares,
and determines the amounts, if any, to be paid to Agents and the basis on which
such payments are made. Pursuant to the Class B and Class C Plan, the Limited
Term Income Fund pays the Distributor for distributing the Limited Term Income
Fund's Class B and Class C shares at an aggregate annual rate of 0.50% of the
value of the average daily net assets of Class B and Class C shares of Limited
Term Income Fund. The Company's Board of Directors believes that there is a
reasonable likelihood that the Service Plan, the Class B and Class C Plan and
the Class T Plan (each a "Plan" and collectively the "Plans") will benefit the
Funds and the holders of Class B and Class C shares of the Funds and Class T
shares of Balanced Fund.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not be
amended to increase materially the cost which holders of Class B, Class C or
Class T shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be approved
by the Board of Directors and by the Directors who are not interested persons of
the Company and have no direct or indirect financial interest in the operation
of the Plan or in any agreements entered into in connection with the Plan, by
vote cast in person at a meeting called for the purpose of considering such
amendments. Each Plan is subject to annual approval by such vote of the
Directors cast in person at a meeting called for the purpose of voting on the
Plan. Each Plan may be terminated at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or in any agreements entered
into in connection with the Plan or by vote of the holders of a majority of
Class B, Class C and Class T shares, as applicable.
An Agent entitled to receive compensation for selling and servicing a
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan described above are payable without
regard to actual expenses incurred. Each Fund and the Distributor may suspend or
reduce payments under any of the plans at any time, and payments are subject to
the continuation of the Fund's plans and the Agreements described above. From
time to time, the Agents, the Distributor and each Fund may voluntarily agree to
reduce the maximum fees payable under the plans.
For the fiscal year ended October 31, 1999, Balanced Fund paid the
Distributor and Dreyfus Service Corporation $134,998 and $120,555, respectively,
pursuant to the Class A Plan. For the fiscal year ended October 31, 1999,
Balanced Fund paid the Distributor $984,882 and $229,462 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 $318,643 and $9,651,
respectively, pursuant to the Service Plan with respect to Class B shares and
$45,442 and $31,045, respectively, pursuant to the Service Plan with respect to
Class C shares. For the period August 16, 1999 (commencement of operations)
through October 31, 1999, the Balanced Fund paid the Distributor $6 pursuant to
the Class T Plan and paid the Distributor and Dreyfus Service Corporation $6 and
$0, respectively, pursuant to the Service Plan with respect to Class T shares.
For the fiscal year ended October 31, 1999, Limited Term Income Fund paid
the Distributor and Dreyfus Service Corporation $14,831 and $1,984,
respectively, pursuant to the Class A Plan. For the fiscal year ended October
31, 1999, Limited Term Income Fund paid the Distributor $46,834 and $7,664,
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
$8,942 and $14,475, respectively, pursuant to the Service Plan with respect to
Class B shares and $2,680 and $1,152, 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 Touch(R) automated telephone system) from any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. Each Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Funds nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a
TeleTransfer redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if TeleTransfer redemption had
been used. During the delay, the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the Fund shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to the
number of Class A, Class B or Class T shares you have redeemed, within 45 days
of redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon reinstatement,
with respect to Class B shares, or Class A or Class T shares if such shares were
subject to a CDSC, your account will be credited with an amount equal to the
CDSC previously paid upon redemption of the shares reinvested. The Reinvestment
Privilege may be exercised only once.
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds will
be on deposit in your account at an ACH member bank ordinarily two days after
receipt of the redemption request. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a wire redemption will be
effected as a TeleTransfer transaction through the ACH system unless more prompt
transmittal specifically is requested. Holders of jointly registered Fund or
bank accounts may redeem through the TeleTransfer Privilege for transfer to
their bank account only up to $500,000 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 is paid to
Dreyfus Service Corporation 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 is paid
to Dreyfus Service Corporation 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. You may purchase,
in exchange for shares of the Fund, shares of the same Class of another fund in
the Dreyfus Premier Family of Funds, shares of the same Class of certain funds
advised by Founders, or shares of certain other funds in the Dreyfus Family of
Funds, and, with respect to Class T shares of the Fund, Class A shares of
certain Dreyfus Premier fixed-income funds, t the extent such shares are offered
for sale in your state of residence.
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. You may purchase, in exchange for shares of the Fund,
shares of the same Class of another fund in the Dreyfus Premier Family of Funds,
shares of the same Class of certain funds advised by Founders, or shares of
certain other funds in the Dreyfus Family of Funds, and, with respect to Class T
shares of the Balanced Fund, Class A shares of certain Dreyfus Premier
fixed-income funds, to the extent such shares are offered for sale in your state
of residence. 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 Touch(R) 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. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, shares of the same Class of another fund in the
Dreyfus Premier Family of Funds, shares of the same Class of certain funds
advised by Founders, or shares of certain other funds in the Dreyfus Family of
Funds, and, with respect to Class T shares of the Balanced Fund, Class A shares
of certain Dreyfus Premier fixed-income funds, of which you a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged automatically
on the first and/or fifteenth day of the month according to the schedule the
investor has selected. This Privilege is available only for existing accounts.
With respect to Class R shares held by a Retirement Plan, exchanges may be made
only between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund. Shares will be exchanged on
the basis of relative NAV as described above under "Fund Exchanges." Enrollment
in or modification or cancellation of this Privilege is effective three business
days following notification by the investor. An investor will be notified if the
investor's account falls below the amount designated to be exchanged under this
Privilege. In this case, an investor's account will fall to zero unless
additional investments are made in excess of the designated amount prior to the
next Auto-Exchange transaction. Shares held under IRAs and other retirement
plans are eligible for this Privilege. Exchanges of IRA shares may be made
between IRA accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by each
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to the applicable Fund at
P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund may charge a
service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Auto-Exchange
Authorization Form, please call toll free 1-800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as a
sale of the shares given in exchange and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Funds reserve the right to reject any
exchange request in whole or in part. The Fund Exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to the applicable Fund at P.O. Box 6587, Providence, Rhode
Island 02940-6587 and the notification will be effective three business days
following receipt. Each Fund may modify or terminate this Privilege at any time
or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, a Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement Plans,
may permit certain participants to establish an automatic withdrawal plan from
such Retirement Plans. Participants should consult their Retirement Plan sponsor
and tax adviser for details. Such a withdrawal plan is different from the
Automatic Withdrawal Plan. The Automatic Withdrawal Plan may be ended at any
time by the shareholder, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares, and Class A or Class T shares to which a CDSC applies,
that are withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC. Purchases of additional Class A or Class T shares where the
sales load is imposed concurrently with withdrawals of Class A or Class T shares
generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Funds, shares of the same Class of certain funds advised by
Founders, or shares of certain other funds in the Dreyfus Family of Funds, and,
with respect to Class T shares of the Balanced Fund, in Class A shares of
certain Dreyfus Premier fixed-income funds, of which you are a shareholder.
Dreyfus Dividend Sweep allows investors to invest automatically their dividends
or dividends and other distributions, if any, from a Fund in shares of the same
Class of certain other funds in the Dreyfus Premier Family of Funds or the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of the
same Class of other funds purchased pursuant to this Privilege will be purchased
on the basis of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or other
distributions are being swept, without giving effect to any reduced
loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a CDSC and the applicable CDSC,
if any, will be imposed upon redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and other distributions, if any, from a Fund to a designated bank
account. Only an account maintained at a domestic financial institution which is
an ACH member may be so designated. Banks may charge a fee for this service.
For more information concerning these Privileges, or to request a Dividend
Options Form, please call toll free 1-800-554-4611. You may cancel these
Privileges by mailing written notification to the applicable Fund at P.O. Box
6587, Providence, Rhode Island 02940-6587. To select a new fund after
cancellation, you must submit a new Dividend Options Form. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. Each Fund may modify or terminate these privileges at
any time or charge a service fee. No such fee currently is contemplated. Shares
held under Keogh Plans, IRAs or other retirement plans are not eligible for
Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Funds, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-554-4611. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the respective Fund may terminate your participation upon 30
days' notice to you.
Letter of Intent--Class A and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of Eligible
Fund shares purchased in a 13-month period pursuant to the terms and conditions
set forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of shares you
hold (on the date of submission of the Letter of Intent) in any Eligible Fund
that may be used toward "Right of Accumulation" benefits described above may be
used as a credit toward completion of the Letter of Intent. However, the reduced
sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A or Class T shares, as applicable, of the
applicable Fund held in escrow to realize the difference. Signing a Letter of
Intent does not bind you to purchase, or a Fund to sell, the full amount
indicated at the sales load in effect at the time of signing, but you must
complete the intended purchase to obtain the reduced sales load. At the time you
purchase Class A or Class T shares, you must indicate your intention to do so
under a Letter of Intent. Purchases pursuant to a Letter of Intent will be made
at the then-current NAV plus the applicable sales load in effect at the time
such Letter of Intent was executed.
Retirement Plans. Each Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares. All
fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may not
be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Funds are intended to be long-term investment vehicles and are not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to a Fund's
performance and its shareholders. Accordingly, if a Fund's management determines
that an investor is engaged in excessive trading, the Fund, with or without
prior notice, may temporarily or permanently terminate the availability of Fund
Exchanges, or reject in whole or part any purchase or exchange request, with
respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of a Fund during any calendar year or who
makes exchanges that appear to coincide with an active market-timing strategy
may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, a Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused, a
Fund will take no other action with respect to the shares until it receives
further instructions from the investor. A Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
A Fund's policy on excessive trading applies to investors who invest in the Fund
directly or through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, a Fund may suspend
Fund Exchanges temporarily without notice and treat exchange requests based on
their separate components - redemption orders with a simultaneous request to
purchase the other fund's shares. In such a case, the redemption request would
be processed at the Fund's next determined NAV but the purchase order would be
effective only at the NAV next determined after the fund being purchased
receives the proceeds of the redemption, which may result in the purchase being
delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Balanced Fund's equity securities
are valued at the last sale price on the securities exchange or national
securities market on which such securities primarily are traded. Equity
securities not listed on an exchange or national securities market, or equity
securities in which there were no transactions, are valued at the average of the
most recent bid and asked prices. Bid price is used when no asked price is
available. Where market quotations are not readily available, the Balanced
Fund's equity investments are valued based on fair value as determined in good
faith by the Company's Board. Debt securities (excluding short-term investments)
are valued by an independent pricing service approved by the Company's Board
(the "Service"). Securities valued by the Service for which quoted bid prices in
the judgment of the Service are readily available and are representative of the
bid side of the market are valued at the mean between the quoted bid prices (as
obtained by the Service from dealers in such securities) and asked prices (as
calculated by the Service based upon its evaluation of the market for such
securities). Other debt securities valued by the Service are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Investments traded in foreign currencies are translated to U.S. dollars at the
prevailing rates of exchange. If the Fund has to obtain prices as of the close
of trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments not valued by the Service are
carried at amortized cost, which approximates value. Expenses and fees,
including the management fee, are accrued daily and taken into account for the
purpose of determining the NAV of the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Board of Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if it believes that the discount no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Distributions and Taxes."
General. Balanced Fund declares and pays dividends from its net investment
income, if any, four times yearly. Limited Term declares daily and pays monthly
(on the first business day of the following month) dividends from its net
investment income, if any. Each Fund distributes net realized capital and
foreign currency gains, if any once a year, but may make distributions on a more
frequent basis to comply with the distribution requirements of the Code, in all
events in a manner consistent with the 1940 Act. All expenses are accrued daily
and deducted before declaration of dividends to investors. The Funds will not
make distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Shares begin accruing
dividends on the day following the date of purchase. Each Fund's earnings for
Saturdays, Sundays and holidays are declared as dividends on the next business
day. If you redeem all shares in your account at any time during the month, all
dividends to which you are entitled will be paid to you along with the proceeds
of the redemption. Investors other than qualified retirement plans may choose
whether to receive dividends and other distributions in cash, to receive
dividends in cash and reinvest other distributions in additional Fund shares at
NAV, or to reinvest both dividends and other distributions in additional Fund
shares at NAV; dividends and other distributions paid to qualified retirement
plans are reinvested automatically in additional Fund shares at NAV. Dividends
paid by each Class are calculated at the same time and in the same manner and
are in the same amount, except that the expenses attributable solely to a
particular Class are borne exclusively by that Class. Class B and Class C shares
will receive lower per share dividends than Class T shares, which will in turn
receive lower per share dividends than Class A shares, which will in turn
receive lower per share dividends than Class R shares, because of the higher
expenses borne by the relevant Classes.
It is expected that each Fund will continue to qualify for treatment as a
regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such qualification
will relieve a Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, a Fund
- -- which is treated as a separate corporation for federal tax purposes -- (1)
must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions) ("Distribution Requirement"), (2) must derive at least 90% of its
annual gross income from specified sources ("Income Requirement"), and (3) must
meet certain asset diversification and other requirements. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency. The Fund will be subject to a
non-deductible 4% excise tax ("Excised Tax") to the extent it fails to
distribute substantially all of its taxable investment income and capital gains.
If the Fund failed to qualify for treatment as a RIC for any taxable year, (1)
it would be taxed at corporate rates on the full amount of its taxable income
for that year without being able to deduct the distributions it makes to its
shareholders and (2) the shareholders would treat all those distributions,
including distributions of net capital gain (the excess of net long-term capital
gain over net short-term capital loss), as dividends (that is, ordinary income)
to the extent of the Fund's earnings and profits. In addition, the Fund could be
required to recognize unrealized gains, pay substantial taxes and interest and
make substantial distributions before requalifying for RIC treatment.
Distributions. If you elect to receive other dividends and distributions
in cash, and your distribution check is returned to a Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest that
distribution and all future distributions payable to you in additional Fund
shares at NAV. No interest will accrue on amounts represented by uncashed
distribution or redemptions check.
Dividends derived from net investment income, together with distributions
from net realized short-term capital gains, net realized gains from certain
foreign currency transactions and all or a portion of any gains realized from
the sale or other disposition of certain market discount bonds (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions from net capital gain (the excess of net
long-term capital gain over net short-term capital loss) are taxable to those
shareholders as long-term capital gains regardless of how long the shareholders
have held their Fund shares and whether the distributions are received in cash
or reinvested in additional Fund shares.
Dividend distributions paid by the Fund to a non-resident foreign investor
generally are subject to U.S. withholding tax at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax treaty.
Capital gain distributors paid by the Fund to a non-resident foreign investor,
as well as the proceeds of any redemptions by such an investor, regardless of
the extent to which gain or loss may be realized, generally are not subject to
U.S. withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies his or
her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to distributions paid during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A and Class T shares if a shareholder redeems those shares or
exchanges them for shares of another fund advised or administered by Dreyfus,
within 90 days of purchase, and (1) in the case of a redemption, the shareholder
acquires other fund Class A or Class T shares through exercise of the
Reinvestment Privilege (2) or, in the case of an exchange, the other fund
reduces or eliminates its otherwise applicable sales load. In these cases, the
amount of the sales load charged on the purchase of the original Class A or
Class T shares, up to the amount of the reduction of the sales load pursuant to
the Reinvestment Privilege or on the exchange, as the case may be, is not
included in the tax basis of those shares for purposes of computing gain or loss
and instead is added to the tax basis of the acquired shares.
Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the plans. The Fund will not report to the Internal Revenue
Service ("IRS") distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. The
administrator, trustee or custodian of a retirement plan will be responsible for
reporting distributions from the plan to the IRS. Moreover, certain
contributions to a qualified retirement plan in excess of the amounts permitted
by law may be subject to an excise tax. If a distributee of an "eligible
rollover distribution" from a qualified retirement plan does not elect to have
the distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the distribution is subject to 20% income tax withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholders if such
shareholder fails to furnish a TIN to the Fund and certify that it is correct.
Backup withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) the shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income. A TIN is either the Social Security number, IRS individual
taxpayer identification number or employer identification number of the record
owner of an account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner and may be claimed as a
credit on the his or her federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a distribution would be a return on
investment in an economic sense, although taxable as discussed above. In
addition, if a shareholder sells shares of the Fund held for six months or less
and receives any capital gain distributions with respect to those shares, any
loss incurred on the sale of those shares will be treated as a long-term capital
loss to the extent of those distributions.
Dividends and other distributions declared by a Fund in October, November
or December of any year and payable to shareholders of record on a date in any
of those months are deemed to have been paid by a Fund and received by the
shareholders on December 31 if the distributions are paid by a Fund during the
following January. Accordingly, those distributions will be taxed to
shareholders for the year in which that December 31 falls.
Interest received by the Fund may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would reduce
the yield on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.
Foreign Currency, Hedging Transactions. Gains from the sale or other
disposition of foreign currencies (except certain gains therefrom that may be
excluded by future regulations), and gain from options, futures and forward
contracts derived by the Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under the
Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, a portion of the gain or loss from
the disposition of foreign currencies and certain foreign currency denominated
instruments (including debt instruments and certain financial forward, futures
contracts and options) may be treated as ordinary income or loss under Section
988 of the Code. In addition, all or a portion of any gain realized from the
disposition of certain market discount bonds and from engaging in "conversion
transactions that otherwise would be treated as capital gain" may be treated as
ordinary income. "Conversion transactions" are defined to include certain option
and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by a Fund on the
exercise of lapse of, or closing transactions respecting, certain options,
futures and forward contracts ("Section 1256 contracts") will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. Gain or
loss will arise upon exercise or lapse of such contracts and options as well as
from closing transactions. In addition, any Section 1256 contracts remaining
unexercised at the end of a Fund's taxable year will be treated as sold for
their then fair market value (a process known as "marking-to-market"), resulting
in additional gain or loss to the Fund characterized in the same manner.
Offsetting positions held by a Fund involving certain contracts or options
may constitute "straddles," which are defined to include "offsetting positions"
in actively traded personal property. Under Section 1092 of the Code, any loss
from the disposition of a position in a straddle generally may be deducted only
to the extent the loss exceeds the unrealized gain on the offsetting position(s)
of the straddle. In addition, these rules may postpone the recognition of loss
that otherwise would be recognized under the mark-to-market rules discussed
above. The regulations under Section 1092 also provide certain "wash sale"
rules, which apply to transactions where a position is sold at a loss and a new
offsetting position is acquired within a prescribed period, and "short sale"
rules applicable to straddles. If the Fund makes certain elections (including an
election as to straddles that include a position in one or more Section 1256
Contracts (so-called "mixed straddles"), the amount, character, and timing of
recognition of gains and losses from the affected straddle positions would be
determined under rules that vary according to the elections made. Because only a
few of the regulations implementing the straddle rules have been promulgated,
the tax consequences to the Fund of straddle transactions are not entirely
clear.
Investment by the Fund in securities issued or acquired at a discount (for
example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
would be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and could need to
distribute that income to satisfy the Distribution Requirement and avoid
imposition of the 4% excise tax referred to in the Fund's Prospectus under
"Dividends, Other Distributions and Taxes." In that case, the Fund may have to
dispose of securities it might otherwise have continued to hold in order to
generate cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder"), depends on whether the income from a Fund
is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to a U.S. federal withholding tax of 30%
(or lower treaty rate). Capital gains realized by foreign shareholders on the
sale of Fund shares and distributions to them of net capital gain generally will
not be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all distributions
to that shareholder and any gains realized by that shareholder on the
disposition of the Fund shares will be subject to U.S. federal income tax at the
graduated rates applicable to U.S. citizens and domestic corporations, as the
case may be. Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of each Fund
by Dreyfus. Debt securities purchased and sold by each Fund are generally traded
on a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with a Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. Each Fund will pay a spread or commission in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to each Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions on
behalf of a Fund are selected on the basis of their professional capability and
the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.
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, 1999, 1998 and 1997, Balanced Fund
paid brokerage commissions amounting to $384,506, $213,688 and $171,266,
respectively. For the fiscal years ended October 31, 1999, 1998 and 1997,
Balanced Fund paid brokerage concessions amounting to $0, $14,229 and $32,249,
respectively.
For the fiscal years ended October 31, 1999, 1998 and 1997, Limited Term
Income Fund did not pay any brokerage commission. Limited Term Income Fund
typically does not pay a stated brokerage fee on transactions.
The aggregate amount of transactions during the fiscal year ended October
31, 1999 in securities effected on agency basis through a broker dealer for
research was $92,718,886 for the Balanced Fund and the commissions and
concessions related to such transactions was $92,246 for the Balanced Fund.
Portfolio Turnover. While securities are purchased for Balanced Fund on
the basis of potential for growth and high current income and Limited Term
Income Fund for high current income and not for short-term trading profits, in
the past the portfolio turnover rate of the Limited Term Income Fund has
exceeded 100% and, for each Fund, may exceed 100% in the future. A portfolio
turnover rate of 100% would occur, for example, if all the securities held by a
Fund were replaced once in a period of one year. In past years Limited Term
Income Fund's rate of portfolio turnover exceeded that of certain other mutual
funds with a similar investment objective. A higher rate of portfolio turnover
(100% or greater) involves correspondingly greater brokerage commissions and
other expenses that must be borne directly by a Fund and, thus, indirectly by
its shareholders. In addition, a high rate of portfolio turnover may result in
the realization of larger amounts of short-term capital gains that, when
distributed to a Funds' shareholder, are taxable to them as ordinary income.
Nevertheless, security transactions will be based only upon investment
considerations and will not be limited by any other considerations when Dreyfus
deems it appropriate to make changes in a Fund's assets. The portfolio turnover
rate for each Fund is calculated by dividing the lesser of the Fund's annual
sales or purchases of portfolio securities (exclusive of purchases and sales of
securities whose maturities at the time of acquisition were one year or less) by
the monthly average value of securities in the Fund during the year. Portfolio
turnover may vary from year to year as well as within a year.
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, 1999
1 Year 5 Years Since Inception
------ ------- ---------------
Class A shares 7.80% 17.66% 16.74%(4/14/94)
Class B shares 9.64% - 19.07%(12/19/94)
Class C shares 12.59% - 19.34%(12/19/94)
Class R shares 14.76% 19.37% 16.00%(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, 1999
1 Year 5 Years Since Inception
------ ------- ---------------
Class A shares (4.22)% 5.64% 5.09%(4/7/94)
Class B shares (4.54)% - 5.82%(12/19/94)
Class C shares (2.44)% - 5.69%(12/19/94)
Class R shares (0.91)% 6.59% 6.51%(7/11/91)
Inception date appears in parentheses following the average annual total return
since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase and
the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price in
the case of Class A and Class T) per share with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result. The average annual total return figures for a
Class calculated in accordance with such formula assume that, in the case of
Class A or Class T, the maximum sales load has been deducted from the
hypothetical initial investment at the time of purchase or, in the case of Class
B or Class C, the maximum applicable CDSC has been paid upon redemption at the
end of the period.
The total return of Class R shares of the Balanced Fund for the period
September 15, 1993 (inception date of Class R) to October 31, 1999 was 148.38%.
The total return of Class A shares of the Balanced Fund for the period April 14,
1994 (inception date of Class A) to October 31, 1999 was 136.05%. Based on NAV
per share, the total return for Class A was 150.37% for the same period. The
total return of Class B and Class C shares of the Balanced Fund for the period
from December 19, 1994 (inception date of Class B and Class C) through October
31, 1999 was 134.01% and 136.59%, respectively. Without giving effect to the
applicable CDSC, the total return for Class B and Class C shares was 136.01% and
136.59%, respectively, for the same period. The total return of Class R shares
of the Limited Term Income Fund for the period July 11, 1991 (inception date of
Class R) to October 31, 1999 was 68.90%. The total return for Class A shares of
the Limited Term Income Fund for the period April 7, 1994 (inception date of
Class A) to October 31, 1999 was 31.83%. Based on NAV per share, the total
return for Class A was 35.86% for the same period. The total return for Class B
and Class C shares of the Limited Term Income Fund for the period from December
19, 1994 (inception date of Class B and Class C) through October 31, 1999 was
31.74% and 30.92%, respectively. Without giving effect to the applicable CDSC,
the total return for Class B and Class C shares of the Limited Term Income Fund
was 32.74% and 30.92%, respectively, for the same period.
The Balanced Fund's aggregate total return for the period from August 16,
1999 (inception date of Class T) through October 31, 1999 for Class T shares was
(2.97%). Based on NAV per share, the aggregate total return for the Balanced
Fund's Class T shares was 1.62% for the same period.
Total return is calculated by subtracting the amount of a Fund's NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of a stated period from the NAV per share at the end of the period
(after giving effect to the reinvestment of dividends and other distributions
during the period and any applicable CDSC), and dividing the result by the NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of the period. Total return also may be calculated based on the NAV
per share at the beginning of the period instead of the maximum offering price
per share at the beginning of the period for Class A or Class T shares or
without giving effect to any applicable CDSC at the end of the period for Class
B or C shares. In such cases, the calculation would not reflect the deduction of
the sales load with respect to Class A or Class T shares or any applicable CDSC
with respect to Class B or C shares, which, if reflected would reduce the
performance quoted.
Dreyfus Premier Limited Term Income Fund's current yield for the 30-day
period ended October 31, 1999 was 5.71%, 5.37%, 5.37% and 6.12% for its Class A,
Class B Class C and Class R shares, respectively. Current yield is computed
pursuant to a formula which operates, with respect to each Class, as follows:
the amount of the Fund's expenses with respect to such Class accrued for the
30-day period (net of reimbursements) is subtracted from the amount of the
dividends and interest earned (computed in accordance with regulatory
requirements) by the Fund with respect to such Class during the period. That
result is then divided by the product of: (a) the average daily number of shares
outstanding during the period that were entitled to receive dividends, and (b)
the maximum offering price per share in the case of Class A or the net asset
value per share in the case of Class B, Class C and Class R on the last day of
the period less any undistributed earned income per share reasonably expected to
be declared as a dividend shortly thereafter. The quotient is then added to 1,
and the sum is raided to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by 2.
Performance information for the Funds may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the Lehman
Brothers Aggregate Bond Index; (ii) the S&P 500, the Dow Jones Industrial
Average, or other appropriate unmanaged domestic or foreign indices of
performance of various types of investments so that investors may compare the
Fund's results with those of indices widely regarded by investors as
representative of the securities markets in general; (iii) other groups of
mutual funds tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies, publications, or
persons who rank mutual funds on overall performance or other criteria; (iv) the
Consumer Price Index (a measure of inflation) to assess the real rate of return
from an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives. Unmanaged
indices may assume the reinvestment of dividends but generally do not reflect
deductions or administrative and management costs and expenses. From time to
time, advertising materials for the Fund may refer to Morningstar ratings and
related analyses supporting the rating.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market shares,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to or
include commentary by the portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUNDS/COMPANY
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Each Fund is
one of nineteen portfolios of the Company. Fund shares have equal rights 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 or, where matters affect different classes of a portfolio
differently, by class.
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.
COUNSEL AND INDEPENDENT AUDITORS
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, 2000, 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.
<PAGE>
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH
AND DUFF & PHELPS RATINGS
STANDARD & POOR'S
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard & Poor's. 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 Standard & Poor's 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
A Standard & Poor's 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
characteristics 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:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o 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
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
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 not
B be met when due. Financial protection factors will fluctuate widely
B- 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, CLASS R AND CLASS T SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
- ------------------------------------------------------------------------------
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, 2000, 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 that is registered with the
Securities and Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. The financial statements for the fiscal year ended October 31,
1999, are included in the Fund's 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.
TABLE OF CONTENTS
Page
Description of The Fund/Company............................................B-2
Management of The Fund....................................................B-17
Management Arrangements...................................................B-22
Purchase of Shares........................................................B-25
Distribution and Service Plans............................................B-33
Redemption of Shares......................................................B-36
Shareholder Services......................................................B-41
Additional Information About Purchases,
Exchanges and Redemptions...............................................B-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
Counsel and Independent Auditors..........................................B-61
Appendix..................................................................B-62
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. 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. 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. ("Moody's"), F-1 by Fitch IBCA, Inc. ("Fitch") or Duff-1 by Duff &
Phelps Credit Rating Co. ("Duff & Phelps").
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.
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.
Investment Techniques
In addition to the principal investment strategies discussed in the Fund's
Prospectus, the Fund also may engage in the investment techniques described
below. The Fund might not use, or may not have the ability to use, any of these
strategies and there can be no assurance that any strategy that is used will
succeed.
Borrowing. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
When-Issued Securities and Delayed Delivery Transactions. New issues of
U.S. Treasury and Government securities are often offered on a "when-issued"
basis. This means that delivery and payment for the securities normally will
take place approximately 7 to 45 days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a "when-issued" basis are each fixed at the
time the buyer enters into the commitment. The Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the commitment
before the settlement date if it is deemed advisable as a matter of investment
strategy. Cash or marketable high-grade debt securities equal to the amount of
the above commitments will be segregated on the Fund's records. For the purpose
of determining the adequacy of these securities the segregated securities will
be valued at market. If the market value of such securities declines, additional
cash or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Fund.
Securities purchased on a "when-issued" basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value of
such securities will fluctuate inversely to changes in interest rates i.e., they
will appreciate in value when interest rates decline and decrease in value when
interest rates rise. Therefore, if in order to achieve higher interest income
the Fund remains substantially fully invested at the same time that it has
purchased securities on a "when-issued" basis, there will be a greater
possibility of fluctuation in the Fund's net asset value ("NAV").
When payment for "when-issued" securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated securities,
the sale of other securities and/or, although it would not normally expect to do
so, from the sale of the "when-issued" securities themselves (which may have a
market value greater or less than the Fund's payment obligation). The sale of
securities to meet such obligations carries with it a greater potential for the
realization of capital gains, which are subject to federal income taxes.
To secure advantageous prices or yields, the Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed delivery
basis involves the risk that the value of the securities purchased will decline
prior to the settlement date. The sale of securities for delayed delivery
involves the risk that the prices available in the market on the delivery date
may be greater than those obtained in the sale transaction. The Fund will
establish a segregated account consisting of cash, U.S. Government securities or
other high-grade debt obligations in an amount at least equal at all times to
the amounts of its delayed delivery commitments.
Loans of Fund Securities. The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of the Fund's
total assets and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. These loans are terminable by the Fund at any time upon
specified notice. The Fund might experience loss if the institution to which it
has lent its securities fails financially or breaches its agreement with the
Fund. In addition, it is anticipated that the Fund may share with the borrower
some of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the Fund
considers all relevant factors and circumstances including the creditworthiness
of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by Dreyfus to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (1) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (2) agrees to repurchase the securities at a
future date by repaying the cash with interest. The Fund retains record
ownership of the security involved including the right to receive interest and
principal payments. Cash or liquid high-grade debt securities held by the Fund
equal in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is in
effect.
Futures, Options and Other Derivative Instruments. The Fund may purchase
and sell various financial instruments ("Derivative Instruments"), such as
financial futures contracts (such as index futures contracts) and options (such
as options on U.S. and foreign securities or indices of such securities). The
index Derivative Instruments which the Fund may use may be based on indices of
U.S. or foreign equity securities. These Derivative Instruments may be used, for
example, to preserve a return or spread or to facilitate or substitute for the
sale or purchase of securities. The Fund may invest in futures contracts and
options to a limited extent but does not currently intend to invest more than 5%
of its assets in such instruments.
Hedging strategies can be broadly categorized as "short hedges" and "long
hedges." A short hedge is a purchase or sale of a Derivative Instrument intended
partially or fully to offset potential declines in the value of one or more
investments held in the Fund's portfolio. Thus, in a short hedge the Fund takes
a position in a Derivative Instrument whose price is expected to move in the
opposite direction of the price of the investment being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential increases in the acquisition
cost of one or more investments that the Fund intends to acquire. Thus, in a
long hedge the Fund takes a position in a Derivative Instrument whose price is
expected to move in the same direction as the price of the prospective
investment being hedged. A long hedge is sometimes referred to as an
anticipatory hedge. In an anticipatory hedge transaction, the Fund does not own
a corresponding security and, therefore, the transaction does not relate to a
security the Fund owns. Rather, it relates to a security that the Fund intends
to acquire. If the Fund does not complete the hedge by purchasing the security
it anticipated purchasing, the effect on the Fund's portfolio is the same as if
the transaction were entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that the Fund
owns or intends to acquire. Derivative Instruments on indices, in contrast,
generally are used to attempt to hedge against price movements in market sectors
in which the Fund has invested or expects to invest.
The use of Derivative Instruments is subject to applicable regulations of
the 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.
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.
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.
Nonfundamental. 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
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
The Company has a Board composed of eight 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 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 and Century Business Services,
Inc. (formerly, International Alliance Services, Inc.), a provider of
various outsourcing functions for small and medium sized companies. For
more than five years prior to January 1995, he was President, a director
and, until August 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus and until August 24, 1994, the Fund's
distributor. From August 1994 until December 31, 1994, he was a director of
Mellon Financial Corporation. Age: 56 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; former Chairman of the Board and CEO of Fieldcrest
Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road, Brookline,
Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw &
McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board and
Director, Rexene Corporation. Age: 78 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, each an affiliate of Dreyfus. Age: 53 years
old: 625 Madison Avenue, New York, New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years old. Address:
401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures, Inc.;
Director, American Express Centurion Bank; Director, Ontario Hydro Services
Company; Director, the Hyams Foundation, Inc. Age: 50 years old. Address:
25 Braddock Park, Boston, Massachusetts 02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation of
African Americans in positions of leadership, influence and decision-making
in Boston, MA; Trustee, Boston College; Trustee, WGBH Educational
Foundation; Trustee, Children's Hospital; Director, The Greater Boston
Chamber of Commerce; Director, The First Albany Companies, Inc.; from April
1995 to March 1998, Director, TBC. Age: 53 years old. Address: 334 Boylston
Street, Suite 400, Boston, Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 40 years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant Secretary of
the Company. Vice President of New Business Development of Funds
Distributor, Inc. Age: 38 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, he was Assistant Counsel at Forum
Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc. From
July 1994 to November 1995, she was a Fund Accountant for Investors Bank &
Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company. Vice
President of the Distributor and Funds Distributor, Inc. Age: 35 years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company. Executive
Vice President and Client Service Director of Funds Distributor, Inc. From
June 1995 to March 1998, he was Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he was
Director of Business Development for First Data Corporation. Age: 45 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. Age: 37 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company. Assistant
Vice President of Funds Distributor, Inc. From March 1990 to May 1996, she
was employed by U.S. Trust Company of New York, where she held various
sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company. Vice
President and Senior Counsel of Funds Distributor, Inc. since February
1997. From June 1994 to January 1996, she was Manager of SEC Registration
at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parenthesis next to each Board
member's total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $ 80,989 (28)
Kenneth A. Himmel $16,666 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $20,000 $ 80,989 (28)
Benaree Pratt Wiley $20,000 $ 80,989 (28)
- ----------------------------
# 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
$5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company, for which the
Board member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds
on January 1, 1999.
***J.Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Company and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal
year ended October 31, 1999, the aggregate amount of fees received by
J. Tomlinson Fort from Dreyfus for serving as a Board member of the
Company was $20,000. For the year ended December 31, 1999, 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 $80,989. In addition, Dreyfus
reimbursed Mr. Fort a total of $2,799.33 for expenses attributable to
the Company's Board meetings which is not included in the $5,639.39
amount in note # above.
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, 2000.
Principal Shareholders. As of February 1, 2000, the following
shareholder(s) owned beneficially or of record 5% or more of Class A of the
Fund: Nationwide Advisory Services, Inc., c/o Portfolio Select-Omnibus, 3
Nationwide Plaza #32601, Columbus, OH 43215-2410; 8.47% and MLPF & S For the
Sole Benefit of It's Customers, 4800 Deer Lake Drive East, Jacksonville, FL
32246-6484; 8.46%.
As of February 1, 2000, 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; 15.34%
and Nationwide Advisory Services, Inc., c/o Portfolio Select - Omnibus, 3
Nationwide Plaza #32601, Columbus, OH 43215-2410; 8.16%.
As of February 1, 2000, 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; 28.89%.
As of February 1, 2000, the following shareholder(s) owned beneficially or
of record 5% or more of Class T of the Fund: First Union Securities, a/c
4247-2816, Jerry D. Hansen, 111 East Kilbourn Avenue, Milwaukee, WI 53202;
43.82%; Dain Rauscher Custodian, Patsy T. Joyner, a/c #4512-4327, 2706 Peach
Tree Drive, Carrollton, TX 75006-4736; 20.58%; Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998; 8.88%;
and First Union Securities, Inc., a/c 2154-5653, Christie Properties Ltd, c/o
Stephen Christie, 111 East Kilbourn Avenue, Milwaukee, WI 53202; 6.94%.
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 Financial 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 (the
"Management Agreement"), 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 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; Ronald P. O'Hanley III, Vice Chairman; J. David Officer,
Vice Chairman and a director; William T. Sandalls, Jr., Executive Vice
President; Stephen R. Byers, Senior Vice President; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Diane P. Durnin, Vice
President-Product Development; Patrice M. Kozlowski, Vice President-Corporate
Communications; Mary Beth Leibig, Vice President-Human Resources; Ray Van Cott,
Vice President-Information Systems; Theodore A. Schachar, Vice President-Tax;
Wendy Strutt, Vice President; Richard Terres, Vice President; William H.
Maresca, Controller; James Bitetto, Assistant Secretary; Steven F. Newman,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G.
Elliott, Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.90% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
Directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.
For the last three years, the Fund had the following expenses:
For the Fiscal Year Ended October 31,
1999 1998 1997
---- ---- ----
Management fees $1,087,286 $467,761 $229,763
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, 1999, the Distributor retained no
sales loads on the Fund's Class A shares. For the fiscal year ended October 31,
1999, the Distributor retained $108,968 and $7,013 from the contingent deferred
sales charge ("CDSC") on Class B and Class C shares of the Fund, respectively.
For the period August 16, 1999 (commencement of operations) through October 31,
1999, the Distributor retained no sales loads on the Fund's Class T shares. For
the fiscal year ended October 31, 1998, the Distributor retained no sales loads
on the Fund's Class A shares. For the period January 16, 1998 (inception date of
Class B and Class C shares) through October 31, 1998, the Distributor retained
no fees from the CDSC on Class B and Class C shares of the Fund, respectively.
Transfer and Dividend Disbursing Agent and Custodian. 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.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most beneficial to
you depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee, service fee and CDSC, if any, on Class B or
Class C shares would be less than the accumulated distribution fee and initial
sales charge on Class A shares or the accumulated distribution fee, service fee
and initial sales charge on Class T shares, purchased at the same time, and to
what extent, if any, such differential would be offset by the return on Class A
shares and Class T shares, respectively. You may also want to consider whether,
during the anticipated life of your investment in the Fund, the accumulated
distribution fee, service fee, and initial sales charge on Class T shares would
be less than the accumulated distribution fee and higher initial sales charge on
Class A shares purchased at the same time, and to what extent, if any, such
differential could be offset by the return of Class A. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution and service fees on Class
B or Class C shares and the accumulated distribution fee, service fee and
initial sales charge on Class T shares may exceed the accumulated distribution
fee and initial sales charge on Class A shares during the life of the
investment. Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class B
shares, Class C shares do not have a conversion feature and, therefore, are
subject to ongoing distribution and service fees. Thus, Class B shares may be
more attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares will be most appropriate for investors who
invest $1,000,000 or more in Fund shares, and Class A and Class T shares will
not be appropriate for investors who invest less than $50,000 in Fund shares.
The Fund reserves the right to reject any purchase order.
Class A, Class B, Class C and Class T shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. In addition, holders of Investor shares of the Fund as
of January 15, 1998 may continue to purchase Class A shares of the Fund at NAV.
Subsequent purchases may be sent directly to the Transfer Agent or your Agent.
Class R shares are sold only to holders of Restricted shares of the Fund
as of November 30, 1997. Such shareholders were primarily bank trust departments
and other financial service providers (including Mellon Bank and its affiliates)
acting on behalf of customers having a qualified trust or investment account or
relationship at such institution, customers who received and held shares of the
Fund distributed to them by virtue of such an account or relationship, or other
persons who acquired Restricted shares when they were generally available to the
public.
The minimum initial investment is $1,000. Subsequent investments must be
at least $100. The minimum initial investment is $750 for Dreyfus-sponsored
Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non working
spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one
participant and $500 for Dreyfus-sponsored Education IRAs, with no minimum on
subsequent purchases except the no minimum on Education IRAs does not apply
until after the first year. The initial investment must be accompanied by the
Fund's Account Application. The Fund reserves the right to offer Fund shares
without regard to minimum purchase requirements to employees participating in
certain qualified or non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner and
form acceptable to the Fund. The Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.
Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For 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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares is the NAV
per share of that Class, plus, except for shareholders owning Investor shares of
the Fund on January 15, 1998, a sales load as shown below:
Total Sales Load Dealers' Reallowance
as a % of Offering as a % of
Amount of Transaction Price Per Share Offering Price
--------------------- ------------------- ----------------------
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Holders of Investor shares of the Fund as of January 15, 1998 may continue
to purchase Class A shares of the Fund at NAV. However, investments by such
holders in other funds advised by Dreyfus will be subject to any applicable
front-end sales load. Omnibus accounts will be eligible to purchase Class A
shares without a front-end sales load only on behalf of their customers who held
Investor shares of the Fund through such omnibus account on January 15, 1998.
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those shares within one year of purchase, a CDSC of 1.00% will be
assessed at the time of redemption. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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, the Dreyfus Family of Funds, certain funds advised by Founders Asset
Management LLC ("Founders"), an affiliate of Dreyfus, 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, certain funds in
the Dreyfus Family of Funds, certain funds advised by Founders 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, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or intrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
Class T Shares. The public offering price for Class T shares is the NAV
per share of that Class plus a sales load as shown below:
Total Sales Load Dealers' Reallowance
as a % of Offering as a % of
Amount of Transaction Price Per Share 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. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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.
Class T shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class T 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, at the time of such
distribution, such qualified retirement plan or Dreyfus-sponsored 403(b)(7) plan
(a) met the requirements of an Eligible Benefit Plan and all or a portion of
such plan's assets were invested in funds in the Dreyfus Premier Family of
Funds, the Dreyfus Family of Funds, certain funds advised by Founders or certain
other products made available by the Distributor to such plans, or (b) invested
all of its assets in funds in the Dreyfus Premier Family of Funds, certain funds
in the Dreyfus Family of Funds, certain funds advised by Founders or certain
other products made available by the Distributor to such plans.
Class T 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 T 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.
Dealer Reallowance -- Class A and Class T Shares. The dealer reallowance
provided with respect to Class A and Class T shares may be changed from time to
time but will remain the same for all dealers. The Distributor, at its own
expense, may provide additional promotional incentives to dealers that sell
shares of funds advised by Dreyfus which are sold with a sales load, such as
Class A and Class T shares. In some instances, these incentives may be offered
only to certain dealers who have sold or may sell significant amounts of such
shares.
Sales Loads -- Class A and Class T Shares. The scale of sales loads
applies to purchases of Class A and Class T shares made by any "purchaser,"
which term includes an individual and/or spouse purchasing securities for his,
her or their own account or for the account of any minor children, or a trustee
or other fiduciary purchasing securities for a single trust estate or a single
fiduciary account (including a pension, profit-sharing or other employee benefit
trust created pursuant to a plan qualified under Section 401 of the Code
although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k) and 457 of the Code);
or an organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class A
shares of the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Fund's Prospectus at a price based upon the NAV
of a Class A share at the close of business on October 31, 1999:
NAV per share $23.97
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ 1.46
Per Share Offering Price to Public $25.43
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, 1999:
NAV per share $23.96
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ 1.13
Per Share Offering Price to Public $25.09
Right of Accumulation--Class A and Class T Shares. Reduced sales loads
apply to any purchase of Class A and Class T shares, shares of other funds in
the Dreyfus Premier Family of Funds which are sold with a sales load, shares of
certain other funds advised by Dreyfus or Founders which are sold with a sales
load and shares acquired by a previous exchange of such shares by you and any
related "purchaser" as defined above, where the aggregate investment, including
such purchase, is $50,000 or more. If, for example, you previously purchased and
still hold Class A or Class T shares of the Fund, or shares of any other
Eligible Fund or combination thereof, with an aggregate current market value of
$40,000 and subsequently purchase Class A or Class T shares of the Fund or
shares of an Eligible Fund having a current value of $20,000, the sales load
applicable to the subsequent purchase would be reduced to 4.50% of the offering
price in the case of Class A shares or 4.00% of the offering price in the case
of Class T shares. All present holdings of Eligible Funds may be combined to
determine the current offering price of the aggregate investment in ascertaining
the sales load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the Transfer
Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
Class B Shares. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in the Fund's Prospectus.
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 B and C Shares. Pursuant to an agreement with the Distributor,
Dreyfus Service Corporation compensates certain Agents for selling Class B and
Class C shares at the time of purchase from its own assets. The proceeds of the
CDSC and the distribution fee, in part, are used to defray these expenses.
Class R Shares. The public offering price for Class R shares is the NAV per
share of that Class.
TeleTransfer Privilege. You may purchase Fund shares by telephone through
the TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred between
the bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution that is an
Automated Clearing House ("ACH") member may be so designated. TeleTransfer
purchase orders may be made at any time. Purchase orders received by 4:00 p.m.,
New York time, on any business day that the Transfer Agent and the NYSE are open
for business will be credited to the shareholder's Fund account on the next bank
business day following such purchase order. Purchase orders made after 4:00
p.m., New York time, on any business day the Transfer Agent and the NYSE are
open for business, or orders made on Saturday, Sunday or any Fund holiday (e.g.,
when the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order. To
qualify to use the TeleTransfer Privilege, the initial payment for purchase of
Fund shares must be drawn on, and redemption proceeds paid to, the same bank and
account as are designated on the Account Application or Shareholder Services
Form on file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and
signature-guaranteed. See "Redemption of Shares - TeleTransfer Privilege." The
Fund may modify or terminate this Privilege at any time or charge a service fee
upon notice to shareholders. No such fee currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual fees
for distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule") regulating
the circumstances under which investment companies such as the Company may,
directly or indirectly, bear the expenses of distributing their shares. The Rule
defines distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.
Distribution Plan--Class A Shares. The Company has adopted a Distribution
Plan pursuant to the Rule with respect to the Class A shares of the Fund (the
"Class A Plan"), whereby Class A shares of the Fund may spend annually up to
0.25% of the average of its net assets to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities and
the Distributor for shareholder servicing activities and expenses primarily
intended to result in the sale of Class A shares of the Fund. The Class A Plan
allows the Distributor to make payments from the Rule 12b-1 fees it collects
from the Fund to compensate Agents that have entered into Selling Agreements
("Agreements") with the Distributor. Under the Agreements, the Agents are
obligated to provide distribution related services with regard to the Fund
and/or shareholder services to the Agent's clients that own Class A shares of
the Fund. The Company's Board of Directors believes that there is a reasonable
likelihood that the Class A Plan will benefit the Fund and the holders of Class
A shares.
The Class A Plan provides that a report of the amounts expended under the
Class A Plan, and the purposes for which such expenditures were incurred, must
be made to the Company's Directors for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which the Fund may bear for distribution pursuant to the
Class A Plan without the approval of the holders of Class A shares, and that
other material amendments of the Class A Plan must be approved by the vote of a
majority of the Directors and of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Company or the Distributor and who do not
have any direct or indirect financial interest in the operation of the Class A
Plan, cast in person at a meeting called for the purpose of considering such
amendments. The Class A Plan is subject to annual approval by the entire Board
of Directors and by the Directors who are neither interested persons nor have
any direct or indirect financial interest in the operation of the Class A Plan,
by vote cast in person at a meeting called for the purpose of voting on the
Class A Plan. The Class A Plan is terminable, as to the Fund's Class A shares,
at any time by vote of a majority of the Directors who are not interested
persons and have no direct or indirect financial interest in the operation of
the Class A Plan or by vote of the holders of a majority of the outstanding
shares of such class of the Fund.
Distribution and Service Plans -- Class B, Class C and Class T Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B, Class C and Class T shares, pursuant to which the Fund pays
the Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B, Class C and Class
T shares for the provision of certain services to the holders of Class B, Class
C and Class T shares, respectively. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Fund and providing reports and other information, and
providing services related to the maintenance of such shareholder accounts. With
regard to such services, each Agent is required to disclose to its clients any
compensation payable to it by the Fund and any other compensation payable by its
clients in connection with the investment of their assets in Class B, Class C
and Class T shares. The Distributor may pay one or more Agents in respect of
services for these Classes of shares. The Distributor determines the amounts, if
any, to be paid to Agents under the Service Plan and the basis on which such
payments are made. The Company's Board of Directors has also adopted a
Distribution Plan pursuant to the Rule with respect to Class B and Class C
shares (the "Class B and Class C Plan") and a separate Distribution Plan
pursuant to the Rule with respect to Class T shares (the "Class T Plan").
Pursuant to the Class B and Class C Plan, the Fund pays the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual rate
of 0.75% of the value of the average daily net assets of Class B and Class C
shares, respectively. Pursuant to the Class T Plan, the Fund pays the
Distributor for distributing the Fund's Class T shares at an annual rate of
0.25% of the value of the average daily net assets of Class T shares. The
Distributor may pay one or more Agents in respect of advertising, marketing and
other distribution services for Class T shares, and determines the amounts, if
any, to be paid to Agents and the basis on which such payments are made. The
Company's Board of Directors believes that there is a reasonable likelihood that
the Service Plan, the Class B and Class C Plan and the Class T Plan (each a
"Plan" and collectively, the "Plans") will benefit the Fund and the holders of
Class B, Class C and Class T shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not be
amended to increase materially the cost which holders of Class B, Class C or
Class T shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be approved
by the Board of Directors and by the Directors who are not interested persons of
the Company and have no direct or indirect financial interest in the operation
of the Plan or in any agreements entered into in connection with the Plan, by
vote cast in person at a meeting called for the purpose of considering such
amendments. Each Plan is subject to annual approval by such vote of the
Directors cast in person at a meeting called for the purpose of voting on the
Plan. Each Plan may be terminated at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or in any agreements entered
into in connection with the Plan or by vote of the holders of a majority of
Class B, Class C or Class T shares, as applicable.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan described above are payable without
regard to actual expenses incurred. The Fund and the Distributor may suspend or
reduce payments under any of the plans at any time, and payments are subject to
the continuation of the Fund's plans and the Agreements described above. From
time to time, the Agents, the Distributor and the Fund may voluntarily agree to
reduce the maximum fees payable under the plans.
For the fiscal year ended October 31, 1999, the Fund paid the Distributor
and Dreyfus Service Corporation $60,630 and $38,755, respectively, pursuant to
the Class A Plan. For the fiscal year ended October 31, 1999, the Fund paid the
Distributor $252,960 and $108,600 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 $13,350 and $70,970, respectively, pursuant to
the Service Plan with respect to Class B shares and $181 and $36,019,
respectively, pursuant to the Service Plan with respect to Class C shares. For
the period August 16, 1999 (commencement of operations) through October 31,
1999, the Fund paid the Distributor $5 pursuant to the Class T Plan and paid the
Distributor and Dreyfus Service Corporation $5 and $0, 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 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 Touch(R) automated telephone system) from any person representing
himself or herself to be you, or a representative of your Agent, and reasonably
believed by the Transfer Agent to be genuine. The Fund will require the Transfer
Agent to employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions reasonably
believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used. During the delay,
the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the Fund shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to the
number of Class A, Class B or Class T shares you have redeemed, within 45 days
of redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon reinstatement,
with respect to Class B shares, or Class A or Class T shares if such shares were
subject to a CDSC, your account will be credited with an amount equal to the
CDSC previously paid upon redemption of the shares reinvested. The Reinvestment
Privilege may be exercised only once.
Telephone Redemption Privilege. You may request by telephone that
redemption proceeds (maximum $250,000 per day) be paid by check and mailed to
your address.
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 $500,000 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 $500,000 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 is paid to
Dreyfus Service Corporation 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% is paid to
Dreyfus Service Corporation 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. You may purchase, in exchange for shares of the Fund,
shares of the same Class of another fund in the Dreyfus Premier Family of Funds,
shares of the same Class of certain funds advised by Founders, or shares of
certain other funds in the Dreyfus Family of Funds, and, with respect to Class T
shares of the Fund, Class A shares of certain Dreyfus Premier fixed-income
funds, to the extent such shares are offered for sale in your state of
residence. Shares of other funds purchased by exchange will be purchased on the
basis of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a sale
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 Touch(R) 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. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, shares of the same Class of another fund in the
Dreyfus Premier Family of Funds, shares of the same Class of certain funds
advised by Founders, or shares of certain other funds in the Dreyfus Family of
Funds, and, with respect to Class T shares of the Fund, Class A shares of
certain Dreyfus Premier fixed-income funds, of which you are a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged automatically
on the first and/or fifteenth day of the month according to the schedule the
investor has selected. This Privilege is available only for existing accounts.
With respect to Class R shares held by a Retirement Plan, exchanges may be made
only between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund. Shares will be exchanged on
the basis of relative NAV as described above under "Fund Exchanges." Enrollment
in or modification or cancellation of this Privilege is effective three business
days following notification by the investor. An investor will be notified if the
investor's account falls below the amount designated to be exchanged under this
Privilege. In this case, an investor's account will fall to zero unless
additional investments are made in excess of the designated amount prior to the
next Auto-Exchange transaction. Shares held under IRAs and other retirement
plans are eligible for this Privilege. Exchanges of IRA shares may be made
between IRA accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier Large
Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund
may charge a service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Auto-Exchange
Authorization Form, please call toll free 1-800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as a
sale of the shares given in exchange and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to Dreyfus Premier Large Company Stock Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587 and the notification will be effective three
business days following receipt. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement Plans,
may permit certain participants to establish an automatic withdrawal plan from
such Retirement Plans. Participants should consult their Retirement Plan sponsor
and tax adviser for details. Such a withdrawal plan is different from the
Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares, and Class A or Class T shares to which a CDSC applies,
that are withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC. Purchases of additional Class A or Class T shares where the
sales load is imposed concurrently with withdrawals of Class A or Class T shares
generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Funds, shares of the same Class of certain funds advised by
Founders, or shares of certain other funds in the Dreyfus Family of Funds, and,
with respect to Class T shares of the Fund, in Class A shares of certain Dreyfus
Premier fixed-income funds, of which you are 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 Builder(R), Dreyfus Government Direct Deposit Privilege
or Dreyfus Payroll Savings Plan. Participation in this Program may be terminated
by the shareholder at any time by discontinuing participation in
Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s).The Fund reserves the right to redeem your account if you have
terminated your participation in the Program and your account's NAV is $500 or
less. See "Account Policies-General Policies" in the Fund's Prospectus. The Fund
may modify or terminate this Program at any time. The Dreyfus Step Program is
not available to open new accounts in any Class of the Fund.
Letter of Intent--Class A and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of Eligible
Fund shares purchased in a 13-month period pursuant to the terms and conditions
set forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of shares you
hold (on the date of submission of the Letter of Intent) in any Eligible Fund
that may be used toward "Right of Accumulation" benefits described above may be
used as a credit toward completion of the Letter of Intent. However, the reduced
sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A or Class T shares, as applicable, of the Fund held
in escrow to realize the difference. Signing a Letter of Intent does not bind
you to purchase, or the Fund to sell, the full amount indicated at the sales
load in effect at the time of signing, but you must complete the intended
purchase to obtain the reduced sales load. At the time you purchase Class A or
Class T shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the
then-current NAV plus the applicable sales load in effect at the time such
Letter of Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares. All
fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may not
be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund Exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year (for
calendar year 1998 beginning on January 15th) or who makes exchanges that appear
to coincide with an active market-timing strategy may be deemed to be engaged in
excessive trading. Accounts under common ownership or control will be considered
as one account for purposes of determining a pattern of excessive trading. In
addition, the Fund may refuse or restrict purchase or exchange requests by any
person or group if, in the judgment of the Fund's management, the Fund would be
unable to invest the money effectively in accordance with its investment
objective and policies or could otherwise be adversely affected or if the Fund
receives or anticipates receiving simultaneous orders that may significantly
affect the Fund (e.g., amounts equal to 1% or more of the Fund's total assets).
If an exchange request is refused, the Fund will take no other action with
respect to the shares until it receives further instructions from the investor.
The Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount of
the redemption request otherwise would be disruptive to efficient portfolio
management or would adversely affect the Fund. The Fund's policy on excessive
trading applies to investors who invest in the Fund directly or through
financial intermediaries, but does not apply to the Dreyfus Auto-Exchange
Privilege, to any automatic investment or withdrawal privilege described herein,
or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined NAV but the purchase
order would be effective only at the NAV next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at the
last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV of
the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Board of Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if it believes that the discount no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is currently
scheduled to be closed are: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income, if any, four times yearly and distributes net realized
capital gains and gains from foreign currency transactions, if any, once a year,
but it may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent with
of the 1940 Act. All expenses are accrued daily and deducted before declaration
of dividends to investors. The Fund will not make distributions from net
realized capital gains unless all capital loss carryovers, if any, have been
utilized or have expired. Investors other than qualified retirement plans may
choose whether to receive dividends and other distributions in cash, to receive
dividends in cash and reinvest other distributions in additional Fund shares at
NAV, or to reinvest both dividends and other distributions in additional Fund
shares at NAV; dividends and other distributions paid to qualified retirement
plans are reinvested automatically in additional Fund shares at NAV. Dividends
and other distributions paid by each Class are calculated at the same time and
in the same manner and will be in the same amount, except that the expenses
attributable solely to a particular Class are borne exclusively by that Class.
Class B and Class C shares will receive lower per share dividends than Class T
shares, which will in turn receive lower per share dividends than Class A
shares, which will in turn receive lower per share dividends than Class R
shares, because of the higher expenses borne by the relevant Classes.
It is expected that the Fund will continue to qualify for treatment as a
regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such qualification
will relieve the Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, the
Fund -- which is treated as a separate corporation for federal tax purposes --
(1) must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions) ("Distribution Requirement"), (2) must derive at least 90% of its
annual gross income from specified sources ("Income Requirement"), and (3) must
meet certain asset diversification and other requirements. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency. If the Fund failed to qualify
for treatment as a RIC for any taxable year, (1) it would be taxed at corporate
rates on the full amount of its taxable income for that year without being able
to deduct the distributions it makes to its shareholders and (2) the
shareholders would treat all those distributions, including distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), as dividends (that is, ordinary income) to the extent of the
Fund's earnings and profits. In addition, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying for RIC treatment. The Fund will
be subject to a non-deductible 4% excise tax ("Excise Tax"), to the extent it
fails to distribute as substantially all of its taxable investment income and
capital gains.
Distributions. If you elect to receive dividends and other distributions
in cash, and your distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest that
distribution and all future distributions payable to you in additional Fund
shares at NAV. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Dividends derived from net investment income, together with distributions
from net realized short-term capital gains not realized gains from certain
foreign currency transactions and all or a portion of any gains realized from
the sale or other disposition of certain market discount bonds (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions from net capital gain (the excess of net
long-term capital gain over net short-term capital loss) are taxable to those
shareholders as long-term capital gains regardless of how long the shareholders
have held their Fund shares and whether the distributions are received in cash
or reinvested in additional Fund shares. Dividends and other distributions also
may be subject to state and local taxes.
Dividend distributions paid by the Fund to a non-resident foreign investor
generally are subject to U.S. withholding tax at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax treaty.
Distributions from net capital gain paid by the Fund to a non-resident foreign
investor, as well as the proceeds of any redemptions by such an investor,
regardless of the extent to which gain or loss may be realized, generally are
not subject to U.S. withholding tax. However, such distributions may be subject
to backup withholding, as described below, unless the foreign investor certifies
his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to distributions, if any, paid during
the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A and Class T shares if a shareholder redeems those shares or
exchanges them for shares of another fund advised or administered by Dreyfus,
within 90 days of purchase, and (1) in the case of a redemption, the shareholder
acquires other fund Class A or Class T shares through exercise of the
Reinvestment Privilege (2) or, in the case of an exchange, the other fund
reduces or eliminates its otherwise applicable sales load. In these cases, the
amount of the sales load charged on the purchase of the original Class A or
Class T shares, up to the amount of the reduction of the sales load pursuant to
the Reinvestment Privilege or on the exchange, as the case may be, is not
included in the tax basis of those shares for purposes of computing gain or loss
and instead is added to the tax basis of the acquired shares.
Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the plans. The Fund will not report to the Internal Revenue
Service ("IRS") distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. The
administrator, trustee or custodian of a qualified retirement plan will be
responsible for reporting distributions from the plan to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the distribution paid directly from the plan to an retirement plan in a
"direct rollover," the distribution is subject to 20% income tax withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if the
shareholder fails to furnish a TIN to the Fund and certify that it is correct.
Backup withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) the shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income. A TIN is either the Social Security number, IRS individual
taxpayer identification number or employer identification number of the record
owner of an account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner and may be claimed as a
credit on his or her federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such distribution would be a return on
investment in an economic sense, although taxable as discussed above. In
addition, if a shareholder sells shares of the Fund held for six months or less
and receives any capital gain distributions with respect to those shares, any
loss incurred on the sale of those shares will be treated as a long-term capital
loss to the extent of those distributions.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-received
deduction allowed to corporations. The eligible portion may not exceed the
aggregate dividends received by the Fund from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the Federal alternative
minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes imposed
by foreign countries and U.S. possessions ("foreign taxes") that would reduce
the yield and/or total return on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate foreign taxes, however,
and many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors.
Passive Foreign Investment Companies. The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a foreign
corporation in which, on any day during its taxable year, more than 50% of the
total voting power of all voting stock therein or the total value of all stock
therein is owned, directly, indirectly, or constructively, by "U.S.
shareholders," defined as U.S. persons that individually own, directly,
indirectly, or constructively, at least 10% of that voting power) as to which
the Fund is a U.S. shareholder -- that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a dividend to its shareholders. The balance of the PFIC income will be included
in the Fund's investment company taxable income and, accordingly, will not be
taxable to it to the extent that it distributes income to its shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain -- which
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not distributed to the Fund by the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
The Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock over
the Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included by the Fund for
prior taxable years. The Fund's adjusted basis in each PFIC's stock with respect
to which it makes this election would be adjusted to reflect the amounts of
income included and deductions taken under the election and under regulations
proposed in 1992 that provided a similar election with respect to the stock of
certain PFIC(s).
Foreign Currency and Hedging Transactions. Gains from the sale or other
disposition of foreign currencies (except certain gains therefrom that may be
excluded by future regulations), and gains from options, futures and forward
contracts derived by the Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under the
Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, a portion of the gains and losses
from the disposition of foreign currencies and certain
foreign-currency-denominated instruments (including debt instruments and
financial forward and futures contracts and options) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion of
any gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as capital
gain may be treated as ordinary income. "Conversion transactions" are defined to
include certain option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund on
the exercise or lapse of, or closing transactions respecting, certain options,
futures and forward contracts ("Section 1256 Contracts") will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. In
addition, any Section 1256 Contracts remaining unexercised at the end of the
Fund's taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss to
the Fund characterized in the same manner.
Offsetting positions held by the Fund involving certain options, futures
or forward contracts may constitute "straddles", which are defined to include
"offsetting positions" in actively traded personal property. Under Section 1092
of the Code, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on the
offsetting positions(s) of the straddle. In addition, these rules may postpone
the recognition of loss that otherwise would be recognized under the
mark-to-market rules discussed above. The regulations under Section 1092 also
provide certain "wash sale" rules, which apply to transactions where a position
is sold at a loss and a new offsetting position is acquired within a prescribed
period, and "short sale" rules applicable to straddles. If the Fund makes
certain elections (including an election as to straddles that include a position
in one or more Section 1256 Contracts (so-called "mixed straddles')), the
amount, character, and timing of recognition of gains and losses from the
affected straddle positions would be determined under rules that vary according
to the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
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 position, 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 identical property. In addition, if the appreciated financial
position is itself a short sale or such a contract, acquisition of the
underlying property or substantially identical 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 identical 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 using the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
would be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and could need to
distribute that income to satisfy the Distribution Requirement and avoid the
Excise Tax. In that case, the Fund may have to dispose of securities it might
otherwise have continued to hold in order to generate cash to satisfy these
requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all distributions
to that shareholder and any gains realized by that shareholder on the
disposition of the Fund shares will be subject to U.S. federal income tax at the
graduated rates applicable to U.S. citizens and domestic corporations, as the
case may be. Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares of
the Fund, that they own at the time of their death. Certain credits against that
tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the Fund are generally traded on
a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transaction may be executed through brokers
acting as agent. The Fund will pay a spread or commission in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions on
behalf of the Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.
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,
1999, 1998 and 1997, the Fund paid to Dreyfus Brokerage Services, Inc., ("DBS")
brokerage commissions of $30,728, $27,084 and $8,315, respectively. The amount
paid to DBS during the fiscal years ended October 31, 1999, 1998 and 1997, was
approximately 18%, 24%, and 28%, respectively, of the aggregate brokerage
commissions paid by the Fund, for transactions involving approximately 23%, 30%,
and 32%, 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, 1999, 1998 and 1997, the Fund paid
brokerage commissions amounting to $166,866, $113,263 and $29,323, 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.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for Class A,
Class B, Class C and Class R shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1999
1 Year 5 year Since Inception
------ ------ ---------------
Class A shares 16.72% 23.02% 22.12% (9/2/94)
Class B shares 18.91% - 18.65% (1/16/98)
Class C shares 21.97% - 20.59% (1/16/98)
Class R shares 24.16% 24.79% 23.81% (9/2/94)
Inception date appears in parentheses following the average annual total return
since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase and
the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price in
the case of Class A and Class T) per share with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result. The average annual total return figures for a
Class calculated in accordance with such formula assume that, in the case of
Class A or Class T, the maximum sales load has been deducted from the
hypothetical initial investment at the time of purchase or, in the case of Class
B or Class C, the maximum applicable CDSC has been paid upon redemption at the
end of the period.
The Fund's total return for Class A shares (formerly called Investor
shares) for the period from September 2, 1994 (inception date of Class A shares)
to October 31, 1999 was 180.43% (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 197.54% for this period. The Fund's total
return for Class B and Class C shares for the period from January 16, 1998
(inception date of Class B and Class C shares) to October 31, 1999 was 35.82%
and 39.82%, respectively. Without giving effect to the applicable CDSC, the
total return for Class B and Class C shares was 39.82% and 39.82% respectively,
for the same period. The Fund's total return for Class R shares (formerly called
Restricted shares) for the period September 2, 1994 (inception date of Class R
shares) to October 31, 1999 was 201.09%. Total return is calculated by
subtracting the amount of the Fund's NAV (maximum offering price in the case of
Class A and Class T) per share at the beginning of a stated period from the NAV
per share at the end of the period (after giving effect to the reinvestment of
dividends and other distributions during the period and any applicable CDSC),
and dividing the result by the NAV (maximum offering price in the case of Class
A and Class T) per share at the beginning of the period. Total return also may
be calculated based on the NAV per share at the beginning of the period instead
of the maximum offering price per share at the beginning of the period for Class
A or Class T shares or without giving effect to any applicable CDSC at the end
of the period for Class B or Class C shares. In such cases, the calculation
would not reflect the deduction of the sales load with respect to Class A or
Class T shares or any applicable CDSC with respect to Class B or C shares,
which, if reflected would reduce the performance quoted.
The Fund's aggregate total return for the period from August 16, 1999
(commencement of operations) through October 31, 1999 for Class T shares was
(2.92)%. Based on NAV per share, the aggregate total return for the Class T
shares was 1.66% 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 S&P
500, the Dow Jones Industrial Average, or other appropriate unmanaged domestic
or foreign indices of performance of various types of investments so that
investors may compare the Fund's results with those of indices widely regarded
by investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; (iii) the Consumer Price Index (a measure of inflation) to assess the
real rate of return from an investment in the Fund or the Fund's performance
against inflation to the performance of other instruments against inflation; and
(iv) products managed by a universe of money managers with similar performance
objectives. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions or administrative and management costs and
expenses. From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
From time to time, advertising material for the Fund may include: (i)
biographical information relating to its portfolio manager, including honors and
awards and may refer to, or include commentary by the Fund's portfolio manager
relating to investment strategy, asset growth, current or past business,
political, economic or financial conditions and other matters of general
interest to investors; (ii) statistical data or general discussions about the
growth and development of Dreyfus Retirement Services (in terms of new
customers, assets under management, market share, etc.) and its presence in the
defined contribution plan market; (iii) the approximate number of then current
Fund shareholders; (iv) references to the Fund's quantitative, disciplined
approach to stock market investing and the number of stocks analyzed by Dreyfus;
and (v) Lipper or Morningstar ratings and related analysis supporting the
ratings. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions or administrative and management costs and
expenses.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. The Fund is
one of nineteen portfolios of the Company. Fund shares have equal rights 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 or, where matters affect different classes of a portfolio
differently, by class.
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.
COUNSEL AND INDEPENDENT AUDITORS
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, 2000, 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.
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS
Standard & Poor's
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard & Poor's. 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
Standard & Poor's 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
A Standard & Poor's 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 Standard & Poor's 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 characteristics 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:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed
financial charges and high internal cash generation.
o 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
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
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
AA but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk factors
A are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- 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 not
B be met when due. Financial protection factors will fluctuate widely
B- according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with
unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financial requirements, access to capital markets is good.
Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not sufficient
to insure against disruption in debt service. Operating factors and
market access may be subject to a high degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest payments.
DREYFUS PREMIER MIDCAP STOCK FUND
CLASS A, CLASS B, CLASS C, CLASS R AND CLASS T SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
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, 2000, as it may
be revised from time to time. The Fund is a separate, diversified portfolio of
The Dreyfus/Laurel Funds, Inc. (the "Company"), an open-end management
investment company, known as a mutual fund, that is registered with the
Securities and Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. Copies of the Annual Report accompany this Statement of Additional
Information. The financial statements included in the Annual Report, and the
Independent Auditors' Report thereon contained therein, and related notes, are
incorporated herein by reference.
TABLE OF CONTENTS
Page
Description of the Fund/Company............................................B-3
Management of the Fund....................................................B-18
Management Arrangements...................................................B-24
Purchase of Shares........................................................B-27
Distribution and Service Plans............................................B-36
Redemption of Shares......................................................B-38
Shareholder Services......................................................B-43
Additional Information About Purchases, Exchanges and Redemptions.........B-50
Determination of Net Asset Value..........................................B-51
Dividends, Other Distributions and Taxes..................................B-52
Portfolio Transactions....................................................B-59
Performance Information...................................................B-61
Information About the Fund/Company........................................B-63
Counsel and Independent Auditors..........................................B-64
Appendix..................................................................B-65
<PAGE>
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. 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. 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 Index(R) ("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 $10 billion in market value. Any medium-capitalization stocks
already included in the Standard & Poor's 500 Composite Stock Price Index(R)
("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. ("Fitch") or, Duff-1 by Duff & Phelps Credit Rating Co. ("Duff
& Phelps").
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.
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.
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 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.
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.
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.
Nonfundamental. 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
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
The Company has a Board composed of eight 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
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 and
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus and, until August 24, 1994, the Fund's Distributor. From
August 1994 until December 31, 1994, he was a director of Mellon Bank.
Age: 56 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; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 78 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Director of the Company; President & CEO, The Palladium
Company; President & CEO, Himmel and Company, Inc.; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), and
Boston Safe Deposit and Trust Company, each an affiliate of Dreyfus.
Age: 53 years old. Address: 625 Madison Avenue, New York, New York
10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years old.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Ontario
Hydro Services Company; Director, the Hyams Foundation, Inc. Age: 50
years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor, Inc. Age: 38 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, he was Assistant
Counsel at Forum Financial Group.
Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 45 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. Age: 37
years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor, Inc. since
February 1997. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parenthesis next to each Board
member's total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,117 (189)
James M. Fitzgibbons $20,000 $74,989 (28)
J. Tomlinson Fort*** None None (28)
Arthur L. Goeschel $20,000 $80,989 (28)
Kenneth A. Himmel $16,666 $62,489 (28)
Stephen J. Lockwood $18,333 $68,989 (28)
Roslyn M. Watson $20,000 $80,989 (28)
Benaree Pratt Wiley $20,000 $80,989 (28)
- ----------------------------
# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October
31, 1999, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Company was $20,000. For the
year ended December 31, 1999, 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 $80,989. In addition, Dreyfus
reimbursed Mr. Fort a total of $2,799.33 for expenses attributable to the
Company's Board meetings which is not included in the $5,639.39 amount in
note # above.
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, 2000.
Principal Shareholders:
As of February 1, 2000, the following shareholder(s) owned beneficially
or of record 5% or more of Class A of the Fund: Charles Schwab & Co. Inc.,
Reinvest Account, 101 Montgomery Street, San Francisco, CA 94104-4122;
6.9013%.
As of February 1, 2000, 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; 13.0083%
and Nationwide Advisory Services, Inc. c/o Portfolio Select-Omnibus, 3
Nationwide Plaza #32601; 6.3702%.
As of February 1, 2000, 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; 39.5742%.
As of February 1, 2000, 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; 57.2438% and
Mcwood & Co., First Citizens Bank and Trust, P.O. Box 29522 Raleigh, NC
27626-0522; 16.4240%.
As of February 1, 2000, the following shareholder(s) owned of record 5% or
more of Class T of the Fund: First Union Securities, Inc., FBO Lana Caswell
Garcia, 111 East Kilbourn Avenue, Milwaukee, WI 53202; 45.0429% First Union
Securities, Inc., FBO HS Garcia, 111 East Kilbourn Avenue, Milwaukee, WI 53202;
21.8950% PaineWebber For The Benefit of Painewebber CDN FBO, James M. Rose, P.O.
Box 3321, Weehawken, NJ 07087-8154; 15.1713% and First Union Securities, Inc.,
FBO Vonda Faye Lane IRA, 111 East Kilbourn Avenue, Milwaukee, WI 53202; 8.9007%.
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 Financial 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 (the
"Management Agreement"), 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" (as defined in the
1940 Act) 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 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; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Diane P. Durnin, Vice President-Product Development; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Ray Van Cott, Vice-President-Information Systems;
Theodore A. Schachar, Vice President-Tax; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James
Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott, Martin C. McGuinn,
Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.10% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
Directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.
For the last three years, the Fund had the following expenses:
For the Fiscal Year Ended October 31,
1999 1998 1997
---- ---- ----
Management fees $2,121,314 $783,685 $318,694
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, 1999, the Distributor retained
$11,963, from sales loads on the Fund's Class A shares. For the fiscal year
ended October 31, 1999, the Distributor retained $87,877 and $5,625 from the
contingent deferred sales charge ("CDSC") on Class B and Class C shares,
respectively. For the period August 16, 1999 (inception date of Class T shares)
through October 31, 1999, the Distributor retained $7 from sales loads on the
Fund's Class T shares. 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 CDSC on Class B
shares and Class C shares, respectively.
Transfer and Dividend Disbursing Agent and Custodian. 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.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most beneficial to
you depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee, service fee and CDSC, if any, on Class B or
Class C shares would be less than the accumulated distribution fee and initial
sales charge on Class A shares or the accumulated distribution fee, service fee
and initial sales charge on Class T shares, purchased at the same time, and to
what extent, if any, such differential would be offset by the return on Class A
shares and Class T shares, respectively. You may also want to consider whether,
during the anticipated life of your investment in the Fund, the accumulated
distribution fee, service fee, and initial sales charge on Class T shares would
be less than the accumulated distribution fee and higher initial sales charge on
Class A shares purchased at the same time, and to what extent, if any, such
differential could be offset by the return of Class A. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution and service fees on Class
B or Class C shares and the accumulated distribution fee, service fee and
initial sales charge on Class T shares may exceed the accumulated distribution
fee and initial sales charge on Class A shares during the life of the
investment. Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class B
shares, Class C shares do not have a conversion feature and, therefore, are
subject to ongoing distribution and service fees. Thus, Class B shares may be
more attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares will be most appropriate for investors who
invest $1,000,000 or more in Fund shares, and Class A and Class T shares will
not be appropriate for investors who invest less than $50,000 in Fund shares.
The Fund reserves the right to reject any purchase order.
Class A, Class B, Class C and Class T shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. In addition, holders of Investor shares of the Fund as
of January 15, 1998 may continue to purchase Class A shares of the Fund at NAV.
Subsequent purchases may be sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates), acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of the Fund distributed to them by virtue of such an account or
relationship. In addition, holders of Restricted shares of the Fund as of
January 15, 1998 may continue to purchase Class R shares of the Fund whether or
not they would otherwise be eligible to do so. Class R shares may be purchased
for a retirement plan only by a custodian, trustee, investment manager or other
entity authorized to act on behalf of such a plan. Institutions effecting
transactions in Class R shares for the accounts of their clients may charge
their clients direct fees in connection with such transactions.
The minimum initial investment is $1,000. Subsequent investments must be
at least $100. The minimum initial investment is $750 for Dreyfus-sponsored
Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non working
spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one
participant and $500 for Dreyfus-sponsored Education IRAs, with no minimum on
subsequent purchases except the no minimum on Education IRAs does not apply
until after the first year. The initial investment must be accompanied by the
Fund's Account Application. The Fund reserves the right to offer Fund shares
without regard to minimum purchase requirements to employees participating in
certain qualified or non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner and
form acceptable to the Fund. The Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.
Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For 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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.
Class A Shares. The public offering price for Class A shares is the NAV of
that Class, plus, except for shareholders owning Investor shares of the Fund on
January 15, 1998, a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Holders of Investor shares of the Fund as of January 15, 1998 may continue
to purchase Class A shares of the Fund at NAV. However, investments by such
holders in other funds advised by Dreyfus will be subject to any applicable
front-end sales load. Omnibus accounts will be eligible to purchase Class A
shares without a front-end sales load only on behalf of their customers who held
Investor shares of the Fund through such omnibus account on January 15, 1998.
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those shares within one year of purchase, a CDSC of 1.00% will be
assessed at the time of redemption. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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, the Dreyfus Family of Funds, certain funds advised by Founders Asset
Management LLC ("Founders"), an affiliate of Dreyfus, 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, the Dreyfus
Family of Funds, certain funds advised by Founders 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, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
Class T Shares. The public offering price for Class T shares is the NAV
per share of that Class plus a sales load as shown below:
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $50,000 4.50 4.00
$50,000 to less than $100,000 4.00 3.50
$100,000 to less than $250,000 3.00 2.50
$250,000 to less than $500,000 2.00 1.75
$500,000 to less than $1,000,000 1.50 1.25
$1,000,000 or more -0- -0-
There is no initial sales charge on purchases of $1,000,000 or more of
Class T shares. However, if you purchase Class T shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those shares within one year of purchase, a CDSC of 1.00% will be
assessed at the time of redemption. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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.
Class T shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class T shares also may be purchased
(including by exchange) at net asset value 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, at
the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible Benefit
Plan and all or a portion of such plan's assets were invested in funds in the
Dreyfus Premier Family of Funds, the Dreyfus Family of Funds, certain funds
advised by Founders or certain other products made available by the Distributor
to such plans, or (b) invested all of its assets in funds in the Dreyfus Premier
Family of Funds, certain funds in the Dreyfus Family of Funds, certain funds
advised by Founders or certain other products made available by the Distributor
to such plans.
Class T 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 T 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.
Dealer Reallowance -- Class A and Class T Shares. The dealer reallowance
provided with respect to Class A and Class T shares may be changed from time to
time but will remain the same for all dealers. The Distributor, at its own
expense, may provide additional promotional incentives to dealers that sell
shares of funds advised by Dreyfus which are sold with a sales load, such as
Class A and Class T shares. In some instances, these incentives may be offered
only to certain dealers who have sold or may sell significant amounts of such
shares.
Sales Loads -- Class A and Class T Shares. The scale of sales loads
applies to purchases of Class A and Class T shares made by any "purchaser,"
which term includes an individual and/or spouse purchasing securities for his,
her or their own account or for the account of any minor children, or a trustee
or other fiduciary purchasing securities for a single trust estate or a single
fiduciary account (including a pension, profit-sharing or other employee benefit
trust created pursuant to a plan qualified under Section 401 of the Code)
although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k) and 457 of the Code);
or an organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class A
shares of the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Fund's Prospectus at a price based upon the NAV
of a Class A share at the close of business on October 31, 1999:
NAV per share $16.69
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ 1.02
Per Share Offering Price to Public $17.71
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, 1999:
NAV per share $16.68
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .78
Per Share Offering Price to Public $17.46
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 which are sold with a sales load, shares of
certain other funds advised by Dreyfus or Founders Asset Management LLC
("Founders"), an affiliate of Dreyfus, which are sold with a sales load and
shares acquired by a previous exchange of such shares (hereinafter referred to
as "Eligible Funds"), by you and any related "purchaser" as defined above, where
the aggregate investment, including such purchase, is $50,000 or more. If, for
example, you previously purchased and still hold Class A or Class T shares of
the Fund, or shares of any other Eligible Fund or combination thereof, with an
aggregate current market value of $40,000 and subsequently purchase Class A or
Class T shares of the Fund or shares of an Eligible Fund having a current value
of $20,000, the sales load applicable to the subsequent purchase would be
reduced to 4.50% of the offering price in the case of Class A shares or 4.00% of
the offering price in the case of Class T shares. All present holdings of
Eligible Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the Transfer
Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
Class B Shares. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in the Fund's Prospectus.
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 B and C Shares. Pursuant to an agreement with the Distributor,
Dreyfus Service Corporation compensates certain Agents for selling Class B and
Class C shares at the time of purchase from its own assets. The proceeds of the
CDSC and the distribution fee, in part, are used to defray these expenses.
Class R Shares. The public offering price for Class R shares is the
NAV per share of that Class.
TeleTransfer Privilege. You may purchase Fund shares by telephone through
the TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred between
the bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution that is an
Automated Clearing House ("ACH") member may be so designated. TeleTransfer
purchase orders may be made at any time. Purchase orders received by 4:00 p.m.,
New York time, on any business day that the Transfer Agent and the NYSE are open
for business will be credited to the shareholder's Fund account on the next bank
business day following such purchase order. Purchase orders made after 4:00
p.m., New York time, on any business day the Transfer Agent and the NYSE are
open for business, or orders made on Saturday, Sunday or any Fund holiday (e.g.,
when the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order. To
qualify to use the TeleTransfer Privilege, the initial payment for purchase of
Fund shares must be drawn on, and redemption proceeds paid to, the same bank and
account as are designated on the Account Application or Shareholder Services
Form on file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and
signature-guaranteed. See "Redemption of Shares - TeleTransfer Privilege." The
Fund may modify or terminate this Privilege at any time or charge a service fee
upon notice to shareholders. No such fee currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual fees
for distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule") regulating
the circumstances under which investment companies such as the Company may,
directly or indirectly, bear the expenses of distributing their shares. The Rule
defines distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.
Distribution Plan--Class A Shares. The Company has adopted a Distribution
Plan pursuant to the Rule with respect to the Class A shares of the Fund (the
"Class A Plan"), whereby Class A shares of the Fund may spend annually up to
0.25% of the average of its net assets to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities and
the Distributor for shareholder servicing activities and expenses primarily
intended to result in the sale of Class A shares of the Fund. The Class A Plan
allows the Distributor to make payments from the Rule 12b-1 fees it collects
from the Fund to compensate Agents that have entered into Selling Agreements
("Agreements") with the Distributor. Under the Agreements, the Agents are
obligated to provide distribution related services with regard to the Fund
and/or shareholder services to the Agent's clients that own Class A shares of
the Fund. The Company's Board of Directors believes that there is a reasonable
likelihood that the Class A Plan will benefit the Fund and the holders of Class
A shares.
The Class A Plan provides that a report of the amounts expended under the
Class A Plan, and the purposes for which such expenditures were incurred, must
be made to the Company's Directors for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which the Fund may bear for distribution pursuant to the
Class A Plan without approval of the holders of Class A shares, and that other
material amendments of the Class A Plan must be approved by the vote of a
majority of the Directors and of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Company or the Distributor and who do not
have any direct or indirect financial interest in the operation of the Class A
Plan, cast in person at a meeting called for the purpose of considering such
amendments. The Class A Plan is subject to annual approval by the entire Board
of Directors and by the Directors who are neither interested persons nor have
any direct or indirect financial interest in the operation of the Class A Plan,
by vote cast in person at a meeting called for the purpose of voting on the
Class A Plan. The Class A Plan is terminable, as to the Fund's Class A shares,
at any time by vote of a majority of the Directors who are not interested
persons and have no direct or indirect financial interest in the operation of
the Class A Plan or by vote of the holders of a majority of the outstanding
shares of such class of the Fund.
Distribution and Service Plans -- Class B, Class C and Class T Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B, Class C and Class T shares, pursuant to which the Fund pays
the Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B, Class C and Class
T shares for the provision of certain services to the holders of Class B, Class
C and Class T shares, respectively. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Fund and providing reports and other information, and
providing services related to the maintenance of such shareholder accounts. With
regard to such services, each Agent is required to disclose to its clients any
compensation payable to it by the Fund and any other compensation payable by its
clients in connection with the investment of their assets in Class B, Class C
and Class T shares. The Distributor may pay one or more Agents in respect of
services for these Classes of shares. The Distributor determines the amounts, if
any, to be paid to Agents under the Service Plan and the basis on which such
payments are made. The Company's Board of Directors has also adopted a
Distribution Plan pursuant to the Rule with respect to Class B and Class C
shares (the "Class B and Class C Plan") and a separate Distribution Plan
pursuant to the Rule with respect to Class T shares (the "Class T Plan").
Pursuant to the Class B and Class C Plan, the Fund pays the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual rate
of 0.75% of the value of the average daily net assets of Class B and Class C
shares, respectively. Pursuant to the Class T Plan, the Fund pays the
Distributor for distributing the Fund's Class T shares at an annual rate of
0.25% of the value of the average daily net assets of Class T shares. The
Distributor may pay one or more Agents in respect of advertising, marketing and
other distribution services for Class T shares, and determines the amounts, if
any, to be paid to Agents and the basis on which such payments are made. The
Company's Board of Directors believes that there is a reasonable likelihood that
the Service Plan, the Class B and Class C Plan and the Class T Plan (each a
"Plan" and collectively, the "Plans") will benefit the Fund and the holders of
Class B, Class C and Class T shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not be
amended to increase materially the cost which holders of Class B, Class C or
Class T shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be approved
by the Board of Directors and by the Directors who are not interested persons of
the Company and have no direct or indirect financial interest in the operation
of the Plan or in any agreements entered into in connection with the Plan, by
vote cast in person at a meeting called for the purpose of considering such
amendments. Each Plan is subject to annual approval by such vote of the
Directors cast in person at a meeting called for the purpose of voting on the
Plan. Each Plan may be terminated at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or in any agreements entered
into in connection with the Plan or by vote of the holders of a majority of
Class B, Class C or Class T shares, as applicable.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan are payable without regard to actual
expenses incurred. The Fund and the Distributor may suspend or reduce payments
under any of the plans at any time, and payments are subject to the continuation
of the Fund's plans and the Agreements described above. From time to time, the
Agents, the Distributor and the Fund may voluntarily agree to reduce the maximum
fees payable under the plans.
For the fiscal year ended October 31, 1999, the Fund paid the Distributor
and Dreyfus Service Corporation $59,714 and $165,952, respectively, pursuant to
the Class A Plan. For the fiscal year ended October 31, 1999, the Fund paid the
Distributor $170,645 and $35,859, 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 $40,682 and $16,200, respectively, pursuant to
the Service Plan with respect to Class B shares and $524 and $11,429,
respectively, pursuant to the Service Plan with respect to Class C shares. For
the period August 16, 1999 (commencement of operations) through October 31,
1999, the Fund paid the Distributor $1 pursuant to the Class T Plan and paid the
Distributor and Dreyfus Service Corporation $1 and $0, 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 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, Teletransfer Privilege or Telephone
Exchange Privilege authorizes the Transfer Agent to act on telephone
instructions (including The Dreyfus Touch(R) automated telephone system) from
any person representing himself or herself to be you, or a representative of
your Agent, and reasonably believed by the Transfer Agent to be genuine. The
Fund will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Fund or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Fund nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used. During the delay,
the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the Fund shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to the
number of Class A, Class B or Class T shares you have redeemed, within 45 days
of redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon reinstatement,
with respect to Class B shares, or Class A or Class T shares if such shares were
subject to a CDSC, your account will be credited with an amount equal to the
CDSC previously paid upon redemption of the shares reinvested. The Reinvestment
Privilege may be exercised only once.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone, or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Ordinarily, the Fund will initiate payment for
shares redeemed pursuant to this Privilege on the next business day after
receipt by the Transfer Agent of the redemption request in proper form.
Redemption proceeds ($1,000 minimum), will be transferred by Federal Reserve
wire only to the commercial bank account specified by the investor on the
Account Application or Shareholder Services Form, or a correspondent bank if the
investor's bank is not a member of the Federal Reserve System. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of only up
to $500,000 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 $500,000 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 is paid to
Dreyfus Service Corporation 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% is paid to
Dreyfus Service Corporation 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. You may purchase, in exchange for shares of the Fund,
shares of the same Class of another fund in the Dreyfus Premier family of Funds,
shares of the same Class of certain funds advised by Founders, or shares of
certain other funds in the Dreyfus Family of Funds, and, with respect to Class T
shares of the Fund, Class A shares of certain Dreyfus Premier fixed-income
funds, to the extent such shares are offered for sale in your state of
residence. Shares of other funds purchased by exchange will be purchased on the
basis of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable to
the Offered Shares exceeds the maximum sales load that could have
been imposed in connection with the Purchased Shares (at the time
the Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for shares
of another fund will be subject to the higher applicable CDSC of the
two funds and, for purposes of calculating CDSC rates and conversion
periods, if any, will be deemed to have been held since the date the
shares being exchanged were initially purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject to
confirmation of an investor's holdings through a check of appropriate records.
You also may exchange your Fund shares that are subject to a CDSC for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can be
made into certain other funds managed or administered by Dreyfus. No CDSC is
charged when an investor exchanges into an Exchange Account; however, the
applicable CDSC will be imposed when shares are redeemed from an Exchange
Account or other applicable Fund account. Upon redemption, the applicable CDSC
will be calculated without regard to the time such shares were held in an
Exchange Account. See "Redemption of Shares." Redemption proceeds for Exchange
Account shares are paid by Federal wire or check only. Exchange Account shares
also are eligible for the Auto-Exchange Privilege, Dividend Sweep and the
Automatic Withdrawal Plan.
To request an exchange, an investor or an investor's Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-554-4611, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-554-4611. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) 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. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, shares of the same Class of another fund in the
Dreyfus Premier Family of Funds, shares of the same Class of certain funds
advised by Founders, or shares of certain other funds in the Dreyfus Family of
Funds, and, with respect to Class T shares of the Fund, Class A shares of
certain Dreyfus Premier fixed-income funds, of which you are a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged automatically
on the first and/or fifteenth day of the month according to the schedule the
investor has selected. This Privilege is available only for existing accounts.
With respect to Class R shares held by a Retirement Plan, exchanges may be made
only between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund. Shares will be exchanged on
the basis of relative NAV as described above under "Fund Exchanges." Enrollment
in or modification or cancellation of this Privilege is effective three business
days following notification by the investor. An investor will be notified if the
investor's account falls below the amount designated to be exchanged under this
Privilege. In this case, an investor's account will fall to zero unless
additional investments are made in excess of the designated amount prior to the
next Auto-Exchange transaction. Shares held under IRAs and other retirement
plans are eligible for this Privilege. Exchanges of IRA shares may be made
between IRA accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier Midcap
Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund may
charge a service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Auto-Exchange
Authorization Form, please call toll free 1-800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as a
sale of the shares given in exchange and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to Dreyfus Premier Midcap Stock Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587 and the notification will be effective three
business days following receipt. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement Plans,
may permit certain participants to establish an automatic withdrawal plan from
such Retirement Plans. Participants should consult their Retirement Plan sponsor
and tax adviser for details. Such a withdrawal plan is different from the
Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares, and Class A or Class T shares to which a CDSC applies,
that are withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC. Purchases of additional Class A or Class T shares where the
sales load is imposed concurrently with withdrawals of Class A or Class T shares
generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Funds, shares of the same Class of certain funds advised by
Founders, or shares of certain other funds in the Dreyfus Family of Funds, and,
with respect to Class T shares of the Fund, in Class A shares of certain Dreyfus
Premier fixed-income funds, of which you are 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 Builder(R), Dreyfus Government Direct Deposit Privilege
or Dreyfus Payroll Savings Plan. Participation in this Program may be terminated
by the shareholder at any time by discontinuing participation in
Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s).The Fund reserves the right to redeem your account if you have
terminated your participation in the Program and your account's NAV is $500 or
less. See "Account Policies-General Policies" in the Fund's Prospectus. The Fund
may modify or terminate this Program at any time. The Dreyfus Step Program is
not available to open new accounts in any Class of the Fund.
Letter of Intent--Class A and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of Eligible
Fund shares purchased in a 13-month period pursuant to the terms and conditions
set forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of shares you
hold (on the date of submission of the Letter of Intent) in any Eligible Fund
that may be used toward "Right of Accumulation" benefits described above may be
used as a credit toward completion of the Letter of Intent. However, the reduced
sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A or Class T shares, as applicable, of the Fund held
in escrow to realize the difference. Signing a Letter of Intent does not bind
you to purchase, or the Fund to sell, the full amount indicated at the sales
load in effect at the time of signing, but you must complete the intended
purchase to obtain the reduced sales load. At the time you purchase Class A or
Class T shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the
then-current NAV plus the applicable sales load in effect at the time such
Letter of Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares. All
fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may not
be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund Exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined NAV but the purchase
order would be effective only at the NAV next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at the
last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV of
the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Board of Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if it believes that the discount no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income and distributes net realized capital gains, if any, once a
year, but it may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent with
the provisions of the 1940 Act. The Fund will not make distributions from net
realized capital gains unless all capital loss carryovers, if any, have been
utilized or have expired. Investors other than qualified retirement plans may
choose whether to receive dividends and other distributions in cash, to receive
dividends in cash and reinvest other distributions in additional Fund shares at
NAV, or to reinvest both dividends and other distributions in additional Fund
shares at NAV; dividends and other distributions paid to qualified retirement
plans are reinvested automatically in additional Fund shares at NAV. All
expenses are accrued daily and deducted before declaration of dividends to
investors. Dividends and other distributions paid by each Class are calculated
at the same time and in the same manner and will be in the same amount, except
that the expenses attributable solely to a particular Class are borne
exclusively by that Class. Class B and Class C shares will receive lower per
share dividends than Class T shares, which will in turn receive lower per share
dividends than Class A shares, which will in turn receive lower per share
dividends than Class R shares, because of the higher expenses borne by the
respective Classes.
It is expected that the Fund will continue qualify for treatment as a
regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such qualification
will relieve the Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, the
Fund -- which is treated as a separate corporation for federal tax purposes --
(1) must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions) (the "Distribution Requirement"), (2) must derive at least 90% of
its annual gross income from specified sources (the "Income Requirement"), and
(3) must meet certain asset diversification and other requirements. The term
"regulated investment company" does not imply the supervision of management or
investment practices or policies by any government agency. If the Fund failed to
qualify for treatment as a RIC for any taxable year, (1) it would be taxed at
corporate rates on the full amount of its taxable income for that year without
being able to deduct the distributions it makes to its shareholders and (2) the
shareholders would treat all those distributions, including distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), as dividends (that is, ordinary income) to the extent of the
Fund's earnings and profits. In addition, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying for RIC treatment.
The Fund will be subject to a non-deductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute substantially all of its taxable investment
income and capital gains.
Distributions. If you elect to receive dividends and other distributions
in cash, and your distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest that
distribution and all future distributions payable to you in additional Fund
shares at NAV. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Dividends derived from net investment income, together with distributions
from net realized short-term capital gains, net realized gains from certain
foreign currencies transactions and all or a portion of any gains realized from
the sale or other disposition of certain market discount bonds (collectively,
"dividend distributions") will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions from net capital gain (the excess of net
long-term capital gain over net short-term capital loss) are taxable to those
shareholders as long-term capital gains regardless of how long the shareholders
have held their Fund shares and whether the distributions are received in cash
or reinvested in additional Fund shares.
Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to distributions paid during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A and Class T shares if a shareholder redeems those shares or
exchanges them for shares of another fund advised or administered by Dreyfus,
within 90 days of purchase, and (1) in the case of a redemption, the shareholder
acquires other fund Class A or Class T shares through exercise of the
Reinvestment Privilege or, (2) in the case of an exchange, the other fund
reduces or eliminates its otherwise applicable sales load. In these cases, the
amount of the sales load charged on the purchase of the original Class A or
Class T shares, up to the amount of the reduction of the sales load pursuant to
the Reinvestment Privilege or on the exchange, as the case may be, is not
included in the tax basis of those shares for purposes of computing gain or loss
and instead is added to the tax basis of the acquired shares.
Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the plans. The Fund will not report to the Internal Revenue
Service ("IRS") distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. The
administrator, trustee or custodian of a qualified retirement plan will be
responsible for reporting distributions from the plan to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the distribution paid directly from the plan to an eligible retirement
plan in a "direct rollover," the distribution is subject to 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if the
shareholder fails to certify furnish a TIN to the Fund and certify that it is
correct. Backup withholding at that rate also is required from dividends and
capital gain distributions payable to such a shareholder if (1) the shareholder
fails to certify that he or she has not received notice from the IRS of being
subject to backup withholding as a result of a failure properly to report
taxable dividend or interest income on a federal income tax return or (2) the
IRS notifies the Fund to institute backup withholding because the IRS determines
that the shareholder's TIN is incorrect or that the shareholder has failed
properly to report such income. A TIN is either the Social Security number, IRS
individual taxpayer identification number or employer identification number of
the record owner of an account. Any tax withheld as a result of backup
withholding does not constitute an additional tax imposed on the record owner
and may be claimed as a credit on his or her federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other 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
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.
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. Generally, a credit for foreign
taxes may not exceed the portion of the shareholder's federal income tax
attributable to his total foreign source taxable income; however, pursuant to
the Taxpayer Relief Act of 1997 (the "Tax Act"), individuals who have no more
than $300 ($600 for married persons filing jointly) of creditable foreign taxes
included on Forms 1099 and all of whose foreign source income is "qualified
passive income" may elect each year to be exempt from the extremely complicated
foreign tax credit limitation and will be able to claim a foreign tax credit
without having to file the detailed Form 1116 that otherwise is required. The
Fund will report to its shareholders shortly after each taxable year their
respective shares of its income from sources within foreign countries and U.S.
possessions and foreign taxes it paid if it makes the Election.
Passive Foreign Investment Companies. The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a foreign
corporation in which, on any day during its taxable year, more than 50% of the
total voting power of all voting stock therein or the total value of all stock
therein is owned, directly, indirectly, or constructively, by "U.S.
shareholders," defined as U.S. persons that individually own, directly,
indirectly, or constructively, at least 10% of that voting power) as to which
the Fund is a U.S. shareholder -- that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a dividend to its shareholders. The balance of the PFIC income will be included
in the Fund's investment company taxable income and, accordingly, will not be
taxable to it to the extent that it distributes income to its shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain -- which
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not distributed to the Fund by the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
The Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock over
the Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included by the Fund for
prior taxable years. The Fund's adjusted basis in each PFIC's stock with respect
to which it makes this election would be adjusted to reflect the amounts of
income included and deductions taken under the election (and under regulations
proposed in 1992 that provided a similar election with respect to the stock of
certain PFICs).
Foreign Currency and Hedging Transactions. Gains from the sale or other
disposition of foreign currencies (except certain gains therefrom that may be
excluded by future regulations), and gains from options, futures and forward
contracts derived by the Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under the
Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, a portion of the gains and losses
from the disposition of foreign currencies and certain
foreign-currency-denominated instruments (including debt instruments and
financial forward and futures contracts and options) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion of
any gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as capital
gain may be treated as ordinary income. "Conversion transactions" are defined to
include certain option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund on
the exercise or lapse of, or closing transactions respecting, certain options,
futures and forward contracts ("Section 1256 Contracts") will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. In
addition, any Section 1256 Contracts remaining unexercised at the end of the
Fund's taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss to
the Fund characterized in the same manner.
Offsetting positions held by the Fund involving certain options, futures
or forward contracts may constitute "straddles", which are defined to include
"offsetting positions" in actively traded personal property. Under Section 1092
of the Code, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on the
offsetting position(s) of the straddle. In addition, these rules may postpone
the recognition of loss that otherwise would be recognized under the
mark-to-market rules discussed above. The regulations under Section 1092 also
provide certain " "wash sale" rules, which apply to transactions where a
position is sold at a loss and a new offsetting position is acquired within a
prescribed period, and "short sale" rules applicable to straddles. If the Fund
makes certain elections (including an election as to straddles that include a
position in one or more Section 1256 Contracts (so-called "mixed straddles"),
the amount, character, and timing of recognition of gains and losses from the
affected straddle positions would be determined under rules that vary according
to the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward contract,
or short sale) with respect to any stock, debt instrument (other than "straight
debt"), or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the same or
substantially similar property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract, or futures or forward contract entered into by the Fund or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale. The foregoing will not apply,
however, to any transaction during any taxable year that otherwise would be
treated as a constructive sale if the transaction is closed within 30 days after
the end of that year and the Fund holds the appreciated financial position
unhedged for 60 days after that closing (i.e., at no time during that 60-day
period is the Fund's risk of loss regarding that position reduced by reason of
certain specified transactions with respect to substantially similar or related
property, such as having an option to sell, being contractually obligated to
sell, making a short sale, or granting an option to buy substantially identical
stock or securities).
Investment by the Fund in securities issued or acquired at a discount (for
example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
would be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and would need to
distribute that income to satisfy the Distribution Requirement and avoid the
Excise Tax. In that case, the Fund may have to dispose of securities it might
otherwise have continued to hold in order to generate cash to satisfy these
requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all distributions
to that shareholder and any gains realized by that shareholder on the
disposition of the Fund shares will be subject to U.S. federal income tax at the
graduated rates applicable to U.S. citizens and domestic corporations, as the
case may be. Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares of
the Fund, that they own at the time of their death. Certain credits against that
tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the Fund are generally traded on
a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commission in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions on
behalf of the Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.
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, 1999, 1998 and 1997, the Fund paid
brokerage commissions amounting to $353,717, $174,939 and $63,701, respectively.
The aggregate amount of transactions during the fiscal year ended October
31, 1999 in securities effected on an agency basis through a broker dealer for
research services was $20,147,190, and the commissions and concessions related
to such transactions was $35,156.
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.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for Class A,
Class B, Class C and Class R shares of the Fund for the periods noted were:
Average Annual Total Return
for the Periods Ended October 31, 1999
1 Year 5 Years Since Inception
------ ------- ---------------
Class A shares 10.46% 18.45% 15.97% (4/6/94)
Class B shares 12.32% - 4.58% (1/16/98)
Class C shares 15.30% - 6.80% (1/16/98)
Class R shares 17.44% 20.15% 16.27% (11/12/93)
Inception date appears in parentheses following the average annual total return
since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase,
although no sales load was applicable to Class A shares or its predecessor class
until January 16, 1998, and the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price in
the case of Class A and Class T) per share with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result. The average annual total return figures for a
Class calculated in accordance with such formula assume that, in the case of
Class A or Class T, the maximum sales load has been deducted from the
hypothetical initial investment at the time of purchase or, in the case of Class
B or Class C, the maximum applicable CDSC has been paid upon redemption at the
end of the period.
The Fund's total return for Class R shares (formerly called Restricted
Shares) for the period from November 12, 1993 (the Fund's inception date) to
October 31, 1999 was 145.94%. 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, 1999 was 128.30% (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 142.22% for
this period. The Fund's total return for Class B and Class C shares for the
period from January 16, 1998 (inception date of Class B and Class C shares) to
October 31, 1999 was 8.35% and 12.49%, respectively (assuming deduction of the
maximum CDSC to each hypothetical investment). Without giving effect to the
applicable CDSC, the total return for Class B and Class C shares was 12.35% and
12.49%, respectively, for the same period. The Fund's aggregate total return for
Class T shares for the period from August 16, 1999 (inception date of Class T
shares) to October 31, 1999 was (5.39)% (assuming deduction of the maximum sales
load from the hypothetical initial investment at the time of purchase). Without
giving effect to the applicable front-end sales load the aggregate total return
for Class T was (0.95)% for the same period. Total return is calculated by
subtracting the amount of the Fund's NAV (maximum offering price in the case of
Class A and Class T) per share at the beginning of a stated period from the NAV
per share at the end of the period (after giving effect to the reinvestment of
dividends and other distributions during the period and any applicable CDSC),
and dividing the result by the NAV (maximum offering price in the case of Class
A and Class T) per share at the beginning of the period. Total return also may
be calculated based on the NAV per share at the beginning of the period instead
of the maximum offering price per share at the beginning of the period for Class
A or Class T shares or without giving effect to any applicable CDSC at the end
of the period for Class B or Class C shares. In such cases, the calculation
would not reflect the deduction of the sales load with respect to Class A or
Class T shares or any applicable CDSC with respect to Class B or C shares,
which, if reflected would reduce the performance quoted.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the S&P
500, the Standard & Poor, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities markets
in general; (ii) other groups of mutual funds tracked by Lipper Analytical
Services, Inc., a widely used independent research firm which ranks mutual funds
by overall performance, investment objectives and assets, or tracked by other
services, companies, publications, or persons who rank mutual funds on overall
performance or other criteria; (iii) the Consumer Price Index (a measure of
inflation) to assess the real rate of return from an investment in the Fund or
the Fund's performance against inflation to the performance of other instruments
against inflation; and (iv) products managed by a universe of money managers
with similar country allocation and performance objectives. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deductions
or administrative and management costs and expenses. From time to time,
advertising materials for the Fund may refer to Morningstar ratings and related
analyses supporting the rating.
From time to time, advertising material for the Fund may include: (i)
biographical information relating to its portfolio manager and may refer to, or
include commentary by the Fund's portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors (ii)
information concerning retirement and investing for retirement, including
statistical data or general discussions about the growth and development of
Dreyfus Retirement Services (in terms of new customers, assets under management,
market share, etc.) and its presence in the defined contribution plan market;
(iii) the approximate number of then current Fund shareholders; (iv) references
to the Fund's quantitative, disciplined approach to stock market investing and
the number of stocks analyzed by Dreyfus; and (v) Lipper or Morningstar ratings
and related analysis supporting the ratings. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. The Fund is
one of nineteen portfolios of the Company. Fund shares have equal rights 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, or, where matters affect different classes of a portfolio
differently, by class.
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.
COUNSEL AND INDEPENDENT AUDITORS
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, 2000, 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.
<PAGE>
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH
AND DUFF & PHELPS RATINGS
STANDARD & POOR'S
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard & Poor's. 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 Standard & Poor's 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
A Standard & Poor's 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 Standard & Poor's 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
characteristics 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:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and High internal cash generation.
o 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
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'.
<PAGE>
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
A 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 not
B be met when due. Financial protection factors will fluctuate widely
B- 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 SMALL CAP VALUE FUND
CLASS A, CLASS B, CLASS C, CLASS R AND CLASS T SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
- ------------------------------------------------------------------------------
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, 2000, as it
may be revised from time to time. The Fund is a separate, diversified portfolio
of The Dreyfus/Laurel Funds, Inc. (the "Company"), an open-end management
investment company, known as a mutual fund that is registered with the
Securities and Exchange Commission ("SEC"). 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
The financial statements for the fiscal period ended October 31, 1999,
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.
TABLE OF CONTENTS
Page
Description of The Fund/Company............................................B-2
Management of The Fund....................................................B-17
Management Arrangements...................................................B-22
Purchase of Shares........................................................B-25
Distribution and Service Plans............................................B-33
Redemption of Shares......................................................B-36
Shareholder Services......................................................B-40
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
Counsel and Independent Auditors..........................................B-58
Appendix..................................................................B-60
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. The
Company is an open-end management investment company comprised of separate
portfolios, including the Fund, each of which is treated as a separate fund. The
Fund is diversified, which means that, with respect to 75% of its total assets,
the Fund will not invest more than 5% of its assets in the securities of any
single issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
The Fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Russell 2000(R) Value Index. The
Russell 2000(R) Value Index is an unmanaged index of those companies in the
Russell 2000(R) Index with lower price-to-book ratios and lower forecasted
growth values. The Russell 2000(R) Index measures the performance of the 2,000
smallest companies in the Russell 3000(R) 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. ("Fitch") or Duff-1 by Duff & Phelps Credit Rating Co. ("Duff &
Phelps").
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.
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.
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 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.
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.
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.
Nonfundamental. 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
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
The Company has a Board composed of eight 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 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 and Century Business Services,
Inc., (formerly International Alliance Services, Inc.), a provider of
various outsourcing functions for small and medium sized companies. For
more than five years prior to January 1995, he was President, director and,
until August 1994, Chief Operating Officer of Dreyfus and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly owned
subsidiary of Dreyfus and until August 24, 1994, the Fund's distributor.
From August 1994 until December 31, 1994, he was a director of Mellon
Financial Corporation. Age: 56 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; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw &
McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board and
Director, Rexene Corporation. Age: 78 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, each an affiliate of Dreyfus. Age: 53 years
old. Address: 625 Madison Avenue, New York, New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and CEO,
LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years old.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures, Inc.;
Director, American Express Centurion Bank; Director, Ontario Hydro Services
Company; Director, the Hyams Foundation, Inc. Age: 50 years old. Address:
25 Braddock Park, Boston, Massachusetts 02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation of
African Americans in positions of leadership, influence and decision-making
in Boston, MA; Trustee, Boston College; Trustee, WGBH Educational
Foundation; Trustee, Children's Hospital; Director, The Greater Boston
Chamber of Commerce; Director, The First Albany Companies, Inc.; from April
1995 to March 1998, Director, TBC. Age: 53 years old. Address: 334 Boylston
Street, Suite 400, Boston, Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 40 years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant Secretary of
the Company. Vice President of New Business Development of Funds
Distributor, Inc. Age: 38 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, he was Assistant Counsel at Forum
Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc. From
July 1994 to November 1995, she was a Fund Accountant for Investors Bank &
Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company. Vice
President of the Distributor and Funds Distributor, Inc. Age: 35 years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company. Executive
Vice President and Client Service Director of Funds Distributor, Inc. From
June 1995 to March 1998, he was Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he was
Director of Business Development for First Data Corporation. Age: 45 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. Age: 37 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company. Assistant
Vice President of Funds Distributor, Inc. From March 1990 to May 1996, she
was employed by U.S. Trust Company of New York, where she held various
sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company. Vice
President and Senior Counsel of Funds Distributor, Inc. since February
1997. From June 1994 to January 1996, she was Manager of SEC Registration
at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all other funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parentheses next to each Board
member's total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $ 80,989 (28)
Kenneth A. Himmel $16,666 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $20,000 $ 80,989 (28)
Benaree Pratt Wiley $20,000 $ 80,989 (28)
- ----------------------------
# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October
31, 1999, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Company was $20,000. For the
year ended December 31, 1999, 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 $80,989. In addition, Dreyfus
reimbursed Mr. Fort a total of $2,799.33 for expenses attributable to the
Company's Board meetings which is not included in the $5,639.39 amount in
note # above.
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, 2000.
Principal Shareholders. As of February 1, 2000, 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, 63.65%.
As of February 1, 2000, 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, 49.54% and MBCIC, c/o Mellon Bank, 919 N. Market Street, Wilmington,
DE 19801-3023, 28.23%.
As of February 1, 2000, 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, 63.63%; MLPF & S For The Sole
Benefit Of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL
32246-6484, 16.76%; Prudential Securities Inc., FBO Dr. James Walraven, 14704
Collingwood Lane, Edmond, OK 73013-1552, 9.66%; and PaineWebber For the Benefit
Of Lena Gilbert and Sandra J. Symson Co-Trustees FBO, Trust UA DTD 4/20/91, 4621
White Oak Avenue, Encino, CA 91316-3832, 6.99%.
As of February 1, 2000, 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, 84.12%; and Dreyfus Investment
Services Corporation, FBO 479225701, 2 Mellon Bank Center, Room 177, Pittsburgh,
PA 15259, 10.99%.
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 Financial 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 (the
"Management Agreement") 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 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; Ronald P. O'Hanley III, Vice Chairman; J. David Officer,
Vice Chairman and a director; William T. Sandalls, Jr., Executive Vice
President; Stephen R. Byers, Senior Vice President; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Diane P. Durnin, Vice
President-Product Development; Patrice M. Kozlowski, Vice President-Corporate
Communications; Mary Beth Leibig, Vice President-Human Resources; Ray Van Cott,
Vice President-Information Systems; Theodore A. Schachar, Vice President-Tax;
Wendy Strutt, Vice President; Richard Terres, Vice President; William H.
Maresca, Controller; James Bitetto, Assistant Secretary; Steven F. Newman,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G.
Elliott, Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.25% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.
For the fiscal year ended October 31, 1999, the Fund paid Dreyfus $68,883
and 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 fiscal year ended October 31, 1999, the Distributor retained
$677.93 from the sales loads on the Fund's Class A shares. For the fiscal year
ended October 31, 1999, the Distributor retained $802 from the contingent
deferred sales charge ("CDSC") on Class B shares for the Fund. For the same
period, the Distributor retained $205 from the CDSC on Class C shares for the
Fund. 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 from the CDSC on Class B shares for the
Fund. For the same period, the Distributor retained $20 from the CDSC on Class C
shares for the Fund.
Transfer and Dividend Disbursing Agent and Custodian. 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.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most beneficial to
you depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee, service fee and CDSC, if any, on Class B or
Class C shares would be less than the accumulated distribution fee and initial
sales charge on Class A shares or the accumulated distribution fee, service fee
and initial sales charge on Class T shares, purchased at the same time, and to
what extent, if any, such differential would be offset by the return on Class A
shares and Class T shares, respectively. You may also want to consider whether,
during the anticipated life of your investment in the Fund, the accumulated
distribution fee, service fee, and initial sales charge on Class T shares would
be less than the accumulated distribution fee and higher initial sales charge on
Class A shares purchased at the same time, and to what extent, if any, such
differential could be offset by the return of Class A. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution and service fees on Class
B or Class C shares and the accumulated distribution fee, service fee and
initial sales charge on Class T shares may exceed the accumulated distribution
fee and initial sales charge on Class A shares during the life of the
investment. Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class B
shares, Class C shares do not have a conversion feature and, therefore, are
subject to ongoing distribution and service fees. Thus, Class B shares may be
more attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares may be more appropriate for investors who
invest $1,000,000 or more in Fund shares, and Class A and Class T shares will
not be appropriate for investors who invest less than $50,000 in Fund shares.
The Fund reserves the right to reject any purchase order.
Class A, Class B, Class C and Class T shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. Subsequent purchases may be sent directly to the
Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments 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 except the no minimum on Education IRAs does not apply
until after the first year. The initial investment must be accompanied by the
Fund's Account Application. The Fund reserves the right to offer Fund shares
without regard to minimum purchase requirements to employees participating in
certain qualified or non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner and
form acceptable to the Fund. The Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.
Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For 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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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
of Offering Price as a % of Offering
Amount of Transaction 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-
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. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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, the Dreyfus Family of Funds, certain funds advised by Founders Asset
Management LLC ("Founders"), an affiliate of Dreyfus, 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, certain funds in
the Dreyfus Family of Funds, certain funds advised by Founders, 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, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
Class T Shares. The public offering price for Class T shares is the NAV
per share of that Class plus a sales load as shown below:
Total Sales Load as a Dealers' Reallowance
% of Offering Price as a % of Offering
Amount of Transaction Per Share 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. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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.
Class T shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class T 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, at the time of such
distribution, such qualified retirement plan or Dreyfus-sponsored 403(b)(7) plan
(a) met the requirements of an Eligible Benefit Plan and all or a portion of
such plan's assets were invested in funds in the Dreyfus Premier Family of
Funds, the Dreyfus Family of Funds, certain funds advised by Founders or certain
other products made available by the Distributor to such plans, or (b) invested
all of its assets in funds in the Dreyfus Premier Family of Funds, certain funds
in the Dreyfus Family of Funds, certain funds advised by Founders or certain
other products made available by the Distributor to such plans.
Class T 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 T 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.
Dealer Reallowance -- Class A and Class T Shares. The dealer reallowance
provided with respect to Class A and Class T shares may be changed from time to
time but will remain the same for all dealers. The Distributor, at its own
expense, may provide additional promotional incentives to dealers that sell
shares of funds advised by Dreyfus which are sold with a sales load, such as
Class A and Class T shares. In some instances, these incentives may be offered
only to certain dealers who have sold or may sell significant amounts of such
shares.
Sales Loads -- Class A and Class T Shares. The scale of sales loads
applies to purchases of Class A and Class T shares made by any "purchaser,"
which term includes an individual and/or spouse purchasing securities for his,
her or their own account or for the account of any minor children, or a trustee
or other fiduciary purchasing securities for a single trust estate or a single
fiduciary account (including a pension, profit-sharing or other employee benefit
trust created pursuant to a plan qualified under Section 401 of the Code
although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k) and 457 of the Code);
or an organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class A
shares of the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Fund's Prospectus at a price based upon the NAV
of a Class A share at the close of business on October 31, 1999:
NAV per share $10.63
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ .65
Per Share Offering Price to Public $11.28
Set forth below is an example of the method of computing the offering
price of the Fund's Class T shares. The example assumes a purchase of Class T
shares of the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Fund's Prospectus at a price based upon the
initial offering price of $12.50:
NAV per share $12.50
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .59
Per Share Offering Price to Public $13.09
Right of Accumulation--Class A and Class T Shares. Reduced sales loads
apply to any purchase of Class A and Class T shares, shares of other funds in
the Dreyfus Premier Family of Funds, shares of certain other funds advised by
Dreyfus or Founders which are sold with a sales load and shares acquired by a
previous exchange of such shares (hereinafter referred to as "Eligible Funds"),
by you and any related "purchaser" as defined above, where the aggregate
investment, including such purchase, is $50,000 or more. If, for example, you
previously purchased and still hold Class A or Class T shares of the Fund, or
shares of any other Eligible Fund or combination thereof, with an aggregate
current market value of $40,000 and subsequently purchase Class A or Class T
shares of the Fund or shares of an Eligible Fund having a current value of
$20,000, the sales load applicable to the subsequent purchase would be reduced
to 4.50% of the offering price in the case of Class A shares or 4.00% of the
offering price in the case of Class T shares. All present holdings of Eligible
Funds may be combined to determine the current offering price of the aggregate
investment in ascertaining the sales load applicable to each subsequent
purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the Transfer
Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
Class B Shares. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in the Fund's Prospectus.
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 B and C Shares. Pursuant to an agreement with the Distributor,
Dreyfus Service Corporation compensates certain Agents for selling Class B and
Class C shares at the time of purchase from its own assets. The proceeds of the
CDSC and the distribution fee, in part, are used to defray these expenses.
Class R Shares. The public offering price for Class R shares is the NAV per
share of that Class.
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 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, 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
Company's Board of Directors believes that there is a reasonable likelihood that
the Class A Plan will benefit the Fund and the holders of Class A shares.
The Class A Plan provides that a report of the amounts expended under the
Class A Plan, and the purposes for which such expenditures were incurred, must
be made to the Company's Directors for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which the Fund may bear for distribution pursuant to the
Class A Plan without the approval of the holders of Class A shares, and that
other material amendments of the Class A Plan must be approved by the vote of a
majority of the Directors and of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Company or the Distributor and who do not
have any direct or indirect financial interest in the operation of the Class A
Plan, cast in person at a meeting called for the purpose of considering such
amendments. The Class A Plan is subject to annual approval by the entire Board
of Directors and by the Directors who are neither interested persons nor have
any direct or indirect financial interest in the operation of the Class A Plan,
by vote cast in person at a meeting called for the purpose of voting on the
Class A Plan. The Class A Plan is terminable, as to the Fund's Class A shares,
at any time by vote of a majority of the Directors who are not interested
persons and have no direct or indirect financial interest in the operation of
the Class A Plan or by vote of the holders of a majority of the outstanding
shares of such class of the Fund.
Distribution and Service Plans -- Class B, Class C and Class T Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B, Class C and Class T shares, pursuant to which the Fund pays
the Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B, Class C and Class
T shares for the provision of certain services to the holders of Class B, Class
C and Class T shares, respectively. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Fund and providing reports and other information, and
providing services related to the maintenance of such shareholder accounts. With
regard to such services, each Agent is required to disclose to its clients any
compensation payable to it by the Fund and any other compensation payable by its
clients in connection with the investment of their assets in Class B, Class C
and Class T shares. The Distributor may pay one or more Agents in respect of
services for these Classes of shares. The Distributor determines the amounts, if
any, to be paid to Agents under the Service Plan and the basis on which such
payments are made. The Company's Board of Directors has also adopted a
Distribution Plan pursuant to the Rule with respect to Class B and Class C
shares (the "Class B and Class C Plan") and a separate Distribution Plan
pursuant to the Rule with respect to Class T shares (the "Class T Plan").
Pursuant to the Class B and Class C Plan, the Fund pays the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual rate
of 0.75% of the value of the average daily net assets of Class B and Class C
shares, respectively. Pursuant to the Class T Plan, the Fund pays the
Distributor for distributing the Fund's Class T shares at an annual rate of
0.25% of the value of the average daily net assets of Class T shares. The
Distributor may pay one or more Agents in respect of advertising, marketing and
other distribution services for Class T shares, and determines the amounts, if
any, to be paid to Agents and the basis on which such payments are made. The
Company's Board of Directors believes that there is a reasonable likelihood that
the Service Plan, the Class B and Class C Plan and the Class T Plan (each a
"Plan" and collectively, the "Plans") will benefit the Fund and the holders of
Class B, Class C and Class T shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not be
amended to increase materially the cost which holders of Class B, Class C or
Class T shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be approved
by the 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 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 may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with the
Plan or by vote of the holders of a majority of Class B, Class C or Class T
shares, as applicable.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan are payable without regard to actual
expenses incurred. The Fund and the Distributor may suspend or reduce payments
under any of the plans at any time, and payments are subject to the continuation
of the Fund's plans and the Agreements described above. From time to time, the
Agents, the Distributor and the Fund may voluntarily agree to reduce the maximum
fees payable under the Plans.
For the fiscal year ended October 31, 1999, the Fund paid the Distributor
and Dreyfus Service Corporation $879 and $7,823, respectively, pursuant to the
Class A Plan with respect to Class A shares. For the fiscal year ended October
31, 1999, the Fund paid the Distributor $6,783 and $4,629 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 $934 and $1,327,
respectively, pursuant to the Service Plan with respect to Class B shares and
paid the Distributor and Dreyfus Service Corporation $496 and $1,047,
respectively, pursuant to the Service Plan with respect to Class C shares. The
Class T Plan and the Service Plan with respect to Class T shares were not in
effect during the fiscal year ended October 31, 1999, and accordingly, no fees
were paid pursuant to those plans with respect to Class T shares during that
period.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies," "Services
For Fund Investors," "Instructions for Regular Accounts" and "Instructions for
IRAs."
General. If you hold Fund shares of more than one Class, any request for
redemption must specify the Class of shares being redeemed. If you fail to
specify the Class of shares to be redeemed or if you own fewer shares of the
Class than specified to be redeemed, the redemption request may be delayed until
the Transfer Agent receives further instructions from you or your Agent.
The Fund imposes no charges (other than any applicable CDSC) when shares
are redeemed. Agents may charge their clients a fee for effecting redemptions of
Fund shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may be
more or less than their original cost, depending upon the Fund's then-current
NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent. 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 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 Touch(R) automated telephone system) from any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used. During the delay,
the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the Fund shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to the
number of Class A, Class B or Class T shares you have redeemed, within 45 days
of redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon reinstatement,
with respect to Class B shares, or Class A or Class T shares if such shares were
subject to a CDSC, your account will be credited with an amount equal to the
CDSC previously paid upon redemption of the shares reinvested. The Reinvestment
Privilege may be exercised only once.
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds will
be on deposit in your account at an ACH member bank ordinarily two days after
receipt of the redemption request. Holders of jointly registered Fund or bank
accounts may redeem through the TeleTransfer Privilege for transfer to their
bank account only up to $500,000 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 is paid to
Dreyfus Service Corporation 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% is paid to
Dreyfus Service Corporation 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. You may purchase, in exchange for shares of the Fund,
shares of the same Class of another fund in the Dreyfus Premier Family of Funds,
shares of the same Class of certain funds advised by Founders, or shares of
certain other funds in the Dreyfus Family of Funds, and, with respect to Class T
shares of the Fund, Class A shares of certain Dreyfus Premier fixed-income
funds, to the extent such shares are offered for sale in your state of
residence. 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 wil 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 Touch(R) 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. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, shares of the same Class of another fund in the
Dreyfus Premier Family of Funds, shares of the same Class of certain funds
advised by Founders, or shares of certain other funds in the Dreyfus Family of
Funds, and, with respect to Class T shares of the Fund, Class A shares of
certain Dreyfus Premier fixed-income funds, of which you are 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 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 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 or Class T shares to which a CDSC applies,
that are withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC. Purchases of additional Class A or Class T shares where the
sales load is imposed concurrently with withdrawals of Class A or Class T shares
generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Funds, shares of the same Class of certain funds advised by
Founders, or shares of certain other funds in the Dreyfus Family of Funds, and,
with respect to Class T shares of the Fund, in Class A shares of certain Dreyfus
Premier fixed-income funds, of which you are 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 and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of Eligible
Fund shares purchased in a 13-month period pursuant to the terms and conditions
set forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of shares you
hold (on the date of submission of the Letter of Intent) in any Eligible Fund
that may be used toward "Right of Accumulation" benefits described above may be
used as a credit toward completion of the Letter of Intent. However, the reduced
sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A or Class T shares, as applicable, of the Fund held
in escrow to realize the difference. Signing a Letter of Intent does not bind
you to purchase, or the Fund to sell, the full amount indicated at the sales
load in effect at the time of signing, but you must complete the intended
purchase to obtain the reduced sales load. At the time you purchase Class A or
Class T shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the
then-current NAV plus the applicable sales load in effect at the time such
Letter of Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares. All
fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may not
be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund Exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined NAV but the purchase
order would be effective only at the NAV next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at the
last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV of
the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Board of Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if it believes that the discount no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is currently
scheduled to be closed are: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income, 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.
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 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 position, 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 identical property. In addition, if the appreciated financial
position is itself a short sale or such a contract, acquisition of the
underlying property or substantially identical 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 identical 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.
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, 1999 and for the period April 1,
1998 (commencement of operations) through October 31, 1998, the Fund paid
brokerage commissions amounting to $8,890 and $6,503, respectively.
The aggregate amount of transactions during the fiscal year ended October
31, 1999 in securities effected on an agency basis through a broker dealer for
research was $94,266, and the commissions and concessions related to such
transactions was $312.
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.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
Average annual total returns (expressed as a percentage) for Class A,
Class B, Class C and Class R shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1999
1 Year Since Inception
------ ---------------
Class A shares (3.87)% (12.82)% (4/1/98)
Class B shares (2.75)% (12.45)% (4/1/98)
Class C shares 0.34% (10.12)% (4/1/98)
Class R shares 2.26% ( 9.28)% (4/1/98)
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 or Class T, the maximum sales load has been deducted from the
hypothetical initial investment at the time of purchase or, in the case of Class
B or Class C, the maximum applicable CDSC has been paid upon redemption at the
end of the period.
The Fund's total return (expressed as a percentage) for Class A shares for
the period April 1, 1998 (inception date) to October 31, 1999 was (19.60)%
(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 shares was (14.72)% for this period. The Fund's total return for
Class B and Class C shares for the period April 1, 1998 (inception date) to
October 31, 1999 was (19.05)% and (15.60)%, respectively (assuming deduction of
the maximum CDSC to each hypothetical investment). Without giving effect to the
applicable CDSC, the total return for this period for Class B and Class C shares
was (15.68)% and (15.60)%, respectively. The Fund's total return for Class R
shares for the period April 1, 1998 (inception date) to October 31, 1999 was
(14.34)%. Total return is calculated by subtracting the amount of the Fund's NAV
maximum offering price in the case of Class A and Class T) per share at the
beginning of a stated period from the NAV per share at the end of the period
(after giving effect to the reinvestment of dividends and other distributions
during the period and any applicable CDSC), and dividing the result by the NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of the period. Total return also may be calculated based on the NAV
per share at the beginning of the period instead of the maximum offering price
per share at the beginning of the period for Class A and Class T shares or
without giving effect to any applicable CDSC at the end of the period for Class
B or Class C shares. In such cases, the calculation would not reflect the
deduction of the sales load with respect to Class A or Class T shares or any
applicable CDSC with respect to Class B or C shares, which, if reflected would
reduce the performance quoted.
No performance information is provided for Class T shares since they were
not offered as of October 31, 1999.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Russell 2000(R) Value Index, the Russell 2000(R) Growth Index, or the Russell
2000(R) Index; (ii) the Standard & Poor's 500 Composite Stock Price Index, the
Dow Jones Industrial Average, or other appropriate unmanaged domestic or foreign
indices of performance of various types of investments so that investors may
compare the Fund's results with those of indices widely regarded by investors as
representative of the securities markets in general; (iii) other groups of
mutual funds tracked by Lipper Analytical Services, 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.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. The Fund is
one of nineteen portfolios of the Company. Fund shares have equal rights 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 or, where matters affect different classes of a portfolio
differently, by class.
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.
COUNSEL AND INDEPENDENT AUDITORS
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, 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,
2000, 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.
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH
AND DUFF & PHELPS RATINGS
Standard & Poor's
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard & Poor's. 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
Standard & Poor's 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
A Standard & Poor's 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 Standard & Poor's 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 characteristics 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:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o 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
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
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
AA but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk factors
A more are variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- 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 not
B be met when due. Financial protection factors will fluctuate widely
B- 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 SMALL COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C, CLASS R AND CLASS T SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 2000
- ------------------------------------------------------------------------------
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, 2000, as
it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc. (the "Company"), an open-end
management investment company, known as a mutual fund, that is registered with
the Securities and Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. Copies of the Annual Report accompany this Statement of Additional
Information. The financial statements included in the Annual Report, and the
Independent Auditors' Report thereon contained therein, and related notes, are
incorporated herein by reference.
TABLE OF CONTENTS
Page
Description of the Fund/Company............................................B-2
Management of the Fund....................................................B-19
Management Arrangements...................................................B-24
Purchase of Shares........................................................B-27
Distribution and Service Plans............................................B-35
Redemption of Shares......................................................B-38
Shareholder Services......................................................B-42
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-55
Performance Information...................................................B-57
Information About the Fund/Company........................................B-59
Counsel and Independent Auditors..........................................B-60
Appendix..................................................................B-61
<PAGE>
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. 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. 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(TM)
Stock Index. The Russell 2500(TM) Stock Index, published by Frank Russell
Company, is comprised of the bottom 500 companies in the Russell 1000(TM) Index
as ranked by total market capitalization, and all 2,000 stocks in the Russell
2000(TM) Index. The Russell 2000(TM) Index consists of the smallest 2,000
companies in the Russell Index 3000(TM), representing approximately 10% of the
Russell 3000(TM) Index total market capitalization. The Russell 3000(TM) Index
is composed of 3,000 large U.S. companies, as determined by market
capitalization. The Russell 1000(TM) Index consists of the 1,000 largest
companies in the Russell 3000(TM) 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. ("Fitch") or Duff-1 by Duff & Phelps Credit Rating Co. ("Duff &
Phelps").
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.
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.
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 .l,oaned 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 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.
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.
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.
Nonfundamental. 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
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
The Company has a Board composed of eight 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
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 and
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus and, until August 24, 1994, the Fund's Distributor. From
August 1994 until December 31, 1994, he was a director of Mellon
Financial Corporation. Age: 56 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; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 78 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, each an affiliate
of Dreyfus. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company; Chairman of the Board and
CEO, LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Ontario
Hydro Services Company; Director, the Hyams Foundation, Inc. Age: 50
years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor Inc. Age: 38 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, he was Assistant
Counsel at Forum Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 45 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. Age: 37
years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor, Inc. since
February 1997. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parenthesis next to each Board
member's total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,117 (189)
James M. Fitzgibbons $20,000 $74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $80,989 (28)
Kenneth A. Himmel $16,666 $62,489 (28)
Stephen J. Lockwood $18,333 $68,989 (28)
Roslyn M. Watson $20,000 $80,989 (28)
Benaree Pratt Wiley $20,000 $80,989 (28)
- ----------------------------
# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Company and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal
year ended October 31, 1999, the aggregate amount of fees received by
J. Tomlinson Fort from Dreyfus for serving as a Board member of the
Company was $20,000. For the year ended December 31, 1999, 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 $80,989. In addition, Dreyfus
reimbursed Mr. Fort a total of $2,799.33 for expenses attributable to
the Company's Board meetings which is not included in the $5,639.39
amount in note # above.
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, 2000.
Principal Shareholders. As of February 1, 2000, the following
shareholder(s) owned beneficially or of record 5% or more of Class A shares of
the Fund: Nationwide Advisory Services, Inc. c/o Portfolio Select-Omnibus, 3
Nationwide PLZ #32601, Columbus, Ohio 43215-2410; 5.6828% and MLPF&S For The
Sole Benefit of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL
32246-6484; 5.3317%.
As of February 1, 2000, 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;
9.7971%.
As of February 1, 2000, 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;
38.5506% and Pacific Aviation Logistics Inc., 774 Mayo Blvd #10, Incline
Village, NV 89451-9613; 5.2615%.
As of February 1, 2000, the following shareholder(s) owned beneficially or
of record 5% or more of Class R shares of the Fund: MAC & Co., Mutual Fund
Operations, P.O. Box 3198, Pittsburgh, PA 15230-3198; 9.2145%.
As of February 1, 2000, the following shareholder(s) owned beneficially or
of record 5% or more of Class T shares of the Fund: Premier Mutual Fund
Services, Inc., 60 State Street, Suite 1300, Boston, MA 02109-1800; 100%.
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 Financial 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 (the
"Management Agreement"), 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" (as defined in the
1940 Act) 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 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; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Diane P. Durnin, Vice President-Product Development; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Ray Van Cott, Vice-President-Information Systems;
Theodore A. Schachar, Vice President-Tax; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James
Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott, Martin C. McGuinn,
Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.25% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
Directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.
For the last three years, the Fund had the following expenses:
For the Fiscal Year Ended October 31,
1999 1998 1997
---- ---- ----
Management fees $4,147,934 $3,780,009 $2,337,782
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, 1999, the Distributor retained
$10,301.94 from the sales loads on the Fund's Class A shares. For the fiscal
year ended October 31, 1999, the Distributor retained $150,623 from the
contingent deferred sales charge ("CDSC") on Class B shares of the Fund. For the
same period, the Distributor retained $5,630 from the CDSC on Class C shares for
the Fund. For the period from August 16, 1999 (commencement of operations)
through October 31, 1999, the Distributor retained $0 from sales loads on the
Fund's Class T shares.
Transfer and Dividend Disbursing Agent and Custodian. 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.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most beneficial to
you depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee, service fee and CDSC, if any, on Class B
shares or Class C shares would be less than the accumulated distribution fee and
initial sales charge on Class A shares or the accumulated distribution fee,
service fee and initial sales charge on Class T shares, purchased at the same
time, and to what extent, if any, such differential would be offset by the
return on Class A shares and Class T shares, respectively. You may also want to
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee, service fee, and initial sales charge on Class
T shares would be less than the accumulated distribution fee and higher initial
sales charge on Class A shares purchased at the same time, and to what extent,
if any, such differential could be offset by the return of Class A.
Additionally, investors qualifying for reduced initial sales charges who expect
to maintain their investment for an extended period of time might consider
purchasing Class A shares because the accumulated continuing distribution and
service fees on Class B shares or Class C shares and the accumulated
distribution fee, service fee and initial sales charge on Class T shares may
exceed the accumulated distribution fee and initial sales charge on Class A
shares during the life of the investment. Finally, you should consider the
effect of the CDSC period and any conversion rights of the Classes in the
context of your own investment time frame. For example, while Class C shares
have a shorter CDSC period than Class B shares, Class C shares do not have a
conversion feature and, therefore, are subject to ongoing distribution and
service fees. Thus, Class B shares may be more attractive than Class C shares to
investors with longer term investment outlooks. Generally, Class A shares will
be most appropriate for investors who invest $1,000,000 or more in Fund shares,
and Class A and Class T shares will not be appropriate for investors who invest
less than $50,000 in Fund shares. The Fund reserves the right to reject any
purchase order.
Class A, Class B, Class C and Class T shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. Subsequent purchases may be sent directly to the
Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments (including
Mellon Bank and its affiliates) acting on behalf of customers having a qualified
trust or investment account or relationship at such institution, or to customers
who have received and hold shares of the Fund distributed to them by virtue of
such an account or relationship. Class R shares may be purchased for a
retirement plan only by a custodian, trustee, investment manager or other entity
authorized to act on behalf of such a plan. Institutions effecting transactions
in Class R shares for the accounts of their clients may charge their clients
direct fees in connection with such transactions.
The minimum initial investment is $1,000. Subsequent investments must be
at least $100. The minimum initial investment is $750 for Dreyfus-sponsored
Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non working
spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one
participant and $500 for Dreyfus-sponsored Education IRAs, with no minimum on
subsequent purchases except the no minimum on Education IRAs does not apply
until after the first year. The initial investment must be accompanied by the
Fund's Account Application. The Fund reserves the right to offer Fund shares
without regard to minimum purchase requirements to employees participating in
certain qualified or non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner and
form acceptable to the Fund. The Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.
Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For 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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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 as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per as a % of Offering
- --------------------- ---------------------- ------------------
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
.......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 as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per as a % of Offering
- --------------------- ---------------------- ------------------
Share Price
Less than $50,000............. 4.50 4.25
$50,000 to less than $100,000. 4.00 3.75
$100,000 to less than $250,000 3.00 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more............ 0 0
Holders of Class A accounts of the Fund as of December 19, 1994 may
continue to purchase Class A shares of the Fund at NAV. However, investments by
such holders in other funds advised by Dreyfus will be subject to any applicable
front-end sales load.
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those shares within one year of purchase, a CDSC of 1.00% will be
assessed at the time of redemption. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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, the Dreyfus Family of Funds, certain funds advised by Founders Asset
Management LLC ("Founders"), an affiliate of Dreyfus, 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, certain funds in
the Dreyfus Family of Funds, certain funds advised by Founders 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, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
Class T Shares. The public offering price for Class T shares is the NAV per
share of that Class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
<S> <C> <C>
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-
</TABLE>
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. Pursuant to an agreement with the
Distributor, Dreyfus Service Corporation 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.
Class T shares are offered at net asset value without a sales load to
employees participating in Eligible Benefit Plans. Class T shares also may be
purchased (including by exchange) at net asset value 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, at
the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible Benefit
Plan and all or a portion of such plan's assets were invested in funds in the
Dreyfus Premier Family of Funds, the Dreyfus Family of Funds, certain funds
advised by Founders or certain other products made available by the Distributor
to such plans, or (b) invested all of its assets in funds in the Dreyfus Premier
Family of Funds, certain funds in the Dreyfus Family of Funds, certain funds
advised by Founders or certain other products made available by the Distributor
to such plans.
Class T 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 T 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.
Dealer Reallowance -- Class A and Class T Shares. The dealer reallowance
provided with respect to Class A and Class T shares may be changed from time to
time but will remain the same for all dealers. The Distributor, at its own
expense, may provide additional promotional incentives to dealers that sell
shares of funds advised by Dreyfus which are sold with a sales load, such as
Class A and Class T shares. In some instances, these incentives may be offered
only to certain dealers who have sold or may sell significant amounts of such
shares.
Sales Loads -- Class A and Class T Shares. The scale of sales loads applies
to purchases of Class A and Class T shares made by any "purchaser," which term
includes an individual and/or spouse purchasing securities for his, her or their
own account or for the account of any minor children, or a trustee or other
fiduciary purchasing securities for a single trust estate or a single fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Code) although
more than one beneficiary is involved; or a group of accounts established by or
on behalf of the employees of an employer or affiliated employers pursuant to an
employee benefit plan or other program (including accounts established pursuant
to Sections 403(b), 408(k) and 457 of the Code); or an organized group which has
been in existence for more than six months, provided that it is not organized
for the purpose of buying redeemable securities of a registered investment
company and provided that the purchases are made through a central
administration or a single dealer, or by other means which result in economy of
sales effort or expense.
Set forth below is an example of the method of computing the offering price
of the Fund's Class A shares. The example assumes a purchase of Class A shares
of the Fund aggregating less than $50,000 subject to the schedule of sales
charges set forth in the Fund's Prospectus at a price based upon the NAV of a
Class A share at the close of business on October 31, 1999:
NAV per share $16.67
Per Share Sales Charge - 5.75%* of offering price
(6.10% of NAV per share) $ 1.02
Per Share Offering Price to Public $17.69
- ------------------------------------------
* Class A shares purchased by shareholders beneficially owning Class A
shares on November 30, 1996, but who opened their accounts after December
19, 1994, are subject to a different sales load schedule as described
above.
Set forth below is an example of the method of computing the offering
price of the Fund's Class T shares. The example assumes a purchase of Class T
shares of the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Fund's Prospectus at a price based upon NAV of a
Class T share at the close of business on October 31, 1999:
NAV per share $16.67
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .78
Per Share Offering Price to Public $17.45
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 which are sold with a sales load, shares of
certain other funds advised by Dreyfus or Founders which are sold with a sales
load and shares acquired by a previous exchange of such shares (hereinafter
referred to as "Eligible Funds"), by you and any related "purchaser" as defined
above, where the aggregate investment, including such purchase, is $50,000 or
more. If, for example, you previously purchased and still hold Class A or Class
T shares of the Fund, or shares of any other Eligible Fund or combination
thereof, with an aggregate current market value of $40,000 and subsequently
purchase Class A or T shares of the Fund or shares of an Eligible Fund having a
current value of $20,000, the sales load applicable to the subsequent purchase
would be reduced to 4.50% of the offering price in the case of Class A shares or
4.00% of the offering price in the case of Class T shares. All present holdings
of Eligible Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase. Class A shares purchased by shareholders beneficially
owning Fund shares on November 30, 1996, but who opened their Fund accounts
after December 19, 1994, are subject to a different sales load structure, as
described above.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the Transfer
Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
Class B Shares. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in the Fund's Prospectus.
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 B and C Shares. Pursuant to an agreement with the Distributor,
Dreyfus Service Corporation compensates certain Agents for selling Class B and
Class C shares at the time of purchase from its own assets. The proceeds of the
CDSC and the distribution fee, in part, are used to defray these expenses.
Class R Shares. The public offering for Class R shares is the NAV per share
of that Class.
TeleTransfer Privilege. You may purchase Fund shares by telephone through
the TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred between
the bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution that is an
Automated Clearing House ("ACH") member may be so designated. TeleTransfer
purchase orders may be made at the Transfer Agent any time. Purchase orders
received by 4:00 p.m., New York time, on any business day that the Transfer
Agent and the NYSE are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the NYSE are open for business, or orders made on Saturday,
Sunday or any Fund holiday (e.g., when the NYSE is not open for business), will
be credited to the shareholder's Fund account on the second bank business day
following such purchase order. To qualify to use the TeleTransfer Privilege, the
initial payment for purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of Shares -
TeleTransfer Privilege." The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee currently
is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual fees
for distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule") regulating
the circumstances under which investment companies such as the Company may,
directly or indirectly, bear the expenses of distributing their shares. The Rule
defines distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.
Distribution Plan--Class A Shares. The Company has adopted a Distribution
Plan pursuant to the Rule with respect to the Class A shares of the Fund (the
"Class A Plan"), whereby Class A shares of the Fund may spend annually up to
0.25% of the average of its net assets to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities and
the Distributor for shareholder servicing activities and expenses primarily
intended to result in the sale of Class A shares of the Fund. The Class A Plan
allows the Distributor to make payments from the Rule 12b-1 fees it collects
from the Fund to compensate Agents that have entered into Selling Agreements
("Agreements") with the Distributor. Under the Agreements, the Agents are
obligated to provide distribution-related services with regard to the Fund
and/or shareholder services to the Agent's clients that own Class A shares of
the Fund. The Company's Board of Directors believes that there is a reasonable
likelihood that the Class A Plan will benefit the Fund and the holders of Class
A shares.
The Class A Plan provides that a report of the amounts expended under the
Class A Plan, and the purposes for which such expenditures were incurred, must
be made to the Company's Directors for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which the Fund may bear for distribution pursuant to the
Class A Plan without approval of the holders of Class A shares, and that other
material amendments of the Class A Plan must be approved by the vote of a
majority of the Directors and of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Company 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 is terminable, as to the Fund's Class A shares, at any time by vote of a
majority of the Directors who are not interested persons and have no direct or
indirect financial interest in the operation of the Class A Plan or by vote of
the holders of a majority of the outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B, Class C and Class T Shares. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B, Class C and Class T shares, pursuant to which the Fund pays
the Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B, Class C and Class
T shares for the provision of certain services to the holders of Class B, Class
C and Class T shares. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and providing
services related to the maintenance of such shareholder accounts. With regard to
such services, each Agent is required to disclose to its clients any
compensation payable to it by the Fund and any other compensation payable by its
clients in connection with the investment of their assets in Class B, Class C
and Class T shares. The Distributor may pay one or more Agents in respect of
services for these Classes of shares. The Distributor determines the amounts, if
any, to be paid to Agents under the Service Plan and the basis on which such
payments are made. The Company's Board of Directors has also adopted a
Distribution Plan pursuant to the Rule with respect to Class B and Class C
shares (the "Class B and Class C Plan") and a separate Distribution Plan
pursuant to the Rule with respect to Class T shares (the "Class T Plan").
Pursuant to the Class B and Class C Plan, the Fund pays the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual rate
of 0.75% of the value of the average daily net assets of Class B and Class C
shares, respectively. Pursuant to the Class T Plan, the Fund pays the
Distributor for distributing the Fund's Class T shares at an annual rate of
0.25% of the value of the average daily net assets of Class T shares. The
Distributor may pay one or more Agents in respect of advertising, marketing and
other distribution services for Class T shares, and determines the amounts, if
any, to be paid to Agents and the basis on which such payments are made. The
Company's Board of Directors believes that there is a reasonable likelihood that
the Service Plan, the Class B and Class C Plan and the Class T Plan (each a
"Plan" and collectively, the "Plans") will benefit the Fund and the holders of
Class B, Class C and Class T shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not be
amended to increase materially the cost which holders of Class B, Class C or
Class T shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be approved
by the Board of Directors and by the Directors who are not interested persons of
the Company and have no direct or indirect financial interest in the operation
of the Plan or in any agreements entered into in connection with the Plan, by
vote cast in person at a meeting called for the purpose of considering such
amendments. Each Plan is subject to annual approval by such vote of the
Directors cast in person at a meeting called for the purpose of voting on the
Plan. Each Plan may be terminated at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or in any agreements entered
into in connection with the Plan or by vote of the holders of a majority of
Class B, Class C or Class T shares, as applicable.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan described above are payable without
regard to actual expenses incurred. The Fund and the Distributor may suspend or
reduce payments under any of the plans at any time, and payments are subject to
the continuation of the Fund's plans and the Agreements described above. From
time to time, the Agents, the Distributor and the Fund may voluntarily agree to
reduce the maximum fees payable under the plans.
For the fiscal year ended October 31, 1999, the Fund paid the Distributor
and Dreyfus Service Corporation $22,407 and $15,417, respectively, pursuant to
the Class A Plan. For the fiscal year ended October 31, 1999, the Fund paid the
Distributor $192,788 and $31,534 pursuant to the Class B and Class C Plan with
respect to Class B shares and Class C shares, respectively, and paid the
Distributor and Dreyfus Service Corporation $18,248 and $46,015, respectively,
pursuant to the Service Plan with respect to Class B shares and $2,860 and
$7,651, respectively, pursuant to the Service Plan with respect to Class C
shares. For the period August 16, 1999 (commencement of operations) through
October 31, 1999, the Fund paid the Distributor $0 pursuant to the Class T plan
and paid the Distributor and Dreyfus Service Corporation $0 and $0,
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 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 Touch(R) automated telephone system) from any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used. During the delay,
the Fund's NAV may fluctuate.
Redemption Through a Selected Dealer. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the Fund shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to the
number of Class A, Class B or Class T shares you have redeemed, within 45 days
of redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon reinstatement,
with respect to Class B shares, or Class A or Class T shares if such shares were
subject to a CDSC, your account will be credited with an amount equal to the
CDSC previously paid upon redemption of the shares reinvested. The Reinvestment
Privilege may be exercised only once.
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds will
be on deposit in your account at an ACH member bank ordinarily two days after
receipt of the redemption request. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a wire redemption will be
effected as a TeleTransfer transaction through the ACH system unless more prompt
transmittal specifically is requested. Holders of jointly registered Fund or
bank accounts may redeem through the TeleTransfer Privilege for transfer to
their bank account only up to $500,000 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 is paid to
Dreyfus Service Corporation 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% is paid to
Dreyfus Service Corporation 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. You may purchase, in exchange for shares of the Fund,
shares of the same Class of another fund in the Dreyfus Premier Family of Funds,
shares of the same Class of certain funds advised by Founders, or shares of
certain other funds in the Dreyfus Family of Funds, and, with respect to Class T
shares of the Fund, Class A shares of certain Dreyfus Premier fixed-income
funds, to the extent such shares are offered for sale in your state of
residence. Shares of other funds purchased by exchange will be purchased on the
basis of relative NAV per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable to
the Offered Shares exceeds the maximum sales load that could have
been imposed in connection with the Purchased Shares (at the time
the Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for shares
of another fund will be subject to the higher applicable CDSC of the
two funds and, for purposes of calculating CDSC rates and conversion
periods, if any, will be deemed to have been held since the date the
shares being exchanged were initially purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject to
confirmation of an investor's holdings through a check of appropriate records.
To request an exchange, an investor or an investor's Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-554-4611, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-554-4611. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) 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. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, shares of the same Class of another fund in the
Dreyfus Premier Family of Funds, shares of the same Class of certain funds
advised by Founders, or shares of certain other funds in the Dreyfus Family of
Funds, and, with respect to Class T shares of the Fund, Class A shares of
certain Dreyfus Premier fixed-income funds, of which you are a shareholder. The
amount the investor designates, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged automatically
on the first and/or fifteenth day of the month according to the schedule the
investor has selected. This Privilege is available only for existing accounts.
With respect to Class R shares held by a Retirement Plan, exchanges may be made
only between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund. Shares will be exchanged on
the basis of relative NAV as described above under "Fund Exchanges." Enrollment
in or modification or cancellation of this Privilege is effective three business
days following notification by the investor. An investor will be notified if the
investor's account falls below the amount designated to be exchanged under this
Privilege. In this case, an investor's account will fall to zero unless
additional investments are made in excess of the designated amount prior to the
next Auto-Exchange transaction. Shares held under IRAs and other retirement
plans are eligible for this Privilege. Exchanges of IRA shares may be made
between IRA accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification Dreyfus Premier Small
Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund
may charge a service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Auto-Exchange
Authorization Form, please call toll free 1-800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as a
sale of the shares given in exchange and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to Dreyfus Premier Small Company Stock Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587 and the notification will be effective three
business days following receipt. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
Particular Retirement Plans, including Dreyfus-sponsored Retirement Plans,
may permit certain participants to establish an automatic withdrawal plan from
such Retirement Plans. Participants should consult their Retirement Plan sponsor
and tax adviser for details. Such a withdrawal plan is different from the
Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares, and Class A or Class T shares to which a CDSC applies,
that are withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC. Purchases of additional Class A or Class T shares where the
sales load is imposed concurrently with withdrawals of Class A or Class T shares
generally are undesirable.
Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Fund, shares of the same Class of certain funds advised by
Founders, or shares of certain other funds in the Dreyfus Family of Funds, and,
with respect to Class T shares of the Fund, in Class A shares of certain Dreyfus
Premier fixed-income funds, of which you are a shareholder. Shares of the same
Class of other funds purchased pursuant to this Privilege will be purchased on
the basis of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or other
distributions are being swept, without giving effect to any reduced
loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a CDSC and the applicable CDSC,
if any, will be imposed upon redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a designated
bank account. Only an account maintained at a domestic financial institution
which is an ACH member may be so designated. Banks may charge a fee for this
service.
For more information concerning these Privileges, or to request a Dreyfus
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing a written notification to Dreyfus Premier Small
Company Stock Fund, P.O. Box 6587, Providence Rhode Island, 02940-6587. To
select a new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Fund, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-554-4611. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days' notice
to you.
Letter of Intent--Class A and Class T Shares. By signing a Letter of
Intent form, which can be obtained by calling 1-800-554-4611, you become
eligible for the reduced sales load applicable to the total number of Eligible
Fund shares purchased in a 13-month period pursuant to the terms and conditions
set forth in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of shares you
hold (on the date of submission of the Letter of Intent) in any Eligible Fund
that may be used toward "Right of Accumulation" benefits described above may be
used as a credit toward completion of the Letter of Intent. However, the reduced
sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A or Class T shares, as applicable, of the Fund held
in escrow to realize the difference. Signing a Letter of Intent does not bind
you to purchase, or the Fund to sell, the full amount indicated at the sales
load in effect at the time of signing, but you must complete the intended
purchase to obtain the reduced sales load. At the time you purchase Class A or
Class T shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the
then-current NAV plus the applicable sales load in effect at the time such
Letter of Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares. All
fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may not
be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund Exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to participants in employer-sponsored retirement
plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined NAV but the purchase
order would be effective only at the NAV next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. The Fund's securities are valued at the
last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV of
the Fund's shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Board of Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if it believes that the discount no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.
NYSE Closings. The holidays (as observed) on which the NYSE is currently
scheduled to be closed are: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares and pays dividends from its net
investment income and distributes net realized capital gains and gains from
foreign currency transactions, if any, once a year, but it may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the 1940
Act. All expenses are accrued daily and deducted before declaration of dividends
to investors. The Fund will not make distributions from net realized capital
gains unless all capital loss carryovers, if any, have been utilized or have
expired. Investors other than qualified retirement plans may choose whether to
receive dividends and other distributions in cash, to receive dividends in cash
and reinvest other distributions in additional Fund shares at NAV, or to
reinvest both dividends and other distributions in additional Fund shares at
NAV; dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV. Dividends and other
distributions paid by each Class are calculated at the same time and in the same
manner and will be in the same amount, except that the expenses attributable
solely to a particular Class are borne exclusively by that Class. Class B and
Class C shares will receive lower per share dividends than Class T shares, which
will in turn receive lower per share dividends than Class A shares, which will
in turn receive lower per share dividends than Class R shares, because of the
higher expenses borne by the relevant Classes. See "Expenses" in the Fund's
Prospectus.
It is expected that the Fund will continue to qualify for treatment as a
regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such qualification
will relieve the Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, the
Fund -- which is treated as a separate corporation for federal tax purposes --
(1) must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions) (the "Distribution Requirement"), (2) must derive at least 90% of
its annual gross income from specified sources (the "Income Requirement"), and
(3) must meet certain asset diversification and other requirements. The term
"regulated investment company" does not imply the supervision of management or
investment practices or policies by any government agency. The Fund will be
subject to a non-deductible 4% excise tax ("Excise Tax") to the extent it fails
to distribute substantially all of its taxable income and capital gains. If the
Fund failed to qualify for treatment as a RIC for any taxable year, (1) it would
be taxed at corporate rates on the full amount of its taxable income for that
year without being able to deduct the distributions it makes to its shareholders
and (2) the shareholders would treat all those distributions, including
distributions of net capital gain (the excess of net long-term capital gain over
net short-term capital loss), as dividends (that is, ordinary income) to the
extent of the Fund's earnings and profits. In addition, the Fund could be
required to recognize unrealized gains, pay substantial taxes and interest and
make substantial distributions before requalifying for RIC treatment.
Distributions. If you elect to receive dividends and other distributions
in cash, and your dividend or distribution check is returned to the Fund as
undeliverable or remains uncashed for six months, the Fund reserves the right to
reinvest that distribution and all future distributions payable to you in
additional Fund shares at NAV. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
Dividends derived from net investment income, together with distributions
from net realized short-term capital gains, net realized gains from certain
foreign currency transactions and all or a portion of any gains realized from
the sale or other disposition of certain market discount bonds (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions from net capital gain (the excess net of
long-term capital gain over net short-term capital loss) will be taxable to
those shareholders as long-term capital gains regardless of how long the
shareholders have held their Fund shares and whether the distributions are
received in cash or reinvested in additional Fund shares.
Dividend distributions paid by the Fund to a non-resident foreign investor
generally are subjected to U.S. withholding tax at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax treaty.
Distributions from net capital gain paid by the Fund to a non-resident foreign
investor, as well as the proceeds of any redemptions by such an investor,
regardless of the extent to which gain or loss may be realized, generally are
not subject to U.S. withholding tax. However, such distributions may be subject
to backup withholding, as described below, unless the foreign investor certifies
his or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to dividends and distributions from net
capital gain, if any, paid during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A and Class T shares if a shareholder redeems those shares or
exchanges them for shares of another fund advised or administered by Dreyfus,
within 90 days of purchase, and (1) in the case of a redemption, the shareholder
acquires other fund Class A or Class T shares through exercise of the
Reinvestment Privilege or (2) in the case of an exchange, the other fund reduces
or eliminates its otherwise applicable sales load. In these cases, the amount of
the sales load charged on the purchase of the original Class A or Class T
shares, up to the amount of the reduction of sales load pursuant to the
Reinvestment Privilege or on the exchange, as the case may be, is not included
in the tax basis of those shares for purposes of computing gain or loss and
instead is added to the tax basis of the acquired shares.
Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the plans. The Fund will not report to the IRS distributions
paid to such plans. Generally, distributions from qualified retirement plans,
except those representing returns of non-deductible contributions thereto, will
be taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to 10%
of the taxable portion of the distribution. The administrator, trustee or
custodian of a qualified retirement plan will be responsible for reporting
distributions from the plans to the IRS. Moreover, certain contributions to a
qualified retirement plan in excess of the amounts permitted by law may be
subject to an excise tax. If a distributee of an "eligible rollover
distribution" from a qualified retirement plan does not elect to have the
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the distribution will be subject to a 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if such
shareholder fails to furnish a TIN to the Fund and certify that it is correct.
Backup withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) the shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income. A TIN is either the Social Security number, individual
taxpayer identification number or employer identification number of the record
owner of the account. Any tax withheld as a result of backup withholding does
not constitute an additional tax and may be claimed as a credit on the record
owner's Federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as stated in
the Fund's Prospectus. In addition, if a shareholder sells shares of the Fund
held for six months or less and receives 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 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.
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. Generally, a credit for foreign taxes may not exceed the
shareholder's federal income tax attributable to his total foreign source
taxable income. The Fund will report to its shareholders shortly after each
taxable year their respective shares of the income from sources within, and
taxes paid to, foreign countries and U.S. possessions if it makes the Election.
Passive Foreign Investment Companies. The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, the Fund will be subject to federal income tax on a portion of
any "excess distribution" received on the stock of a PFIC or of any gain on
disposition of the stock (collectively "PFIC income"), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders. If the Fund invests
in a PFIC and elects to treat the PFIC as "qualified electing fund," then in
lieu of the foregoing tax and interest obligation, the Fund would be required to
include in income each year its pro rata share of the qualified electing fund's
annual ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) -- which probably would have to
be distributed to satisfy the Distribution Requirement and avoid imposition of
the 4% excise tax referred to in the Fund's Prospectus under "Dividends, Other
Distributions and Taxes" -- even if those earnings and gain were not received by
the Fund.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would
be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
Foreign Currency, Futures, Forward and Hedging Transactions. Gains from
the sale or other disposition of foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and gains from options,
futures and forward contracts derived by the Fund with respect to its business
of investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain and loss. However, a portion of the gain or loss from
the disposition of foreign currencies and certain foreign-currency-denominated
instruments (including debt instruments and financial forward, futures and
option contracts) may be treated as ordinary income or loss under Section 988 of
the Code. In addition, all or a portion of any gain realized from the sale or
other disposition of certain market discount bonds will be treated as ordinary
income. Moreover, all or a portion of the gain realized from engaging in
"conversion transactions" that otherwise would be valued as capital gain may be
treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold as producing capital gains
and transactions described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund from
certain futures, forward contracts and options transactions will be treated as
60% long-term capital gain or loss and 40% short-term capital gain or loss. Gain
or loss will arise upon exercise or lapse of such contracts and options as well
as from closing transactions. In addition, any such contracts or options
remaining unexercised at the end of the Fund's taxable year will be treated as
sold for their then fair market value (a process known as "marking-to-market"),
resulting in additional gain or loss to the Fund characterized in the same
manner.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles," which are defined to include "offsetting
positions" in actively traded personal property. Under Section 1092 of the Code,
any loss from the disposition of a position in a straddle generally may be
deducted only to the extent the loss exceeds the unrealized gain on the
offsetting position(s) of the straddle. In addition, these rules may postpone
the recognition of loss that otherwise would be recognized under the
mark-to-market rules discussed above. The regulations under Section 1092 also
provide certain "wash sale" rules, which apply to transactions where a position
is sold at a loss and a new offsetting position is acquired within a prescribed
period, and "short sale" rules applicable to straddles. If the Fund makes
certain elections (including an election as to straddles that include a position
in one or more Section 1256 Contracts (so-called "mixed straddles")), the
amount, character, and timing of recognition of gains and losses from the
affected straddle positions would be determined under rules that vary according
to the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
Foreign Currency Gains and Losses. Gains and losses attributable to
fluctuations in foreign currency exchange rates that occur between the time the
Fund accrues dividends, interest or other receivables, or expenses or other
liabilities, denominated in a foreign currency and the time the Fund actually
collects the receivables or pays the liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on the disposition of a debt
security denominated in a foreign currency, or of an option or forward contract
on a foreign currency, gains or losses attributable to fluctuations in the value
of the foreign currency between the date of acquisition of the security, option
or contract and the date of disposition also are treated as ordinary income or
loss. These gains or losses may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its shareholders.
State and Local Taxes. Depending upon the extent of the Fund's activities
in states and localities in which it is deemed to be conducting business, the
Fund may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder"), depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to a U.S. federal withholding tax of 30%
(or lower treaty rate). Capital gains realized by foreign shareholders on the
sale of Fund shares and distributions to them of net capital gain (the excess of
net long-term capital gain over net short-term capital loss) generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all distributions to
that shareholder and any gains realized by that shareholder on the disposition
of the Fund shares will be subject to U.S. federal income tax at the graduated
rates applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits against
that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the Fund are generally traded on
a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commission in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions on
behalf of the Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.
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, 1999, 1998 and 1997, the Fund paid
brokerage commissions amounting to $449,989, $470,403 and $347,777,
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. In periods in
which extraordinary market conditions prevail, Dreyfus will not be deterred from
changing the Fund's investment strategy as rapidly as needed, in which case
higher turnover rates can be anticipated.
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, 1999
1 Year 5 Years Since Inception
Class A shares 3.47% 12.20% 11.95% (9/2/94)
Class B shares 4.88% - 14.16% (12/19/94)
Class C shares 7.88% - 14.42% (12/19/94)
Class R shares 10.08% 13.78% 13.48% (9/2/94)
Inception date appears in parentheses following the average annual total return
since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase and
the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price in
the case of Class A and Class T) per share with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result. The average annual total return figures for a
Class calculated in accordance with such formula assume that, in the case of
Class A or Class T, the maximum sales load has been deducted from the
hypothetical initial investment at the time of purchase or, in the case of Class
B or Class C, the maximum applicable CDSC has been paid upon redemption at the
end of the period.
The Fund's total return for the period September 2, 1994 (commencement of
operations) to October 31, 1999 for Class R was 92.03%. The Fund's total return
for Class A for the period September 2, 1994 (commencement of operations) to
October 31, 1999 was 79.02%. Based on NAV per share, the total return for Class
A was 89.94% for this period. The Fund's total return for Class B and Class C
for the period from December 19, 1994 (commencement of operations of Class B and
Class C) through October 31, 1999 was 90.59% and 92.71%, respectively. Without
giving effect to the applicable CDSC, total return for Class B and Class C was
92.59% and 92.71%, respectively, for this period.
The Fund's aggregate total return for August 16, 1999 (commencement of
operations) to October 31, 1999 for Class T shares was (4.69)%. Based on NAV per
share, the total return for Class T was (0.18)% for this period.
Total return is calculated by subtracting the amount of the Fund's NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of a stated period from the NAV per share at the end of the period
(after giving effect to the reinvestment of dividends and other distributions
during the period and any applicable CDSC), and dividing the result by the NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of the period. Total return also may be calculated based on the NAV
per share at the beginning of the period instead of the maximum offering price
per share at the beginning of the period for Class A or Class T shares or
without giving effect to any applicable CDSC at the end of the period for Class
B or Class C shares. In such cases, the calculation would not reflect the
deduction of the sales load with respect to Class A or Class T shares or any
applicable CDSC with respect to Class B or Class C shares, which, if reflected
would reduce the performance quoted.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) Russell
2500 Index, the Russell 2000 Value Index, the Russell 2000 Growth Index, or the
Russell 2000 Index; (ii) the Standard & Poor's 500 Composite Stock Price Index,
the Dow Jones Industrial Average, or other appropriate unmanaged domestic or
foreign indices of performance of various types of investments so that investors
may compare the Fund's results with those of indices widely regarded by
investors as representative of the securities markets in general; (iii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; (iv) the Consumer Price Index (a measure of inflation) to assess the
real rate of return from an investment in the Fund, or the Fund's performance
against inflation to the performance of other instruments against inflation; and
(v) products managed by a universe of money managers with similar performance
objectives. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions or administrative and management costs and
expenses.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market. From time to
time, advertising materials for the Fund may refer to Morningstar ratings and
related analyses supporting that rating.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to, or
include commentary by the portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
INFORMATION ABOUT THE FUND/COMPANY
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock.
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. The Fund is
one of nineteen portfolios of the Company. Fund shares have equal rights 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, or, where matters affect different classes of a portfolio
differently, by class.
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.
COUNSEL AND INDEPENDENT AUDITORS
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, 2000, 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.
<PAGE>
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH
AND DUFF & PHELPS RATINGS
STANDARD & POOR'S
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard & Poor's. 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 Standard & Poor's 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
A Standard & Poor's 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 Standard & Poor's 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
characteristics 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:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o 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
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
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
AA but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk factors
A are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- 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 not
B be met when due. Financial protection factors will fluctuate widely
B- 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, 2000
- ------------------------------------------------------------------------------
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, 2000, as it
may be revised from time to time. The Fund is a separate, diversified portfolio
of The Dreyfus/Laurel Funds, Inc. (the "Company"), an open-end management
investment company, known as a mutual fund, that is registered with the
Securities and Exchange Commission ("SEC"). 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
The financial statements for the fiscal year ended October 31, 1999,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. The Financial Statements for the fiscal year ended October 31,
1999, are included in the Fund's 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.
TABLE OF CONTENTS
Page
Description of The Fund/Company............................................B-2
Management of The Fund.....................................................B-10
Management Arrangements....................................................B-16
Purchase of Shares.........................................................B-19
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-52
Counsel and Independent Auditors...........................................B-53
Appendix...................................................................B-54
<PAGE>
DESCRIPTION OF THE FUND/COMPANY
The Company is a Maryland corporation formed on August 6, 1987. 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. ("Fitch") or Duff-1
by Duff & Phelps Credit Rating Co ("Duff & Phelps").
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 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.
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.
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.
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 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
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
The Company has a Board composed of eight 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
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 and
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus and, until August 24, 1994, the Fund's Distributor. From
August 1994 until December 31, 1994, he was a director of Mellon
Financial Corporation. Age: 56 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; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 78 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 & CEO, Himmel and Company, Inc.; CEO,
American Food Management; former Director, The Boston Company, Inc.
("TBC"), and Boston Safe Deposit and Trust Company, each an affiliate of
Dreyfus. Age: 53 years old. Address: 625 Madison Avenue, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Director of the Company, Chairman and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 years old.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Ontario
Hydro Services Company; Director, the Hyams Foundation, Inc. Age: 50
years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts 02146.
- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. Age: 30 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of New Business Development
of Funds Distributor Inc. Age: 38 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, he was Assistant
Counsel at Forum Financial Group. Age: 35 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. Age: 35
years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President of the Distributor and 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: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 45 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. Age: 37
years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 38 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Company.
Vice President and Senior Counsel of Funds Distributor Inc. since
February 1997. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 33 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. 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.
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.
The aggregate amounts of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1999, and from
all funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parenthesis next to each Board
member's total compensation)* during the year ended December 31, 1999, 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** $25,000 $642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** none none (28)
Arthur L. Goeschel $20,000 $ 80,989 (28)
Kenneth A. Himmel $16,666 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $20,000 $ 80,989 (28)
Benaree Pratt Wiley $20,000 $ 80,989 (28)
- ----------------------------
# 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 $5,639.39 for the Company.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Company, for which the Board
member served.
**Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by the
Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1999, the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus
for serving as a Board member of the Company was $20,000. For the year ended
December 31, 1999, 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 $80,989. In addition, Dreyfus reimbursed Mr. Fort a
total of $2,799.33 for expenses attributable to the Company's Board meetings
which is not included in the $5,639.39 amount in note # above.
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, 2000.
Principal Shareholders. As of February 1, 2000, 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, 26.6060%.
As of February 1, 2000, 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, 32.8031%.
As of February 1, 2000, 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, 45.2311%.
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 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 Financial 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, 1999,
Sarofim managed approximately $48.5 billion in assets for numerous discretionary
accounts and provided investment advisory services to six registered investment
companies having aggregate assets of approximately $8.1 billion.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company (the
"Management Agreement"), 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" (as defined in the
1940 Act) 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 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; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Diane P. Durnin, Vice President-Product Development; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Ray Van Cott, Vice-President-Information Systems;
Theodore A. Schachar, Vice President-Tax; 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.
Under Dreyfus' personal securities trading policy (the "Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
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 a Sub-Investment Advisory Agreement (the
"Sub-Advisory Agreement") between Sarofim and Dreyfus, subject to the overall
authority of the Company's Board in accordance with Maryland law. 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 Steve Gupta, Mary L. Porter, James A
Reynolds, III, and Christopher B. Sarofim, 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 fiscal year ended October 31, 1999, the Fund paid Dreyfus
$2,759,427 pursuant to the Management Agreement. For the same period, Dreyfus
paid Sarofim $752,571 pursuant to the Sub-Advisory Agreement. 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 Sub-Advisory 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 fiscal year ended October 31, 1999, the Distributor retained
$14,968.20 from sales loads on the Fund's Class A and $399.42 from sales loads
on the Fund's Class T shares. For the same period, the Distributor retained
$285,241 from the contingent deferred sales charge ("CDSC" ) on Class B shares
and $21,294 from the CDSC on Class C shares of the Fund. For the fiscal period
November 14, 1997( commencement of operations) through October 31, 1998, the
Distributor retained $0 from sales loads on the Fund's Class A shares. For the
same period, the Distributor retained $57,161 from the CDSC on Class B shares
and $4,456 from CDSC on Class C shares of the Fund.
Transfer and Dividend Disbursing Agent and Custodian. 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.
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 based on 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"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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, the Dreyfus Family of Funds, certain funds advised by Founders Asset
Management LLC ("Founders"), an affiliate of Dreyfus, 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, certain funds in
the Dreyfus Family of Funds, certain funds advised by Founders 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, 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.
Class T shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class T 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, at the time of such
distribution, such qualified retirement plan or Dreyfus-sponsored 403(b)(7) plan
(a) met the requirements of an Eligible Benefit Plan and all or a portion of
such plan's assets were invested in funds in the Dreyfus Premier Family of
Funds, the Dreyfus family of Funds, certain funds advised by Founders or certain
other products made available by the Distributor to such plans, or (b) invested
all of its assets in funds in the Dreyfus Premier Family of Funds, certain funds
in the Dreyfus Family of Funds, certain funds advised by Founders or certain
other products made available by the Distributor to such plans.
Class T 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 T 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.
Dealer Reallowance--Class A and Class T Shares. The dealer reallowance
provided with respect to Class A and Class T shares may be changed from time to
time but will remain the same for all dealers. The Distributor, at its own
expense, may provide additional promotional incentives to dealers that sell
shares of funds advised by Dreyfus which are sold with a sales load, such as
Class A and Class T shares. In some instances, these incentives may be offered
only to certain dealers who have sold or may sell significant amounts of such
shares. 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, 1999:
NAV per share $17.67
Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $ 1.08
Per Share Offering Price to Public $18.75
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, 1999:
NAV per share $17.60
Per Share Sales Charge - 4.50% of offering price
(4.70% of NAV per share) $ .83
Per Share Offering Price to Public $18.43
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 or Founders 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 1-800-554-4611.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B, Class C and Class T shares are subject to annual fees
for distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule") regulating
the circumstances under which investment companies such as the Company may,
directly or indirectly, bear the expenses of distributing their shares. The Rule
defines distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.
Distribution Plan--Class A Shares. The Company has adopted a Distribution
Plan pursuant to the Rule with respect to the Class A shares of the Fund ("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 fiscal year ended October 31, 1999, the Fund paid the Distributor
and Dreyfus Service Corporation $127,401 and $27,457, respectively, pursuant to
the Class A Plan. For the fiscal year ended October 31, 1999, the Fund paid the
Distributor $1,034,191 and $327,221, 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 $49,349 and $295,381, respectively,
pursuant to the Service Plan with respect to Class B shares and $1,458 and
$107,616 respectively, pursuant to the Service Plan with respect to Class C
shares. For the fiscal year ended October 31, 1999, the Fund paid the
Distributor $18,481 pursuant to the Class T Plan and paid the Distributor and
Dreyfus Service Corporation $751 and $17,730, 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 Touch(R) 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 $500,000 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. You may purchase, in exchange for shares of the Fund,
shares of the same Class of another fund in the Dreyfus Premier Family of Funds,
shares of the same Class of certain funds advised by Founders, or shares of
certain other funds in the Dreyfus Family of Funds, and, with respect to Class T
shares of the Fund, Class A shares of such other funds, to the extent such
shares are offered for sale in your state of residence. 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 Touch(R) 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. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, shares of the same Class of another fund in the
Dreyfus Premier Family of Funds, shares of the same Class of certain funds
advised by Founders, or shares of certain other funds in the Dreyfus Family of
Funds, and, with respect to Class T shares of the Fund, Class A shares of such
other funds, of which you are 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 Builder(R). 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 you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Funds, shares of the same Class of certain funds advised by
Founders, or shares of certain other funds in the Dreyfus Family of Funds, and,
with respect to Class T shares of the Fund, in Class A shares of such other
funds, of which you are a shareholder. 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 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 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.
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.
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 year ended October 31,
1999, the Fund paid to Dreyfus Brokerage Services, Inc., ("DBS") brokerage
commissions of $16,800. The amount paid to DBS during the fiscal year ended
October 31, 1999 was approximately 12% of the aggregate brokerage commissions
paid by the Fund, for transactions involving approximately 16% 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 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 fiscal year ended October 31, 1999, the Fund paid brokerage
commissions amounting to $141,605, and brokerage concessions amounting to
$8,082.
The aggregate amount of transactions for the fiscal year ended October 31,
1999 in securities effected on an agency basis through a broker dealer in
consideration of, among other things, research services provided was $26,427,339
and the commissions and concessions related to such transactions were $22,226.
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.
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 T shares of the Fund for the
periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1999
1 Year Since Inception
Class A shares 12.76% 15.57% (11/4/97)
Class B shares 14.81% 16.47% (11/4/97)
Class C shares 17.74% 18.15% (11/4/97)
Class T shares 14.06% 16.06% (11/4/97)
Inception date appears in parentheses following the average annual total return
since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase and
the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price in
the case of Class A and Class T) per share with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result. The average annual total return figures for a
Class calculated in accordance with such formula assume that, in the case of
Class A or Class T, the maximum sales load has been deducted from the
hypothetical initial investment at the time of purchase or, in the case of Class
B or Class C, the maximum applicable CDSC has been paid upon redemption at the
end of the period.
The Fund's total return for the period from November 4, 1997 (commencement
of operations) through October 31, 1999 for Class A and Class T shares was
33.37% and 34.51%, respectively. Based on NAV per share, the total return for
Class A and Class T shares was 41.48% and 40.86%, respectively for the same
period. The Fund's total return for the period from November 4, 1997
(commencement of operations) through October 31, 1999 for Class B and Class C
shares was 35.44% and 39.36%, respectively. Without giving effect to the
applicable CDSC, the total return for Class B and Class C shares was 39.44% and
39.36%, respectively for the same period.
Total return is calculated by subtracting the amount of the Fund's NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of a stated period from the NAV per share at the end of the period
(after giving effect to the reinvestment of dividends and other distributions
during the period and any applicable CDSC), and dividing the result by the NAV
(maximum offering price in the case of Class A and Class T) per share at the
beginning of the period. Total return also may be calculated based on the NAV
per share at the beginning of the period instead of the maximum offering price
per share at the beginning of the period for Class A or Class T shares or
without giving effect to any applicable CDSC at the end of the period for Class
B or Class C shares. In such cases, the calculation would not reflect the
deduction of the sales load with respect to Class A or Class T shares or any
applicable CDSC with respect to Class B or 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) 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 may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or other such
studies.
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 equal rights 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, or, where matters affect different classes of a portfolio
differently, by class.
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.
COUNSEL AND INDEPENDENT AUDITORS
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, 2000, 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.
<PAGE>
APPENDIX
DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH
AND DUFF & PHELPS RATINGS
STANDARD & POOR'S
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
Standard &Poor's. 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.
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
A Standard & Poor's 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.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through 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.
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:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o 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
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.
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
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
AA but may vary slightly from time to time because of economic
AA- conditions.
A+ Protection factors are average but adequate. However, risk factors
A are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- cycles.
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.
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.
A(19) Articles of Supplementary dated August 9, 1999. Filed herewith.
A(20) Articles of Supplementary dated March 15, 1999. Filed herewith.
A(21) Articles of Amendment dated March 15, 1999. Filed herewith.
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 Amendment 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.
D(5) Sub-Investment Advisory Agreement between the Dreyfus Corporation and
Fayez Sarofim & Co. with respect to Dreyfus Premier Tax Managed Growth
Fund. Filed herewith.
E(1) Distribution Agreement between Premier Mutual Fund Services, Inc. and
the Registrant. Incorporated by reference to Post-Effective Amendment
No. 31.
E(2) Amended Exhibit A to Distribution Agreement between Premier Mutual Fund
Services, Inc. and the Registrant. Incorporated by reference to
Post-Effective Amendment No. 67.
E(3) Amended Distribution Agreement between Premier Mutual Fund Services,
Inc. and the Registrant dated October 21, 1999. Filed herewith.
F Not Applicable.
G(1) Form of Custody Agreement between the Registrant and Mellon Bank, N.A.
Incorporated by reference to Post-Effective Amendment No. 41.
G(2) Sub-Custodian Agreement between Mellon Bank, N.A. and Boston Safe
Deposit and Trust Company. Incorporated by reference to Post-Effective
Amendment No. 67.
H Not Applicable.
I(1) Opinion of counsel. Incorporated by reference to the Registration
Statement and to Post-Effective Amendment No. 32 and Post-Effective
Amendment No. 56 and Post-Effective Amendment No. 67.
I(2) Consent of Counsel. Filed herewith.
J Consent of KPMG LLP. Filed herewith.
K Letter of Investment Intent. Incorporated by reference to the
Registration Statement.
M(1) Restated Distribution Plan (relating to Investor Shares and Class A
Shares) for Dreyfus Bond Market Index Fund, Dreyfus International Equity
Allocation Fund, Dreyfus Institutional Government Money Market Fund,
Dreyfus Institutional Prime Money Market Fund, Dreyfus Institutional U.S.
Treasury Money Market Fund, Dreyfus Money Market Reserves, Dreyfus
Municipal Reserves, Dreyfus BASIC S&P 500 Stock Index Fund, Dreyfus U.S.
Treasury Reserves, Dreyfus Premier Balanced Fund, Dreyfus Premier Limited
Term Income Fund, Dreyfus Premier Small Company Stock Fund and Dreyfus
Disciplined Intermediate Bond Fund. Incorporated by reference to
Post-Effective Amendment No. 31.
M(2) Restated Distribution Plan for Dreyfus Disciplined Stock Fund
Incorporated by reference to Post-Effective Amendment No. 61 to the
Registrant's Registration Statement ("Post-Effective Amendment No. 61").
M(3) Form of Distribution and Service Plans (relating to Class B Shares and
Class C Shares). Incorporated by reference to Post-Effective Amendment No.
32.
M(4) Distribution Plan for Dreyfus Tax-Smart Growth Fund and Dreyfus
Disciplined Smallcap Stock Fund. Incorporated by reference to
Post-Effective Amendment No. 67.
N(1) Rule 18f-3 Plans. Incorporated by reference to Post-Effective
Amendment No. 61.
N(2) Amended Rule 18f-3 Plans. Filed herewith.
Other Exhibits
(1) Powers of Attorney of the Directors dated June 15, 1998. Incorporated
by reference to Post-Effective Amendment No. 65. Powers of Attorney of
the Directors dated June 1, 1999. Incorporated by reference to
Post-Effective Amendment No. 73.
(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>
ITEM 26 Business and Other Connections of Investment Adviser (continued)
Officers and Directors of Investment Adviser
Name and Position
With Dreyfus Other Businesses Position Held Dates
<S> <C> <C> <C>
Christopher M. Condron Franklin Portfolio Associates, LLC* Director 1/97 - Present
Chairman of the Board and
Chief Executive Officer TBCAM Holdings, Inc.* Director 10/97 - Present
President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Director 1/98 - Present
Asset Management, LLC* Chairman 1/98 - 6/98
President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Director 4/95 - 1/98
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Certus Asset Advisors Corp.** Director 6/95 -Present
Mellon Capital Management Director 5/95 -Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 -1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc. * Director 5/95 - Present
President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - 3/98
Mellon Financial Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Christopher M. Condron The Boston Company, Inc.* Vice Chairman 1/94 - Present
Chairman and Chief Executive Director 5/93 - Present
Officer
(Continued) Laurel Capital Advisors, LLP+ Exec. Committee 1/98 - 8/98
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Director 5/93 -Present
Company*
The Boston Company Financial President 6/89 - Present
Strategies, Inc. * Director 6/89 - Present
Mandell L. Berman Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
Burton C. Borgelt DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Financial Corporation+ Director 6/91 - Present
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Inc. Director 2/81 - Present
570 West College Avenue
York, PA
Quill Corporation Director 3/93 - Present
Lincolnshire, IL
Stephen R. Byers Gruntal & Co., LLC Executive Vice President 5/97 - 1/00
New York, NY Partner 5/97 - 1/00
Executive Committee 5/97 - 1/00
Member
Board of Directors 5/97 - 1/00
Member
Treasurers 5/97 - 1/00
Chief Financial Officer 5/97 - 6/99
Stephen E. Canter Dreyfus Investment Chairman of the Board 1/97 - Present
President, Chief Operating Advisors, Inc.++ Director 5/95 - Present
Officer, Chief Investment President 5/95 - Present
Officer, and Director
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - Present
Member
Mellon Equity Associates, LLP+ Executive Committee 1/99 - Present
Member
Franklin Portfolio Associates, LLC* Director 2/99 - Present
Franklin Portfolio Holdings, Inc.* Director 2/99 - Present
The Boston Company Asset Director 2/99 - Present
Management, LLC*
Stephen E. Canter TBCAM Holdings, Inc.* Director 2/99 - Present
President, Chief Operating
Officer, Chief Investment Mellon Capital Management Director 1/99 - Present
Officer, and Director Corporation***
(Continued)
Founders Asset Management, LLC**** Member, Board of 12/97 - Present
Managers
Acting Chief Executive 7/98 - 12/98
Officer
The Dreyfus Trust Company+++ Director 6/95 - Present
Chairman 1/99 - Present
President 1/99 - Present
Chief Executive Officer 1/99 - Present
Thomas F. Eggers Dreyfus Service Corporation++ Executive Vice President 4/96 - Present
Vice Chairman - Institutional Director 9/96 - Present
and Director
Founders Asset Management, LLC**** Member, Board of Managers 2/99 - Present
Dreyfus Investment Advisors, Inc. Director 1/00 - Present
Dreyfus Service Organization++ Director 3/99 - Present
Dreyfus Insurance Agency of Director 3/99 - Present
Massachusetts, Inc. +++
Dreyfus Brokerage Services, Inc. Director 11/97 - 6/98
401 North Maple Avenue
Beverly Hills, CA.
Steven G. Elliott Mellon Financial 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
Steven G. Elliott Collection Services Corporation Controller 10/90 - 2/99
Director (Continued) 500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Executive Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+
Mellon Financial Services Treasurer 12/87 - Present
Corporation +
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
Lawrence S. Kash Dreyfus Investment Director 4/97 - 12/99
Vice Chairman Advisors, Inc.++
Dreyfus Brokerage Services, Inc. Chairman 11/97 - 2/99
401 North Maple Ave. Chief Executive Officer 11/97 - 2/98
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - 2/99
President 9/96 - 3/99
Dreyfus Precious Metals, Inc.+++ Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - 3/99
Organization, Inc.++ President 1/97 - 3/99
Seven Six Seven Agency, Inc. ++ Director 1/97 - 4/99
Dreyfus Insurance Agency of Chairman 5/97 - 3/99
Massachusetts, Inc.++++ President 5/97 - 3/99
Director 5/97 - 3/99
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - 6/99
Corporation++ President 5/97 - 6/99
Director 12/94 - 6/99
Lawrence S. Kash Founders Asset Management, LLC**** Member, Board of Managers 12/97 - Present
Vice Chairman (Continued)
The Boston Company Advisors, Chairman 12/95 - 1/99
Inc. Chief Executive Officer 12/95 - 1/99
Wilmington, DE President 12/95 - 1/99
The Boston Company, Inc.* Director 5/93 - Present
President 5/93 -Present
Mellon Bank, N.A.+ Executive Vice President 6/92 - Present
Laurel Capital Advisors, LLP+ Chairman 1/98 - 8/98
Executive Committee 1/98 - 8/98
Member
Chief Executive Officer 1/98 - 8/98
President 1/98 - 8/98
Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Chairman 9/93 - 1/98
President and CEO 12/91 - 1/98
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Martin G. McGuinn Mellon Financial Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 3/98
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
J. David Officer Dreyfus Service Corporation++ Executive Vice President 5/98 - Present
Vice Chairman Director 3/99 - Present
And Director
Dreyfus Service Organization, Inc.++ Director 3/99 - Present
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Dreyfus Brokerage Services, Inc. Chairman 3/99 - Present
401 North Maple Avenue
Beverly Hills, CA
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
J. David Officer North Miami Beach, FL 33180
Vice Chairman and
Director (Continued) Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - Present
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - Present
Services, Inc.* Director 8/96 - Present
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
Mellon Trust of New York Director 6/96 - Present
1301 Avenue of the Americas
New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
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 Chief Executive Officer 12/98 - Present
Prudential Securities
New York, NY Senior Vice President 07/91 - 11/98
Regional Director 07/91 - 11/98
Richard F. Syron Thermo Electron President 6/99 - Present
Director 81 Wyman Street Chief Executive Officer 6/99 - Present
Waltham, MA 02454-9046
American Stock Exchange Chairman 4/94 -6/99
86 Trinity Place Chief Executive Officer 4/94 - 6/99
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
Boston Safe Advisors, Inc. * Chairman 6/97 - Present
Director 2/97 - Present
Ronald P. O'Hanley Pareto Partners Partner Representative 5/97 - Present
Vice Chairman 271 Regent Street
Continued 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
Mark N. Jacobs Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - 3/99
Organization, Inc.++
William H. Maresca The Dreyfus Trust Company+++ Chief Financial Officer 3/99 - Present
Controller Treasurer 9/98 - Present
Director 3/97 - Present
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
William H. Maresca Dreyfus Service Treasurer 3/99 - Present
Controller (Continued) Organization, Inc.++ Assistant Treasurer 3/93 - 3/99
William H. Maresca Dreyfus Insurance Agency of
Controller (Continued) Massachusetts, Inc.++++ Assistant Treasurer 5/98 - Present
Dreyfus Transfer, Inc. Chairman 2/97 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - Present
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97-12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
Wilmington, DE 19808
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
The Dreyfus Trust Company +++ Director 1/96 - Present
Dreyfus Service Organization, Treasurer 10/96- 3/99
Inc.++
Dreyfus Insurance Agency of Director 5/97 - 3/99
Massachusetts, Inc.++++ Treasurer 5/97- 3/99
Executive Vice President 5/97 - 3/99
Diane P. Durnin Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and
Development Advertising Division
Patrice M. Kozlowski None
Vice President - Corporate
Communications
Mary Beth Leibig None
Vice President -
Human Resources
Theodore A. Schachar Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
The Dreyfus Consumer Credit Chairman 6/99 - Present
Corporation ++ President 6/99 - Present
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
Raymond J. Van Cott Mellon Financial Corporation+ Vice President 1/95 - Present
Vice-President -
Information Systems Computer Sciences Corporation+ Vice President 1/96 - 7/98
El Segundo, CA
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 2930 East Third Avenue,Denver, Colorado 80206.
+ 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
**** The address of the business so indicated is 2930 East Third Avenue,Denver, Colorado 80206.
</TABLE>
Item 27. Principal Underwriters
- -------- ----------------------
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management Funds
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Debt and Equity Funds
28) Dreyfus Index Funds, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Preferred Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Funds, Inc.
35) Dreyfus Investment Grade Bond Funds, Inc.
36) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds Trust
38) The Dreyfus/Laurel Tax-Free Municipal Funds
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus MidCap Index Fund 46) Dreyfus Money Market Instruments, Inc.
45) Dreyfus Municipal Bond Fund, Inc.
46) Dreyfus Municipal Cash Management Plus
47) Dreyfus Municipal Money Market Fund, Inc.
48) Dreyfus New Jersey Intermediate Municipal Bond Fund
49) Dreyfus New Jersey Municipal Bond Fund, Inc.
50) Dreyfus New Jersey Municipal Money Market Fund, Inc.
51) Dreyfus New Leaders Fund, Inc.
52) Dreyfus New York Insured Tax Exempt Bond Fund
53) Dreyfus New York Municipal Cash Management
54) Dreyfus New York Tax Exempt Bond Fund, Inc.
55) Dreyfus New York Tax Exempt Intermediate Bond Fund
56) Dreyfus New York Tax Exempt Money Market Fund
57) Dreyfus U.S. Treasury Intermediate Term Fund
58) Dreyfus U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus U.S. Treasury Short Term Fund
61) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
62) Dreyfus Pennsylvania Municipal Money Market Fund
63) Dreyfus Premier California Municipal Bond Fund
64) Dreyfus Premier Equity Funds, Inc.
65) Dreyfus Premier International Funds, Inc.
66) Dreyfus Premier GNMA Fund
67) Dreyfus Premier Worldwide Growth Fund, Inc.
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Equity Funds
72) Dreyfus Short-Intermediate Government Fund
73) Dreyfus Short-Intermediate Municipal Bond Fund
74) The Dreyfus Socially Responsible Growth Fund, Inc.
75) Dreyfus Stock Index Fund
76) Dreyfus Tax Exempt Cash Management
77) The Dreyfus Premier Third Century Fund, Inc.
78) Dreyfus Treasury Cash Management
79) Dreyfus Treasury Prime Cash Management
80) Dreyfus Variable Investment Fund
81) Dreyfus Worldwide Dollar Money Market Fund, Inc.
82) Founders Funds, Inc.
83) General California Municipal Bond Fund, Inc.
84) General California Municipal Money Market Fund
85) General Government Securities Money Market Funds, Inc.
86) General Money Market Fund, Inc.
87) General Municipal Bond Fund, Inc.
88) General Municipal Money Market Funds, Inc.
89) General New York Municipal Bond Fund, Inc.
90) General New York Municipal Money Market Fund
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Chief Treasurer
Compliance Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Jean M. O'Leary+ Assistant Vice President, None
Assistant Secretary and
Assistant Clerk
William J. Nutt+ Chairman of the Board None
Stephanie D. Pierce++ Vice President Vice President,
Assistant Secretary
and Assistant
Treasurer
Patrick W. McKeon+ Vice President None
Joseph A. Vignone+ Vice President None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 28. Location of Accounts and Records
_______ ________________________________
1. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
2. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
3. 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 effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, and
State of New York on the 24th day of February 2000.
THE DREYFUS/LAUREL FUNDS, INC.
BY: /s/Marie E. Connolly*
______________________________________
Marie E. Connolly, President
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to the Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
- ------------------------ ------------------------------ --------
/s/Marie E. Connolly* President, Treasurer 02/24/00
- ---------------------------
Marie E. Connolly
/s/Joseph S. DiMartino* Director 02/24/00
- ---------------------------
Joseph S. DiMartino
/s/James M. Fitzgibbons* Director 02/24/00
- ---------------------------
James M. Fitzgibbons
/s/J. Tomlinson Fort* Director 02/24/00
- ---------------------------
J. Tomlinson Fort
/s/Arthur L. Goeschel* Director 02/24/00
- ---------------------------
Arthur L. Goeschel
/s/Kenneth A. Himmel* Director 02/24/00
- ---------------------------
Kenneth A. Himmel
/s/Stephen J. Lockwood* Director 02/24/00
- ---------------------------
Stephen J. Lockwood
/s/Roslyn M. Watson* Director 02/24/00
- ---------------------------
Roslyn M. Watson
/s/Benaree Pratt Wiley* Director 02/24/00
- ---------------------------
Benaree Pratt Wiley
*By: /s/Stephanie D. Pierce
---------------------------
Stephanie D. Pierce,
Attorney-in-Fact
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
THE DREYFUS/LAUREL FUNDS, INC.
The Dreyfus/Laurel Funds, Inc. (the "Corporation"), a Maryland
Corporation, incorporated on August 6, 1987, having its principal office in
Maryland in Baltimore, Maryland, hereby certifies to the State Department of
Assessments and Taxation that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation ("Board") by Article FIFTH of the Articles of Incorporation of
the Corporation, as amended ("Articles of Incorporation"), the Board has
heretofore duly designated, in accordance with Section 2-105(c) of the Maryland
General Corporation Law, the aggregate number of shares of capital stock which
the Corporation is authorized to issue at twenty-five billion (25,000,000,000)
shares of capital stock, par value $.001 per share, amounting in the aggregate
to a par value of twenty-five million dollars ($25,000,000). Such shares of
capital stock have heretofore been classified by the Board among the series of
the Corporation as follows:
Dreyfus Money Market Reserves, Class R (2 billion shares)
Dreyfus Money MarketReserves, Investor Class (2 billion shares)
Dreyfus U.S. Treasury Reserves,Class R (1 billion shares)
Dreyfus U.S. Treasury Reserves, Investor Class (1 billion shares)
Dreyfus Municipal Reserves, Class R (1 billion shares)
Dreyfus Municipal Reserves, Investor Class (1 billion shares)
Dreyfus Institutional Government Money Market Fund (2 billion shares)
Dreyfus Institutional Prime Money Market Fund (2 billion shares)
Dreyfus Institutional U.S. Treasury Money Market Fund (2 billion shares)
Dreyfus Premier Balanced Fund, Class R (50 million shares)
Dreyfus Premier Balanced Fund, Class A (50 million shares)
Dreyfus Premier Balanced Fund, Class B (50 million shares)
Dreyfus Premier Balanced Fund, Class C (50 million shares)
Dreyfus Bond Market Index Fund, BASIC Class (100 million shares)
Dreyfus Bond Market Index Fund, Investor Class (50 million shares)
Dreyfus Disciplined Intermediate Bond Fund,
Restricted Class (100 million shares)
Dreyfus Disciplined Intermediate Bond Fund, Investor Class (100 million shares)
Dreyfus Premier Limited Term Income Fund, Class R (100 million shares)
Dreyfus Premier Limited Term Income Fund, Class A (50 million shares)
Dreyfus Premier Limited Term Income Fund, Class B (50 million shares)
Dreyfus Premier Limited Term Income Fund, Class C (50 million shares)
Dreyfus Premier Large Company Stock Fund, Class R (30 million shares)
Dreyfus Premier Large Company Stock Fund, Class A (20 million shares)
Dreyfus Premier Large Company Stock Fund, Class B (100 million shares)
Dreyfus Premier Large Company Stock Fund, Class C (100 million shares)
Dreyfus Premier Midcap Stock Fund,Class R (66 million shares)
Dreyfus Premier Midcap Stock Fund, Class A (22 million shares)
Dreyfus Premier Midcap Stock Fund, Class B (100 million shares)
Dreyfus Premier Midcap Stock Fund, Class C (100 million shares)
Dreyfus Premier Small Company Stock Fund, Class R (41 million shares)
Dreyfus Premier Small Company Stock Fund, Class A (27 million shares)
Dreyfus Premier Small Company Stock Fund, Class B (50 million shares)
Dreyfus Premier Small Company Stock Fund, Class C (50 million shares)
Dreyfus Disciplined Stock Fund (245 million shares)
Dreyfus BASIC S&P 500 Stock Index Fund (150 million shares)
Dreyfus Premier Small Cap Value Fund, Class R (100 million shares)
Dreyfus Premier Small Cap Value Fund, Class A (100 million shares)
Dreyfus Premier Small Cap Value Fund, Class B (100 million shares)
Dreyfus Premier Small Cap Value Fund, Class C (100 million shares)
Dreyfus Premier Tax Managed Growth Fund, Class A (100 million shares)
Dreyfus Premier Tax Managed Growth Fund, Class B (100 million shares)
reyfus Premier Tax Managed Growth Fund, Class C (100 million shares)
Dreyfus Premier Tax Managed Growth Fund, Class T (100 million shares)
Dreyfus Disciplined Smallcap Stock Fund (100 million shares)
Dreyfus Tax-Smart Growth Fund (100 million shares)
SECOND: Pursuant to authority expressly vested in the Board by Article
FIFTH of the Articles of Incorporation, the Board, in accordance with Sections
2-105 (including 2-105(c)), 2-208 and 208.1 of the Maryland General Corporation
Law, establishes and designates the following Classes of the Series below,
effective August 14, 1999:
Dreyfus Premier Large Company Stock Fund, Class T
(200 million shares)
Dreyfus Premier Small Company Stock Fund, Class T
(200 million shares)
Dreyfus Premier Midcap Stock Fund, Class T
(200 million shares)
Dreyfus Premier Balanced Fund, Class T
(200 million shares)
Dreyfus Premier Small Cap Value Fund, Class T
(200 million shares)
THIRD: The Class T shares shall have all of the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption as set forth in the
Corporation's Articles of Incorporation, as amended, except for certain
differences attributable to such Class as described in the Corporation's Rule
18f-3 Plan. Furthermore, assets of the Corporation attributable to the Class A,
Class B, Class C, Class R and Class T capital stock of Dreyfus Premier Large
Company Stock Fund, Dreyfus Premier Small Company Stock Fund, Dreyfus Premier
Midcap Stock Fund, Dreyfus Premier Balanced Fund and Dreyfus Premier Small Cap
Value Fund respectively, shall be invested in the same investment portfolio of
such Series of the Corporation. The proceeds of the redemption of a share of
common stock (including a fractional share) to be paid to the holder thereof
shall be reduced by the amount of any contingent deferred sales charge payable
on such redemption pursuant to the terms of issuance of such share of common
stock.
FOURTH: The aggregate number of shares of all Classes and Series of
capital stock of the Corporation remains twenty-five billion (25,000,000,000),
the par value per share remains $.001, and the aggregate par value of all
authorized stock remains twenty-five million dollars ($25,000,000). Except as
provided in the foregoing Article SECOND of these Articles Supplementary, the
designation and aggregate number of shares of capital stock of each Series and
Class that the Corporation is authorized to issue remain unchanged from those
set forth in Article FIRST. All authorized shares not designated or classified
above remain available for future designation and classification by the Board.
FIFTH: The Corporation is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act
of 1940, as amended.
IN WITNESS WHEREOF, the undersigned hereby executes these Articles
Supplementary on behalf of the Corporation, acknowledging it to be the act of
the Corporation, and further states under the penalties of perjury that, to the
best of his or her knowledge, information and belief, the matters and facts set
forth herein are true in all material respects.
Dated August 9, 1999 THE DREYFUS/LAUREL FUNDS, INC.
By: /s/ Stephanie D. Pierce
Name: Stephanie D. Pierce
Title: Vice President
Attest: /s/ Kathleen K. Morrisey
Name: Kathleen K. Morrisey
Title: Vice President
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
THE DREYFUS/LAUREL FUNDS, INC.
The Dreyfus/Laurel Funds, Inc. (the "Corporation"), a Maryland
Corporation, incorporated on August 6, 1987, having its principal office in
Maryland in Baltimore, Maryland, hereby certifies to the State Department of
Assessments and Taxation that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation ("Board") by Article FIFTH of the Articles of Incorporation of
the Corporation, as amended ("Articles of Incorporation"), the Board has
heretofore duly designated, in accordance with Section 2-105(c) of the Maryland
General Corporation Law, the aggregate number of shares of capital stock which
the Corporation is authorized to issue at twenty-five billion (25,000,000,000)
shares of capital stock, par value $.001 per share, amounting in the aggregate
to a par value of twenty-five million dollars ($25,000,000). Such shares of
capital stock have heretofore been classified by the Board among the series of
the Corporation as follows:
Dreyfus Money Market Reserves, Class R (2 billion shares)
Dreyfus Money Market Reserves, Investor Class (2 billion shares)
Dreyfus U.S. Treasury Reserves, Class R (1 billion shares)
Dreyfus U.S. Treasury Reserves, Investor Class (1 billion shares)
Dreyfus Municipal Reserves, Class R (1 billion shares)
Dreyfus Municipal Reserves, Investor Class (1 billion shares)
Dreyfus Institutional Government Money Market Fund (2 billion shares)
Dreyfus Institutional Prime Money Market Fund (2 billion shares)
Dreyfus Institutional U.S. Treasury Money Market Fund (2 billion shares)
Dreyfus Premier Balanced Fund, Class R (50 million shares)
Dreyfus Premier Balanced Fund, Class A (50 million shares)
Dreyfus Premier Balanced Fund, Class B (50 million shares)
Dreyfus Premier Balanced Fund, Class C (50 million shares)
Dreyfus Bond Market Index Fund, BASIC Class (100 million shares)
Dreyfus Bond Market Index Fund, Investor Class (50 million shares)
Dreyfus Disciplined Intermediate Bond Fund,
Restricted Class (100 million shares)
Dreyfus Disciplined Intermediate Bond Fund,
Investor Class (100 million shares)
Dreyfus Premier Limited Term Income Fund, Class R (100 million shares)
Dreyfus Premier Limited Term Income Fund, Class A (50 million shares)
Dreyfus Premier Limited Term Income Fund, Class B (50 million shares)
Dreyfus Premier Limited Term Income Fund, Class C (50 million shares)
Dreyfus Premier Large Company Stock Fund, Class R (30 million shares)
Dreyfus Premier Large Company Stock Fund, Class A (20 million shares)
Dreyfus Premier Large Company Stock Fund, Class B (100 million shares)
Dreyfus Premier Large Company Stock Fund, Class C (100 million shares)
Dreyfus Premier Midcap Stock Fund, Class R (66 million shares)
Dreyfus Premier Midcap Stock Fund, Class A (22 million shares)
Dreyfus Premier Midcap Stock Fund, Class B (100 million shares)
Dreyfus Premier Midcap Stock Fund, Class C (100 million shares)
Dreyfus Premier Small Company Stock Fund, Class R (41 million shares)
Dreyfus Premier Small Company Stock Fund, Class A (27 million shares)
Dreyfus Premier Small Company Stock Fund, Class B (50million shares)
Dreyfus Premier Small Company Stock Fund, Class C (50 million shares)
Dreyfus Disciplined Stock Fund (245 million shares)
Dreyfus BASIC S&P 500 Stock Index Fund (70 million shares)
Dreyfus Premier Small Cap Value Fund, Class R (100 million shares)
Dreyfus Premier Small Cap Value Fund, Class A (100 million shares)
Dreyfus Premier Small Cap Value Fund, Class B (100 million shares
Dreyfus Premier Small Cap Value Fund, Class C (100 million shares)
Dreyfus Premier Tax Managed Growth Fund, Class A (100million shares)
Dreyfus Premier Tax Managed Growth Fund, Class B (100 million shares)
Dreyfus Premier Tax Managed Growth Fund, Class C (100 million shares)
Dreyfus Premier Tax Managed Growth Fund, Class T (100 million shares)
Dreyfus Disciplined Smallcap Stock Fund (100 million shares)
Dreyfus Tax-Smart Growth Fund (100 million shares)
SECOND: Pursuant to authority expressly vested in the Board by Article
FIFTH of the Articles of Incorporation, the Board, in accordance with Sections
2-105(c) and 2-208.1 of the Maryland General Corporation Law, determined to
increase, and hereby increases the number of shares of the designated classes of
Dreyfus BASIC S&P 500 Stock Index Fund from 70,000,000 shares to 150,000,000
shares.
THIRD: The aggregate number of shares of all Classes and Series of the
Corporation remains twenty-five billion (25,000,000,000), the par value per
share remains $.001, and the aggregate par value of all authorized stock remains
twenty-five million dollars ($25,000,000). Except as provided in the foregoing
Article SECOND of these Articles Supplementary, the designation and aggregate
number of shares of capital stock of each Series and Class that the Corporation
is authorized to issue remain unchanged from those set forth in Article FIRST.
All authorized shares not designated or classified above remain available for
future designation and classification by the Board.
FOURTH: The Corporation is registered with the Securities and
------
Exchange Commission as an open-end investment company under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned hereby executes these Articles
Supplementary on behalf of the Corporation, acknowledging it to be the act of
the Corporation, and further states under the penalties of perjury that, to the
best of his or her knowledge, information and belief, the matters and facts set
forth herein are true in all material respects.
Dated March 15, 1999 THE DREYFUS/LAUREL FUNDS, INC.
By: /s/Michael Petrucelli
Name: Michael Petrucelli
Title: Vice President
Attest: /s/ Stephanie Pierce
Name: Stephanie Pierce
Title: Assistant Secretary
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
THE DREYFUS/LAUREL FUNDS, INC.
Pursuant to Sections 2-105, 2-605(a)(4) and 2-607 of the Maryland General
Corporation Law, The Dreyfus/Laurel Funds, Inc. (the "Corporation"), a Maryland
Corporation, incorporated on August 6, 1987, having its principal office in
Maryland in Baltimore, Maryland, hereby adopts the following Articles of
Amendment to the Corporation's Articles of Incorporation:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation ("Board") by Article FIFTH of the Articles of Incorporation, the
Board, in accordance with Sections 2-105, 2-605(a)(4) and 2-607(a)(2) of the
Maryland General Corporation Law, changes the name of the "Dreyfus Tax-Efficient
Growth Fund," a Series of the Corporation, to "Dreyfus Tax-Smart Growth Fund."
SECOND: The Amendment contained herein was approved by a majority of the
entire Board and is limited to changes expressly permitted by Section
2-605(a)(4) of the Maryland General Corporation Law to be made without action by
the stockholders of the Corporation.
THIRD: The Corporation is registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned hereby executes these Articles of
Amendment to the Corporation's Articles of Incorporation on behalf of the
Corporation, acknowledging it to be the act of the Corporation, and further
states under the penalties of perjury that, to the best of his or her knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects.
Dated March 15, 1999 THE DREYFUS/LAUREL FUNDS, INC.
By: /s/ Michael Petrucelli
Name: Michael Petrucelli
Title: Vice President
Attest: /s/ Stephanie Pierce
Name: Stephanie Pierce
Title: Assistant Secretary
SUB-INVESTMENT ADVISORY AGREEMENT
THE DREYFUS CORPORATION
200 Park Avenue
New York, New York 10166
October 23, 1997
Fayez Sarofim & Co.
Two Houston Center
Suite 2907
Houston, Texas 77010
Dear Sirs:
As you are aware, Dreyfus Premier Tax Managed Growth Fund (the
"Fund"),a series of The Dreyfus/Laurel Funds, Inc., a Maryland corporation (the
"Company"), desires to employ its capital by investing and reinvesting the same
in investments of the type and in accordance with the limitations specified in
its Articles of Incorporation and in its Prospectus and Statement of Additional
Information as from time to time in effect, copies of which have been or will be
submitted to you, and in such manner and to such extent as from time to time may
be approved by the Company's Board of Directors. The Company intends to employ
The Dreyfus Corporation (the "Adviser") to act as the Fund's investment adviser
pursuant to a written agreement with the Company dated April 4, 1994,
transferred to the Adviser on October 17, 1994 (the "Management Agreement"), a
copy of which has been furnished to you. The Adviser desires to employ you to
act as the Fund's sub-investment adviser.
In this connection, it is understood that from time to time
you will employ or associate with yourself such person or persons as you may
believe to be particularly fitted to assist you in the performance of this
Agreement. Such person or persons may be officers or employees who are employed
by both you and the Fund. The compensation of such person or persons shall be
paid by you and no obligation may be incurred on the Fund's behalf in any such
respect.
Subject to the supervision and approval of the Adviser, you
will provide investment management of the Fund's portfolio in accordance with
the Fund's investment objectives and policies as stated in the Fund's Prospectus
and Statement of Additional Information as from time to time in effect. In
connection therewith, you will supervise the Fund's investments and conduct a
continuous program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. You will furnish to the Adviser or the Fund
such statistical information, with respect to the investments which the Fund may
hold or contemplate purchasing, as the Adviser or the Fund may reasonably
request.
The Fund and the Adviser wish to be informed of important
developments materially affecting the Fund's portfolio and shall expect you, on
your own initiative, to furnish to the Fund or the Adviser from time to time
such information as you may believe appropriate for this purpose.
You shall exercise your best judgment in rendering the
services to be provided hereunder, and the Adviser agrees as an inducement to
your undertaking the same that you shall not be liable hereunder for any error
of judgment or mistake of law or for any loss suffered by the Fund or the
Adviser, provided that nothing herein shall be deemed to protect or purport to
protect you against any liability to the Adviser, the Fund or the Fund's
security holders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties
hereunder, or by reason of your reckless disregard of your obligations and
duties hereunder.
In consideration of services rendered pursuant to this
Agreement, the Adviser will pay you, on the first business day of each month,
out of the management fee it receives and only to the extent thereof, an annual
fee of .30 of 1% of the value of the Fund's average daily net assets, calculated
daily and paid monthly.
Net asset value shall be computed on such days and at such
time or times as described in the Fund's then-current Prospectus and Statement
of Additional Information. The fee for the period from the date following the
commencement of sales of the Fund's shares (after any sales are made to the
Adviser) to the end of the month during which such sales shall have been
commenced shall be pro-rated according to the proportion which such period bears
to the full monthly period, and upon any termination of this Agreement before
the end of any month, the fee for such part of a month shall be pro-rated
according to the proportion which such period bears to the full monthly period
and shall be payable within 10 business days of date of termination of this
Agreement.
For the purpose of determining fees payable to you, the value
of the Fund's net assets shall be computed in the manner specified in the Fund's
Articles of Incorporation for the computation of the value of the Fund's net
assets.
You wil1 bear all expenses in connection with the performance
of your services under this Agreement. All other expenses to be incurred in the
operation of the Fund (other than those borne by the Adviser) will be borne by
the Fund, except to the extent specifically assumed by you. Under the Management
Agreement, Dreyfus pays all of the Fund's expenses, except brokerage fees,
taxes, interest, fees and expenses of non-interested Directors (including
counsel fees), Rule 12b-1 fees (if applicable) and extraordinary expenses, each
of which is borne by the Fund.
The Adviser understands that you now act, and that from time to
time hereafter you may act, as investment adviser to one or more other
investment companies and fiduciary of other managed accounts, and the Adviser
has no objection to your so acting, provided that when purchase or sale of
securities of the same issuer is suitable for the investment objectives of two
or more companies or accounts managed by you which have available funds for
investment, the available securities will be allocated in a manner believed by
you to be equitable to each company or account. It is recognized that in some
cases this procedure may adversely affect the price paid or received by the Fund
or the size of the position obtainable for or disposed of by the Fund.
In addition, it is understood that the persons employed by you
to assist in the performance of your duties hereunder will not devote their full
time to such services and nothing contained herein shall be deemed to limit or
restrict your right or the right of any of your affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
You shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund or the Adviser in connection with
the matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on your part in the
performance of your duties or from reckless disregard by you of your obligations
and duties under this Agreement. Any person, even though also your officer,
director, partner, employee or agent, who may be or become an officer, Director,
employee or agent of the Fund, shall be deemed, when rendering services to the
Fund or acting on any business of the Fund, to be rendering such services to or
acting solely for the Fund and not as your officer, director, partner, employee,
or agent or one under your control or direction even though paid by you.
This Agreement shall continue until April 4, 1999, and
thereafter shall continue automatically for successive annual periods ending on
April 4th of each year, provided such continuance is specifically approved at
least annually by (i) the Fund's Directors or (ii) vote of a majority (as
defined in the Investment Company Act of 1940, as amended) of the Fund's
outstanding voting securities, provided that in either event its continuance
also is approved by a majority of the Fund's Directors who are not "interested
persons" (as defined in said Act) of any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable without penalty (i) by the Adviser upon 60 days' notice
to you, (ii) by the Fund's Directors or by vote of the holders of a majority of
the Fund's shares upon 60 days' notice to you, or (iii) by you upon not less
than 90 days' notice to the Fund and the Adviser. This Agreement also will
terminate automatically in the event of its assignment (as defined in said Act).
In addition, notwithstanding anything herein to the contrary, if the Management
Agreement terminates for any reason, this Agreement shall terminate effective
upon the date the Management Agreement terminates.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
THE DREYFUS CORPORATION
By:/s/Larry Kash
Title:Vice Chairman
Accepted:
FAYEZ SAROFIM & CO.
By:/s/Raye White
Title:Executive Vice President
DISTRIBUTION AGREEMENT
The Dreyfus/Laurel Funds, Inc.
The Dreyfus/Laurel Funds Trust
The Dreyfus/Laurel Tax-Free Municipal Funds
200 Park Avenue
New York, New York 10166
October 14, 1994
As Amended October 21, 1999
===========================
Premier Mutual Fund Services, Inc.
60 State Street
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the "Fund") has
agreed that you shall be, for the period of this agreement, the distributor of
(a) shares of each Series of the Fund set forth on Exhibit A hereto, as such
Exhibit may be revised from time to time (each, a "Series") or (b) if no Series
are set forth on such Exhibit, shares of the Fund. For purposes of this
agreement the term "Shares" shall mean the authorized shares of the relevant
Series, if any, and otherwise shall mean the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered by,
and in accordance with, the registration statement and prospectus then in effect
under the Securities Act of 1933, as amended, and will transmit promptly any
orders received by you for purchase or redemption of Shares to the Transfer and
Dividend Disbursing Agent for the Fund of which the Fund has notified you in
writing.
1.2 You agree to use your best efforts to solicit orders for the sale
of Shares. It is contemplated that you will enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitation, all rules
and regulations made or adopted pursuant to the Investment Company Act of 1940,
as amended, by the Securities and Exchange Commission or any securities
association registered under the Securities Exchange Act securities association
registered under the Securities Exchange Act of 1934, as amended.
0.1 Whenever in their judgment such action is warranted by market,
economic or political conditions, or by abnormal circumstances of any kind, the
Fund's officers may decline to accept any orders for, or make any sales of, any
Shares until such time as they deem it advisable to accept such orders and to
make such sales and the Fund shall advise you promptly of such determination.
0.2 The Fund agrees to pay all costs and expenses in connection with
the registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided, however,
that nothing contained herein shall be deemed to require the Fund to pay any of
the costs of advertising the sale of Shares.
0.3 The Fund agrees to execute any and all documents and to furnish
any and all information and otherwise to take all actions which may be
reasonably necessary in the discretion of the Fund's officers in connection with
the qualification of Shares for sale in such states as you may designate to the
Fund and the Fund may approve, and the Fund agrees to pay all expenses which may
be incurred in connection with such qualification. You shall pay all expenses
connected with your own qualification as a dealer under state or Federal laws
and, except as otherwise specifically provided in this agreement, all other
expenses incurred by you in connection with the sale of Shares as contemplated
in this agreement.
0.4 The Fund shall furnish you from time to time, for use in
connection with the sale of Shares, such information with respect to the Fund or
any relevant Series and the Shares as you may reasonably request, all of which
shall be signed by one or more of the Fund's duly authorized officers; and the
Fund warrants that the statements contained in any such information, when so
signed by the Fund's officers, shall be true and correct. The Fund also shall
furnish you upon request with: (a) semi-annual reports and annual audited
reports of the Fund's books and accounts made by independent public accountants
regularly retained by the Fund, (b) quarterly earnings statements prepared by
the Fund, (c) a monthly itemized list of the securities in the Fund's or, if
applicable, each Series' portfolio, (d) monthly balance sheets as soon as
practicable after the end of each month, and (e) from time to time such
additional information regarding the Fund's financial condition as you may
reasonably request.
0.5 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the Shares have been carefully prepared in
conformity with the requirements of said Acts and rules and regulations of the
Securities and Exchange Commission thereunder. As used in this agreement the
terms "registration statement" and "prospectus" shall mean any registration
statement and prospectus, including the statement of additional information
incorporated by reference therein, filed with the Securities and Exchange
Commission and any amendments and supplements thereto which at any time shall
have been filed with said Commission. The Fund represents and warrants to you
that any registration statement and prospectus, when such registration statement
becomes effective, will contain all statements required to be stated therein in
conformity with said Acts and the rules and regulations of said Commission; that
all statements of fact contained in any such registration statement and
prospectus will be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any prospectus when
such registration statement becomes effective will include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Fund may
but shall not be obligated to propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus as, in the light of future developments, may, in the opinion of
the Fund's counsel, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request from you to do so, you may,
at your option, terminate this agreement or decline to make offers of the Fund's
securities until such amendments are made. The Fund shall not file any amendment
to any registration statement or supplement to any prospectus without giving you
reasonable notice thereof in advance; provided, however, that nothing contained
in this agreement shall in any way limit the Fund's right to file at any time
such amendments to any registration statement and/or supplements to any
prospectus, of whatever character, as the Fund may deem advisable, such right
being in all respects absolute and unconditional.
0.6 The Fund authorizes you to use any prospectus in the form
furnished to you from time to time, in connection with the sale of Shares. The
Fund agrees to indemnify, defend and hold you, your several officers and
directors, and any person who controls you within the meaning of Section 15 of
the Securities Act of 1933, as amended, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which you, your officers and directors,
or any such controlling person, may incur under the Securities Act of 1933, as
amended, or under common law or otherwise, arising out of or based upon any
untrue statement, or alleged untrue statement, of a material fact contained in
any registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Fund's
agreement to indemnify you, your officers or directors, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of any untrue statement or alleged untrue statement or omission or
alleged omission made in any registration statement or prospectus in reliance
upon and in conformity with written information furnished to the Fund by you
specifically for use in the preparation thereof. The Fund's agreement to
indemnify you, your officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Fund's being notified of any action
brought against you, your officers or directors, or any such controlling person,
such notification to be given by letter or by telegram addressed to the Fund at
its address set forth above within ten days after the summons or other first
legal process shall have been served. The failure so to notify the Fund of any
such action shall not relieve the Fund from any liability which the Fund may
have to the person against whom such action is brought by reason of any such
untrue, or alleged untrue, statement or omission, or alleged omission, otherwise
than on account of the Fund's indemnity agreement contained in this paragraph
1.9. The Fund will be entitled to assume the defense of any suit brought to
enforce any such claim, demand or liability, but, in such case, such defense
shall be conducted by counsel of good standing chosen by the Fund and approved
by you. In the event the Fund elects to assume the defense of any such suit and
retain counsel of good standing approved by you, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Fund does not elect to assume the defense of any
such suit, or in case you do not approve of counsel chosen by the Fund, the Fund
will reimburse you, your officers and directors, or the controlling person or
persons named as defendant or defendants in such suit, for the fees and expenses
of any counsel retained by you or them. The Fund's indemnification agreement
contained in this paragraph 1.9 and the Fund's representations and warranties in
this agreement shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of you, your officers and directors, or
any controlling person, and shall survive the delivery of any Shares. This
agreement of indemnity will inure exclusively to your benefit, to the benefit of
your several officers and directors, and their respective estates, and to the
benefit of any controlling persons and their successors. The Fund agrees
promptly to notify you of the commencement of any litigation or proceedings
against the Fund or any of its officers or Board members in connection with the
issue and sale of Shares.
0.7 You agree to indemnify, defend and hold the Fund, its several
officers and Board members, and any person who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Fund, its officers or Board members, or any such controlling person, may incur
under the Securities Act of 1933, as amended, or under common law or otherwise,
but only to the extent that such liability or expense incurred by the Fund, its
officers or Board members, or such controlling person resulting from such claims
or demands, shall arise out of or be based upon any untrue, or alleged untrue,
statement of a material fact contained in information furnished in writing by
you to the Fund specifically for use in the Fund's registration statement and
used in the answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by you to the Fund and
required to be stated in such answers or necessary to make such information not
misleading. Your agreement to indemnify the Fund, its officers and Board
members, and any such controlling person, as aforesaid, is expressly conditioned
upon your being notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification to be given by
letter or telegram addressed to you at your address set forth above within ten
days after the summons or other first legal process shall have been served. You
shall have the right to control the defense of such action, with counsel of your
own choosing, satisfactory to the Fund, if such action is based solely upon such
alleged misstatement or omission on your part, and in any other event the Fund,
its officers or Board members, or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any such
action. The failure so to notify you of any such action shall not relieve you
from any liability which you may have to the Fund, its officers or Board
members, or to such controlling person by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission, otherwise than on account of
your indemnity agreement contained in this paragraph 1.10. This agreement of
indemnity will inure exclusively to the Fund's benefit, to the benefit of the
Fund's officers and Board members, and their respective estates, and to the
benefit of any controlling persons and their successors.
You agree promptly to notify the Fund of the commencement of any litigation or
proceedings against you or any of your officers or directors in connection with
the issue and sale of Shares.
0.8 No Shares shall be offered by either you or the Fund under any of
the provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission; provided, however, that nothing contained in
this paragraph 1.11 shall in any way restrict or have an application to or
bearing upon the Fund's obligation to repurchase any Shares from any shareholder
in accordance with the provisions of the Fund's prospectus or charter documents.
0.9 The Fund agrees to advise you immediately in
writing:
(a) of any request by the Securities and
Exchange Commission for amendments to the registration
statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the effectiveness of
the registration statement or prospectus then in effect or the
initiation of any proceeding for that purpose;
(c) of the happening of any event which makes untrue any
statement of a material fact made in the registration statement or
prospectus then in effect or which requires the making of a change in
such registration statement or prospectus in order to make the
statements therein not misleading; and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to any registration
statement or prospectus which may from time to time be filed with the
Securities and Exchange Commission.
1. Offering Price
Shares of any class of the Fund offered for sale by you shall be
offered for sale at a price per share (the "offering price") approximately equal
to (a) their net asset value (determined in the manner set forth in the Fund's
charter documents) plus (b) a sales charge, if any and except to those persons
set forth in the then-current prospectus, which shall be the percentage of the
offering price of such Shares as set forth in the Fund's then-current
prospectus. The offering price, if not an exact multiple of one cent, shall be
adjusted to the nearest cent. In addition, Shares of any class of the Fund
offered for sale by you may be subject to a contingent deferred sales charge as
set forth in the Fund's then-current prospectus. You shall be entitled to
receive any sales charge or contingent deferred sales charge in respect of the
Shares. Any payments to dealers shall be governed by a separate agreement
between you and such dealer and the Fund's then-current prospectus.
2. Term
This agreement shall continue until the date (the "Reapproval Date")
set forth on Exhibit A hereto (and, if the Fund has Series, a separate
Reapproval Date shall be specified on Exhibit A for each Series), and thereafter
shall continue automatically for successive annual periods ending on the day
(the "Reapproval Day") of each year set forth on Exhibit A hereto, provided such
continuance is specifically approved at least annually by (i) the Fund's Board
or (ii) vote of a majority (as defined in the Investment Company Act of 1940) of
the Shares of the Fund or the relevant Series, as the case may be, provided that
in either event its continuance also is approved by a majority of the Board
members who are not "interested persons" (as defined in said Act) of any party
to this agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This agreement is terminable without penalty, on 60
days' notice, by vote of holders of a majority of the Fund's or, as to any
relevant Series, such Series' outstanding voting securities or by the Fund's
Board as to the Fund or the relevant Series, as the case may be. This agreement
is terminable by you, upon 270 days' notice, effective on or after the fifth
anniversary of the date hereof. This agreement also will terminate
automatically, as to the Fund or relevant Series, as the case may be, in the
event of its assignment (as defined in said Act).
<PAGE>
3. Exclusivity
So long as you act as the distributor of Shares, you shall not
perform any services for any entity other than a "Mellon Entity," such term
being defined as any entity that is advised or administered by a direct or
indirect subsidiary of the Mellon Financial Corporation. The Fund acknowledges
that the persons employed by you to assist in the performance of your duties
under this agreement may not devote their full time to such service and, subject
to the preceding sentence, nothing contained in this agreement shall be deemed
to limit or restrict your or any of your affiliates right to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
**4. Miscellaneous
This agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this agreement shall only be binding upon the assets and property
of the Fund and shall not be binding upon any Board member, officer or
shareholder of the Fund individually.**
Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding agreement between us.
Very truly yours,
[NAME OF FUND]
By: _______________________
Accepted:
PREMIER MUTUAL FUND SERVICES, INC.
By:_______________________________
<PAGE>
EXHIBIT A**
Name of Series Reapproval Reapproval
Date Day
The Dreyfus/Laurel Funds, Inc.
Dreyfus Bond Market Index Fund April 4, 2000 April 4th
Dreyfus Premier Midcap Stock Fund April 4, 2000 April 4th
Dreyfus Disciplined Stock Fund April 4, 2000 April 4th
Dreyfus Premier Large Company Stock Fund April 4, 2000 April 4th
Dreyfus Institutional Government Money April 4, 2000 April 4th
Market Fund
Dreyfus Institutional Prime Money Market April 4, 2000 April 4th
Fund
Dreyfus Institutional U.S. Treasury Money April 4, 2000 April 4th
Market Fund
Dreyfus Money Market Reserves April 4, 2000 April 4th
Dreyfus Municipal Reserves April 4, 2000 April 4th
Dreyfus U.S. Treasury Reserves April 4, 2000 April 4th
Dreyfus Premier Balanced Fund April 4, 2000 April 4th
Dreyfus Premier Limited Term Income Fund April 4, 2000 April 4th
Dreyfus Premier Small Company Stock Fund April 4, 2000 April 4th
Dreyfus Disciplined Intermediate Bond Fund April 4, 2000 April 4th
Dreyfus Premier Small Cap Value Fund April 4, 2000 April 4th
Dreyfus Premier Tax Managed Growth Fund April 4, 2000 April 4th
Dreyfus Tax-Smart Growth Fund April 4, 2000 April 4th
Dreyfus Disciplined Smallcap Stock Fund April 4, 2000 April 4th
Dreyfus BASIC S&P 500 Stock Index Fund April 4, 2000 April 4th
The Dreyfus/Laurel Funds Trust
Dreyfus Premier Core Value Fund April 4, 2000 April 4th
Dreyfus Premier Managed Income Fund April 4, 2000 April 4th
Dreyfus Premier Limited Term High Income April 4, 2000 April 4th
Fund
The Dreyfus/Laurel Tax-Free Municipal Funds
Dreyfus BASIC California Municipal Money April 4, 2000 April 4th
Market Fund
Dreyfus BASIC Massachusetts Municipal Money April 4, 2000 April 4th
Market Fund
Dreyfus BASIC New York Municipal Money April 4, 2000 April 4th
Market Fund
Dreyfus Premier Limited Term Municipal Fund April 4, 2000 April 4th
Dreyfus Premier Limited Term Massachusetts April 4, 2000 April 4th
Municipal Fund
**No changes will be made to a Fund's current Reapproval Date or Day.
Independent Auditors' Consent
To the Shareholders and Board of Directors
The Dreyfus/Laurel Funds, Inc.
We consent to the use of our reports dated December 15, 1999 with respect to The
Dreyfus Premier Tax Managed Growth Fund, Dreyfus Bond Market Index Fund, Dreyfus
Premier Limited Term Income Fund, Dreyfus Disciplined Smallcap Stock Fund,
Dreyfus Disciplined Intermediate Bond Fund, Dreyfus Disciplined Stock Fund,
Dreyfus Premier Balanced Fund, Dreyfus Premier Large Company Stock Fund, Dreyfus
Basic S&P 500 Stock Index Fund, Dreyfus Premier Small Company Stock Fund,
Dreyfus Premier Small Cap Value Fund, Dreyfus Premier Midcap Stock Fund, Dreyfus
Money Market Reserves, Dreyfus Institutional U.S. Treasury Money Market Fund,
Dreyfus Institutional Government Money Market Fund, Dreyfus Institutional Prime
Money Market Fund, Dreyfus U.S. Treasury Reserves and Dreyfus Municipal Reserves
of The Dreyfus/Laurel Funds, Inc (the "Funds"), incorporated herein by reference
and to the references to our Firm under the headings "Financial Highlights" in
the Prospectuses and "Transfer and Dividend Disbursing Agent, Custodian, Counsel
and Independent Auditors" in the Statements of Additional Information.
/s/KPMG LLP
New York, New York
February 22, 2000
THE DREYFUS FAMILY OF FUNDS
(Funds Included in Schedule A)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940
Act"), requires that the Board of an investment company desiring to offer
multiple classes of shares pursuant to said Rule adopt a plan setting forth the
differences among the classes with respect to shareholder services, distribution
arrangements, expense allocations and any related conversion features or
exchange privileges.
The Board, including a majority of the non-interested Board members, of
each of the investment companies, or series thereof, listed on Schedule A
attached hereto as the same may be revised from time to time (each a "Fund"),
which desires to offer multiple classes has determined that the following plan
is in the best interests of each class individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into
Investor Class and Class R.
2. Differences in Availability: The sale of Investor shares of a Fund
shall be limited to accounts of investors maintaining related securities,
brokerage, commodities trading or similar accounts with banks, securities
brokers or dealers or other financial institutions that have entered into
selling agreements with the Fund's distributor and to those retail investors who
have held Investor shares of a Fund prior to September 1, 1995 and have
continued to hold Investor shares of that Fund.
Class R shares of a Fund shall be sold primarily to bank trust departments
and other financial service providers acting on behalf of customers having a
qualified trust or investment account or relationship at such institution, or to
customers who has received and hold shares of that Fund distributed to them by
virtue of such an account or relationship.
3. Differences in Services: Other than shareholder
services provided under the Distribution Plan, the services
offered to shareholders of each Class shall be the same.
4. Differences in Distribution Arrangements: Investor shares shall be
subject to a Distribution Plan adopted pursuant to Rule 12b-1 under the 1940
Act. The Distribution Plan for Investor shares allows the Fund to spend annually
up to 0.25% of its average daily net assets attributable to Investor shares to
compensate Dreyfus Service Corporation, an affiliate of The Dreyfus Corporation
("Dreyfus"), for shareholder servicing activities, and the Fund's Distributor
for shareholder servicing activities and for activities or expenses primarily
intended to result in the sale of Investor shares.
Class R shares shall not be subject to a Distribution Plan.
5. Expense Allocation: The following expenses shall be allocated, to the
extent practicable, on a Class-by-Class basis: (a) fees under the Distribution
Plan; (b) printing and postage expenses payable by the Fund related to preparing
and distributing materials, such as proxies, to current shareholder of a
specific Class; and (c) litigation or other legal expenses relating solely to a
specific Class.
6. Conversion Features: There shall be no automatic
conversion feature for either the Investor Class or Class R.
7. Exchange Privileges: Investor shares shall be exchangeable only for (a)
Investor shares (however the same may be named) of other funds managed or
administered by Dreyfus; (b) Class A shares (however the same may be named) of
certain other funds managed or administered by Dreyfus or managed by Founders
Asset Management LLC ("Founders"), an affiliate of Dreyfus (subject to any sales
load applicable to such shares); (c) BASIC shares (however the same may be
named) of other funds managed or administered by Dreyfus (subject to the minimum
investment amount applicable to such shares); (d) shares of funds managed or
administered by Dreyfus which do not have separate share classes; and (e) shares
of certain other funds specified from time to time.
Class R shares shall be exchangeable only for (a) Class R shares (however
the same may be named) of certain other funds managed or administered by Dreyfus
or managed by Founders; (b) Restricted shares (however the same may be named) of
other funds managed or administered by Dreyfus; (c) BASIC shares (however the
same may be named) of other funds managed or administered by Dreyfus (subject to
the minimum investment amount applicable to such shares); (d) shares of funds
managed or administered by Dreyfus which do not have separate share classes; and
(e) shares of certain other funds specified from time to time.
Dated: April 26, 1995
Revised as of August 15, 1997 and amended as of December 31, 1999.
<PAGE>
SCHEDULE A
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Money Market Reserves
Dreyfus Municipal Reserves
Dreyfus U.S. Treasury Reserves
THE DREYFUS FAMILY OF FUNDS
(Dreyfus Premier Family of Funds -
Fixed-Income Funds Included in Exhibit I)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"), requires that the Board of an investment company desiring to offer
multiple classes of shares pursuant to said Rule adopt a plan setting forth the
differences among the classes with respect to shareholder services, distribution
arrangements, expense allocations and any related conversion features or
exchange privileges.
The Board, including a majority of the non-interested Board members,
of each of the investment companies, or series thereof, listed on Exhibit I
attached hereto as the same may be revised from time to time (each, a "Fund"),
which desires to offer multiple classes has determined that the following plan
is in the best interests of each class individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into Class A, Class B,
Class C and Class R.
2. Differences in Availability: Class A shares, Class B shares and Class C
shares shall be available only to clients of banks, brokers, dealers and other
financial institutions, except that full-time or part-time employees or
directors of The Dreyfus Corporation ("Dreyfus") or any of its affiliates or
subsidiaries, Board members or a fund advised by Dreyfus, including members of
the Fund's Board, or the spouse or minor child of any of the foregoing may
purchase Class A shares directly through the Distributor.
Class R shares shall be sold primarily to bank trust departments and
other financial service providers acting on behalf of customers having a
qualified trust or investment account or relationship at such institution, or to
customers who have received and hold shares of the Fund distributed to them by
virtue of such an account or relationship.
3. Differences in Services: Other than shareholder services provided under the
Distribution Plan for Class A shares and the Service Plans for Class B and Class
C shares, the services offered to shareholders of each Class shall be
substantially the same, except that Right of Accumulation and Letter of Intent
shall be applicable only to holders of Class A shares and Reinvestment Privilege
shall be applicable only to holders of Class A and Class B shares.
4. Differences in Distribution Arrangements: Class A shares shall be offered
with a front-end sales charge, as such term is defined in Rule 2830(b) of the
Conduct Rules of the National Association of Securities Dealers, Inc. ("Rule
2830(b)"), and a deferred sales charge (a "CDSC"), as such term is defined in
Rule 2830(b), may be assessed on certain redemptions of Class A shares purchased
without an initial sales charge as part of an investment of $1 million or more.
The amount of the sales charge and the amount of and provisions relating to the
CDSC pertaining to the Class A shares are set forth on Schedule A hereto. Class
A shares shall be subject to a Distribution Plan adopted pursuant to Rule 12b-1
under the 1940 Act. The Distribution Plan for Class A shares allows the Fund to
spend annually up to 0.25% of its average daily net assets attributable to Class
A shares to compensate Dreyfus Service Corporation, an affiliate of Dreyfus, for
shareholder servicing activities, and the Fund's Distributor for shareholder
servicing activities and for activities or expenses primarily intended to result
in the sale of Class A shares.
Class B shares shall not be subject to a front-end sales charge, but
shall be subject to a CDSC. The amount of and provisions relating to the CDSC
are set forth on Schedule B hereto. Class B shares shall be subject to a
Distribution Plan and Service Plan each adopted pursuant to Rule 12b-1 under the
1940 Act. Under the Distribution Plan for Class B shares, the Fund pays the
Distributor for distributing the Fund's Class B shares at an aggregate annual
rate of .50 of 1% of the value of the average daily net assets of Class B. Under
the Service Plan for Class B shares, the Fund pays Dreyfus Service Corporation
or the Distributor for the provision of certain services to the holders of Class
B shares a fee at the annual rate of .25 of 1% of the value of the average daily
net assets of Class B.
Class C shares shall not be subject to a front-end sales charge, but
shall be subject to a CDSC. The amount of and provisions relating to the CDSC
are set forth on Schedule C hereto. Class C shares shall be subject to a
Distribution Plan and Service Plan each adopted pursuant to Rule 12b-1 under the
1940 Act. Under the Distribution Plan for Class C shares, the Fund pays the
Distributor for distributing the Fund's Class C shares at an aggregate annual
rate of .50 of 1% of the value of the average daily net assets of Class C. Under
the Service Plan for Class C shares, the Fund pays Dreyfus Service Corporation
or the Distributor for the provision of certain services to the holders of Class
C shares a fee at the annual rate of .25 of 1% of the value of the average daily
net assets of Class C.
Class A, Class B and Class C shares shall vote separately with
respect to any matter relating to the Plan or Plans that effect them.
Class R shares shall not be subject to a front-end sales charge,
CDSC, distribution plan or service plan.
5. Expense Allocation: The following expenses shall be allocated, to the
extent practicable, on a Class-by-Class basis: (a) fees under the Distribution
Plans and Service Plan; (b) printing and postage expenses payable by the Fund
related to preparing and distributing materials, such as proxies, to current
shareholders of a specific Class; and (c) litigation or other legal expenses
relating solely to a specific Class.
6. Conversion Features: Class B shares shall automatically convert to Class A
shares after a specified period of time after the date of purchase, based on the
relative net asset value of each such Class without the imposition of any sales
charge, fee or other charge, as set forth on Schedule D hereto. No other Class
shall be subject to any automatic conversion feature.
7. Exchange Privileges: Class A shares shall be exchangeable only for (a) Class
A shares (however the same may be named) of certain other funds managed or
administered by Dreyfus or managed by Founders Asset Management LLC
("Founders"), an affiliate of Dreyfus; (b) Investor shares (however the same may
be named) of other funds managed or administered by Dreyfus; (c) BASIC shares
(however the same may be named) of other funds managed or administered by
Dreyfus (subject to the minimum investment amount applicable to such shares);
(d) shares of funds managed or administered by Dreyfus which do not have
separate share classes; and (e) shares of certain other funds, as specified from
time to time.
Class B shares shall be exchangeable only for (a) Class B shares
(however the same may be named) of certain other funds managed or administered
by Dreyfus or managed by Founders with the same CDSC structure as the Fund; and
(b) shares of certain other funds, as specified from time to time.
Class C shares shall be exchangeable only for (a) Class C shares
(however the same may be named) of certain other funds managed or administered
by Dreyfus or managed by Founders with the same CDSC structure as the Fund; and
(b) shares of certain other funds, as specified from time to time.
Class R shares shall be exchangeable only for (a) Class R shares
(however the same may be named) of certain other funds managed or administered
by Dreyfus or managed by Founders; (b) Restricted shares (however the same may
be named) of other funds managed or administered by Dreyfus; (c) BASIC shares
(however the same may be named) of other funds managed or administered by
Dreyfus (subject to the minimum investment amount applicable to such shares);
(d) shares of funds managed or administered by Dreyfus which do not have
separate share classes; and (e) shares of certain other funds, as specified from
time to time.
Dated: April 26, 1995
Revised as of August 15, 1997 and amended as of
December 31, 1999
<PAGE>
EXHIBIT I
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Premier Limited Term Income Fund
The Dreyfus/Laurel Tax-Free Municipal Funds -
Dreyfus Premier Limited Term Municipal Fund
Dreyfus Premier Limited Term Massachusetts
Municipal Fund
<PAGE>
SCHEDULE A
Front-End Sales Charge--Class A Shares--The public offering price for Class A
shares shall be the net asset value per share of that Class plus a sales load as
shown below:
Total Sales Load
----------------------------
Amount of Transaction As a % of As a % of
offering net asset
price per value per
share share
------------ ------------
Less than $100,000.................. 3.00 3.10
$100,000 to less than $250,000...... 2.75 2.80
$250,000 to less than $500,000...... 2.25 2.30
$500,000 to less than $1,000,000.... 2.00 2.00
$1,000,000 or more.................. -0- -0-
Contingent Deferred Sales Charge--Class A Shares--A CDSC of 1% shall be assessed
at the time of redemption of Class A shares purchased without an initial sales
charge as part of an investment of at least $1,000,000 and redeemed within one
year after purchase. The terms contained in Schedule B pertaining to the CDSC
assessed on redemptions of Class B shares (other than the amount of the CDSC and
its time periods), including the provisions for waiving the CDSC, shall be
applicable to the Class A shares subject to a CDSC. Letter of Intent and Right
of Accumulation shall apply to such purchases of Class A shares.
<PAGE>
SCHEDULE B
Contingent Deferred Sales Charge--Class B Shares--A CDSC payable to the Fund's
Distributor shall be imposed on any redemption of Class B shares which reduces
the current net asset value of such Class B shares to an amount which is lower
than the dollar amount of all payments by the redeeming shareholder for the
purchase of Class B shares of the Fund held by such shareholder at the time of
redemption. No CDSC shall be imposed to the extent that the net asset value of
the Class B shares redeemed does not exceed (i) the current net asset value of
Class B shares acquired through reinvestment of dividends or capital gain
distributions, plus (ii) increases in the net asset value of the shareholder's
Class B shares above the dollar amount of all payments for the purchase of Class
B shares of the Fund held by such shareholder at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may be
applied to the then-current net asset value rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
shall depend on the number of years from the time the shareholder purchased the
Class B shares until the time of redemption of such shares. Solely for purposes
of determining the number of years from the time of any payment for the purchase
of Class B shares, all payments during a month shall be aggregated and deemed to
have been made on the first day of the month. The following table sets forth the
rates of the CDSC:
CDSC as a % of
Year Since Amount Invested
Purchase Payment or Redemption
Was Made Proceeds
- ---------------- -----------
First......................... 3.00
Second........................ 3.00
Third......................... 2.00
Fourth........................ 2.00
Fifth......................... 1.00
Sixth......................... 0.00
In determining whether a CDSC is applicable to a redemption, the
calculation shall be made in a manner that results in the lowest possible rate.
Therefore, it shall be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in net asset value of
Class B shares above the total amount of payments for the purchase of Class B
shares made during the preceding five years; then of amounts representing the
cost of shares purchased five years prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable five-year period.
Waiver of CDSC--The CDSC shall be waived in connection with (a) redemptions made
within one year after the death or disability, as defined in Section 72(m)(7) of
the Internal Revenue Code of 1986, as amended (the "Code"), of the shareholder,
(b) redemptions by employees participating in qualified or non-qualified
employee benefit plans or other programs where (i) the employers or affiliated
employers maintaining such plans or programs have a minimum of 250 employees
eligible for participation in such plans or programs, or (ii) such plan's or
program's aggregate investment in the Dreyfus Family of Funds or certain other
products made available by the Fund's Distributor exceeds one million dollars,
(c) redemptions as a result of a combination of any investment company with the
Fund by merger, acquisition of assets or otherwise, (d) a distribution following
retirement under a tax-deferred retirement plan or upon attaining age 70-1/2 in
the case of an IRA or Keogh plan or custodial account pursuant to Section 403(b)
of the Code and (e) redemption pursuant to the Automatic Withdrawal Plan, as
described in the Fund's Prospectus. Any Fund shares subject to a CDSC which were
purchased prior to the termination of such waiver shall have the CDSC waived as
provided in the Fund's prospectus at the time of the purchase of such shares.
<PAGE>
SCHEDULE C
Contingent Deferred Sales Charge--Class C Shares--A CDSC of .75% payable to the
Fund's Distributor shall be imposed on any redemption of Class C shares within
one year of the date of purchase. The basis for calculating the payment of any
such CDSC shall be the method used in calculating the CDSC for Class B shares.
In addition, the provisions for waiving the CDSC shall be those set forth for
Class B shares.
<PAGE>
SCHEDULE D
Conversion of Class B Shares--Class B shares shall automatically convert to
Class A shares on the first Fund business day of the month in which the sixth
anniversary of the date of purchase occurs (unless otherwise specified by the
Board), based on the relative net asset values for shares of each such Class,
and shall be subject to the Distribution Plan for Class A shares but shall no
longer be subject to the Distribution Plan and Service Plan applicable to Class
B shares. (Such conversion is subject to suspension by the Board members if
adverse tax consequences might result.) At that time, Class B shares that have
been acquired through the reinvestment of dividends and distributions ("Dividend
Shares") shall be converted in the proportion that a shareholder's Class B
shares (other than Dividend Shares) converting to Class A shares bears to the
total Class B shares then held by the shareholder which were not acquired
through the reinvestment of dividends and distributions.
THE DREYFUS FAMILY OF FUNDS
(Funds Included in Schedule A)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"), requires that the Board of an investment company desiring to offer
multiple classes of shares pursuant to said Rule adopt a plan setting forth the
differences among the classes with respect to shareholder services, distribution
arrangements, expense allocations and any related conversion features or
exchange privileges.
The Board, including a majority of the non-interested Board members,
of each of the investment companies, or series thereof, listed on Schedule A
attached hereto as the same may be revised from time to time (each, a "Fund"),
which desires to offer multiple classes has determined that the following plan
is in the best interests of each class individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into
Investor Class (formerly Institutional Class and prior thereto
Investor Class) and BASIC Class (formerly Retail Class and prior
thereto Class R).
2. Differences in Availability: Investor shares and BASIC shares shall be
offered to any investor. The minimum initial investment requirement for Investor
shares shall be $2,500, or $750 for Dreyfus-sponsored Keogh plans, IRAs
(including regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs,
SEP-IRAs and rollover IRAs), and 403(b)(7) plans with only one participant
(collectively, "Individual Retirement Plans") and $500 for Dreyfus-sponsored
Education IRAs. The minimum initial investment requirement for BASIC shares
shall be $10,000, or $5,000 for Individual Retirement Plans. The minimum
subsequent investment requirement for Investor shares shall be $100, with no
minimum on subsequent purchases for Individual Retirement Plans and Education
IRAs. The minimum subsequent investment requirement for BASIC shares shall be
$1,000 (or $100 for shareholders of that Class prior to August 15, 1997, with no
minimum for shareholders of that Class prior to August 15, 1997 with respect to
Individual Retirement Plans). Other than the different minimum initial and
subsequent investment requirements, there shall be no differences in
availability between the Classes.
3. Differences in Services: Other than shareholder services provided under the
Distribution Plan, the services offered to shareholders of each Class shall be
the same.
4. Differences in Distribution Arrangements: Investor shares shall be
subject to a Distribution Plan adopted pursuant to Rule 12b-1 under the 1940
Act. The Distribution Plan for Investor shares allows the Fund to spend annually
up to 0.25% of its average daily net assets attributable to Investor shares to
compensate Dreyfus Service Corporation, an affiliate of The Dreyfus Corporation
("Dreyfus"), for shareholder servicing activities, and the Fund's Distributor
for shareholder servicing activities and for activities or expenses primarily
intended to result in the sale of Investor shares.
BASIC shares shall not be subject to a Distribution Plan.
5. Expense Allocation: The following expenses shall be allocated on a
Class-by-Class basis: (a) fees under the Distribution Plan; (b) printing and
postage expenses payable by the Fund related to preparing and distributing
materials, such as proxies, to current shareholders of a specific Class; and (c)
litigation or other legal expenses relating solely to a specific Class.
6. Conversion Features: There shall be no automatic conversion feature for
either the Investor Class or BASIC Class.
7. Exchange Privileges: Investor shares shall be exchangeable only for (a)
Investor shares (however the same may be named) of other funds managed or
administered by Dreyfus; (b) Class A shares (however the same may be named) of
certain other funds managed or administered by Dreyfus or managed by Founders
Asset Management LLC ("Founders"), an affiliate of Dreyfus (subject to any sales
load applicable to such shares); (c) BASIC shares (however the same may be
named) of other funds managed or administered by Dreyfus (subject to the minimum
investment amount applicable to such shares); (d) shares of funds managed or
administered by Dreyfus which do not have separate share classes; and (e) shares
of certain other funds, as specified from time to time.
BASIC shares shall be exchangeable only for (a) BASIC shares (however the
same may be named) of other funds managed or administered by Dreyfus; (b)
Restricted shares (however the same may be named) of other funds managed or
administered by Dreyfus to the extent a shareholder is otherwise eligible to
purchase that Class of shares; (c) Class R shares (however the same may be
named) of certain other funds managed or administered by Dreyfus or managed by
Founders to the extent a shareholder is otherwise eligible to purchase that
Class of shares; (d) Investor shares (however the same may be named) of other
funds managed or administered by Dreyfus; (e) Class A shares (however the same
may be named) of certain other funds managed or administered by Dreyfus or
managed by Founders (subject to any sales load applicable to such shares); (f)
shares of funds managed or administered by Dreyfus which do not have separate
share classes; and (g) shares of certain other funds, as specified from time to
time.
Dated: April 26, 1995
Revised as of January 1, 1998 and amended as of
December 31, 1999
<PAGE>
SCHEDULE A
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Bond Market Index Fund
THE DREYFUS FAMILY OF FUNDS
(Funds Included in Schedule A)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940
Act"), requires that the Board of an investment company desiring to offer
multiple classes of shares pursuant to said Rule adopt a plan setting forth the
differences among the classes with respect to shareholder services, distribution
arrangements, expense allocations and any related conversion features or
exchange privileges.
The Board, including a majority of the non-interested Board members, of
each of the investment companies, or series thereof, listed on Schedule A
attached hereto as the same may be revised from time to time (each, a "Fund"),
which desires to offer multiple classes has determined that the following plan
is in the best interests of each class individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into
Investor Class (formerly Institutional Class and prior thereto
Investor Class) and Restricted Class (formerly Retail Class and
prior thereto Class R).
2. Differences in Availability: Investor shares shall be
offered to any investor.
The sale of Restricted shares shall be limited to bank trust departments
and other financial service providers acting on behalf of customers having a
qualified trust or investment account or relationship at such institution, and
to customers who have received and hold shares of the Fund distributed to them
by virtue of such an account or relationship, and to those investors who have
held shares of that Class (however previously designated) prior to August 15,
1997 and have continued to hold shares of that Class.
3. Differences in Services: Other than shareholder
services provided under the Distribution Plan, the services
offered to shareholders of each Class shall be the same.
4. Differences in Distribution Arrangements: Investor shares shall be
subject to a Distribution Plan adopted pursuant to Rule 12b-1 under the 1940
Act. The Distribution Plan for Investor shares allows the Fund to spend annually
up to 0.25% of its average daily net assets attributable to Investor shares to
compensate Dreyfus Service Corporation, an affiliate of The Dreyfus Corporation
("Dreyfus"), for shareholder servicing activities, and the Fund's Distributor
for shareholder servicing activities and for activities or expenses primarily
intended to result in the sale of Investor shares.
Restricted shares shall not be subject to a Distribution Plan.
5. Expense Allocation: The following expenses shall be
allocated on a Class-by-Class basis: (a) fees under the
Distribution Plan; (b) printing and postage expenses payable by
the Fund related to preparing and distributing materials, such
as proxies, to current shareholders of a specific Class; and (c)
litigation or other legal expenses relating solely to a specific
Class.
6. Conversion Features: There shall be no automatic
conversion feature for either the Investor Class or Restricted
Class.
7. Exchange Privileges: Investor shares shall be exchangeable only for (a)
Investor shares (however the same may be named) of other funds managed or
administered by Dreyfus; (b) Class A shares (however the same may be named) of
certain other funds managed or administered by Dreyfus or managed by Founders
Asset Management LLC ("Founders"), an affiliate of Dreyfus (subject to any sales
load applicable to such shares); (c) BASIC shares (however the same may be
named) of other funds managed or administered by Dreyfus (subject to the minimum
investment amount applicable to such shares); (d) shares of funds managed or
administered by Dreyfus which do not have separate share classes; and (e) shares
of certain other funds, as specified from time to time.
Restricted shares shall be exchangeable only for (a) Restricted shares
(however the same may be named) of other funds managed or administered by
Dreyfus; (b) Class R shares (however the same may be named) of certain other
funds managed or administered by Dreyfus or managed by Founders; (c) BASIC
shares (however the same may be named) of other funds managed or administered by
Dreyfus (subject to the minimum investment amount applicable to such shares);
(d) shares of funds managed or administered by Dreyfus which do not have
separate share classes; and (e) shares of certain other funds, as specified from
time to time.
Dated: April 26, 1996
Revised as of August 15, 1997 and amended as of December 31, 1999
<PAGE>
SCHEDULE A
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Disciplined Intermediate Bond Fund
THE DREYFUS FAMILY OF FUNDS
(DREYFUS PREMIER FAMILY OF FUNDS - FUNDS INCLUDED IN EXHIBIT I)
AMENDED RULE 18F-3 PLAN
RULE 18F-3 UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE
"1940 ACT"), REQUIRES THAT THE BOARD OF AN INVESTMENT COMPANY DESIRING TO
OFFER MULTIPLE CLASSES OF SHARES PURSUANT TO SAID RULE ADOPT A PLAN SETTING
FORTH THE DIFFERENCES AMONG THE CLASSES WITH RESPECT TO SHAREHOLDER SERVICES,
DISTRIBUTION ARRANGEMENTS, EXPENSE ALLOCATIONS AND ANY RELATED CONVERSION
FEATURES OR EXCHANGE PRIVILEGES.
THE BOARD, INCLUDING A MAJORITY OF THE NON-INTERESTED BOARD MEMBERS,
OF EACH OF THE INVESTMENT COMPANIES, OR SERIES THEREOF, LISTED ON EXHIBIT I
ATTACHED HERETO AS THE SAME MAY BE REVISED FROM TIME TO TIME (EACH, A "FUND"),
WHICH DESIRES TO OFFER MULTIPLE CLASSES HAS DETERMINED THAT THE FOLLOWING PLAN
IS IN THE BEST INTERESTS OF EACH CLASS INDIVIDUALLY AND THE FUND AS A WHOLE:
1. CLASS DESIGNATION: EXCEPT WHERE LIMITED AS
INDICATED ON EXHIBIT I, FUND SHARES SHALL BE DIVIDED INTO CLASS A,
CLASS B, CLASS C, CLASS R AND CLASS T.
2. DIFFERENCES IN AVAILABILITY: CLASS A SHARES, CLASS B SHARES,
CLASS C SHARES AND CLASS T SHARES SHALL BE AVAILABLE ONLY TO CLIENTS OF BANKS,
BROKERS, DEALERS AND OTHER FINANCIAL INSTITUTIONS, EXCEPT THAT FULL-TIME OR
PART-TIME EMPLOYEES OR DIRECTORS OF THE DREYFUS CORPORATION ("DREYFUS") OR ANY
OF ITS AFFILIATES OR SUBSIDIARIES, BOARD MEMBERS OR A FUND ADVISED BY DREYFUS,
INCLUDING MEMBERS OF THE FUND'S BOARD, OR THE SPOUSE OR MINOR CHILD OF ANY OF
THE FOREGOING MAY PURCHASE CLASS A SHARES DIRECTLY THROUGH THE FUND'S
DISTRIBUTOR. WITH RESPECT TO DREYFUS PREMIER BALANCED FUND AND DREYFUS PREMIER
SMALL COMPANY STOCK FUND, HOLDERS OF CLASS A ACCOUNTS OF THE FUND AS OF
DECEMBER 19, 1994, MAY CONTINUE TO PURCHASE CLASS A SHARES OF THE FUND AT NET
ASSET VALUE PER SHARE. IN ADDITION, HOLDERS OF INVESTOR SHARES OF DREYFUS
PREMIER MIDCAP STOCK FUND AND DREYFUS PREMIER LARGE COMPANY STOCK FUND AS OF
JANUARY 15, 1998, MAY CONTINUE TO PURCHASE CLASS A SHARES OF THE FUND AT NET
ASSET VALUE PER SHARE.
WITH RESPECT TO DREYFUS PREMIER BALANCED FUND, DREYFUS PREMIER SMALL
COMPANY STOCK FUND, DREYFUS PREMIER MIDCAP STOCK FUND AND DREYFUS PREMIER
SMALL CAP VALUE FUND, CLASS R SHARES SHALL BE SOLD PRIMARILY TO BANK TRUST
DEPARTMENTS AND OTHER FINANCIAL SERVICE PROVIDERS ACTING ON BEHALF OF
CUSTOMERS HAVING A QUALIFIED TRUST OR INVESTMENT ACCOUNT OR RELATIONSHIP AT
SUCH INSTITUTION, OR TO CUSTOMERS WHO HAVE RECEIVED AND HOLD SHARES OF THE
FUND DISTRIBUTED TO THEM BY VIRTUE OF SUCH AN ACCOUNT OR RELATIONSHIP. WITH
RESPECT TO DREYFUS PREMIER MIDCAP STOCK FUND, 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.
WITH RESPECT TO DREYFUS PREMIER LARGE COMPANY STOCK FUND, CLASS R
SHARES ARE SOLD ONLY TO HOLDERS OF RESTRICTED SHARES OF THE FUND AS OF
NOVEMBER 30, 1997.
3. DIFFERENCES IN SERVICES: OTHER THAN SHAREHOLDER SERVICES PROVIDED
UNDER THE DISTRIBUTION PLAN FOR CLASS A SHARES AND THE SERVICE PLAN FOR CLASS
B, CLASS C AND CLASS T SHARES, THE SERVICES OFFERED TO SHAREHOLDERS OF EACH
CLASS SHALL BE SUBSTANTIALLY THE SAME, EXCEPT THAT RIGHT OF ACCUMULATION AND
LETTER OF INTENT PRIVILEGES SHALL BE APPLICABLE ONLY TO HOLDERS OF CLASS A AND
CLASS T SHARES AND REINVESTMENT PRIVILEGE SHALL BE APPLICABLE ONLY TO HOLDERS
OF CLASS A, CLASS B AND CLASS T SHARES.
4. DIFFERENCES IN DISTRIBUTION ARRANGEMENTS: CLASS A SHARES SHALL BE
OFFERED WITH A FRONT-END SALES CHARGE, AS SUCH TERM IS DEFINED IN RULE 2830(B)
OF THE CONDUCT RULES OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
("RULE 2830(B)"), AND A DEFERRED SALES CHARGE (A "CDSC"), AS SUCH TERM IS
DEFINED IN RULE 2830(B), MAY BE ASSESSED ON CERTAIN REDEMPTIONS OF CLASS A
SHARES PURCHASED WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF
$1 MILLION OR MORE. THE AMOUNT OF THE SALES CHARGE AND THE AMOUNT OF AND
PROVISIONS RELATING TO THE CDSC PERTAINING TO THE CLASS A SHARES ARE SET FORTH
ON SCHEDULE A HERETO. CLASS A SHARES SHALL BE SUBJECT TO A DISTRIBUTION PLAN
ADOPTED PURSUANT TO RULE 12B-1 UNDER THE 1940 ACT. THE DISTRIBUTION PLAN FOR
CLASS A SHARES ALLOWS THE FUND TO SPEND ANNUALLY UP TO 0.25% OF ITS AVERAGE
DAILY NET ASSETS ATTRIBUTABLE TO CLASS A SHARES TO COMPENSATE DREYFUS SERVICE
CORPORATION, AN AFFILIATE OF DREYFUS, FOR SHAREHOLDER SERVICING ACTIVITIES,
AND THE FUND'S DISTRIBUTOR FOR SHAREHOLDER SERVICING ACTIVITIES AND FOR
ACTIVITIES OR EXPENSES PRIMARILY INTENDED TO RESULT IN THE SALE OF CLASS A
SHARES.
CLASS B SHARES SHALL NOT BE SUBJECT TO A FRONT-END SALES CHARGE, BUT
SHALL BE SUBJECT TO A CDSC. THE AMOUNT OF AND PROVISIONS RELATING TO THE CDSC
ARE SET FORTH ON SCHEDULE B HERETO. CLASS B SHARES SHALL BE SUBJECT TO A
DISTRIBUTION PLAN AND SERVICE PLAN EACH ADOPTED PURSUANT TO RULE 12B-1 UNDER
THE 1940 ACT. UNDER THE DISTRIBUTION PLAN FOR CLASS B SHARES, THE FUND PAYS
THE DISTRIBUTOR FOR DISTRIBUTING THE FUND'S CLASS B SHARES AT AN AGGREGATE
ANNUAL RATE OF .75 OF 1% OF THE VALUE OF THE AVERAGE DAILY NET ASSETS OF CLASS
B. UNDER THE SERVICE PLAN FOR CLASS B SHARES, THE FUND PAYS DREYFUS SERVICE
CORPORATION OR THE DISTRIBUTOR FOR THE PROVISION OF CERTAIN SERVICES TO THE
HOLDERS OF CLASS B SHARES A FEE AT THE ANNUAL RATE OF .25 OF 1% OF THE VALUE
OF THE AVERAGE DAILY NET ASSETS OF CLASS B.
CLASS C SHARES SHALL NOT BE SUBJECT TO A FRONT-END SALES CHARGE, BUT
SHALL BE SUBJECT TO A CDSC. THE AMOUNT OF AND PROVISIONS RELATING TO THE CDSC
ARE SET FORTH ON SCHEDULE C HERETO. CLASS C SHARES SHALL BE SUBJECT TO A
DISTRIBUTION PLAN AND SERVICE PLAN EACH ADOPTED PURSUANT TO RULE 12B-1 UNDER
THE 1940 ACT. UNDER THE DISTRIBUTION PLAN FOR CLASS C SHARES, THE FUND PAYS
THE DISTRIBUTOR FOR DISTRIBUTING THE FUND'S CLASS C SHARES AT AN AGGREGATE
ANNUAL RATE OF .75 OF 1% OF THE VALUE OF THE AVERAGE DAILY NET ASSETS OF CLASS
C. UNDER THE SERVICE PLAN FOR CLASS C SHARES, THE FUND PAYS DREYFUS SERVICE
CORPORATION OR THE DISTRIBUTOR FOR THE PROVISION OF CERTAIN SERVICES TO THE
HOLDERS OF CLASS C SHARES A FEE AT THE ANNUAL RATE OF .25 OF 1% OF THE VALUE
OF THE AVERAGE DAILY NET ASSETS OF CLASS C.
CLASS R SHARES SHALL NOT BE SUBJECT TO A FRONT-END SALES CHARGE,
CDSC, DISTRIBUTION PLAN OR SERVICE PLAN.
CLASS T SHARES SHALL BE OFFERED WITH A FRONT-END SALES CHARGE AS
DEFINED IN RULE 2830(B) AND A CDSC MAY BE ASSESSED ON CERTAIN REDEMPTIONS OF
CLASS T SHARES PURCHASED WITHOUT AN INITIAL SALES CHARGE AS PART OF AN
INVESTMENT OF $1 MILLION OR MORE. THE AMOUNT OF THE SALES CHARGE AND THE
AMOUNT OF AND PROVISIONS RELATING TO THE CDSC PERTAINING TO THE CLASS T SHARES
ARE SET FORTH ON SCHEDULE D HERETO. CLASS T SHARES SHALL BE SUBJECT TO A
DISTRIBUTION PLAN AND SERVICE PLAN EACH ADOPTED PURSUANT TO RULE 12B-1 UNDER
THE 1940 ACT. UNDER THE DISTRIBUTION PLAN FOR CLASS T SHARES, THE FUND PAYS
THE DISTRIBUTOR FOR ACTIVITIES PRIMARILY INTENDED TO RESULT IN THE SALE OF
CLASS T SHARES AT THE AGGREGATE ANNUAL RATE OF .25 OF 1% OF THE VALUE OF THE
AVERAGE DAILY NET ASSETS OF CLASS T. THE DISTRIBUTOR MAY PAY ONE OR MORE
AGENTS ALL OR A PORTION OF SUCH FEE FOR ADVERTISING, MARKETING AND OTHER
DISTRIBUTION SERVICES. UNDER THE SERVICE PLAN FOR CLASS T SHARES, THE FUND
PAYS DREYFUS SERVICE CORPORATION OR THE DISTRIBUTOR FOR THE PROVISION OF
CERTAIN SERVICES TO HOLDERS OF CLASS T SHARES A FEE AT THE ANNUAL RATE OF .25
OF 1% OF THE VALUE OF THE AVERAGE DAILY NET ASSETS OF CLASS T.
CLASS A, CLASS B, CLASS C AND CLASS T SHARES SHALL VOTE SEPARATELY
WITH RESPECT TO ANY MATTER RELATING TO THE PLAN OR PLANS THAT AFFECT THAT
CLASS.
5. EXPENSE ALLOCATION. THE FOLLOWING EXPENSES SHALL BE ALLOCATED, TO
THE EXTENT PRACTICABLE, ON A CLASS-BY-CLASS BASIS: (A) FEES UNDER THE
DISTRIBUTION PLANS AND SERVICE PLAN; (B) PRINTING AND POSTAGE EXPENSES PAYABLE
BY THE FUND RELATED TO PREPARING AND DISTRIBUTING MATERIALS, SUCH AS PROXIES,
TO CURRENT SHAREHOLDERS OF A SPECIFIC CLASS; AND (C) LITIGATION OR OTHER LEGAL
EXPENSES RELATING SOLELY TO A SPECIFIC CLASS.
6. CONVERSION FEATURES. CLASS B SHARES SHALL AUTOMATICALLY CONVERT
TO CLASS A SHARES AFTER A SPECIFIED PERIOD OF TIME AFTER THE DATE OF PURCHASE,
BASED ON THE RELATIVE NET ASSET VALUE OF EACH SUCH CLASS WITHOUT THE
IMPOSITION OF ANY SALES CHARGE, FEE OR OTHER CHARGE, AS SET FORTH ON SCHEDULE
E HERETO. NO OTHER CLASS SHALL BE SUBJECT TO ANY AUTOMATIC CONVERSION FEATURE.
7. EXCHANGE PRIVILEGES. CLASS A SHARES SHALL BE EXCHANGEABLE ONLY
FOR (A) CLASS A SHARES (HOWEVER THE SAME MAY BE NAMED) OF CERTAIN OTHER FUNDS
MANAGED OR ADMINISTERED BY DREYFUS OR MANAGED BY FOUNDERS ASSET MANAGEMENT LLC
("FOUNDERS"), AN AFFILIATE OF DREYFUS; (B) INVESTOR SHARES (HOWEVER THE SAME
MAY BE NAMED) OF OTHER FUNDS MANAGED OR ADMINISTERED BY DREYFUS; (C) BASIC
SHARES (HOWEVER THE SAME MAY BE NAMED) OF OTHER FUNDS MANAGED OR ADMINISTERED
BY DREYFUS (SUBJECT TO THE MINIMUM INVESTMENT AMOUNT APPLICABLE TO SUCH
SHARES); (D) SHARES OF FUNDS MANAGED OR ADMINISTERED BY DREYFUS WHICH DO NOT
HAVE SEPARATE SHARE CLASSES; AND (E) SHARES OF CERTAIN OTHER FUNDS, AS
SPECIFIED FROM TIME TO TIME.
CLASS B SHARES SHALL BE EXCHANGEABLE ONLY FOR (A) CLASS B SHARES
(HOWEVER THE SAME MAY BE NAMED) OF CERTAIN OTHER FUNDS MANAGED OR ADMINISTERED
BY DREYFUS OR MANAGED BY FOUNDERS WITH THE SAME CDSC STRUCTURE AS THE FUND;
AND (B) SHARES OF CERTAIN OTHER FUNDS, AS SPECIFIED FROM TIME TO TIME.
CLASS C SHARES SHALL BE EXCHANGEABLE ONLY FOR (A) CLASS C SHARES
(HOWEVER THE SAME MAY BE NAMED) OF CERTAIN OTHER FUNDS MANAGED OR ADMINISTERED
BY DREYFUS OR MANAGED BY FOUNDERS WITH THE SAME CDSC STRUCTURE AS THE FUND;
AND (B) SHARES OF CERTAIN OTHER FUNDS, AS SPECIFIED FROM TIME TO TIME.
CLASS R SHARES SHALL BE EXCHANGEABLE ONLY FOR (A) CLASS R SHARES
(HOWEVER THE SAME MAY BE NAMED) OF CERTAIN OTHER FUNDS MANAGED OR ADMINISTERED
BY DREYFUS OR MANAGED BY FOUNDERS; (B) RESTRICTED SHARES (HOWEVER THE SAME MAY
BE NAMED) OF OTHER FUNDS MANAGED OR ADMINISTERED BY DREYFUS; (C) BASIC SHARES
(HOWEVER THE SAME MAY BE NAMED) OF OTHER FUNDS MANAGED OR ADMINISTERED BY
DREYFUS (SUBJECT TO THE MINIMUM INVESTMENT AMOUNT APPLICABLE TO SUCH SHARES);
(D) SHARES OF FUNDS MANAGED OR ADMINISTERED BY DREYFUS WHICH DO NOT HAVE
SEPARATE SHARE CLASSES; AND (E) SHARES OF CERTAIN OTHER FUNDS, AS SPECIFIED
FROM TIME TO TIME.
CLASS T SHARES SHALL BE EXCHANGEABLE ONLY FOR (A) CLASS T SHARES
(HOWEVER THE SAME MAY BE NAMED) OF CERTAIN OTHER FUNDS MANAGED OR ADMINISTERED
BY DREYFUS OR MANAGED BY FOUNDERS; (B) CLASS A SHARES (HOWEVER THE SAME MAY BE
NAMED) OF CERTAIN FIXED-INCOME FUNDS MANAGED OR ADMINISTERED BY DREYFUS; (C)
INVESTOR SHARES (HOWEVER THE SAME MAY BE NAMED) OF OTHER FUNDS MANAGED OR
ADMINISTERED BY DREYFUS; (D) BASIC SHARES (HOWEVER THE SAME MAY BE NAMED) OF
OTHER FUNDS MANAGED OR ADMINISTERED BY DREYFUS (SUBJECT TO THE MINIMUM
INVESTMENT AMOUNT APPLICABLE TO SUCH SHARES); (E) SHARES OF FUNDS MANAGED OR
ADMINISTERED BY DREYFUS WHICH DO NOT HAVE SEPARATE SHARE CLASSES; AND (F)
SHARES OF CERTAIN OTHER FUNDS, AS SPECIFIED FROM TIME TO TIME.
WITH RESPECT TO ALL FUNDS EXCEPT FOR DREYFUS PREMIER BALANCED FUND
AND DREYFUS PREMIER SMALL COMPANY STOCK FUND, SHARES OF A FUND THAT ARE
SUBJECT TO A CDSC MAY BE EXCHANGED FOR SHARES OF DREYFUS WORLDWIDE DOLLAR
MONEY MARKET FUND, INC. ON THE TERMS PROVIDED IN THE FUND'S THEN-CURRENT
PROSPECTUS.
AS AMENDED AS OF DECEMBER 31, 1999
<PAGE>
EXHIBIT I
DREYFUS PREMIER LARGE COMPANY STOCK FUND
(ORIGINALLY DATED APRIL 26, 1995; REVISED AS OF JANUARY 16, 1998, AUGUST 14,
1999 AND DECEMBER 31, 1999)
DREYFUS PREMIER SMALL COMPANY STOCK FUND
(ORIGINALLY DATED APRIL 26, 1995; REVISED AS OF AUGUST 15, 1997, AUGUST 14, 1999
AND DECEMBER 31, 1999)
DREYFUS PREMIER MIDCAP STOCK FUND
(ORIGINALLY DATED APRIL 26, 1995; REVISED AS OF JANUARY 16, 1998, AUGUST 14,
1999 AND DECEMBER 31, 1999)
DREYFUS PREMIER BALANCED FUND
(ORIGINALLY DATED APRIL 26, 1995; REVISED AS OF AUGUST 15, 1997, AUGUST 14, 1999
AND DECEMBER 31, 1999)
DREYFUS PREMIER TAX MANAGED GROWTH FUND (CLASS A, CLASS B, CLASS C AND CLASS T
SHARES ONLY) (ORIGINALLY DATED OCTOBER 23, 1997; REVISED AS OF AUGUST 14, 1999
AND DECEMBER 31, 1999)
DREYFUS PREMIER SMALL CAP VALUE FUND
(ORIGINALLY ADOPTED AS OF AUGUST 15, 1997; REVISED AUGUST 14, 1999
AND DECEMBER 31, 1999)
<PAGE>
SCHEDULE A
FRONT-END SALES CHARGE--CLASS A SHARES--THE PUBLIC OFFERING PRICE FOR CLASS A
SHARES SHALL BE THE NET ASSET VALUE PER SHARE OF THAT CLASS PLUS A SALES LOAD
AS SHOWN BELOW:
TOTAL SALES LOAD
----------------------------
AMOUNT OF TRANSACTION AS A % OF AS A % OF
OFFERING NET ASSET
PRICE PER VALUE PER
SHARE SHARE
------------ ------------
LESS THAN $50,000 5.75 6.10
$50,000 TO LESS THAN $100,000 4.50 4.70
$100,000 TO LESS THAN $250,000 3.50 3.60
$250,000 TO LESS THAN $500,000 2.50 2.60
$500,000 TO LESS THAN $1,000,000 2.00 2.00
$1,000,000 OR MORE -0- -0-
WITH RESPECT TO DREYFUS PREMIER BALANCED FUND AND DREYFUS PREMIER
SMALL COMPANY STOCK FUND, HOLDERS OF ACCOUNTS OF THE FUND AS OF DECEMBER 19,
1994, MAY CONTINUE TO PURCHASE CLASS A SHARES OF THE FUND AT NET ASSET VALUE PER
SHARE AND, FOR OTHER SHAREHOLDERS WHO BENEFICIALLY OWNED CLASS A SHARES HELD IN
A FUND ACCOUNT ON NOVEMBER 30, 1996, THE PUBLIC OFFERING PRICE FOR CLASS A
SHARES SHALL BE THE NET ASSET VALUE PER SHARE OF THAT CLASS PLUS A SALES LOAD AS
SHOWN BELOW:
TOTAL SALES LOAD
----------------------------
AMOUNT OF TRANSACTION AS A % OF AS A % OF
OFFERING NET ASSET
PRICE PER VALUE PER
SHARE SHARE
------------ ------------
LESS THAN $50,000 4.50 4.70
$50,000 TO LESS THAN $100,000 4.00 4.20
$100,000 TO LESS THAN $250,000 3.00 3.10
$250,000 TO LESS THAN $500,000 2.50 2.60
$500,000 TO LESS THAN $1,000,000 2.00 2.00
$1,000,000 OR MORE -0- -0-
LETTER OF INTENT AND RIGHT OF ACCUMULATION SHALL APPLY TO PURCHASES
OF CLASS A SHARES AS SET FORTH IN THE FUND'S THEN-CURRENT PROSPECTUS.
WITH RESPECT TO DREYFUS PREMIER LARGE COMPANY STOCK FUND AND DREYFUS
PREMIER MIDCAP STOCK FUND, HOLDERS OF INVESTOR SHARES OF THE FUND AS OF JANUARY
15, 1998 MAY CONTINUE TO PURCHASE CLASS A SHARES OF THE FUND AT NET ASSET VALUE
PER SHARE.
CONTINGENT DEFERRED SALES CHARGE--CLASS A SHARES--A CDSC OF 1% SHALL BE ASSESSED
AT THE TIME OF REDEMPTION OF CLASS A SHARES PURCHASED WITHOUT AN INITIAL SALES
CHARGE AS PART OF AN INVESTMENT OF AT LEAST $1,000,000 AND REDEEMED WITHIN ONE
YEAR AFTER PURCHASE. THE TERMS CONTAINED IN SCHEDULE B PERTAINING TO THE CDSC
ASSESSED ON REDEMPTIONS OF CLASS B SHARES (OTHER THAN THE AMOUNT OF THE CDSC AND
ITS TIME PERIODS), INCLUDING THE PROVISIONS FOR WAIVING THE CDSC, SHALL BE
APPLICABLE TO THE CLASS A SHARES SUBJECT TO A CDSC.
<PAGE>
SCHEDULE B
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES--A CDSC PAYABLE TO THE FUND'S
DISTRIBUTOR SHALL BE IMPOSED ON ANY REDEMPTION OF CLASS B SHARES WHICH REDUCES
THE CURRENT NET ASSET VALUE OF SUCH CLASS B SHARES TO AN AMOUNT WHICH IS LOWER
THAN THE DOLLAR AMOUNT OF ALL PAYMENTS BY THE REDEEMING SHAREHOLDER FOR THE
PURCHASE OF CLASS B SHARES OF THE FUND HELD BY SUCH SHAREHOLDER AT THE TIME OF
REDEMPTION. NO CDSC SHALL BE IMPOSED TO THE EXTENT THAT THE NET ASSET VALUE OF
THE CLASS B SHARES REDEEMED DOES NOT EXCEED (I)THE CURRENT NET ASSET VALUE OF
CLASS B SHARES ACQUIRED THROUGH REINVESTMENT OF DIVIDENDS OR CAPITAL GAIN
DISTRIBUTIONS, PLUS (II) INCREASES IN THE NET ASSET VALUE OF THE SHAREHOLDER'S
CLASS B SHARES ABOVE THE DOLLAR AMOUNT OF ALL PAYMENTS FOR THE PURCHASE OF
CLASS B SHARES OF THE FUND HELD BY SUCH SHAREHOLDER AT THE TIME OF REDEMPTION.
IF THE AGGREGATE VALUE OF THE CLASS B SHARES REDEEMED HAS DECLINED
BELOW THEIR ORIGINAL COST AS A RESULT OF THE FUND'S PERFORMANCE, A CDSC MAY BE
APPLIED TO THE THEN-CURRENT NET ASSET VALUE RATHER THAN THE PURCHASE PRICE.
IN CIRCUMSTANCES WHERE THE CDSC IS IMPOSED, THE AMOUNT OF THE CHARGE
SHALL DEPEND ON THE NUMBER OF YEARS FROM THE TIME THE SHAREHOLDER PURCHASED
THE CLASS B SHARES UNTIL THE TIME OF REDEMPTION OF SUCH SHARES. SOLELY FOR
PURPOSES OF DETERMINING THE NUMBER OF YEARS FROM THE TIME OF ANY PAYMENT FOR
THE PURCHASE OF CLASS B SHARES, ALL PAYMENTS DURING A MONTH SHALL BE
AGGREGATED AND DEEMED TO HAVE BEEN MADE ON THE FIRST DAY OF THE MONTH. THE
FOLLOWING TABLE SETS FORTH THE RATES OF THE CDSC:
CDSC AS A % OF
YEAR SINCE AMOUNT INVESTED
PURCHASE PAYMENT OR REDEMPTION
WAS MADE PROCEEDS
---------------- -----------
FIRST 4.00
SECOND 4.00
THIRD 3.00
FOURTH 3.00
FIFTH 2.00
SIXTH 1.00
IN DETERMINING WHETHER A CDSC IS APPLICABLE TO A REDEMPTION, THE
CALCULATION SHALL BE MADE IN A MANNER THAT RESULTS IN THE LOWEST POSSIBLE
RATE. THEREFORE, IT SHALL BE ASSUMED THAT THE REDEMPTION IS MADE FIRST OF
AMOUNTS REPRESENTING SHARES ACQUIRED PURSUANT TO THE REINVESTMENT OF DIVIDENDS
AND DISTRIBUTIONS; THEN OF AMOUNTS REPRESENTING THE INCREASE IN NET ASSET
VALUE OF CLASS B SHARES ABOVE THE TOTAL AMOUNT OF PAYMENTS FOR THE PURCHASE OF
CLASS B SHARES MADE DURING THE PRECEDING SIX YEARS; THEN OF AMOUNTS
REPRESENTING THE COST OF SHARES PURCHASED SIX YEARS PRIOR TO THE REDEMPTION;
AND FINALLY, OF AMOUNTS REPRESENTING THE COST OF SHARES HELD FOR THE LONGEST
PERIOD OF TIME WITHIN THE APPLICABLE SIX-YEAR PERIOD.
WAIVER OF CDSC--THE CDSC SHALL BE WAIVED IN CONNECTION WITH (A) REDEMPTIONS
MADE WITHIN ONE YEAR AFTER THE DEATH OR DISABILITY, AS DEFINED IN SECTION
72(M)(7) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OF THE
SHAREHOLDER, (B) REDEMPTIONS BY EMPLOYEES PARTICIPATING IN QUALIFIED OR
NON-QUALIFIED EMPLOYEE BENEFIT PLANS OR OTHER PROGRAMS WHERE (I) THE EMPLOYERS
OR AFFILIATED EMPLOYERS MAINTAINING SUCH PLANS OR PROGRAMS HAVE A MINIMUM OF
250 EMPLOYEES ELIGIBLE FOR PARTICIPATION IN SUCH PLANS OR PROGRAMS, OR (II)
SUCH PLAN'S OR PROGRAM'S AGGREGATE INVESTMENT IN THE DREYFUS FAMILY OF FUNDS
OR CERTAIN OTHER PRODUCTS MADE AVAILABLE BY THE FUND'S DISTRIBUTOR EXCEEDS ONE
MILLION DOLLARS, (C) REDEMPTIONS AS A RESULT OF A COMBINATION OF ANY
INVESTMENT COMPANY WITH THE FUND BY MERGER, ACQUISITION OF ASSETS OR
OTHERWISE, (D) A DISTRIBUTION FOLLOWING RETIREMENT UNDER A TAX-DEFERRED
RETIREMENT PLAN OR UPON ATTAINING AGE 70-1/2 IN THE CASE OF AN IRA OR KEOGH
PLAN OR CUSTODIAL ACCOUNT PURSUANT TO SECTION 403(B) OF THE CODE AND (E)
REDEMPTIONS PURSUANT TO THE AUTOMATIC WITHDRAWAL PLAN, AS DESCRIBED IN THE
FUND'S THEN-CURRENT PROSPECTUS. ANY FUND SHARES SUBJECT TO A CDSC WHICH WERE
PURCHASED PRIOR TO THE TERMINATION OF SUCH WAIVER SHALL HAVE THE CDSC WAIVED
AS PROVIDED IN THE FUND'S THEN-CURRENT PROSPECTUS AT THE TIME OF THE PURCHASE
OF SUCH SHARES.
<PAGE>
SCHEDULE C
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES--A CDSC OF 1.00% PAYABLE TO
THE FUND'S DISTRIBUTOR SHALL BE IMPOSED ON ANY REDEMPTION OF CLASS C SHARES
WITHIN ONE YEAR OF THE DATE OF PURCHASE. THE BASIS FOR CALCULATING THE PAYMENT
OF ANY SUCH CDSC SHALL BE THE METHOD USED IN CALCULATING THE CDSC FOR CLASS B
SHARES. IN ADDITION, THE PROVISIONS FOR WAIVING THE CDSC SHALL BE THOSE SET
FORTH FOR CLASS B SHARES.
<PAGE>
SCHEDULE D
FRONT-END SALES CHARGE--CLASS T SHARES--THE PUBLIC OFFERING PRICE FOR CLASS T
SHARES SHALL BE THE NET ASSET VALUE PER SHARE OF THAT CLASS PLUS A SALES LOAD
AS SHOWN BELOW:
TOTAL SALES LOAD
----------------------------
AMOUNT OF TRANSACTION AS A % OF AS A % OF
OFFERING NET ASSET
PRICE PER VALUE PER
SHARE SHARE
------------ ------------
LESS THAN $50,000 4.50 4.70
$50,000 TO LESS THAN $100,000 4.00 4.20
$100,000 TO LESS THAN $250,000 3.00 3.10
$250,000 TO LESS THAN $500,000 2.00 2.00
$500,000 TO LESS THAN $1,000,000 1.50 1.50
$1,000,000 OR MORE -0- -0-
LETTER OF INTENT AND RIGHT OF ACCUMULATION SHALL APPLY TO PURCHASES
OF CLASS T AS SET FORTH IN THE FUND'S THEN-CURRENT PROSPECTUS.
CONTINGENT DEFERRED SALES CHARGE--CLASS T SHARES--A CDSC OF 1% SHALL BE
ASSESSED AT THE TIME OF REDEMPTION OF CLASS T SHARES PURCHASED WITHOUT AN
INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF AT LEAST $1,000,000 AND
REDEEMED WITHIN ONE YEAR AFTER PURCHASE. THE TERMS CONTAINED IN SCHEDULE B
PERTAINING TO THE CDSC ASSESSED ON REDEMPTIONS OF CLASS B SHARES (OTHER THAN
THE AMOUNT OF THE CDSC AND ITS TIME PERIODS), INCLUDING THE PROVISIONS FOR
WAIVING THE CDSC, SHALL BE APPLICABLE TO THE CLASS T SHARES SUBJECT TO A CDSC.
<PAGE>
SCHEDULE E
CONVERSION OF CLASS B SHARES--CLASS B SHARES SHALL AUTOMATICALLY CONVERT TO
CLASS A SHARES ON THE FIRST FUND BUSINESS DAY OF THE MONTH IN WHICH THE SIXTH
ANNIVERSARY OF THE DATE OF PURCHASE OCCURS (UNLESS OTHERWISE SPECIFIED BY THE
BOARD), BASED ON THE RELATIVE NET ASSET VALUES FOR SHARES OF EACH SUCH CLASS,
AND SHALL BE SUBJECT TO THE DISTRIBUTION PLAN FOR CLASS A SHARES BUT SHALL NO
LONGER BE SUBJECT TO THE DISTRIBUTION PLAN AND SERVICE PLAN APPLICABLE TO
CLASS B SHARES. (SUCH CONVERSION IS SUBJECT TO SUSPENSION BY THE BOARD MEMBERS
IF ADVERSE TAX CONSEQUENCES MIGHT RESULT.) AT THAT TIME, CLASS B SHARES THAT
HAVE BEEN ACQUIRED THROUGH THE REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
("DIVIDEND SHARES") SHALL BE CONVERTED IN THE PROPORTION THAT A SHAREHOLDER'S
CLASS B SHARES (OTHER THAN DIVIDEND SHARES) CONVERTING TO CLASS A SHARES BEARS
TO THE TOTAL CLASS B SHARES THEN HELD BY THE SHAREHOLDER WHICH WERE NOT
ACQUIRED THROUGH THE REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS.
