Registration No. 33-43847
811-5591
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 14 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 13 X
The Dreyfus/Laurel Investment Series
(formerly The Laurel Company Investment Series
(Exact name of Registrant as Specified in Charter)
200 Park Avenue - 55th Floor
New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 225-5267
John E. Pelletier
Secretary
The Dreyfus/Laurel Investment Series
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
X immediately upon filing pursuant to Rule 485(b)
on _______________pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
on pursuant to Rule 485(a)
The Registrant has previously filed a declaration of indefinite
registration of its shares pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant's Rule 24f-2 Notice for the
fiscal year ended August 31, 1994 was filed on October 31, 1994.
THE DREYFUS/LAUREL INVESTMENT SERIES
(formerly The Laurel Investment Series)
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A.
Item No. Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Expense Summary; Investor Shares Distribution Plan
3. Financial Highlights Financial Highlights;
Performance Information
4. General Description of Cover Page; Investment Objectives;
Registrant Investment Policies; The Laurel Funds Investment
Series
5. Management of the Fund Expense Summary; Management
6. Capital Stock and Other Special Shareholder Services;
Securities The Laurel Funds Investment Series; Distributions;
Taxes
7. Purchase of Securities How to Invest in The Laurel Funds; Special
Shareholder Services; Share Price
8. Redemption or Repurchase How to Redeem Shares; Share Price;
Distributions; Special Shareholder Services
9. Pending Legal Proceedings Not Applicable
Part B Statement of Additional
Item No. Information Caption
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information Management of the Trust
and History Custodian and Transfer Agent
13. Investment Objectives and Investment Policies
and Policies
14. Management of the Fund Management of the Trust;
Distributor; Custodian and Transfer Agent
15. Control Persons and Management of the Trust
Principal Holders of
Securities
16. Investment Advisory and Management of the Trust
and Other Services Purchase of Shares; Custodian; Transfer
Agent
17. Brokerage Allocation Investment Policies
18. Capital Stock and Purchase of Shares; Taxes;
Other Securities Description of the Trust
19. Purchase, Redemption and Purchase of Shares; Redemption of
Pricing of Securities Shares; Valuation of Shares;
Being Offered
20. Tax Status Taxes
21. Underwriters Purchase of Shares
22. Calculation of Performance Performance Information
Data
23. Financial Statements Financial Statements
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PROSPECTUS APRIL 10, 1995
DREYFUS/LAUREL SHORT-TERM BOND FUND
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THE DREYFUS/LAUREL SHORT-TERM BOND FUND (THE "FUND), FORMERLY CALLED
THE "LAUREL SHORT-TERM BOND FUND," IS A SEPARATE PORTFOLIO OF
THEDREYFUS/LAUREL INVESTMENT SERIES, AN OPEN-END, DIVERSIFIED MANAGEMENT
INVESTMENT COMPANY (THE "COMPANY") KNOWN AS A MUTUAL FUND. THE FUND SEEKS TO
OBTAIN A HIGH LEVEL OF CURRENT INCOME, CONSISTENT WITH PRESERVATION OF
CAPITAL, BY INVESTING IN A BROAD RANGE OF FIXED-INCOME SECURITIES HAVING
REMAINING MATURITIES OF FIVE YEARS OR LESS.
BY THIS PROSPECTUS, THE FUND IS OFFERING INVESTOR SHARES AND CLASS R
SHARES. (CLASS R SHARES OF THE FUND WERE FORMERLY CALLED TRUST SHARES.)
INVESTOR SHARES AND CLASS R SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES
OFFERED TO AND THE EXPENSES BORNE BY EACH CLASS. CLASS R SHARES ARE SOLD
PRIMARILY TO BANK TRUST DEPARTMENTS AND OTHER FINANCIAL SERVICE PROVIDERS
(INCLUDING MELLONBANK, N.A. AND ITS AFFILIATES) ("BANKS") 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.
INVESTOR SHARES ARE PRIMARILY SOLD TO RETAIL INVESTORS BY THE FUND'S
DISTRIBUTOR AND BY BANKS, SECURITIES BROKERS OR DEALERS AND OTHER FINANCIAL
INSTITUTIONS ("AGENTS") THAT HAVE ENTERED INTO A SELLING AGREEMENT WITH THE
FUND'S DISTRIBUTOR.
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUND ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS TELET
RANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
-----------------
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
A STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED APRIL 10, 1995,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY,
WRITE TO THE FUND AT 144 GLENNCURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 666.
-----------------
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK
OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH
AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 6
MANAGEMENT OF THE FUND.......................... 11
HOW TO BUY FUND SHARES.......................... 13
SHAREHOLDER SERVICES............................ 16
HOW TO REDEEM FUND SHARES....................... 19
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)........ 21
PERFORMANCE INFORMATION......................... 22
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 23
GENERAL INFORMATION............................. 25
Page 2
[This Page Intentionally Left Blank]
Page 3
EXPENSE SUMMARY
<TABLE>
<CAPTION>
INVESTOR SHARES CLASS R SHARES
--------------- ---------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases................. none none
Maximum Sales Load Imposed on Reinvestments............. none none
Deferred Sales Load..................................... none none
Redemption Fee.......................................... none none
Exchange Fee............................................ none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee.......................................... .55% .55%
12b-1 Fee1.............................................. .25% none
Other Expenses2......................................... .00% .00%
_____ _____
Total Fund Operating Expenses........................... 0.80% 0.55%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period: INVESTOR SHARES CLASS R SHARES
--------------- ---------------
1 Year $ 8 $ 6
3 Years $26 $ 18
5 Years $44 $ 31
10 Years $99 $ 69
(1) See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for the Investor Class.
(2) Does not include fees and expenses of the non-interested trustees
(including counsel). The investment manager is
contractually required to reduce its Management Fee in an amount equal to the
Fund's allocable portion of such fees and expenses, which are estimated to be
.02% of the Fund's net assets. (See "Management of the Fund.")
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
- -------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Investor shares could pay more in 12b-1 fees
than the economic equivalent of paying the maximum front-end sales charges
applicable to mutual funds sold by members of the National Association of
Securities Dealers, Inc. The information in the foregoing table does not
reflect any fee waivers or expense reimbursement arrangements that may be in
effect. Certain Agents may charge their clients direct fees for effecting
transactions in Fund shares; such fees are not reflected in the foregoing
table. See "Management of the Fund," "How to Buy Fund Shares" and
"Distribution Plan (Investor Shares Only)."
The Fund understands that banks, securities brokers or dealers and
other financial institutions (including Mellon Bank and its affiliates)
(collectively, "Agents") may charge fees to their clients who are owners of
the Fund's Investor shares 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 Selling Agreement ("Agreement") with Premier Mutual Fund
Services, Inc. (the "Distributor"). The Agreement requires each Agent to
disclose to its clients any compensation payable to such Agent by the
Distributor and any other compensation payable by the clients for various
services provided in connection with their account.
Page 4
FINANCIAL HIGHLIGHTS
The table below is based upon a single Investor share outstanding
throughout each fiscal year and should be read in conjunction with the
financial statements and related notes that appear in the Fund's Annual
Report dated August 31, 1994. The financial statements included in the Fund's
Annual Report dated August 31, 1994 are incorporated by reference to the SAI
and have been audited by KPMG Peat Marwick LLP, independent accountants,
whose report appears in the Fund's Annual Report. The Fund did not offer
Class R shares during the fiscal year ended August 31, 1994. Further
information about the Fund's performance is contained in the Fund's Annual
Report which may be obtained without charge.
<TABLE>
<CAPTION>
DREYFUS/LAUREL SHORT-TERM BOND FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.(1)
8/31/94## 8/31/9 8/31/92 8/31/91 8/31/90 8/31/89*
------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $12.50 $12.64 $12.23 $11.82 $11.84 $12.00
------- ------- ------ ------- ------- -------
Income from investment operations:
Net investment income***... 0.63 0.68 0.75 0.82 0.93 0.86
Net realized and unrealized gain/(loss)
on investments ............ (0.62) (0.15) 0.41 0.41 (0.02) (0.17)
------- ------- ------ ------- ------- -------
Total from investment operations 0.01 0.53 1.16 1.23 0.91 0.69
------- ------- ------ ------- ------- -------
Less distributions:
Distributions from net
investment income.......... (0.64) (0.67) (0.75) (0.82) (0.93) (0.85)
Distributions in excess of net
investment income.......... (0.02) (0.00)# --- --- --- ---
------- ------- ------ ------- ------- -------
Total distributions........ (0.66) (0.67) (0.75) (0.82) (0.93) (0.85)
------- ------- ------ ------- ------- -------
Net asset value, end of period. $11.85 $12.50 $12.64 $12.23 $11.82 $11.84
======= ======= ======= ======= ======= =======
Total return................... 0.06% 4.34% 9.73% 10.79% 7.95% 5.97%
------- ------- ------ ------- ------- -------
Ratios to average net assets/
supplemental data:
Net assets, end of year
(in 000's)................. $2,273 $3,477 $5,449 $3,895 $2,771 $3,374
Ratio of operating expenses to
average net assets**....... 0.95% 0.99% 0.98% 0.99% 0.99% 1.14%
Ratio of net investment income
to average net assets...... 5.38% 5.29% 5.96% 6.90% 7.77% 8.07%
Portfolio turnover rate........ 53% 6% 30% 70% 52% 232%
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(1) Effective April 4, 1994 the Retail and Institutional classes of shares
were reclassified as a single class of shares known
as the Investor Shares. The amounts shown for the year ended August 31, 1994,
were calculated using the performance of a Retail Share outstanding from
September 1, 1993 to April 3, 1994, and the performance of an Investor Share
outstanding from April 4, 1994 to August 31, 1994. The Financial Highlights
for the year ended August 31,1993 and prior years are based upon a Retail Share
outstanding.
* The Fund commenced operations on October 18, 1988.
** Annualized expense ratios before waiver of fees and/or reimbursement of
expenses by investment adviser, transfer agent and custodian for the years
ended August 31, 1994, 1993, 1992, 1991, 1990 and the period ended August 31,
1989 would have been 4.21%, 2.54%, 1.88%, 3.07%, 3.67%, and 1.54%,
respectively.
*** Net investment income per share before waiver of fees and/or
reimbursement of expenses by investment adviser, transfer agent and custodian
for the years ended August 31, 1994, 1993, 1992, 1991, 1990 and the period
ended August 31, 1989 would have been $0.25, $0.48, $0.63, $0.57, $0.61 and
$0.82, respectively.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated.
+++ Per share amounts have been calculated using the monthly average
share method, which more appropriately presents the per share data for this
period since use of the undistributed income method does not accord with
results of operations.
# Amount represents less than $0.01.
## Effective October 17, 1994, Dreyfus serves as the Fund's investment
manager. From April 4, 1994 to October 16, 1994, Mellon Bank served as the
Fund's investment manager. Prior to April 4, 1994, The Boston Company
Advisors, Inc. served as the Fund's investment adviser.
</TABLE>
Page 5
DESCRIPTION OF THE FUND
GENERAL
By this Prospectus, the Fund is offering Investor shares and Class R
shares. (Class R shares of the Fund were formerly called Trust Shares.)
Investor shares and Class R shares are identical, except as to the services
offered to and the expenses borne by each Class. Class R shares are sold
primarily to Banks 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. Investor shares are primarily sold to retail
investors by the Distributor and by Agents that have entered into a Selling
Agreement with the Distributor. If shares of the Fund are held in an account
at a Bank or with an Agent, such Bank or Agent may require you to place all
Fund purchase, exchange and redemption orders through them. All Banks and
Agents have agreed to transmit transaction requests to the Fund's transfer
agent or to the Distributor. Distributor and shareholder servicing paid by
Investor shares will cause Investor shares to have a higher expense ratio and
pay lower dividends than Class R shares.
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a diversified fund that seeks to obtain a high level of
current income, consistent with the preservation of capital by investing in a
broad range of fixed-income securities having remaining maturities of five
years or less.
The Fund will invest primarily in investment-grade fixed-income
securities of all types. Investment-grade fixed-income securities are
securities rated Baa or higher by Moody's Investors Service, Inc.
("Moody's")or BBB or higher by Standard &Poor's Ratings Group ("Standard &
Poor's"), and unrated securities that are of equivalent quality in the
opinion of Dreyfus. Fixed-income securities in the Fund's portfolio may
include bonds, notes, U.S. Government and government agency obligations, and
money market securities, including bank certificates of deposit and time
deposits, bankers' acceptances, prime commercial paper, high-grade,
short-term corporate obligations, and repurchase agreements with respect to
these instruments. Securities rated Baa by Moody's or BBB by Standard &
Poor's have speculative characteristics and could be weakened in periods of
economic distress.
Although the Fund will invest primarily in investment-grade,
fixed-income securities, a portion of its total assets, not to exceed 5%, may
be invested in lower quality securities, so long as they are consistent with
the Fund's objective of obtaining a high level of current income consistent
with the preservation of capital. Such securities may include bonds rated as
low as C by Moody's and by Standard & Poor's. For additional information
concerning fixed-income securities, see "OTHER INVESTMENT POLICIES," and the
Appendix to the SAI.
All securities in which the Fund invests have remaining maturities of
five years or less at the date of purchase. Under normal conditions, the Fund
expects to maintain an average-weighted portfolio maturity of three years or
less. The Fund expects to experience smaller fluctuations in net asset value
than other higher current income funds that maintain longer average-weighted
portfolio maturities.
OTHER INVESTMENT POLICIES AND RISK FACTORS
BANK CERTIFICATES OF DEPOSIT AND BANKERS ACCEPTANCES. The Fund may
invest in U.S. dollar- denominated instruments of domestic banks, including
their branches located outside the United States, and of domestic branches of
foreign banks. In addition, the Fund may invest up to 10% of its assets in
certain U.S. dollar-denominated time deposits issued by foreign branches of
domestic banks. The foregoing investments may be made provided the bank has
capital, surplus and undivided profits (as of the date of its
Page 6
most recently published annual financial statements) in excess of $100 million
as of the date of investment. The Fund may not invest more than 25% of its
assets in securities or obligations issued by banks.
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.
COVERED OPTION WRITING. From time to time, the Fund may write covered
put and call options on portfolio securities. The Fund could realize fees
(referred to as "premiums'') for granting the rights evidenced by the
options. However, in return for the premium, the Fund forfeits the right to
any appreciation in the value of the underlying security while the option is
outstanding. A put option embodies the right of its purchaser to compel the
writer of the option to purchase from the option holder an underlying
security at the specified price at any time during the option period. In
contrast, a call option embodies the right of its purchaser to compel the
writer of the option to sell the option holder an underlying security at a
specified price at any time during the option period.
Upon the exercise of a put option written by the Fund, the Fund may
suffer a loss equal to the difference between the price at which the Fund is
required to purchase the underlying security and its market value at the time
of the option exercise, less the premium received for writing the option.
Upon the exercise of a call option written by the Fund, the Fund may suffer a
loss equal to the excess of the security's market value at the time of the
option exercise over the Fund's acquisition cost of the security, less the
premium received for writing the option.
Whenever the Fund writes a call option it will continue to own or
have the present right to acquire the underlying security for as long as it
remains obligated as the writer of the option. To support its obligation to
purchase the underlying security if a put option is exercised, the Fund will
either (a) deposit with the Fund's custodian in a segregated account, cash,
U.S. Government securities or other high grade debt obligations having a
value at least equal to the exercise price of the underlying securities or
(b) continue to own an equivalent number of puts of the same "series'' (that
is, puts on the same underlying security having the same exercise prices and
expiration dates as those written by the Fund), or an equivalent number of
puts of the same "class'' (that is, puts on the same underlying security)
with exercise prices greater than those that it has written (or, if the
exercise prices of the puts it holds are less than the exercise prices of
those it has written, it will deposit the difference with the Fund's
custodian in a segregated account).
The Fund may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the
outstanding option's expiration). To effect a closing purchase transaction,
the Fund would purchase, prior to the holder's exercise of an option that the
Fund has written, an option of the same series as that on which the Fund
desires to terminate its obligation. The obligation of the Fund under an
option that it has written would be terminated by a closing purchase
transaction, but the Fund would not be deemed to own an option as the result
of the transaction. There can be no assurance that the Fund will be able to
effect closing purchase transactions at a time when it wishes to do so. To
facilitate closing purchase transactions, however, the Fund will ordinarily
write options only if a secondary market for the options exists on a national
securities exchange or in the over-the-counter market.
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 interest rates, the yield of the Fund may tend to be
lower. Also, when interest rates are falling, the inflow of net new money to
the Fund from the continuous sale of its shares will likely be invested in
Page 6
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 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.
FUTURES AND OPTIONS ON FUTURES. The Fund may enter into futures
contracts and purchase and write options on future contracts as hedges when
deemed advisable by Dreyfus. The Fund may purchase and sell financial futures
contracts, including futures for stock indexes, and purchase and write
related options, that are traded on a United States exchange or board of
trade. These investments, if any, by the Fund will be made solely for the
purpose of hedging against changes in the value of its portfolio securities
or securities which the Fund intends to purchase due to anticipated changes
in interest rates and market conditions, and when the transactions are
economically appropriate to the reduction of risks inherent in the management
of the Fund. The use of futures contracts and options on futures contracts as
a hedging device involves several risks. There can be no assurance that there
will be a correlation between price movements in the underlying securities,
on the one hand, and price movements in the securities which are the subject
of the hedge, on the other hand. Positions in futures contracts and options
on futures contracts may be closed out only on an exchange or board of trade
that provides an active market for them, and there can be no assurance that a
liquid market will exist for the contract or the option at any particular
time. Losses incurred by hedging transactions and the costs of these
transactions will affect the Fund's performance. Successful use of futures
contracts by the Fund is subject to the ability of Dreyfus to correctly
predict movements in the direction of interest rates. The Fund may not
purchase or sell futures contracts or purchase options on futures if,
immediately thereafter, more than 33 1/3% of its net assets would be hedged.
In addition, the Fund may not enter into futures and related options
contracts for which aggregate initial margin deposits and premiums exceed 5%
of the fair market value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on futures contracts into which it
has entered.
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 are readily marketable 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 which can be sold to qualified
institutional buyers in accordance with Rule 144A under that Act ("Rule 144A
securities''). 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 in an exempt transaction. 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. Determinations as to
the liquidity of investments in Section 4(2) paper and Rule 144A securities
will be made by the Board of Trustees. The Board will consider availability
of reliable price information and other relevant information in making such
determinations. If a particular investment in Section 4(2) paper or Rule 144A
Securities is not determined to be liquid, that invest-
Page 8
ment 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.
LENDING OF PORTFOLIO SECURITIES. From time to time, the Fund may lend
portfolio securities to brokers, dealers and other financial organizations.
Such loans will not exceed 33 1/3% of the Fund's total assets, taken at
value. Loans of portfolio securities by the Fund will be collateralized by
cash, letters of credit or securities issued or guaranteed by the U.S.
Government or its agencies which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities.
LOW-RATED AND COMPARABLE UNRATED SECURITIES. The Fund may invest in
low-rated and comparable unrated securities. Low-rated and comparable unrated
securities (collectively referred to in this discussion as "low-rated''
securities) will likely have some quality and protective characteristics
that, in the judgment of the rating organization, are outweighed by large
uncertainties or major risk exposures to adverse conditions; and are
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
Further information regarding security ratings is contained in the SAI.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its investment objective and policies and permissible under
the Investment Company Act of 1940 (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.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement
transactions in pursuit of its investment objective. A repurchase agreement
involves the purchase of a security by the Fund and a simultaneous agreement
(generally with a bank or broker-dealer) to repurchase that security from the
Fund at a specified price and date or upon demand. This technique offers a
method of earning income on idle cash. A risk associated with repurchase
agreements is the failure of the seller to repurchase the securities as
agreed, which may cause the Fund to suffer a loss if the market value of such
securities declines before they can be liquidated on the open market.
Repurchase agreements with a duration of more than seven days are considered
illiquid securities and are subject to the limit on illiquid securities
stated above.
SHORT-TERM SECURITIES. The Fund may invest in short-term securities
such as U.S. Government securities and other high-grade, short-term money
market instruments, including repurchase agreements, time deposits,
certificates of deposit, bankers' acceptances and high-grade commercial paper
for temporary defensive purposes when Dreyfus determines that market
conditions so warrant. In addition, the Fund may invest up to 10% of its
assets in such securities on a regular basis to maintain liquidity for
purposes of redeeming shares and meeting other cash obligations of the Fund.
The Fund may also invest in these securities for other purposes consistent
with achieving its investment objective.
STOCK INDEX OPTIONS. The Fund may purchase and write exchange-listed
put and call options on stock indexes to hedge against risks of market-wide
price movements. A stock index measures the movement of a certain group of
stocks by assigning relative values to the common stocks included in the
index. (Examples of well-known stock indexes are the Standard & Poor's 500
Composite Stock Price Index and the NYSE Composite Index.) Options on stock
indexes are similar to options on securities.
Page 9
However, because options on stock indexes do not involve the delivery of an
underlying security, the option represents the holder's right to obtain from
the writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the exercise date.
The advisability of using stock index options to hedge against the
risk of market-wide movements will depend on the extent of diversification of
the Fund's stock investments and the sensitivity of its stock investments to
factors influencing the underlying index. The effectiveness of purchasing or
writing stock index options as a hedging technique will depend upon the
extent to which price movements in the portion of the portfolio being hedged
correlate with price movements in the stock index selected.
When the Fund writes an option on a stock index, it will deposit cash or cash
equivalents or a combination of both in an amount equal to the market value
of the option, in a segregated account with the Fund's custodian, and will
maintain the account while the option is open.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued
or guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government securities that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, or other instrumentalities.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government
securities on a when-issued basis or 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 when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the market- place, 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 equal to the
amounts of its when-issued and delayed delivery commitments.
PORTFOLIO TURNOVER. While securities are purchased for the Fund for a
high level of current income and not for short-term trading profits, in the
past the portfolio turnover rate of the Fund has exceeded 100% and may exceed
100% in the future. 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. In past years the Fund's rate of portfolio turnover
exceeded that of certain other mutual funds with the same investment
objective. A higher rate of portfolio turnover involves correspondingly
greater brokerage commissions and other expenses which 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 which, when distributed to the Fund's shareholders,
are taxable to them as ordinary income. Nevertheless, security 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.
Page 10
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. The SAI describes all of the
Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. 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 their then
current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interests of the
Fund, it may consider terminating sales of its shares in the states involved.
MASTER/FEEDER OPTION. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's 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 Trustees determine it to be in the best interest of the Fund and its
shareholders. In making that determination, the Trustees will consider, among
other things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiencies. Although the Fund believes that
the trustees 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.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of March 31, 1995, Dreyfus managed or administered
approximately $72 billion in assets for more than 1.9 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager. Dreyfus supervises
and assists in the overall management of the Fund's affairs under an
Investment Management Agreement with the Fund, subject to the overall
authority of the Company's Board of Trustees in accordance with Massachusetts
law. Pursuant to the Investment 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 the Fund's investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
Roberta Shea, an Officer of Mellon Bank and a Vice President of The
Boston Company Advisors, Inc., is the portfolio manager for the Fund. Ms.
Shea is a portfolio manager at the Manager and has been employed by the
Manager since October 17, 1994. Ms. Shea manages money market instruments,
including U.S. Treasury bills, for several major corporations and investment
firms. Ms. Shea has also served as a Treasury analyst and as a Federal Funds
trader. A Holy Cross graduate, she has been with The Boston Company since
1984.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the 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. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National
Page 11
Association, Mellon Bank (MD), The Boston Company, Inc., AFCO Credit
Corporation and a number of companies known as Mellon Financial Services
Corporations. Through its subsidiaries, including Dreyfus, Mellon managed
approximately $193 billion in assets as of December 31, 1994, including $70
billion in mutual fund assets. As of December 31, 1994, Mellon, through
various subsidiaries, provided non-investment services, such as custodial or
administration services, for approximately $654 billion in assets, including
approximately $74 billion in mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to pay
a monthly fee at the annual rate of .55% of the Fund's average daily net
assets. Dreyfus pays all of the expenses of the Fund except brokerage fees,
taxes, interest, fees and expenses of the non-interested Trustees (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
Trustees (including counsel fees), Dreyfus is contractually required to
reduce its investment management fee in an amount equal to the Fund's
allocable share of such fees and expenses. In order to compensate Dreyfus for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies'
investment adviser. From time to time, Dreyfus may waive (either voluntarily
or pursuant to applicable state limitations) a portion of the investment
management fees payable by the Fund. For the period from September 1, 1993
through April 3, 1994, the Fund paid its investment adviser, The Boston
Company Advisors, Inc. (an indirect wholly-owned subsidiary of Mellon), 0.00%
(annualized) of the Fund's average daily net assets in investment advisory
fees (net of fees waived and expenses reimbursed) under the Fund's previous
investment advisory contract (such contract only covered the provision of
investment advisory and certain specified administrative services). For the
period from April 4, 1994 through the fiscal year ended August 31, 1994, the
Fund paid Mellon Bank .55% (annualized) of the Fund's average daily net
assets in investment management fees. For the fiscal year ended August 31,
1994, total operating expenses (excluding Rule 12b-1 fees) (net of fees
waived and expenses reimbursed) of the Fund were 0.78% of the Fund's average
daily net assets for the Investor shares. It is anticipated that the current
total operating expenses of the Fund (excluding Rule 12b-1 fees) will be
approximately .55% of the Fund's average daily net assets.
In addition, Investor shares are subject to certain distribution and
service fees. See "Distribution Plan (Investor Shares only)."
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 Agents in respect of these services.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. 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 has a lending relationship.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"). The Distributor is located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor is a wholly-owned subsidiary of
Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR--Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Fund's custodian and fund
Page 12
accountant. The Fund's Transfer and Dividend Disbursing Agent is The
Shareholder Services Group, Inc. (the "Transfer Agent"), a subsidiary of First
Data Corporation, One American Express Plaza, Providence, Rhode Island 02903.
Premier Mutual Fund Services, Inc. is the Fund's sub-administrator and,
pursuant to a Sub-Administration Agreement with Dreyfus, provides various
administrative and corporate secretarial services to the Fund.
HOW TO BUY FUND SHARES
GENERAL-- Investor shares are offered to any investor and may be
purchased through the Distributor or Agents that have entered into Selling
Agreements with the Distributor.
Class R shares are sold primarily to Banks 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. A
Retirement Plan is a certain 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-pro
fit entities or state and local governments ("Retirement Plan"). 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.
Institutions effecting transactions in Class R shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. 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 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 for Dreyfus-sponsored Keogh Plans,
IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750, with no
minimum on subsequent purchases. Individuals who open an IRA also may open a
non-working spousal IRA with a minimum initial investment of $250. 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 in $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 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 to 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.
You may purchase Fund shares by check or wire, or, with respect to
Investor shares only, through the Dreyfus TELETRANSFER Privilege described
below. Checks should be made payable to "The Dreyfus Family of Funds" or, if
for Dreyfus retirement plan accounts, to "The Dreyfus Trust Company,
Custodian." Payments to open new accounts which are mailed should be sent to
The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account
Page 13
Application indicating which Class of shares is being purchased. For subsequent
investments, your Fund account number should appear on the check and an
investment slip should be enclosed and sent to The Dreyfus Family of Funds,
P.O. Box 105, Newark, New Jersey 07101-0105. For Dreyfus retirement plan
accounts, both initial and subsequent investments should be sent to The Dreyfus
Trust Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427.
Neither initial nor subsequent investments should be made by third party check.
PURCHASE ORDERS MAY BE DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER.
THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON
RECEIPT THEREBY. FOR THE LOCATION OF THE NEAREST DREYFUS FINANCIAL CENTER,
PLEASE CALL ONE OF THE TELEPHONE NUMBERS LISTED UNDER "GENERAL INFORMATION."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. To purchase Investor shares in your
name, immediately available funds may be transmitted by wire to Boston Safe
Deposit & Trust Co., DDA# 043478. For wire information with respect to Class
R shares, please call 1-800-645-6561. The wire must include your Fund account
number (for new accounts, your Taxpayer Identification Number ("TIN") should
be included instead), account registration and dealer number, if applicable.
If your initial purchase of Fund shares is by wire, you should call
1-800-645-6561 after completing your wire payment in order to obtain your
Fund account number. Please include your Fund account number on the Fund's
Account Application and promptly mail the Account Application to the Fund, as
no redemptions will be permitted until the Account Application is received.
You may obtain further information about remitting funds in this manner from
your bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit & Trust Co. with instructions to credit
your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4820".
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified 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 one million dollars ("Eligible Benefit
Plans"). The determination of the number of employees eligible for
participation in a plan or program shall be made on the date Fund shares are
first purchased by or on behalf of employees participating in such plan or
program and on each subsequent January 1st. All present holdings of shares of
funds in the Dreyfus Family of Funds by Eligible Benefit Plans will be
aggregated to determine the fee payable with respect to each purchase of Fund
shares. The Distributor reserves the right to cease paying these fees at any
time. The Distributor will pay such fees from its own funds, other than
amounts received from the Fund, including past profits or any other source
available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and 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 (the
"IRS").
Page 14
NET ASSET VALUE ("NAV") -- An investment portfolio's NAV refers to
the worth of one share. The NAV for Investor shares and Class R shares is
computed by adding, with respect to such Class of shares, the value of the
Fund's investments, cash, and other assets attributable to that Class,
deducting liabilities of the Class and dividing the result by the number of
shares of that Class outstanding. The valuation of assets for determining NAV
for the Fund may be summarized as follows:
The portfolio securities of the Fund listed or traded on a stock
exchange, except as otherwise noted, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith in accordance with procedures established by the Board of Trustees.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Trustees.
Pursuant to a determination by the Board of Trustees that such value
represents fair value, debt securities with maturities of 60 days or less
held by the Fund are valued at amortized cost. When a security is valued at
amortized cost, it is valued at its cost when purchased, and thereafter by
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.
NAV is determined on each day that the New York Stock Exchange
("NYSE") is open (a "business day"), as of the close of business of the
regular session of the NYSE (usually 4 p.m., Eastern Time). Investments and
requests to exchange or redeem shares received by the Fund in proper form
before the close of business on the NYSE (usually 4 p.m., Eastern Time) are
effective on, and will receive the share price determined on, that day
(except purchase orders made through the Dreyfus TELETRANSFER Privilege,
which are effective one business day after your call). Investment, exchange
and redemption requests received after the close of the NYSE are effective on
and receive the share price determined on the next business day.
The NAV of most shares of investment portfolios advised by Dreyfus
(other than money market funds) is published in leading newspapers daily. The
yield of most Dreyfus money market funds is published weekly in leading
financial publications and in many local newspapers. The NAV of any Dreyfus
fund may also be obtained by calling 1-800-645-6561.
The public offering price of Investor shares and Class R shares is
the NAV per share of that Class.
DREYFUS TELETRANSFER PRIVILEGE (NOT APPLICABLE TO CLASS R SHARES) --
You may purchase Fund shares (minimum $500 and maximum $150,000 per day) by
telephone if you have checked the appropriate box and supplied the necessary
information on the Fund's 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 ACH member may be so designated. 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.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Investor shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306.
Page 15
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares of the
same class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561. WITH RESPECT
TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE ONLY
BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. Except in the case of Personal
Retirement Plans, the shares being exchanged must have a current value of at
least $500; furthermore, when establishing a new account by exchange, the
shares being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made. The
ability to issue exchange instructions by telephone is given to all Fund
shareholders automatically, unless you check the relevant "No" box on the
Account Application, indicating that you specifically refuse this Privilege.
The Telephone Exchange Privilege may be established for an existing account
by written request, signed by all shareholders on the account, or by a
separate Shareholder Services Form, also available by calling 1-800-645-6561.
If you previously have established the Telephone Exchange Privilege, you may
telephone exchange instructions by calling 1-800-221-4060 or, if calling from
overseas, 1-401-455-3306. See "How to Redeem Fund Shares_Procedures." Upon
an exchange, the following shareholder services and privileges, as applicable
and where available, will be automatically carried over to the fund into
which the exchange is made: Telephone Exchange Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege and
the dividends and distributions payment option (except for Dividend Sweep)
selected by the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Investor shares into funds
sold with a sales load. If you are exchanging Investor shares into a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
of the fund from which you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer Agent or
your Agent must notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the SAI. 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. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
fund exchanges may be modified or terminated at any time upon notice to
shareholders.
Page 16
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 by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same class of certain other funds in the Dreyfus
Family of Funds of which you are currently an investor. WITH RESPECT TO CLASS
R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, 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 you have selected. Shares will be exchanged at the then-current net
asset value; however a sales load may be charged with respect to exchanges of
Investor shares into funds sold with a sales load. 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. 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 by the
shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss. 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.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. 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 by calling 1-800-645-6561 from the Distributor. 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 to 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.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same class of certain other funds in the Dreyfus Family of
Funds of which you are an investor. Shares of the other fund will be
purchased at the then-current NAV; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share
prices
Page 17
which do not include the sales load or which reflect a reduced sales
load. See "Shareholder Services" in the SAI. Dreyfus Dividend ACH permits you
to transfer electronically on the payment date 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. 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 the direct deposit program of your employer, 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.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account.
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
than the Automatic Withdrawal Plan. An application for the Automatic
Withdrawal Plan can be
Page 18
obtained by calling 1-800-645-6561. 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.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 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.
HOW TO REDEEM FUND SHARES
GENERAL--You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value as described below. 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 directly through
the Distributor. Agents or other institutions may charge their clients a
nominal 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.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH
MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE
OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $500 or less and remains so during the notice period.
PROCEDURES--You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, the Wire Redemption Privilege, the
Telephone Redemption Privilege or, for Investor shares only, through the
Dreyfus TELETRANSFER Privilege. Other redemption procedures may be in effect
Page 19
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.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or Telephone Exchange Privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions 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.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed 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. REDEMPTION REQUESTS MAY BE
DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR
THE LOCATION OF THE NEAREST FINANCIAL CENTER, PLEASE CALL THE TELEPHONE NUMBER
LISTED UNDER "GENERAL INFORMATION." Redemption requests must be signed by
each shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program. For
more information with respect to signature-guarantees, please call one of the
telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $1,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of only up to $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-221-4060 or, if
calling from overseas, 1-401-455-3306. The Fund reserves the right to refuse
Page 20
any redemption request, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at any time by the Transfer
Agent or the Fund. The Fund's SAI sets forth instructions for transmitting
redemption requests by wire. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which certificates have been issued, are not
eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE. You may redeem Fund shares (maximum
$150,000 per day) by telephone if you checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. 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. This Privilege may be modified or
terminated at any time by the Transfer Agent or the Fund. Shares held under
Keogh Plans, IRAs or other retirement plans, and shares for which certificates
have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE--INVESTOR SHARES. You may redeem Fund
shares (minimum $500 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between your Fund account and the
bank account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an ACH member may be
so designated. Redemption proceeds will be on deposit in your account at an
ACH member bank ordinarily two days after receipt of the redemption request
or, at your request, paid by check (maximum $150,000 per day) and mailed to
your address. Holders of jointly registered Fund or bank accounts may redeem
through the Dreyfus TELETRANSFER Privilege for transfer to their bank account
only up to $250,000 within any 30-day period. 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 this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares issued in
certificate form, are not eligible for this Privilege.
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)
Investors shares are subject to a Distribution Plan (the "Plan'')
adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1''). Investor
shares of the Fund bear some of the cost of selling those shares under the
Plan. The Plan 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 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 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
Page 21
time to time, the Agents, the Distributor and the Fund may agree to
voluntarily reduce the maximum fees payable under the Plan. See the SAI for
more details on the Plan.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. 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.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may be
calculated on the basis of average annual total return and/or total return.
These total return figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains distributions made by
the Fund during the measuring period were reinvested in shares of the same
Class. These figures also take into account any applicable service and
distribution fees. As a result, at any given time, the performance of the
Investor shares should be expected to be lower than that of Class R.
Performance for each Class will be calculated separately.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
other distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period. Advertisem
ents of the Fund's performance will include the Fund's average annual total
return for one, five and ten year periods, or for shorter periods depending
upon the length of time during which the Fund has operated. Computations of
average annual total return for periods of less than one year represent an
annualization of the Fund's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the NAV at the
beginning of the period. Advertisements may include the percentage rate of
total return or may include the value of a hypothetical investment at the end
of the period which assumes the application of the percentage rate of total
return. Total return also may be calculated by using the NAV at the beginning
of the period for Investor shares.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per Class of such share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a Class of shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
ratings. Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, MUTUAL FUND FORECASTER, NO
LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND
WORLD REPORT, FORBES, FORTUNE, BARRON'S
Page 22
and similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote shares, returns and yields in advertisements
or in shareholder reports. The Fund may also advertise non-standardized
performance information, such as total return, for periods other than those
required to be shown on cumulative performance data.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays monthly (on the first business day
of the following month) dividends from its net investment income, if any. The
Fund distributes any net realized gains, if any, on an annual basis. The
Board of Trustees may elect not to distribute capital gains in whole or in
part to take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain
distributions in cash, your distributions will be automatically reinvested in
additional shares of the Fund at the NAV. You may change the method of
receiving distributions at any time by writing to the Fund. Checks which are
sent to shareholders who have requested distributions to be paid in cash and
which are subsequently returned by the United States Postal Service as not
deliverable or which remain uncashed for six months or more will be reinvested
in additional Fund shares in the shareholder's account at the then current
NAV. Subsequent Fund distributions will be automatically reinvested in
additional Fund shares in the shareholder's account.
Distributions paid by the Fund 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.
Shares purchased on a day on which the Fund calculates its NAV will
not begin to accrue dividends until the following business day. Redemption
orders effected on any particular day will receive all dividends declared
through the day of redemption.
You may elect to have distributions on shares held in IRAs and 403(b)
accounts paid in cash only if you are at least 59 1/2 years old or are
permanently and totally disabled. Distribution checks normally are mailed
within seven days after the record date.
Any dividend and/or capital gain distribution paid by the Fund will
reduce each share's NAV by the amount of the distribution. Shareholders are
subject to taxes with respect to any such distribution. At any given time,
the value of the Fund's shares includes the undistributed net gains, if any,
realized by the Fund on the sale of portfolio securities, and undistributed
dividends and interest received, less the Fund's expenses. Because such gains
and income are included in the value of your shares, when they are
distributed the value of your shares is reduced by the amount of the
distribution. Accordingly, if your distribution is reinvested in additional
shares, the distribution has no effect on the value of your investment; while
you own more shares, the value of each share has been reduced by the amount
of the distribution. Likewise, if you take your distribution in cash, the
value of your shares immediately after the distribution plus the cash
received is equal to the value of the shares immediately before the
distribution. For example, if you own a Fund share that immediately before a
distribution has a value of $10, including $2 in undistributed dividends and
capital gains realized by the Fund during the year, and if the $2 is
distributed, the value of the share will decline to $8. If the $2 is
reinvested at $8 per share, you will receive .250 shares, so that, after the
distribution, you will have 1.250 shares at $8 per share, or $10, the same as
before.
The Fund intends to qualify for treatment as a regulated investment
company under the Code so that it will be relieved of Federal income tax on
that part of its investment company taxable income (consist-
Page 23
ing generally of taxable net investment income and net short-term capital gain)
and net capital gain (the excess of net long-term capital gain over net short-
term capital loss) that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by the Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your shares.
Dividends and other distributions are taxable to you regardless of
whether they are received in cash or reinvested in additional Fund shares,
even if the value of your shares is below your cost. If you purchase shares
shortly before a taxable distribution you must pay income taxes on the
distribution, even though the value of your investment (plus cash received,
if any) remains the same. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
Fund. If these portfolio securities are subsequently sold and the gains are
realized, they will, to the extent not offset by capital losses, be paid to
you as a capital gain distribution and will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year.
Dividends paid by the Fund to qualified retirement plans ordinarily
will not be subject to taxation until the proceeds are distributed from the
retirement plans. The Fund will not report to the IRS dividends 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. If the distribution from such a
retirement plan (other than certain governmental or church plans) for any
taxable year following the year in which the participant reaches age 70 1/2
is less than the ``minimum required distribution'' for that taxable year, an
excise tax equal to 50% of the deficiency may be imposed by the IRS. The
administrator, trustee or custodian of such a retirement plan will be
responsible for reporting such distributions from such 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.
You must furnish the Fund with your taxpayer identification number
(``TIN'') and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is required
to withhold a portion of all dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN; withholding
from dividends and capital gain distributions also is required for such
shareholders who otherwise are subject to backup withholding.
The Fund will 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 taxable ordinary income for that year and capital gain net income
for the one-year period ending on December 31 of that year, plus certain
other amounts. The Fund expects to make such distributions as are necessary
to avoid the imposition of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Fund and its shareholders; see the SAI
for a further discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You therefore are urged
to consult your own tax adviser.
Page 24
GENERAL INFORMATION
The Company offers shares of beneficial interest of separate
investment portfolios with $.001 par value per share (each a "fund''). The
Boston Company Investment Series was organized as a Massachusetts business
trust under the laws of the Commonwealth of Massachusetts on May 26, 1988 and
changed its named to The Laurel Investment Series, and then changed its name
to The Dreyfus/Laurel Investment Series on October 17, 1994. The Company is
registered with the SEC as an open-end management investment company,
commonly known as a mutual fund. The Trustees have authorized shares of the
Fund to be issued in two classes_Investor shares and Class R shares.
Each share (regardless of class) has one vote. All shares of a fund
(and classes thereof) vote together as a single class, except as to any
matter for which a separate vote of any fund or class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or classes, in which case only the shareholders of the
affected fund or classes are entitled to vote, each as a separate class. Only
holders of Investor shares will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution Plan relating to that Class.
At March 31, 1995, Mellon Bank, Dreyfus' parent, owned of record
through its direct and indirect subsidiaries more than 25% of the Company's
outstanding voting shares, and is deemed, under the 1940 Act, to be a
controlling shareholder.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees 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 Trustee from office and
for any other purpose. Company shareholders may remove a Trustee by the
affirmative vote of two-thirds of the Company's outstanding voting shares. In
addition, the Board of Trustees will call a meeting of shareholders for the
purpose of electing Trustees if, at any time, less than a majority of the
Trustees then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 25
Dreyfus/Laurel
Short-Term
Bond Fund
PROSPECTUS
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
398/786p1041095
DREYFUS/LAUREL INTERNATIONAL FUND
INVESTOR AND CLASS R SHARES
APRIL 10, 1995
THE DREYFUS/LAUREL INTERNATIONAL FUND is a diversified equity fund
seeking long-term growth in capital by investing in companies located outside
the United States. Current income from dividends, interest, and other sources
is a secondary objective. The Fund seeks to achieve its investment objectives
through investments in common stocks and securities convertible into common
stock companies located throughout the United States.
THIS PROSPECTUS describes the Dreyfus/Laurel International Fund, (the
"Fund") of The Dreyfus/Laurel Investment Series (formerly The Laurel
Investment Series and prior thereto The Boston Company Investment Series), a
management investment company that is part of The Dreyfus Family of Funds.
This Prospectus describes two classes of shares_Investor Shares and Class R
Shares (collectively, the "Shares")_of the Fund.
This Prospectus sets forth concisely the information about the Fund
that a prospective purchaser should consider before investing. Investors
should read this Prospectus and retain it for future reference. Additional
information about the Fund is contained in a Statement of Additional
Information (the "SAI"), which has been filed with the Securities and
Exchange Commission (the "SEC") and is available upon request without charge
by calling or writing to The Dreyfus Family of Funds. The SAI bears the same
date as the Prospectus and is incorporated by reference in its entirety into
this Prospectus.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THIS PROSPECTUS. THE FUND PAYS MELLON BANK, N.A. ("MELLON
BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR AN
AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
In addition to this Fund, The Dreyfus Family of Funds also offers
other funds that provide investment opportunities for you in the equity,
fixed income and money markets. For more information about these additional
investment opportunities, call 1-800-645-6561
The Dreyfus Family of Funds
For Purchase, Redemption
144 Glenn Curtiss Boulevard
and Performance Information call
Uniondale, New York 11556-0144
1-800-645-6561
TABLE OF CONTENTS
Page
Expense Summary..................................................... 3
Financial Highlights................................................ 4
Investment Objectives and Policies.................................. 5
How to Buy Fund Shares.............................................. 10
Shareholder Services................................................ 12
How to Redeem Fund Shares........................................... 15
Share Price......................................................... 18
Performance Advertising............................................. 18
Distributions....................................................... 19
Taxes............................................................... 20
Other Services...................................................... 21
Further Information About The Fund.................................. 21
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR
IN THE FUND'S SAI INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
BE LAWFULLY MADE.
Page 2
EXPENSE SUMMARY
The purpose of the following tables is to help you understand the
various costs and expenses that you, as a shareholder, will bear directly or
indirectly in connection with an investment in the Investor or Class R Shares
of the Fund See "Management".
<TABLE>
DREYFUS/LAUREL INTERNATIONAL FUND
INVESTOR SHARES CLASS R SHARES
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases............. none none
Maximum Sales Load Imposed on Reinvestments......... none none
Deferred Sales Load................................. none none
Redemption Fee...................................... none none
Exchange Fee........................................ none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Management Fee...................................... 1.50% 1.50%
____---- ____---
12b-1 Fee........................................... 0.25% 0.00%
____---- ____---
Other Expenses(1)................................... 0.00% 0.00%
____---- ____---
Total Fund Operating Expenses....................... 1.75% 1.50%
EXAMPLES:
You would pay the following on a
$1,000 investment, assuming (1) a 5%
annual return and (2) redemption at the end
of each time period: INVESTOR SHARES CLASS R SHARES
1 year $ 18 $ 15
3 years $ 55 $ 47
5 years $ 95 $ 82
10 years $ 206 $ 179
</TABLE>
(1) Does not include fees and expenses of the non-interested (incuding
counsel). The investment manager is contractually required to reduce its
Management Fee in an amount equal to the Fund's allocable portion of such fees
and expenses, which are estimated to be 0.02% of the Fund's net assets.
(See "Management.")
- ---------------------------------------------------------------------------
The amounts listed in the example should not be considered as
representative of future expenses and actual expenses may be greater or less
than those indicated. Moreover, while the example assumes a 5% annual return,
the Fund's actual performance will vary and may result in an actual return
greater or less than 5%.
- -------------------------------------------------------------------------
The Fund understands that banks, securities brokers or dealers and
other financial institutions (including Mellon Bank and its affiliates)
(collectively "Agents") may charge fees to their clients who are owners of
the Fund's Investor Shares 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 and Sales Support Agreements
("Agreements") with Premier Mutual Fund Services Inc. ("Premier"). The
Agreement requires each Agent to disclose to its clients any compensation
payable to such Agent by Premier and any other compensation payable by the
client for various services provided in connection with its account.
Long-term shareholders of Investor Shares could pay more in Rule
12b-1 fees than the economic equivalent of the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc.
Page 3
FINANCIAL HIGHLIGHTS
The table below is based upon a single Investor Share outstanding
throughout each fiscal year and should be read in conjunction with the
financial statements and related notes that appear in the Fund's Annual
Report dated August 31, 1994. The financial statements included in the Fund's
Annual Report dated August 31, 1994 are incorporated by reference into the
SAI and have been audited by KPMG Peat Marwick LLP, independent accountants,
whose report appears in such Fund's Annual Report. The Fund did not offer
Class R Shares during the fiscal year ended August 31, 1994.
<TABLE>
DREYFUS /LAUREL INTERNATIONAL FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH PERIOD.(1)
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
8/31/94#(2) 8/31/93# 8/31/92 8/31/91 8/31/90 8/31/89*
------------ --------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $12.76 $10.93 $11.25 $12.25 $12.98 $12.00
------- -------- ------- ------- ------- --------
Income from investment operations:
Net investment income***... 0.10 0.05 0.03 0.12 0.19 0.12
Net realized and unrealized gain/(loss)
on investments ............ 1.13 1.78 (0.14) (0.73) (0.65) 0.89
------- -------- ------- ------- ------- --------
Total from investment operations... 1.23 1.83 (0.11) (0.61) (0.46) 1.01
------- -------- ------- ------- ------- --------
Less Distributions:
Distributions from net
investment income.......... -_ -_ (0.07) (0.17) (0.18) (0.03)
Distributions from net realized
capital gains.............. -_ -_ (0.14) (0.22) (0.09) -_
------- -------- ------- ------- ------- --------
Total distributions........ -_ -_ (0.21) (0.39) (0.27) (0.03)
------- -------- ------- ------- ------- --------
Net asset value, end of period.... $13.99 $12.76 $10.93 $11.25 $12.25 $12.98
======= ======= ======= ======= ======= ======
Total return................... 9.64% 16.74% (1.05%) (4.88%) (3.69%) 8.40%
------- -------- ------- ------- ------- --------
Ratios to average net assets/
supplemental data:
Net assets, end of period
(in 000's)................. $5,793 $3,399 $11,435 $29,706 $31,372 $24,699
Ratio of operating expenses to
average net assets**....... 1.84% 1.79% 1.87% 1.63% 1.63% 1.76%
Ratio of net investment income
to average net assets...... 0.74% 0.46% 0.24% 0.97% 1.50% 1.52%
Portfolio turnover rate........ 114% 202% 110% 145% 28% 47%
</TABLE>
- -------------------------------
(1) Effective April 4, 1994 the Retail and Institutional classes of shares
were reclassified as a single class of shares known as Investor Shares. The
amounts shown for the year ended August 31, 1994, were calculated using the
performance of a Retail Share outstanding from September 1, 1993 to April 3,
1994, and the performance of an Investor Share outstanding from April 4, 1994
to August 31, 1994. The Financial Highlights for the year ended August 31,1993
and prior years are based upon a Retail Share outstanding.
(2) Effective October 17, 1994, The Dreyfus Corporation began serving as the
Fund's investment manager. From April 4, 1994 to October 16, 1994, Mellon
Bank served as the Fund's investment manager. Prior to April 4, 1994, The
Boston Company Advisors, Inc. served as the Fund's investment adviser.
* The Fund commenced operations on October 12, 1988.
** Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by investment adviser and/or transfer agent and/or
distributor for 1994, 1993 and 1992 were 4.21%, 3.15%, and 2.11%,
respectively.
*** Net investment income/(loss) before voluntary waiver of fees and/or
reimbursement of expenses by investment adviser and/or transfer agent and/or
distributor for the years ended August 31, 1994, 1993 and 1992 were ($0.21),
($0.10) and $0.00, respectively.
+ Annualized.
++ The annualized operating expense ratio excludes interest expense. The
annualized ratio including interest expense as 1.80% for the year ended
August 31, 1993.
+++ Total return represents aggregate total return for the periods
indicated.
# Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for this period
since use of the undistributed method does not accord with results of
operations.
Page 4
On December 20, 1994, the Board of Trustees of The Dreyfus/Laurel
Investment Series approved an Agreement and Plan of Reorganization whereby:
(a) the assets of the Fund would be acquired by the Dreyfus International
Equity Allocation Fund, a fund with a substantially similar investment
objective, that is an investment portfolio of The Dreyfus/Laurel Funds, Inc.;
(b) shareholders of the Fund would become shareholders of the Dreyfus
International Equity Allocation Fund; and (c) the Fund's shareholders would
receive shares of the Dreyfus International Equity Allocation Fund equal in
value to the Fund shares they own. The Agreement and Plan of Reorganization
will be submitted to shareholders of the Fund for their approval at a meeting
to be held April 19, 1995 and, if approved, will be effective May 1, 1995.
INVESTMENT OBJECTIVES AND POLICIES
The Fund seeks long-term growth in capital by investing in companies
located outside the United States. Current income from dividends, interest,
and other sources is a secondary objective. The Fund is a diversified fund
that seeks to achieve its investment objective by investing in common stocks
and securities convertible into common stock of companies located outside the
United States.
The Fund places major emphasis on countries that are considered to
have above average potential for long-term economic growth. In general, the
Fund's investments are expected to be broadly diversified over a number of
countries including, but not limited to, Australia, Canada, France, Germany,
Hong Kong, Italy, Japan, the Netherlands, Singapore/Malaysia, Spain, Sweden,
Switzerland, and the United Kingdom. Within countries, equity investments are
expected to be broadly diversified to spread risk and to provide
representation of the growth potential of the country. Selection of
securities is designed to include participation in economic and industrial
sectors which are important to the growth of the country. Within countries,
the Fund invests primarily in major established companies which are listed
and traded on principal exchanges. The Fund will not invest more than 35% of
its total assets in any one country. For additional information concerning
investments in foreign securities including risks, certain foreign currency
transactions and the Fund's temporary defensive strategy see "Other
Investment Policies".
OTHER INVESTMENT POLICIES.
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.
COVERED OPTION WRITING. From time to time, the Fund may write covered
put and call options on portfolio securities. The Fund could realize fees
(referred to as "premiums") for granting the rights evidenced by the options.
However, in return for the premium, the Fund forfeits the right to any
appreciation in the value of the underlying security while the option is
outstanding. A put option embodies the right of its purchaser to compel the
writer of the option to purchase from the option holder an underlying
security at the specified price at any time during the option period. In
contrast, a call option embodies the right of its purchaser to compel the
writer of the option to sell the option holder an underlying security at a
specified price at any time during the option period.
Upon the exercise of a put option written by the Fund, the Fund may
suffer a loss equal to the difference between the price at which the Fund is
required to purchase the underlying security and its market value at the time
of the option exercise, less the premium received for writing the option.
Upon the exercise of a call option written by the Fund, the Fund may suffer a
loss equal to the excess of the security's market value at the time of the
option exercise over the Fund's acquisition cost of the security, less the
premium received for writing the option.
Whenever the Fund writes a call option it will continue to own or
have the present right to acquire the underlying security for as long as it
remains obligated as the writer of the option. To support its obligation to
purchase the underlying security if a put option is exercised, the Fund will
either (a) deposit with the Fund's custodian in a segregated account, cash,
U.S. Government securities or other high grade debt
Page 5
obligations having a value at least equal to the exercise price of the
underlying securities or (b) continue to own an equivalent number of puts of
the same "series" (that is, puts on the same underlying security having the
same exercise prices and expiration dates as those written by the Fund), or
an equivalent number of puts of the same "class" (that is, puts on the same
underlying security) with exercise prices greater than those that it has
written (or, if the exercise prices of the puts it holds are less than the
exercise prices of those it has written, it will deposit the difference with
the Fund's custodian in a segregated account).
The Fund may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the
outstanding option's expiration). To effect a closing purchase transaction,
the Fund would purchase, prior to the holder's exercise of an option that the
Fund has written, an option of the same series as that on which the Fund
desires to terminate its obligation. The obligation of the Fund under an
option that it has written would be terminated by a closing purchase
transaction, but the Fund would not be deemed to own an option as the result
of the transaction. There can be no assurance that the Fund will be able to
effect closing purchase transactions at a time when it wishes to do so. To
facilitate closing purchase transactions, however, the Fund will ordinarily
write options only if a secondary market for the options exists on a national
securities exchange or in the over-the-counter market.
CURRENCY TRANSACTIONS. The Fund may engage in currency exchange
transactions in order to protect against uncertainty in the level or future
exchange rates on securities denominated in foreign currencies. The Fund will
conduct its currency exchange transactions either on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, or through
entering into forward contracts to purchase or sell currencies. The Fund's
dealings in forward currency exchange contracts will be limited to hedging
involving either specific transactions or aggregate portfolio positions. A
forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are entered into in the interbank
market conducted directly between currency traders (usually large commercial
banks) and their customers. Although such transactions are intended to minimiz
e the risk of loss due to a decline in the value of the hedged currency, at
the same time, they tend to limit any potential gain which might result
should the value of such currency increase.
FIXED-INCOME SECURITIES STRATEGIES. The Fund may invest in
fixed-income securities to achieve its investment objectives. 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 interest rates, the yield
of the Fund may tend to be lower. Also, when interest rates are falling, the
inflow of net new money to the Fund from the continuous sale 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 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.
FOREIGN SECURITIES. The Fund may invest in securities of non-U.S.
issuers directly or in the form of American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs") or similar securities representing
interests in the common stock of foreign issuers. ADRs are receipts,
typically issued by a U.S. bank or trust company, which evidence ownership of
underlying securities issued by a foreign corporation. EDRs are receipts
issued in Europe which evidence a similar ownership arrangement. Generally,
ADRs, in registered form, are designed for use in the U.S. securities markets
and EDRs are designed for use in European securities markets. The underlying
securities are not always denominated
page 6
in the same currency as the ADRs or EDRs. Although investment in the form of
ADRs or EDRs facilitates trading in foreign securities, it does not mitigate
the risks associated with investing in foreign securities.
Investments in foreign securities incur higher costs than investments
in U.S. securities, including higher costs in making securities transactions
as well as foreign government taxes which may reduce the investment return of
the Fund. In addition, foreign investments may include additional risks
associated with currency exchange rates, less complete financial information
about individual companies, less market liquidity, and political instability.
Although the Fund may invest in securities denominated in foreign
currencies, the Fund values its securities and other assets in U.S. dollars.
As a result, the NAV of the Fund's shares generally will fluctuate with U.S.
dollar exchange rates as well as with price changes of the Fund's securities
in the various local markets and currencies. Thus, an increase in the value
of the U.S. dollar compared to the currencies in which the Fund makes its
investments could reduce the effect of increases and magnify the effect of
decreases in the price of the Fund's securities in their local markets.
Conversely, a decrease in the value of the U.S. dollars will have the
opposite effect of magnifying the effect of increases and reducing the effect
of decreases in the prices of the Fund's exchange-rate developments. In
addition to favorable and unfavorable currency exchange-rate developments,
the Fund is subject to the possible imposition of exchange control
regulations or currency blockages.
FUTURES AND OPTIONS ON FUTURES. The Fund may enter into futures
contracts and purchase and write options on future contracts as hedges when
deemed advisable by the Manger. The Fund may purchase and sell financial
futures contracts, including futures for stock indexes, and purchase and
write related options, that are traded on a United States exchange or board
of trade. These investments, if any, by the Fund will be made solely for the
purpose of hedging against changes in the value of its portfolio securities
or securities which the Fund intends to purchase due to anticipated changes
in interest rates and market conditions, and when the transactions are
economically appropriate to the reduction of risks inherent in the management
of the Fund. The use of futures contracts and options on futures contracts as
a hedging device involves several risks. There can be no assurance that there
will be a correlation between price movements in the underlying securities,
on the one hand, and price movements in the securities which are the subject
of the hedge, on the other hand. Positions in futures contracts and options
on futures contracts may be closed out only on an exchange or board of trade
that provides an active market for them, and there can be no assurance that a
liquid market will exist for the contract or the option at any particular
time. Losses incurred by hedging transactions and the costs of these
transactions will affect the Fund's performance. Successful use of futures
contracts by the Fund is subject to the ability of the Manger to correctly
predict movements in the direction of interest rates. The Fund may not
purchase or sell futures contracts or purchase options on futures if,
immediately thereafter, more than 33 1/3% of its net assets would be hedged.
In addition, the Fund may not enter into futures and related options
contracts for which aggregate initial margin deposits and premiums exceed 5%
of the fair market value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on futures contracts into which it
has entered.
ILLIQUID SECURITIES. The Fund will not knowingly invest more that 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 which
can be sold to qualified institutional buyers in accordance with Rule 144A
under
Page 7
that Act ("Rule 144A securities"). 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 in an exempt transaction. 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.
Determinations as to the liquidity of investments in Section 4(2) paper and
Rule 144A Securities will be made by the Board of Trustees. The Board will
consider availability of reliable price information and other relevant
information in making such determinations. If a particular investment in
Section 4(2) paper or Rule 144A Securities is not determined to be liquid,
that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities
to 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.
LENDING OF PORTFOLIO SECURITIES. From time to time, the Fund may lend
portfolio securities to brokers, dealers and other financial organizations.
Such loans will not exceed 33 1/3% of the Fund's total assets, taken at
value. Loans of portfolio securities by the Fund will be collateralized by
cash, letters of credit or securities issued or guaranteed by the U.S.
Government or its agencies which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its investment objectives and policies and permissible under
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 bear directly
in connection with its own operations.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement
transactions in pursuit of its investment objectives. A repurchase agreement
involves the purchase of a security by the Fund and a simultaneous agreement
(generally with a bank or broker-dealer) to repurchase that security from the
Fund at a specified price and date or upon demand. This technique offers a
method of earning income on idle cash. A risk associated with repurchase
agreements is the failure of the seller to repurchase the securities as
agreed, which may cause the Fund to suffer a loss if the market value of such
securities declines before they can be liquidated on the open market.
Repurchase agreements with a duration of more than seven days are considered
illiquid securities and are subject to the limit on illiquid securities
stated above.
SHORT-TERM SECURITIES. The Fund may invest in short-term securities
such as U.S. Government securities and other high-grade, short-term money
market instruments, including repurchase agreements, time deposits,
certificates of deposit, bankers' acceptances and high-grade commercial paper
for temporary defensive purposes when the Manager determines that market
conditions so warrant. In addition, the Fund may invest up to 10% of its
assets in such securities on a regular basis to maintain liquidity for
purposes of redeeming shares and meeting other cash obligations of the Fund.
The Fund may also invest in these securities for other purposes consistent
with achieving its investment objectives.
STOCK INDEX OPTIONS. The Fund may purchase and write exchange-listed
put and call options on stock indexes to hedge against risks of market-wide
price movements. A stock index measures the movement of a certain group of
stocks by assigning relative values to the common stocks included in the
index. (Examples of well-known stock indexes are the Standard & Poor's 500
Composite Stock Price
Page 8
Index and the NYSE Composite Index). Options on stock indexes are similar to
options on securities. However, because options on stock indexes do not
involve the delivery of an underlying security, the option represents the
holder's right to obtain from the writer in cash a fixed multiple of the
amount by which the exercise price exceeds (in the case of a put) or is less
than (in the case of a call) the closing value of the underlying index on
the exercise date.
The advisability of using stock index options to hedge against the
risk of market-wide movements will depend on the extent of diversification of
the Fund's stock investments and the sensitivity of its stock investments to
factors influencing the underlying index. The effectiveness of purchasing or
writing stock index options as a hedging technique will depend upon the
extent to which price movements in the portion of the portfolio being hedged
correlate with price movements in the stock index selected.
When the Fund writes an option on a stock index, it will deposit cash
or cash equivalents or a combination of both in an amount equal to the market
value of the option, in a segregated account with the Fund's custodian, and
will maintain the account while the option is open.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued
or guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government securities that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Corporation,
the Federal Home Loan Mortgage Association, or other instrumentalities.
WHEN ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government
securities on a when-issued basis or 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 when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the market place, 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 transactions. The Fund will establish
a segregated account consisting of cash, U.S. Government securities or other
high-grade debt obligations in an amount equal to the amounts of its
when-issued and delayed delivery commitments.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on
the basis of potential for capital appreciation, in the past the portfolio
turnover rate of the Fund has exceeded 100% and may exceed 100% in the
future. A portfolio turnover rate of 100% would occur, for example, if all
these securities held by the Fund were replaced once in a period of one year.
In past years the Fund's rate of portfolio turnover exceeded that of certain
other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions and
other expenses which 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
which, when distributed to the Fund's shareholders, are taxable to them as
ordinary income. (See "Distributions" and "Taxes.") Nevertheless, security
transactions for the Fund will be based only upon investment considerations
and will not be limited by any other considerations when the Manager deems it
appropriate to make changes in the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of
Page 9
the holders of a majority of the Fund's outstanding Shares. The SAI describes
all of the Fund's fundamental and non-fundamental restrictions.
The investment objectives, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objectives, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to permit the sale of the Fund's Shares in certain states,
the Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interests of the
Fund, it may consider terminating sales of its Shares in the states involved.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Investment Series may in the
future seek to achieve the Fund's investment objectives by investing all of
the Fund's assets in another investment company having the same investment
objectives 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 Trustees determine it to be in the best interest of the Fund and
its shareholders. In making that determination, the Trustees will consider,
among other things, the benefits to shareholders and/or the opportunity to
reduce costs and achieve operational efficiencies. Although the Fund believes
that the Trustees 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.
HOW TO BUY FUND SHARES
GENERAL_ Investor shares are offered to any investor and may be
purchased through the Distributor or Agents that have entered into Selling
Agreements with the Distributor.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates)
("Banks") 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. A Retirement Plan is a certain 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 ("Retirement Plan"). 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. Institutions effecting
transactions in Class R shares for the accounts of their clients may charge
their clients direct fees in connection with such transactions.
Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. 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 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 for Dreyfus-sponsored Keogh Plans,
IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750, with no
minimum on subsequent purchases. Individuals who open an IRA also may open a
non-working spousal IRA with a minimum initial investment of $250. 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.
Page 10
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
various limitations on the amount that may be contributed to 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.
You may purchase Fund shares by check or wire, or, with respect to
Investor shares only, through the Dreyfus TELETRANSFER Privilege described
below. Checks should be made payable to "The Dreyfus Family of Funds" or, if
for Dreyfus retirement plan accounts, to "The Dreyfus Trust Company,
Custodian." Payments to open new accounts which are mailed should be sent to
The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application indicating which Class of
shares is being purchased. For subsequent investments, your Fund account
number should appear on the check and an investment slip should be enclosed
and sent to The Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey
07101-0105. For Dreyfus retirement plan accounts, both initial and subsequent
investments should be sent to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Neither initial nor subsequent
investments should be made by third party check. PURCHASE ORDERS MAY BE
DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR
THE LOCATION OF THE NEAREST DREYFUS FINANCIAL CENTER, PLEASE CALL ONE OF THE
TELEPHONE NUMBERS LISTED UNDER "GENERAL INFORMATION."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. To purchase Investor shares in your
name, immediately available funds may be transmitted by wire to Boston Safe
Deposit & Trust Co., DDA# 043370. For wire information with respect to Class
R shares, please call 1-800-645-6561. The wire must include your Fund account
number (for new accounts, your Taxpayer Identification Number ("TIN") should
be included instead), account registration and dealer number, if applicable.
If your initial purchase of Fund shares is by wire, you should call
1-800-645-6561 after completing your wire payment in order to obtain your
Fund account number. Please include your Fund account number on the Fund's
Account Application and promptly mail the Account Application to the Fund, as
no redemptions will be permitted until the Account Application is received.
You may obtain further information about remitting funds in this manner from
your bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit & Trust Co. with instructions to credit
your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4740".
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified 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 one million dollars ("Eligible Benefit
Plans"). The determination of the number of employees eligible for
participation in a plan or program shall be made on the date Fund shares are
first purchased by or on behalf of employees participating in such
Page 11
plan or program and on each subsequent January 1st. All present holdings of
shares of funds in the Dreyfus Family of Funds by Eligible Benefit Plans will
be aggregated to determine the fee payable with respect to each purchase of
Fund shares. The Distributor reserves the right to cease paying these fees at
any time. The Distributor will pay such fees from its own funds, other than
amounts received from the Fund, including past profits or any other source
available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Taxes" and 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 (the "IRS").
The Net asset value per share ("NAV") is determined on each day that
the New York Stock Exchange ("NYSE") is open (a "business day"), as of the
close of business of the regular session of the NYSE (usually 4 p.m., Eastern
Time). Investments and requests to exchange or redeem shares received by the
Fund in proper form before the close of business on the NYSE (usually 4 p.m.,
Eastern Time) are effective on, and will receive the share price determined
on, that day (except investments made by electronic funds transfer, which are
effective two business days after your call). Investment, exchange and
redemption requests received after the close of the NYSE are effective on and
receive the share price determined on the next business day.
The public offering price of Investor shares and Class R shares is
the NAV of that Class.
DREYFUS TELETRANSFER PRIVILEGE _ You may purchase Fund shares
(minimum $500 and maximum $150,000 per day) by telephone if you have checked
the appropriate box and supplied the necessary information on the Fund's
Account Application or have filed a Shareholder Services Form with the Transfe
r 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 ACH member may be
so designated. 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.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Investor shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
Fund Exchanges
You may purchase, in exchange for shares of a Class, shares of the
same class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use. WITH
RESPECT TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE
ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. Except in the case of Personal
Retirement Plans, the shares being exchanged must have a current value of at
least $500; furthermore, when establishing a new
Page 12
account by exchange, the shares being exchanged must have a value of at least
the minimum initial investment required for the fund into which the exchange
is being made. The ability to issue exchange instructions by telephone is
given to all Fund shareholders automatically, unless you check the relevant
"No" box on the Account Application, indicating that you specifically refuse
this Privilege. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, or by a separate Shareholder Services Form, also available by
calling 1-800-645-6561. If you previously have established the Telephone
Exchange Privilege, you may telephone exchange instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. See "How to
Redeem Fund Shares_Procedures." Upon an exchange, the following shareholder
services and privileges, as applicable and where available, will be
automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Wire Redemption Privilege, Telephone Redemption
Privilege, Dreyfus TELETRANSFER Privilege (Investor Shares) and the dividends
and distributions payment option (except for Dividend Sweep) selected by
the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Investor shares into funds
sold with a sales load. If you are exchanging Investor shares into a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
of the fund from which you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer Agent or
your Agent must notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the SAI. 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. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
fund exchanges may be modified or terminated at any time upon notice to
shareholders.
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 by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same class of certain other funds in the Dreyfus
Family of Funds of which you are currently an investor. WITH RESPECT TO CLASS
R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, 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 you have selected. Shares will be exchanged at the then-current net
asset value; however a sales load may be charged with respect to exchanges of
Investor shares into funds sold with a sales load. 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
Page 13
for the use of this Privilege. No such fee currently is contemplated. 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 by the
shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss. 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.
Dreyfus-AUTOMATIC Asset Builder
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. 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 by calling 1-800-645-6561 from the Distributor. 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 to 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.
Dreyfus Dividend Options
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same class of certain other funds in the Dreyfus Family of
Funds of which you are an investor. Shares of the other fund will be
purchased at the then-current net asset value; however, a sales load may be
charged with respect to investments in shares of a fund sold with a sales
load. If you are investing in a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect
a reduced sales load. See "Shareholder Services" in the SAI. Dreyfus Dividend
ACH permits you to transfer electronically on the payment date 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. 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
Page 14
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 the direct deposit program of your employer, 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.
Automatic Withdrawal Plan
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account.
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
than the Automatic Withdrawal Plan. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. 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.
Retirement Plans
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 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.
HOW TO REDEEM FUND SHARES
GENERAL_You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value as described below. 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.
Page 15
The Fund imposes no charges when shares are redeemed directly through
the Distributor. Agents or other institutions may charge their clients a
nominal 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.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH
MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE
OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $500 or less and remains so during the notice period.
PROCEDURES_You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, the Wire Redemption
Privilege, the Telephone Redemption Privilege or, for Investor shares only,
through the Dreyfus TELETRANSFER Privilege. 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.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or Telephone Exchange Privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions 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 net asset value may fluctuate.
Page 16
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed 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. REDEMPTION REQUESTS MAY BE
DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR
THE LOCATION OF THE NEAREST FINANCIAL CENTER, PLEASE CALL THE TELEPHONE NUMBER
LISTED ON THE COVER OF THIS PROSPECTUS. Redemption requests must be signed
by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. For more information with respect to signature-guarantees, please
call one of the telephone numbers listed on the cover of this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $1,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of only up to $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-221-4060 or, if
calling from overseas, 1-401-455-3306. The Fund reserves the right to refuse
any redemption request, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at any time by the Transfer
Agent or the Fund. The Fund's SAI sets forth instructions for transmitting
redemption requests by wire. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which certificates have been issued, are not
eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE. You may redeem Fund shares (maximum
$150,000 per day) by telephone if you checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. 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. This Privilege may be modified or
terminated at any time by the Transfer Agent or the Fund. Shares held under
Keogh Plans, IRAs or other retirement plans, and shares for which certificates
have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE_INVESTOR SHARES. You may redeem Fund
shares (minimum $500 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between your Fund account and the
bank account designated
Page 17
in one of these documents. Only such an account maintained in a domestic
financial institution which is an ACH member may be so designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily
two days after receipt of the redemption request or, at your request, paid by
check (maximum $150,000 per day) and mailed to your address. Holders of
jointly registered Fund or bank accounts may redeem through the Dreyfus
TELETRANSFER Privilege for transfer to their bank account only up to
$250,000 within any 30-day period. 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 this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares issued in
certificate form, are not eligible for this Privilege.
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The
NAV for Investor and Class R Shares of the Fund is computed by adding with
respect to each Class of Shares the value of all the Class' investments,
cash, and other assets, deducting liabilities and dividing the result by
number of Shares of that Class outstanding. The valuation of assets for
determining NAV for the Funds may be summarized as follows:
The portfolio securities of the Fund, except as otherwise noted,
listed or traded on a stock exchange, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith in accordance with procedures established by the Board of Trustees.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Trustees.
Pursuant to a determination by The Dreyfus/Laurel Investment Series'
board of trustees that such value represents fair value, debt securities with
maturities of 60 days or less held by the Fund are valued at amortized cost.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by 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.
The NAV of each class of Shares of many of The Dreyfus Family of
Funds' investment portfolios is published in leading newspapers daily. The
yield of each class of Shares of most of The Dreyfus Family of Funds' money
market funds is published weekly in leading financial publications and in
many local newspapers. The NAV of the Funds may also be obtained by calling
The Dreyfus Family of Funds.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise the yield and total return
on a class of Shares. Total return and yield figures are based on historical
earnings and are not intended to indicate future performance. The "total
return" of a Class of shares of the Fund may be calculated on an average
annual total return basis or a cumulative return basis. Average annual total
return refers to the average annual compounded rates of return on a class of
Shares over one-, five-, and ten-year periods or the life of the Fund (as
stated in the advertisement) that would equate an initial amount invested at
the beginning of a stated period to the ending redeemable value of the
investment, assuming the reinvestment of all dividends and capital gains
distributions. Cumulative total return reflects the total percentage change
in the value of
Page 18
the investment over the measuring period, again assuming the
reinvestment of all dividends and capital gains distributions.
The Fund's "yield" is calculated by dividing a Class of Shares'
annualized net investment income per Share during a recent 30-day (or one
month) period by the maximum public offering price per class of such Share on
the last day of that period. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in a Class of Shares with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
Total return and yield quotations will be computed separately for
each Class of the Fund's Shares. Because of the difference in the fees and
expenses borne by Class R and Investor Shares of the Fund, the return and
yield on Class R Shares will generally be higher than the return and yield on
Investor Shares. Any fees charged by a Bank or Agent directly to its
customers' account in connection with investments in the Fund will not be
included in calculations of total return or yield. The Fund's Annual Report
contains additional performance information and is available upon request
without charge from the Fund's distributor or your Bank or Agent.
The Fund may compare the performance of its Investor and Class R
Shares with various industry standards of performance including Lipper
Analytical Services, Inc. ratings, and the Fund may also compare a Shares
performance with Standard & Poor's 500 Composite Stock Price Index, the
Consumer Price Index, and the Dow Jones Industrial Average. Performance
rankings as reported in CHANGING TIMES, BUSINESS WEEK, INSTITUTIONAL
INVESTOR, THE WALL STREET JOURNAL, REPORT MUTUAL FUND FORECASTER, NO LOAD
INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD
REPORT, FORBES, FORTUNE, BARRON'S and similar publications may also be used
in comparing the Fund's performance. Furthermore, the Fund may quote its
Investor and Class R Shares' returns and yields in advertisements or in
shareholder reports. The Fund may also advertise non-standardized performance
information, such as total return, for periods other than those required to
be shown on cumulative performance data.
DISTRIBUTIONS
The Fund declares and pays dividends from its net investment income
semi-annually. The Fund distributes any net long-term capital gains on an
annual basis. The Board of Trustees may elect not to distribute capital gains
in whole or in part to take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain
distributions in cash, your distributions will be automatically reinvested in
additional Shares of the Fund at the NAV. You may change the method of
receiving distributions at any time by writing to the Fund. Checks which are
sent to shareholders who have requested distributions to be paid in cash and
which are subsequently returned by the United States Postal Service as not
deliverable or which remain uncashed for six months or more will be reinvested
in additional Fund Shares in the shareholder's account at the then current
NAV. Subsequent Fund distributions will be automatically reinvested in
additional Fund Shares in the shareholder's account.
Distributions paid by the Fund 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.
Shares purchased on a day on which the Fund calculates its NAV will
not begin to accrue dividends until the following business day. Redemption
orders effected on any particular day will receive all dividends declared
through the day of redemption.
You may elect to have distributions on Shares held in IRAs and 403(b)
accounts paid in cash only if you are at least 591/2 years old or are
permanently and totally disabled. Distribution checks normally are mailed
within seven days after the record date.
Any dividend and/or capital gain distribution paid by the Fund will
reduce each Share's NAV by the amount of the distribution. Shareholders are
subject to taxes with respect to any such distribution. At any given time,
the value of the Fund's Shares includes the undistributed net gains, if any,
realized by
Page 19
the Fund on the sale of portfolio securities, and undistributed
dividends and interest received, less the Fund's expenses. Because such gains
and income are included in the value of your Shares, when they are
distributed the value of your Shares is reduced by the amount of the
distribution. Accordingly, if your distribution is reinvested in additional
Shares, the distribution has no effect on the value of your investment; while
you own more Shares, the value of each Share has been reduced by the amount
of the distribution. Likewise, if you take your distribution in cash, the
value of your Shares immediately after the distribution plus the cash
received is equal to the value of the Shares immediately before the
distribution. For example, if you own a Fund Share that immediately before a
distribution has a value of $10, including $2 in undistributed dividends and
capital gains realized by the Fund during the year, and if the $2 is
distributed, the value of the Share will decline to $8. If the $2 is
reinvested at $8 per Share, you will receive .250 Shares, so that, after the
distribution, you will have 1.250 Shares at $8 per Share, or $10, the same as
before.
TAXES
The Fund intends to qualify for treatment as a regulated investment
company under the Code so that it will be relieved of Federal income tax on
that part of its investment company taxable income (consisting generally of
taxable net investment income, net short-term capital gain and net gains from
certain foreign currency transactions) and net capital gain (the excess of
net long-term capital gain over net short-term capital loss) that is
distributed to its shareholders.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by a Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your Shares.
All or a portion of the dividends paid by the Fund 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. No dividends paid by the Fund are
expected to be eligible for this deduction.
Dividends and other distributions are taxable to you regardless of
whether they are received in cash or reinvested in additional Fund Shares,
even if the value of your Shares is below your cost. If you purchase Shares
shortly before a taxable distribution you must pay income taxes on the
distribution, even though the value of your investment (plus cash received,
if any) remains the same. In addition, the Share price at the time you
purchase Shares may include unrealized gains in the securities held in the
Fund. If these portfolio securities are subsequently sold and the gains are
realized, they will, to the extent not offset by capital losses, be paid to
you as a capital gain distribution and will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for federal income tax purposes of your
distributions for the preceding year.
Dividends paid by the Fund to qualified retirement plans ordinarily
will not be subject to taxation until the proceeds are distributed from the
retirement plans. The Fund will not report to the IRS dividends 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
591/2, generally will be subject to an additional tax equal to 10% of the
taxable portion of the distribution. If the distribution from such a
retirement plan (other certain governmental or church plans) for any taxable
year following the year in which the participant reaches age 701/2 is less
than the "minimum required distribution" for that taxable year, an excise tax
equal to 50% of the deficiency may be imposed by the IRS. The administrator,
trustee or custodian of such a retirement plan will be responsible for
reporting such distributions from such plans to the IRS.
Page 20
Moreover, certain contributions to a qualified retirement plan in excess of
the amounts permitted by law may be subject to an excise tax.
You must furnish the Fund with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is required
to withhold a portion of all dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN; withholding
from dividends and capital gain distributions also is required for such
shareholders who otherwise are subject to backup withholding.
The Fund will 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 taxable ordinary income for that year and capital gain net income
for the one-year period ending on December 31 of that year, plus certain
other amounts. The Fund expects to make such distributions as are necessary
to avoid the imposition of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Fund and its shareholders; see the SAI
for a further discussion. There may be other federal, state or local tax
considerations applicable to a particular investor. You therefore are urged
to consult your own tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of
the Fund with a summary of its investments and performance. The Fund will
send you a confirmation statement after every transaction (except with regard
to the reinvestment of dividends and other distributions) that affect your
Fund accounts. In addition, an account statement will be mailed to you
quarterly or monthly depending on the Fund's reporting schedule. You may also
request a statement of your account activity at any time. Carefully review
such confirmation statements and account statements and notify the Fund
immediately if there is an error. From time to time, to reduce expenses, only
one copy of a Fund's shareholder reports (such as a Fund's Annual Report) may
be mailed to your household. Please call the Fund if you need additional
copies.
No later than January 31 of each year, the Fund will send you the
following reports, which you may use in completing your federal income tax
return:
Form 1099-DIV Reports taxable distributions (and returns of
capital, if any) during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the
preceding year (for non-retirement plan accounts).
Form 1099-R Reports distributions from IRAs and 403(b)
accounts during the preceding year.
At such time as prescribed by law, the Fund will send you a Form
5498, which reports contributions to your IRA for the previous calendar year.
In addition, the Fund may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUND
THE DREYFUS/LAUREL INVESTMENT SERIES. The Dreyfus/Laurel Investment
Series offers Shares of beneficial interest of separate investment portfolios
with $.001 par value per share (each a "fund"). The Dreyfus/Laurel Investment
Series was organized as a Massachusetts business trust under the laws of The
Commonwealth of Massachusetts on May 26, 1988 and is registered with the SEC
as an open-end management investment company, commonly known as a mutual
fund. The trustees have authorized Shares of the Fund to be issued in two
classes_Investor and Class R Shares.
Page 21
Each Share (regardless of Class) has one vote. All Shares of a fund
(and classes thereof) vote together as a single Class, except as to any
matter for which a separate vote of any fund or Class is required by the
Investment Company Act of 1940 (the "1940 Act"), and except as to any matter
which affects the interests of one or more particular fund or classes, in
which case only the shareholders of the affected fund or classes are entitled
to vote, each as a separate Class. At your written request, the Fund will
issue negotiable stock certificates. Unless otherwise required by the 1940
Act, ordinarily it will not be necessary for the Fund to hold annual meetings
of shareholders. As a result Fund shareholders may not consider each year the
election of Trustees or the appointement of auditors. However, the holders of
at least 10% of the shares outstanding and entitled to vote may require the
Fund to hold a special meeting of shareholders for purposes of removing a
Trustee from office and for any other purpose. Fund shareholders may remove a
Trustee by the affirmative vote of two-thirds of the Fund's outstanding
voting shares. In addition, the Board of Trustees will call a meeting of
shareholders for the purpose of electing Trustees if, at any time, less than
a majority of the Trustees then holding office have been elected by
shareholders.
MANAGEMENT. The business affairs of The Dreyfus/Laurel Investment
Series are managed under the direction of its trustees. The SAI contains the
names and general background information concerning the trustees and officers
of The Dreyfus/Laurel Investment Series.
INVESTMENT MANAGER. The Manager is located at 200 Park Avenue, New
York, NY 101166. As of March 31, 1995, the Manager managed or administered
approximately $72 billion in assets for more than 1.9 million investor
accounts nationwide. The Manager is a wholly-owned subsidiary of Mellon Bank
(One Mellon Bank Center, Pittsburgh, PA 15258), the Fund's prior investment
manager. Pursuant to an Investment Management Agreement, transferred from
Mellon Bank to the Manager effective October 17, 1994, 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, the Manager manages the Fund by making investment
decisions based on the Fund's investment objectives, policies and
restrictions.
Under the Investment Management Agreement, the Fund pays a fee
computed daily, and paid monthly, at the annual rate of 1.50% of the Fund's
average daily net assets less certain expenses described below. The Manager
pays all of the expenses of the Fund except brokerage fees, taxes, interest,
fees, expenses of the non-interested trustees (including counsel fees) and
extraordinary expenses. Although the Manager does not pay for the fees and
expenses of the non-interested trustees (including counsel fees), the Manager
is contractually required to reduce its investment management fee in an
amount equal to a Fund's allocable share of such expenses. In order to
compensate the Manager for paying virtually all of the Fund's expenses, the
Fund's investment management fees are higher than the investment advisory
fees paid by most investment companies. Most, if not all, such companies also
pay for additional non-investment advisory expenses that are not paid by such
companies' investment adviser. From time to time, the Manager may waive
(either voluntarily or pursuant to applicable state limitations) additional
investment management fees payable by the Fund. For the period from September
1, 1993 through April 3, 1994, the Fund paid its investment adviser, The Boston
Company Advisors, Inc., (an indirect wholly-owned subsidiary of Mellon Bank
Corporation), 0.00% of the Fund's average daily net assets in investment
advisory fees (net of fees waived and expenses reimbursed) under the Fund's
previous investment advisory contract (such contract only covered the
provision of investment advisory and certain specified administrative
services). For the period from April 4, 1994 through the fiscal year ended
August 31, 1994, the Fund paid Mellon Bank 1.50% (annualized) of the Fund's
average daily net assets in investment management fees. For the fiscal year
ended August 31, 1994, total operating expenses (excluding Rule 12b-1 fees)
(net of fees waived and expenses reimbursed) of the Fund were 1.66% of the
Fund's average daily net assets for the Investor shares. It is anticipated
that the current
Page 22
total operating expenses of the Fund (excluding Rule 12b-1 fees) will be
approximately 1.50% of the Fund's average daily net assets.
The Manager is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions which are affiliated with
the Manager or which have sold Shares of the Fund, if the Manager believes
that the quality of the transaction and the commission are comparable to what
they would be with other qualified brokerage firms. From time to time, to the
extent consistent with its investment objectives, policies and restrictions,
the Fund may invest in securities of companies with which Mellon Bank has a
lending relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. As of
December 31, 1994, Mellon Bank Corporation was among the 25 largest bank
holding companies in the United States based on total assets. Through its
bank subsidiaries, it operates 631 domestic retail banking locations
including 432 branch offices. Mellon Bank Corporation has 25 domestic
representative offices. There are international branches in Grand Cayman,
British West Indies, London, England, and two international representative
offices in Tokyo, Japan and Hong Kong. Mellon Bank has a banking subsidiary,
Mellon Bank Canada, in Toronto. Mellon Bank is a registered municipal
securities dealer.
The Glass-Steagall Act of 1933 prohibits a national bank from
engaging in the business of issuing, underwriting, selling or distributing
certain securities. The activities of Mellon Bank and the Manager with regard
to the Fund may raise issues under these provisions. However, Mellon Bank has
been advised by its counsel that these activities are consistent with these
statutory and regulatory obligations. For more information on the
Glass-Steagall Act of 1933, see "Federal Law Affecting Mellon Bank" in the
SAI.
Sandor Cseh, an officer of Mellon Bank and a Senior Vice President of
The Boston Company Asset Management, Inc. is the portfolio manager for the
Fund. Mr. Cseh is a portfolio manager at the Manager and has been employed by
the Manager since October 17, 1994. Mr. Cseh manages the international equity
group and serves as the Director of International Investments. Mr. Cseh was
President of Cseh International & Associates Inc., the international money
management division of Cashman, Fanell & Associates, and was a security
analyst with several banks before joining The Boston Company. Mr. Cseh holds
a Bachelor of Science degree in finance from the University of Delaware, and
is a Chartered Financial Analyst.
D. Kirk Henry, an officer of Mellon Bank, a Vice President of The
Boston Company Asset Management, Inc. serves as an international equity
portfolio manager of the Fund. Mr. Henry is a portfolio manager at the
Manager and has been employed by the Manager since October 17, 1994. Mr.
Henry was an Executive Vice President at Cseh International & Associates and
an international portfolio manager at Provident Capital Management, Inc.
before joining The Boston Company. Mr. Henry holds a Bachelor of Arts degree
from Stanford University, and received a Masters of Business Administration
in accounting/finance from the University of Chicago. He is also a Chartered
Financial Analyst.
OTHER SERVICE PROVIDERS. Under a Custody and Fund Accounting Agreement,
Mellon Bank acts as custodian and fund accountant maintaining possession of
the Fund's investment securities and providing certain accounting and related
services.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation ("FDC"), serves as transfer agent ("Transfer Agent") for the
Fund's Shares. The Transfer Agent is located at One American Express Plaza,
Providence, Rhode Island 02903.
Shares of the Funds are sold on a continuous basis by Premier, as the
Fund's sponsor and distributor. Premier is a registered broker-dealer with
principal offices at One Exchange Place, Boston, Massachusetts 02109. Premier
may pay service and/or distribution fees to Service Agents that assist
customers in purchasing and servicing of Shares of the Fund. (See
"Distribution Plan")
Page 23
DISTRIBUTION PLAN (INVESTOR SHARES ONLY). Investor Shares are subject
to a Distribution Plan ("Plan") adopted pursuant to Rule 12b-1 under the 1940
Act ("Rule 12b-1"). The Investor Shares of the Fund may bear some of the cost
of selling those shares under the Plan. The Plan 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
Manager, for shareholder servicing activities and Premier 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 Premier to
make payments form the Rule 12b-1 fees it collects form the Fund to
compensate Agents that have entered into Agreements ("Agreements") with
Premier. 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 Fund and Premier 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, Premier and
the Fund may agree to voluntarily reduce the maximum fees payable under the
Plan. See the SAI for more details on the Plan.
Potential investors should read this Prospectus in light of the terms
governing their Agreements with their Agents. An Agent is 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.
FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUSES
Call 1-800-645-6561
Please read the prospectus before you invest or send money
YIELD AND SHARE PRICE INFORMATION
1-800-645-6561
24 hours a day, 7 days a week
Page 24
- ----------------------------------------------------------------------------
PROSPECTUS APRIL 10, 1995
DREYFUS/LAUREL CONTRARIAN FUND
- ------------------------------------------------------------------------------
DREYFUS/LAUREL CONTRARIAN FUND (THE "FUND"), FORMERLY CALLED THE
"LAUREL CONTRARIAN FUND," IS A SEPARATE PORTFOLIO OF THE DREYFUS/LAUREL
INVESTMENT SERIES, AN OPEN-END, DIVERSIFIED MANAGEMENT INVESTMENT COMPANY
(THE "COMPANY")KNOWN AS A MUTUAL FUND. THE FUND SEEKS LONG-TERM GROWTH IN THE
FUND'S PER SHARE NET ASSET VALUE BY INVESTING PRIMARILY IN COMMON STOCKS
WHICH ARE BELIEVED TO BE UNDERVALUED, AS MEASURED BY VARIOUS FINANCIAL TESTS.
BY THIS PROSPECTUS, THE FUND IS OFFERING INVESTOR SHARES AND CLASS R
SHARES. (CLASS R SHARES OF THE FUND WERE FORMERLY CALLED TRUST SHARES.)
INVESTOR SHARES AND CLASS R SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES
OFFERED TO AND THE EXPENSES BORNE BY EACH CLASS. CLASS R SHARES ARE SOLD
PRIMARILY TO BANK TRUST DEPARTMENTS AND OTHER FINANCIAL SERVICE PROVIDERS
(INCLUDING MELLONBANK, N.A. AND ITS AFFILIATES) ("BANKS") 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.
INVESTOR SHARES ARE PRIMARILY SOLD TO RETAIL INVESTORS BY THE FUND'S
DISTRIBUTOR AND BY BANKS, SECURITIES BROKERS OR DEALERS AND OTHER FINANCIAL
INSTITUTIONS ("AGENTS") THAT HAVE ENTERED INTO A SELLING AGREEMENT WITH THE
FUND'S DISTRIBUTOR.
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUND ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
YOU CAN PURCHASE OR REDEEM INVESTOR SHARES BY TELEPHONE USING THE
DREYFUS TELETRANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
A STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED APRIL 10, 1995,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY,
WRITE TO THE FUND AT 144 GLENNCURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 666.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK
OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH
AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
- ------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------
TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 7
MANAGEMENT OF THE FUND.......................... 12
HOW TO BUY FUND SHARES.......................... 14
SHAREHOLDER SERVICES............................ 16
HOW TO REDEEM FUND SHARES....................... 19
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)........ 22
PERFORMANCE INFORMATION......................... 22
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 23
GENERAL INFORMATION............................. 25
Page 2
This Page Intentionally Left Blank
Page 3
<TABLE>
<CAPTION>
EXPENSE SUMMARY
INVESTOR SHARES CLASS R SHARES
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases................. none none
Maximum Sales Load Imposed on Reinvestments............. none none
Deferred Sales Load..................................... none none
Redemption Fee.......................................... none none
Exchange Fee............................................ none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee.......................................... 1.25% 1.25%
12b-1 Fee1.............................................. .25% none
Other Expenses2......................................... .00% .00%
______ _____
Total Fund Operating Expenses........................... 1.50% 1.25%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period: INVESTOR SHARES CLASS R SHARES
1 Year $15 $ 13
3 Years $47 $ 40
5 Years $82 $ 69
10 Years $179 $151
</TABLE>
- ---------------
(1) See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for the Investor Class.
(2) Does not include fees and expenses of the non-interested trustees
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable portion
of such fees and expenses, which are estimated to be .02% of the Fund's net
assets. (See "Management of the Fund.")
- ------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
- --------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Investor shares could pay more in 12b-1 fees
than the economic equivalent of paying the maximum front-end sales charges
applicable to mutual funds sold by members of the National Association of
Securities Dealers, Inc. The information in the foregoing table does not
reflect any fee waivers or expense reimbursement arrangements that may be in
effect. Certain Agents may charge their clients direct fees for effecting
transactions in Fund shares; such fees are not reflected in the foregoing
table. See "Management of the Fund," "How to Buy Fund Shares" and
"Distribution Plan (Investor Shares Only)."
The Fund understands that banks, securities brokers or dealers and
other financial institutions (including Mellon Bank, and its affiliates)
(collectively, "Agents") may charge fees to their clients who are owners of
the Fund's Investor shares 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 Selling Agreement ("Agreement") with Premier Mutual Fund
Services, Inc. (the "Distributor"). The Agreement requires each Agent to
disclose to its clients any compensation payable to such Agent by the
Distributor and any other compensation payable by the clients for various
services provided in connection with their accounts.
Page 4
FINANCIAL HIGHLIGHTS
The table below is based upon a single Investor share outstanding
throughout each fiscal year and should be read in conjunction with the
financial statements and related notes that appear in the Fund's Annual
Report dated August 31, 1994. The financial statements included in the Fund's
Annual Report dated August 31, 1994 are incorporated by reference to the SAI
and have been audited by KPMG Peat Marwick LLP, independent accountants,
whose report appears in the Fund's Annual Report. The Fund did not offer
Class R shares during the fiscal year ended August 31, 1994. Further
information about the Fund's performance is contained in the Fund's Annual
Report which may be obtained without charge.
<TABLE>
<CAPTION>
DREYFUS/LAUREL CONTRARIAN FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.(1)
YEAR
ENDED
8/31/94 + #
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $17.81
_______
Income from investment operations:
Net investment income/(loss)** (0.12)
Net realized and unrealized gain/(loss) on investments (0.32)
_______
Total from investment operations (0.44)
Less distributions:
Distributions from net investment income -_
Distributions from net realized capital gains (0.80)
_______
Total distributions (0.80)
Net asset value, end of period $16.57
=======
Total return (2.55)%
_______
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $2,950
Ratio of operating expenses to average net assets* 1.83%
Ratio of net investment income/(loss) to average net assets (0.68)%
Portfolio turnover rate 65%
</TABLE>
- -------------------------------
(1)Effective April 4, 1994 the Retail and Institutional classes of shares
were reclassified as a single class of shares known as the Investor Shares.
The amounts shown for the year ended August 31, 1994, were calculated using
the performance of a Retail Share outstanding from September 1, 1993 to April
3, 1994, and the performance of an Investor Share outstanding from April 4,
1994 to August 31, 1994. The Financial Highlights for the year ended August
31, 1993 and prior years are based upon a Retail Share outstanding.
*Annualized expense ratios before waiver of fees and/or reimbursement of
expenses by investment adviser, transfer agent and custodian for the years
ended August 31, 1994, 1993, 1992,1991, 1990 and the period ended August 31,
1989 would have been 3.69%, 4.70%, 3.88%, 5.18%, 4.58%, and 2.58%,
respectively.
**Net investment income/(loss) per share before waiver of fees and/or
reimbursement of expenses by the investment adviser, transfer agent and
custodian for the years ended August 31, 1994, 1993, 1992, 1991, 1990 and the
period ended August 31, 1989 would have been $(0.44), $(0.54), $(0.24),
$(0.24), $(0.14) and $(0.18), respectively.
#Effective October 17, 1994, Dreyfus serves as the Fund's investment manager.
From April 4, 1994 to October 16, 1994, Mellon Bank served as the Fund's
investment manager. Prior to April 4, 1994, The Boston Company Advisors, Inc.
served as the Fund's investment adviser.
+Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for this
period since use of the undistributed income method does not accord
with results of operations.
++Total return represents aggregate total return for the period indicated.
Page 5
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DREYFUS/LAUREL CONTRARIAN FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
8/31/93+++ 8/31/92 8/31/91 8/31/90 8/31/89***
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of year........................ $14.00 $14.08 $12.06 $14.95 $12.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income/(loss)** (0.12) 0.04 0.13 0.15 0.18
Net realized and unrealized gain/
(loss) on investments....... 4.90 0.67 3.08 (1.80) 2.82
------- ------- ------- ------- -------
Total from investment operations 4.78 0.71 3.21 (1.65) 3.00
Less distributions:
Dividends from net
investment income........... -_ (0.09) (0.22) (0.14) (0.05)
Distributions from net
realized gains.............. (0.97) (0.70) (0.97) (1.10) -_
------- ------- ------- ------- -------
Total distributions........... (0.97) (0.79) (1.19) (1.24) (0.05)
------- ------- ------- ------- -------
Net asset value, end of year.... $17.81 $14.00 $14.08 $12.06 $14.95
======= ======= ======= ======= =======
Total return++.................. 35.97% 5.10% 29.93% (11.47)% 25.05%
------- ------- ------- ------- -------
Ratios to average net assets/
supplemental data:
Net assets, end of year (in 000's).... $3,503 $2,666 $2,197 $1,831 $1,635
Ratio of operating expenses to
average net assets**........ 2.00% 1.99% 2.00% 2.00% 1.84%+
Ratio of net investment income
to average net assets....... (0.81)% 0.25% 1.09% 1.34% 1.75%+
Portfolio turnover rate......... 39% 76% 205% 176% 93%
</TABLE>
- -------------------------
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
+++ Per share amounts have been calculated using the montly average share
method, which more appropriately presents the per share data for this
period since use of the undistributed income method does not accord
with results of operations.
* Annualized expense ratios before waiver of fees and/or reimbursement of
expenses by investment adviser, transfer agent and custodian for the years
ended August 31, 1994, 1993, 1992,1991, 1990 and the period ended August 31,
1989 would have been 3.69%, 4.70%, 3.88%, 5.18%, 4.58%, and 2.58%,
respectively.
** Net investment income/(loss) per share before waiver of fees and/or
reimbursement of expenses by the investment adviser, transfer agent and
custodian for the years ended August 31, 1994, 1993, 1992, 1991, 1990
and the period ended August 31, 1989 would have been $(0.44), $(0.54),
$(0.24), $(0.24), $(0.14) and $(0.18), respectively.
*** The Fund commenced selling operations on October 17, 1988.
Page 6
DESCRIPTION OF THE FUND
GENERAL
By this Prospectus, the Fund is offering Investor shares and Class R
shares. (Class R shares of the Fund were formerly called Trust Shares.)
Investor shares and Class R shares are identical, except as to the services
offered to and the expenses borne by each Class. Class R shares are sold
primarily to Banks 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. Investor shares are primarily sold to retail
investors by the Distributor and by Agents that have entered into a Selling
Agreement with the Distributor. If shares of the Fund are held in an account
at a Bank or with an Agent, such Bank or Agent may require you to place all
Fund purchase, exchange and redemption orders through them. All Banks and
Agents have agreed to transmit transaction requests to the Fund's transfer
agent or to the Distributor. Distributor and shareholder servicing paid by
Investor shares will cause Investor shares to have a higher expense ratio and
pay lower dividends than Class R shares.
INVESTMENT OBJECTIVES AND POLICIES
The Dreyfus/Laurel Contrarian Fund is a diversified fund that seeks
long-term growth in the Fund's per share net asset value ("NAV'') by
investing primarily in common stocks which are believed to be undervalued, as
measured by various financial tests. Under normal conditions, the Fund will
invest at least 80% of its assets in equity securities. The Fund may also
invest up to 20% of its total assets in corporate bonds which, in the
judgment of Dreyfus, are undervalued, without regard to their quality or
rating.
In pursuing its objective, the Fund will seek primarily investments
that offer opportunities for capital appreciation. The Fund will not consider
current yield of a security, except to the extent that the dividend or
interest rate of the security may affect opportunities for capital
appreciation.
The Fund estimates the intrinsic value of a stock based on numerous
factors, including cash flow, return on equity, return on assets, fixed
charge coverage, and ratios of costs to revenues. The Fund also considers the
current value of fixed assets and real estate, cash items, net working
capital, debt, and historical book value. The Fund also seeks stocks with a
price-earnings ratio below that of the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500") and a yield higher than the S&P 500.
The Fund invests in corporate bonds when, in the opinion of Dreyfus,
the capital appreciation available from these securities is equal to or
greater than that available from the Fund's equity holdings. There is no
minimum rating to the fixed-income securities in which the Fund may invest.
High yield corporate bonds and convertible bonds are the primary focus of
this activity. Such high risk securities, which are considered to have
speculative characteristics, include securities rated in the lowest rating
categories of Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group ("Standard & Poor's"). These securities are generally
viewed as extremely speculative and may be in default with respect to payment
of principal or interest. The Fund intends to invest in such securities only
when, in the opinion of Dreyfus, investing in these securities presents
substantially reduced risks. It is anticipated that the Fund's portfolio of
corporate bonds will have an average maturity of approximately eight years.
For additional information concerning fixed-income securities, see "Other
Investment Policies" and the Appendix to the SAI.
The Fund invests in stocks and corporate bonds to the extent that an
adequate supply of securities meeting the Fund's criteria are available for
purchase. Since the Fund's investments are wholly determined by the above
criteria, Dreyfus does not attempt to forecast economic trends, interest
rates, or the direction of the stock market. Forecasts of future earnings of
portfolio companies are a minor factor in the selection of securities. (See
"Other Investment Policies.")
Page 7
The Fund's value-oriented investment approach is expected to result
in an average holding period for securities of two to three years.
OTHER INVESTMENT POLICIES AND RISK FACTORS
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.
COVERED OPTION WRITING. From time to time, the Fund may write covered
put and call options on portfolio securities. The Fund could realize fees
(referred to as "premiums") for granting the rights evidenced by the options.
However, in return for the premium, the Fund forfeits the right to any
appreciation in the value of the underlying security while the option is
outstanding. A put option embodies the right of its purchaser to compel the
writer of the option to purchase from the option holder an underlying
security at the specified price at any time during the option period. In
contrast, a call option embodies the right of its purchaser to compel the
writer of the option to sell the option holder an underlying security at a
specified price at any time during the option period.
Upon the exercise of a put option written by the Fund, the Fund may
suffer a loss equal to the difference between the price at which the Fund is
required to purchase the underlying security and its market value at the time
of the option exercise, less the premium received for writing the option.
Upon the exercise of a call option written by the Fund, the Fund may suffer a
loss equal to the excess of the security's market value at the time of the
option exercise over the Fund's acquisition cost of the security, less the
premium received for writing the option.
Whenever the Fund writes a call option it will continue to own or
have the present right to acquire the underlying security for as long as it
remains obligated as the writer of the option. To support its obligation to
purchase the underlying security if a put option is exercised, the Fund will
either (a) deposit with the Fund's custodian in a segregated account, cash,
U.S. Government Securities or other high grade debt obligations having a
value at least equal to the exercise price of the underlying securities or
(b) continue to own an equivalent number of puts of the same "series" (that
is, puts on the same underlying security having the same exercise prices and
expiration dates as those written by the Fund), or an equivalent number of
puts of the same "class" (that is, puts on the same underlying security)
with exercise prices greater than those that it has written (or, if the
exercise prices of the puts it holds are less than the exercise prices of
those it has written, it will deposit the difference with the Fund's
custodian in a segregated account).
The Fund may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the
outstanding option's expiration). To effect a closing purchase transaction,
the Fund would purchase, prior to the holder's exercise of an option that the
Fund has written, an option of the same series as that on which the Fund
desires to terminate its obligation. The obligation of the Fund under an
option that it has written would be terminated by a closing purchase
transaction, but the Fund would not be deemed to own an option as the result
of the transaction. There can be no assurance that the Fund will be able to
effect closing purchase transactions at a time when it wishes to do so. To
facilitate closing purchase transactions, however, the Fund will ordinarily
write options only if a secondary market for the options exists on a national
securities exchange or in the over-the-counter market.
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 interest rates, the yield of the Fund may tend to be
lower. Also, when interest rates are falling, the inflow of net new money to
the Fund from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing
Page 8
the yield of the Fund. In periods of rising interest rates, the opposite can
be true. The net asset value of the 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.
FUTURES AND OPTIONS ON FUTURES. The Fund may enter into futures
contracts and purchase and write options on future contracts as hedges when
deemed advisable by Dreyfus. The Fund may purchase and sell financial futures
contracts, including futures for stock indexes, and purchase and write
related options, that are traded on a United States exchange or board of
trade. These investments, if any, by the Fund will be made solely for the
purpose of hedging against changes in the value of its portfolio securities
or securities which the Fund intends to purchase due to anticipated changes
in interest rates and market conditions, and when the transactions are
economically appropriate to the reduction of risks inherent in the management
of the Fund. The use of futures contracts and options on futures contracts as
a hedging device involves several risks. There can be no assurance that there
will be a correlation between price movements in the underlying securities,
on the one hand, and price movements in the securities which are the subject
of the hedge, on the other hand. Positions in futures contracts and options
on futures contracts may be closed out only on an exchange or board of trade
that provides an active market for them, and there can be no assurance that a
liquid market will exist for the contract or the option at any particular
time. Losses incurred by hedging transactions and the costs of these
transactions will affect the Fund's performance. Successful use of futures
contracts by the Fund is subject to the ability of Dreyfus to correctly
predict movements in the direction of interest rates. The Fund may not
purchase or sell futures contracts or purchase options on futures if,
immediately thereafter, more than 33 1/3% of its net assets would be hedged.
In addition, the Fund may not enter into futures and related options
contracts for which aggregate initial margin deposits and premiums exceed 5%
of the fair market value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on futures contracts into which it
has entered.
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 are readily marketable 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 which can be sold to qualified
institutional buyers in accordance with Rule 144A under that Act ("Rule 144A
securities"). 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 in an exempt transaction. 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. Determinations as to
the liquidity of investments in Section 4(2) paper and Rule 144A securities
will be made by the Board of Trustees. The Board will consider availability
of reliable price information and other relevant information in making such
determinations. If a particular investment in Section 4(2) paper or Rule 144A
Securities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities. The
ability to sell Rule 144A securities to 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
Page 9
increasing the level of Fund illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing
these securities.
LOW-RATED AND COMPARABLE UNRATED SECURITIES. Low-rated and comparable
unrated securities (collectively referred to in this discussion as
"low-rated" securities ) will likely have some quality and protective
characteristics that, in the judgment of the rating organization, are
outweighed by large uncertainties or major risk exposures to adverse
conditions; and are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of
the obligation.
Bonds rated Ba by Moody's, sometimes referred to as "junk bonds," are
judged to have speculative elements and their future cannot be considered as
well assured; bonds rated B by Moody's generally are deemed to lack
characteristics of a desirable investment; and bonds rated Caa are considered
by Moody's to be of poor standing and may be in default or there may be
present elements of danger with respect to the payment of principal or
interest. Bonds rated BB, B and CCC by Standard & Poor's are regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal with CCC indicating a higher degree of
speculation than BB or B.
While the market values of low-rated securities tend to react less to
fluctuations in interest rate levels than the market values of higher rated
securities, the market values of certain low-rated securities tend to be more
sensitive to individual corporate developments and changes in economic
conditions than higher-rated securities. In addition, low-rated securities
generally present a higher degree of credit risk. Issuers of low-rated
securities are often highly leveraged and may not have more traditional
methods of financing available to them so that their ability to service their
debt obligations during an economic downturn or during sustained periods of
rising interest rates may be impaired. The risk of loss due to default by
such issuers is significantly greater because low-rated securities generally
are unsecured and frequently are subordinated to the prior payment of senior
indebtedness. The Fund may incur additional expenses to the extent that it is
required to seek recovery upon a default in the payment of principal or
interest on its portfolio holdings. The existence of limited markets for
low-rated securities may diminish the Fund's ability to obtain accurate
market quotations for purposes of valuing such securities and calculating its
net asset value. Further information regarding security ratings is contained
in the SAI.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its investment objective and policies and permissible under
the Investment Company Act of 1940 (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.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement
transactions in pursuit of its investment objective. A repurchase agreement
involves the purchase of a security by the Fund and a simultaneous agreement
(generally with a bank or broker-dealer) to repurchase that security from the
Fund at a specified price and date or upon demand. This technique offers a
method of earning income on idle cash. A risk associated with repurchase
agreements is the failure of the seller to repurchase the securities as
agreed, which may cause the Fund to suffer a loss if the market value of such
securities declines before they can be liquidated on the open market.
Repurchase agreements with a duration of more than seven days are considered
illiquid securities and are subject to the limit on illiquid securities
stated above.
SHORT-TERM SECURITIES. The Fund may invest in short-term securities
such as U.S. Government securities and other high-grade, short-term money
market instruments, including repurchase agreements, time deposits,
certificates of deposit, bankers' acceptances and high-grade commercial paper
for temporary defensive purposes when Dreyfus determines that market
conditions so warrant. In addition, the Fund may invest up to 10% of its
assets in such securities on a regular basis to maintain liquidity for
purposes of redeeming shares and meeting other cash obligations of the Fund.
When the assets of the
Page 10
Fund are invested in short-term securities, the assets will not be invested
in a manner consistent with achieving its investment objective.
STOCK INDEX OPTIONS. The Fund may purchase and write exchange-listed
put and call options on stock indexes to hedge against risks of market-wide
price movements. A stock index measures the movement of a certain group of
stocks by assigning relative values to the common stocks included in the
index. (Examples of well-known stock indexes are the S&P 500 and the NYSE
Composite Index.) Options on stock indexes are similar to options on
securities. However, because options on stock indexes do not involve the
delivery of an underlying security, the option represents the holder's right
to obtain from the writer in cash a fixed multiple of the amount by which the
exercise price exceeds (in the case of a put) or is less than (in the case of
a call) the closing value of the underlying index on the exercise date.
The advisability of using stock index options to hedge against the
risk of market-wide movements will depend on the extent of diversification of
the Fund's stock investments and the sensitivity of its stock investments to
factors influencing the underlying index. The effectiveness of purchasing or
writing stock index options as a hedging technique will depend upon the
extent to which price movements in the portion of the portfolio being hedged
correlate with price movements in the stock index selected. When the Fund
writes an option on a stock index, it will deposit cash or cash equivalents
or a combination of both in an amount equal to the market value of the
option, in a segregated account with the Fund's custodian, and will maintain
the account while the option is open.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government
Securities on a when-issued basis or 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 when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the market place, 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 transactions. The Fund will establish
a segregated account consisting of cash, U.S. Government Securities or other
high-grade debt obligations in an amount equal to the amounts of its
when-issued and delayed delivery commitments.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on
the basis of potential for capital appreciation and not for short-term
trading profits, in the past the portfolio turnover rate of the Fund has
exceeded 100% and may exceed 100% in the future. 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. In past years the Fund's rate of
portfolio turnover exceeded that of certain other mutual funds with the same
investment objective. A higher rate of portfolio turnover (100% or greater)
involves correspondingly greater brokerage commissions and other expenses
which 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 which, when
distributed to the Fund's shareholders, are taxable to them as ordinary
income. Nevertheless, security 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.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. The SAI describes all of the
Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, poli-
Page 11
cies and restrictions, practices or procedures change, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current positions and needs.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interests of the
Fund, it may consider terminating sales of its shares in the states involved.
MASTER/FEEDER OPTION. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's 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 Trustees determine it to be in the best interest of the Fund and its
shareholders. In making that determination, the Trustees will consider, among
other things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiencies. Although the Fund believes that
the Trustees 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.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of March 31, 1995, Dreyfus managed or administered
approximately $72 billion in assets for more than 1.9 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager. Dreyfus supervises
and assists in the overall management of the Fund's affairs under an
Investment Management Agreement with the Fund, subject to the overall
authority of the Company's Board of Trustees in accordance with Massachusetts
law. Pursuant to the Investment 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 the Fund's investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
Guy R. Scott is an Officer of Mellon Bank, a Senior Vice President of
The Boston Company Advisors, Inc., and a Senior Vice President and Equity
Portfolio Manager of The Boston Company Asset Management, Inc. Mr. Scott is a
portfolio manager at Dreyfus and has been employed by Dreyfus since October
17, 1994. Mr. Scott is responsible for managing the Fund and over $280
million among other various institutional accounts. Mr. Scott also served on
the Equity Policy Group Committee. Previously, Mr. Scott has also held a
position as an Equity Portfolio Manager for Putnam Advisory, where he was
responsible for more than $1 billion in pension assets. A Chartered Financial
Analyst, Mr. Scott earned a B.S. in Economics and an M.B.A. in Finance at the
University of Wisconsin.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the 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. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed approximately $193 billion in assets as of
December 31, 1994, including $70 billion in mutual fund assets. As of
December 31, 1994, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
approximately $654 billion in assets, including approximately $74 billion in
mutual fund assets.
Page 12
Under the Investment Management Agreement, the Fund has agreed to pay
a monthly fee, at the annual rate of 1.25% of the Fund's average daily net
assets. Dreyfus pays all of the expenses of the Fund except brokerage, taxes,
interest, fees and expenses of the non-interested Trustees (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 Trustees
(including counsel fees), Dreyfus is contractually required to reduce its
investment management fee in an amount equal to the Fund's allocable share of
such fees and expenses. In order to compensate Dreyfus for paying virtually
all of the Fund's expenses, the Fund's investment management fee is higher
than the investment advisory fees paid by most investment companies. Most, if
not all, such companies also pay for additional non-investment advisory
expenses that are not paid by such companies' investment adviser. From time
to time, Dreyfus may waive (either voluntarily or pursuant to applicable
state limitations) a portion of the investment management fees payable by the
Fund. For the period from September 1, 1993 through April 3, 1994, the Fund
paid its investment adviser, The Boston Company Advisors, Inc. (an indirect
wholly-owned subsidiary of Mellon Bank Corporation), 0.00% (annualized) of
the Fund's average daily net assets in investment advisory fees (net of fees
waived and expenses reminbursed) under the Fund's previous investment
advisory contract (such contract only covered the provision of investment
advisory and certain specified administrative services). For the period from
April 4, 1994 through the fiscal year ended August 31, 1994, the Fund paid
Mellon Bank 1.25% (annualized) of the Fund's average daily net assets in
investment management fees. For the fiscal year ended August 31, 1994, total
operating expenses (excluding Rule 12b-1 fees) (net of fees waived and
expenses reimbursed) of the Fund were 1.61% of the Fund's average daily net as
sets for the Investor shares. It is anticipated that the current total
operating expenses of the Fund (excluding Rule 12b-1 fees) will be
approximately 1.25% of the Fund's average daily net assets.
In addition, Investor shares may be subject to certain distribution
and service fees. See "Distribution Plan (Investor Shares Only)."
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 Agents in respect of these services.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. 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 has a lending relationship.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"). The Distributor is located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor is a wholly-owned subsidiary of
Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR_Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Fund's custodian and fund accountant. The Fund's
Transfer and Dividend Disbursing Agent is The Shareholder Services Group,
Inc. (the "Transfer Agent"), a subsidiary of First Data Corporation, One
American Express Plaza, Providence, Rhode Island 02903. Premier Mutual Fund
Services, Inc. is the Fund's sub-administrator and, pursuant to a
Sub-Administration Agreement with Dreyfus, provides various administrative
and corporate secretarial services to the Fund.
Page 13
HOW TO BUY FUND SHARES
GENERAL_ Investor shares are offered to any investor and may be
purchased through the Distributor or Agents that have entered into Selling
Agreements with the Distributor.
Class R shares are sold primarily to Banks 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. A
Retirement Plan is a certain 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-pro
fit entities or state and local governments ("Retirement Plan"). 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.
Institutions effecting transactions in Class R shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. 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 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 for Dreyfus-sponsored Keogh Plans,
IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750, with no
minimum on subsequent purchases. Individuals who open an IRA also may open a
non-working spousal IRA with a minimum initial investment of $250. 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 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 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 to 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.
You may purchase Fund shares by check or wire, or, with respect to
Investor shares only, through the Dreyfus TELETRANSFER Privilege described
below. Checks should be made payable to "The Dreyfus Family of Funds" or, if
for Dreyfus retirement plan accounts, to "The Dreyfus Trust Company,
Custodian." Payments to open new accounts which are mailed should be sent to
The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application indicating which Class of
shares is being purchased. For subsequent investments, your Fund account
number should appear on the check and an investment slip should be enclosed
and sent to The Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey
07101-0105. For Dreyfus retirement plan accounts, both initial and subsequent
investments should be sent to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Neither initial nor subsequent
investments should be made by third party check. PURCHASE ORDERS MAY BE
DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL
Page 14
BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR THE LOCATION OF THE NEAREST
DREYFUS FINANCIAL CENTER, PLEASE CALL ONE OF THE TELEPHONE NUMBERS LISTED
UNDER "GENERAL INFORMATION."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. To purchase Investor shares in your
name, immediately available funds may be transmitted by wire to Boston Safe
Deposit & Trust Co., DDA# 043907. For wire information with respect to Class
R shares, please call 1-800-645-6561. The wire must include your Fund account
number (for new accounts, your Taxpayer Identification Number ("TIN") should
be included instead), account registration and dealer number, if applicable.
If your initial purchase of Fund shares is by wire, you should call
1-800-645-6561 after completing your wire payment in order to obtain your
Fund account number. Please include your Fund account number on the Fund's
Account Application and promptly mail the Account Application to the Fund, as
no redemptions will be permitted until the Account Application is received.
You may obtain further information about remitting funds in this manner from
your bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit & Trust Co. with instructions to credit
your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4580."
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified 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 one million dollars ("Eligible Benefit
Plans"). The determination of the number of employees eligible for
participation in a plan or program shall be made on the date Fund shares are
first purchased by or on behalf of employees participating in such plan or
program and on each subsequent January 1st. All present holdings of shares of
funds in the Dreyfus Family of Funds by Eligible Benefit Plans will be
aggregated to determine the fee payable with respect to each purchase of Fund
shares. The Distributor reserves the right to cease paying these fees at any
time. The Distributor will pay such fees from its own funds, other than
amounts received from the Fund, including past profits or any other source
available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and 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 (the
"IRS").
NET ASSET VALUE ("NAV") _ An investment portfolio's NAV refers to
the worth of one share. The NAV for Investor shares and Class R shares is
computed by adding, with respect to such Class of shares, the value of the
Fund's investments, cash, and other assets attributable to that Class,
deducting liabilities of the Class and dividing the result by the number of
shares of that Class outstanding. The valuation of assets for determining NAV
for the Fund may be summarized as follows:
The portfolio securities of the Fund listed or traded on a stock
exchange, except as otherwise noted, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are
Page 15
not readily available, securities and other assets are valued at fair value
as determined in good faith in accordance with procedures established by
the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
Pursuant to a determination by the Board of Directors that such value
represents fair value, debt securities with maturities of 60 days or less
held by the Fund are valued at amortized cost. When a security is valued at
amortized cost, it is valued at its cost when purchased, and thereafter by
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.
NAV is determined on each day that the New York Stock Exchange
("NYSE") is open (a "business day"), as of the close of business of the
regular session of the NYSE (usually 4 p.m., Eastern Time). Investments and
requests to exchange or redeem shares received by the Fund in proper form
before the close of business on the NYSE (usually 4 p.m., Eastern Time) are
effective on, and will receive the share price determined on, that day
(except purchase orders made through the Dreyfus TELETRANSFER Privilege,
which are effective one business day after your call). Investment, exchange
and redemption requests received after the close of the NYSE are effective on
and receive the share price determined on the next business day.
The NAV of most shares of investment portfolios advised by Dreyfus
(other than money market funds) is published in leading newspapers daily. The
yield of most Dreyfus money market funds is published weekly in leading
financial publications and in many local newspapers. The NAV of any Dreyfus
fund may also be obtained by calling 1-800-645-6561.
The public offering price of Investor shares and Class R shares is
the NAV per share of that Class.
DREYFUS TELETRANSFER PRIVILEGE (NOT APPLICABLE TO CLASS R SHARES) _
You may purchase Fund shares (minimum $500 and maximum $150,000 per day) by
telephone if you have checked the appropriate box and supplied the necessary
information on the Fund's 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 ACH member may be so designated. 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.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Investor shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares of the
same class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use. WITH
RESPECT TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE
ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
Page 16
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. Except in the case of Personal
Retirement Plans, the shares being exchanged must have a current value of at
least $500; furthermore, when establishing a new account by exchange, the
shares being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made. The
ability to issue exchange instructions by telephone is given to all Fund
shareholders automatically, unless you check the relevant "No" box on the
Account Application, indicating that you specifically refuse this Privilege.
The Telephone Exchange Privilege may be established for an existing account
by written request, signed by all shareholders on the account, or by a
separate Shareholder Services Form, also available by calling 1-800-645-6561.
If you previously have established the Telephone Exchange Privilege, you may
telephone exchange instructions by calling 1-800-221-4060 or, if calling from
overseas, 1-401-455-3306. See "How to Redeem Fund Shares_Procedures." Upon
an exchange, the following shareholder services and privileges, as applicable
and where available, will be automatically carried over to the fund into
which the exchange is made: Telephone Exchange Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege and
the dividends and distributions payment option (except for Dividend Sweep)
selected by the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Investor shares into funds
sold with a sales load. If you are exchanging Investor shares into a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
of the fund from which you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer Agent or
your Agent must notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the SAI. 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. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
fund exchanges may be modified or terminated at any time upon notice to
shareholders.
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 by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same class of certain other funds in the Dreyfus
Family of Funds of which you are currently an investor. WITH RESPECT TO CLASS
R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, 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 you have selected. Shares will be exchanged at the then-current net
asset value; however a sales load may be charged with respect to exchanges of
Investor shares into funds sold with a sales load. The right to exer-
Page 17
cise 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. 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 by the
shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss. 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.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. 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 by calling 1-800-645-6561 from the Distributor. 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 to 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.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same class of certain other funds in the Dreyfus Family of
Funds of which you are an investor. Shares of the other fund will be
purchased at the then-current NAV; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced sales
load. See "Shareholder Services" in the SAI. Dreyfus Dividend ACH permits you
to transfer electronically on the payment date 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. 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
Page 18
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 the direct deposit program of your employer, 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.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account.
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
than the Automatic Withdrawal Plan. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. 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.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 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.
HOW TO REDEEM FUND SHARES
GENERAL_You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value as described below. 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.
Page 19
The Fund imposes no charges when shares are redeemed directly through
the Distributor. Agents or other institutions may charge their clients a
nominal 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.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH
MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE
OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $500 or less and remains so during the notice period.
PROCEDURES_You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, the Wire Redemption Privilege, the
Telephone Redemption Privilege or, for Investor shares only, through the
Dreyfus TELETRANSFER Privilege. 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.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or Telephone Exchange Privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions 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.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed 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. REDEMPTION REQUESTS MAY BE
DELIVERED IN
Page 20
PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR
THE LOCATION OF THE NEAREST FINANCIAL CENTER, PLEASE CALL THE TELEPHONE NUMBER
LISTED UNDER "GENERAL INFORMATION." Redemption requests must be signed by
each shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program. For
more information with respect to signature-guarantees, please call one of the
telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $1,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of only up to $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-221-4060 or, if
calling from overseas, 1-401-455-3306. The Fund reserves the right to refuse
any redemption request, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at anytime by the Transfer Agent
or the Fund. The Fund's SAI sets forth instructions for transmitting
redemption requests by wire. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which certificates have been issued, are not
eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE. You may redeem Fund shares (maximum
$150,000 per day) by telephone if you checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. 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. This Privilege may be modified or
terminated at any time by the Transfer Agent or the Fund. Shares held under
Keogh Plans, IRAs or other retirement plans, and shares for which certificates
have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE_INVESTOR SHARES. You may redeem Fund
shares (minimum $500 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between your Fund account and the
bank account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an ACH member may be
so designated. Redemption proceeds will be on deposit in your account at an
ACH member bank ordinarily two days after receipt of the redemption request
or, at your request, paid by check (maximum $150,000 per day) and mailed to
your address. Holders of jointly registered Fund or bank accounts may redeem
through the Dreyfus TELETRANSFER Privilege for transfer to their bank account
only up to $250,000 within any 30-day period. The Fund reserves the right to
refuse any
Page 21
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 this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares issued in
certificate form, are not eligible for this Privilege.
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)
Investor shares are subject to a Distribution Plan ("the Plan")
adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Investor
shares of the Fund bear some of the cost of selling those shares under the
Plan. The Plan 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 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 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 agree to voluntarily reduce the maximum fees
payable under the Plan. See the SAI for more details on the Plan.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. 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.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may be
calculated on the basis of average annual total return and/or total return.
These total return figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains distributions made by
the Fund during the measuring period were reinvested in shares of the same
Class. These figures also take into account any applicable service and
distribution fees. As a result, at any given time, the performance of the
Investor shares should be expected to be lower than that of Class R.
Performance for each Class will be calculated separately.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
other distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period. Advertisem
ents of the Fund's performance will include the Fund's average annual total
return for one, five and ten year periods, or for shorter periods depending
upon the length of time during which the Fund has operated. Computations of
average annual total return for periods of less than one year represent an
annualization of the Fund's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the NAV at the
beginning of the
Page 22
period. Advertisements may include the percentage rate of total return or may
include the value of a hypothetical investment at the end of the period which
assumes the application of the percentage rate of total return. Total return
also may be calculated by using the NAV at the beginning of the period for
Investor shares.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per Class of such share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a Class of shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
ratings, the S&P 500, the Consumer Price Index, and the Dow Jones Industrial
Average. Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, MUTUAL FUND FORECASTER, NO
LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND
WORLD REPORT, FORBES, FORTUNE, BARRON'S and similar publications may also be
used in comparing the Fund's performance. Furthermore, the Fund may quote its
shares' returns in advertisements or in shareholder reports. The Fund may
also advertise non-standardized performance information, such as total
return, for periods other than those required to be shown on cumulative
performance data.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares dividends from its net investment income and
distributes any net realized gains, if any, on an annual basis. The Board of
Trustees may elect not to distribute net capital gains in whole or in part to
take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain
distributions in cash, your distributions will be automatically reinvested in
additional shares of the Fund at the NAV. You may change the method of
receiving distributions at any time by writing to the Fund. Checks which are
sent to shareholders who have requested distributions to be paid in cash and
which are subsequently returned by the United States Postal Service as not
deliverable or which remain uncashed for six months or more will be reinvested
in additional Fund shares in the shareholder's account at the then current
NAV. Subsequent Fund distributions will be automatically reinvested in
additional Fund shares in the shareholder's account.
Distributions paid by the Fund 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.
Shares purchased on a day on which the Fund calculates its NAV will
not begin to accrue dividends until the following business day. Redemption
orders effected on any particular day will receive all dividends declared
through the day of redemption.
You may elect to have distributions on shares held in IRAs and 403(b)
accounts paid in cash only if you are at least 59 1/2 years old or are
permanently and totally disabled. Distribution checks normally are mailed
within seven days after the record date.
Page 23
Any dividend and/or capital gain distribution paid by the Fund will
reduce each share's NAV by the amount of the distribution. Shareholders are
subject to taxes with respect to any such distribution. At any given time,
the value of the Fund's shares includes the undistributed net gains, if any,
realized by the Fund on the sale of portfolio securities, and undistributed
dividends and interest received, less the Fund's expenses. Because such gains
and income are included in the value of your shares, when they are
distributed the value of your shares is reduced by the amount of the
distribution. Accordingly, if your distribution is reinvested in additional
shares, the distribution has no effect on the value of your investment; while
you own more shares, the value of each share has been reduced by the amount
of the distribution. Likewise, if you take your distribution in cash, the
value of your shares immediately after the distribution plus the cash
received is equal to the value of the shares immediately before the
distribution. For example, if you own a Fund share that immediately before a
distribution has a value of $10, including $2 in undistributed dividends and
capital gains realized by the Fund during the year, and if the $2 is
distributed, the value of the share will decline to $8. If the $2 is
reinvested at $8 per share, you will receive .250 shares, so that, after the
distribution, you will have 1.250 shares at $8 per share, or $10, the same as
before.
The Fund intends to qualify for treatment as a regulated investment
company under the Code so that it will be relieved of Federal income tax on
that part of its investment company taxable income (consisting generally of
taxable net investment income and net short-term capital gain) and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by the Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your shares.
All or a portion of the dividends paid by the Fund 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.
Dividends and other distributions are taxable to you regardless of
whether they are received in cash or reinvested in additional Fund shares,
even if the value of your shares is below your cost. If you purchase shares
shortly before a taxable distribution you must pay income taxes on the
distribution, even though the value of your investment (plus cash received,
if any) remains the same. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
Fund. If these portfolio securities are subsequently sold and the gains are
realized, they will, to the extent not offset by capital losses, be paid to
you as a capital gain distribution and will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for federal income tax purposes of your
distributions for the preceding year.
Dividends paid by the Fund to qualified retirement plans ordinarily
will not be subject to taxation until the proceeds are distributed from the
retirement plans. The Fund will not report to the IRS dividends 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. If the distribution from such a
retirement plan (other than certain governmental or church plans) for any
taxable year following the year in which the participant reaches age 70 1/2
is less than the ``minimum required distribution" for that taxable year, an
excise tax equal to 50% of the deficiency may be imposed by the IRS. The
administrator, trustee or custodian of such a retirement plan will be
responsible for reporting such distributions from such plans to the IRS.
Page 24
Moreover, certain contributions to a qualified retirement plan in excess of
the amounts permitted by law may be subject to an excise tax.
You must furnish the Fund with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is required
to withhold a portion of all dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN; withholding
from dividends and capital gain distributions also is required for such
shareholders who otherwise are subject to backup withholding.
The Fund will 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 taxable ordinary income for that year and capital gain net income
for the one-year period ending on December 31 of that year, plus certain
other amounts. The Fund expects to make such distributions as are necessary
to avoid the imposition of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Fund and its shareholders; see the SAI
for a further discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You therefore are urged
to consult your own tax adviser.
GENERAL INFORMATION
The Company offers shares of beneficial interest of separate
investment portfolios with $.001 par value per share (each a "fund"). The
Boston Company Investment Series was organized as a Massachusetts business
trust under the laws of the Commonwealth of Massachusetts on May 26, 1988,
changed its name to The Laurel Investment Series, and then changed its name
again to The Dreyfus/Laurel Investment Series on October 17, 1994. The
Company is registered with the SEC as an open-end management investment
company, commonly known as a mutual fund. The Trustees have authorized shares
of the Fund to be issued in two classes_Investor shares and Class R shares.
Each share (regardless of class) has one vote. All shares of a fund
(and Classes thereof) vote together as a single class, except as to any
matter for which a separate vote of any fund or Class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular fund or Classes, in which case only the shareholders of the
affected fund or Classes are entitled to vote, each as a separate class.
Only holders of Investor shares will be entitled to vote on matters
submitted to shareholders pertaining to the Distribution Plan relating to
that Class.
At March 31, 1995, Mellon Bank, Dreyfus' parent, owned of record
through its direct and indirect subsidiaries, more than 25% of the Company's
outstanding voting shares, and is deemed, under the 1940 Act, to be a
controlling shareholder.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees 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 Trustee from office and
for any other purpose. Company shareholders may remove a Trustee by the
affirmative vote of two-thirds of the Company's outstanding voting shares. In
addition, the Board of Trustees will call a meeting of shareholders for the
purpose of electing Trustees if, at any time, less than a majority of the
Trustees then holding office have been elected by shareholders.
Page 25
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 26
DREYFUS
Dreyfus/Laurel
Contrarian
Fund
Prospectus
(lion logo)
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
333p1041095
THE DREYFUS/LAUREL INVESTMENT SERIES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
April 10, 1995
This Statement of Additional Information, which is not a Prospectus,
supplements and should be read in conjunction with each of the following
prospectuses of The Dreyfus/Laurel Investment Series (the "Trust") dated
April 10, 1995 (referred to herein individually as the "Prospectus" and
jointly as the "Prospectuses"): the Prospectuses describing the Class R and
Investor shares of the Dreyfus/Laurel International Fund, the Dreyfus/Laurel
Short-Term Bond Fund and the Dreyfus/Laurel Contrarian Fund, (individually,
the "Fund", collectively, the "Funds"). 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 the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation (the "Manager") serves as the Funds' investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Funds' shares.
TABLE OF CONTENTS
Page
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . B-2
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . B-25
Custodian and Fund Accountant. . . . . . . . . . . . . . . . . . . . . . B-27
Transfer and Dividend Disbursing Agent . . . . . . . . . . . . . . . . . B-27
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . B-28
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
Valuation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-37
Description of the Trust . . . . . . . . . . . . . . . . . . . . . . . . B-41
Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . B-42
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . B-43
Appendix - Information About Securities Ratings . . . . . . . . . . . . B-44
GENERAL INFORMATION
The Trust's name was changed from The Laurel Investment Series to The
Dreyfus/Laurel Investment Series effective October 17, 1994. The names of
the Funds also were changed as follows effective October 17, 1994: Laurel
Short-Term bond Fund to Dreyfus/Laurel Short-Term Bond Fund (the "Short-Term
Bond Fund"); Laurel International Fund to Dreyfus/Laurel International Fund
(the "International Fund"); and Laurel Contrarian Fund to Dreyfus/Laurel
Contrarian Fund (the "Contrarian Fund").
MANAGEMENT OF THE TRUST
Trustees and Officers
The Trustees and executive officers of the Trust are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Each Trustee who is an
"interested person" of the Trust as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), is indicated by an asterisk. Each of the
Trustees also serves as a Trustee of The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds and as a Director of The
Dreyfus/Laurel Funds, Inc. (collectively "The Dreyfus/Laurel Fund Family").
o+RUTH MARIE ADAMS. Trustee of the Trust; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution. Age: 79
years old. Address: 1026 Kendal Lyme Road, Hanover, New Hampshire
03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Trustees and Assistant
Treasurer of the Trust; Director and Chairman, Massachusetts Business
Development Corp.; Director, Boston Mutual Insurance Company; Director
and Vice Chairman of the Board, Home Owners Federal Savings and Loan
(prior to May 1990). Age: 76 years old. Address: Massachusetts
Business Development Corp., One Liberty Square, Boston, Massachusetts
02109.
o*JOSEPH S. DiMARTINO. Director of the Company since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. For more than five years
prior thereto, he was President and a director of the Manager and
Executive Vice President and a director of Dreyfus Service Corporation,
a wholly-owned subsidiary of the Manager and, until August 1994, the
Fund's distributor. In addition, for more than five years prior to
January 1995 and until August 1994, he was Chief Operating Officer of
the Manager and from August 1994 to December 31, 1994, he was a
director of Mellon Bank Corporation. Mr. DiMartino is a director and
former Treasurer of the Muscular Dystrophy Association; a trustee of
Bucknell University; Chairman of the Board of Directors of Noel Group,
Inc.; and a director of Health Plan Corporation. Mr. DiMartino is also
a Board member of 58 other funds in the Dreyfus Family of Funds. Age:
51 years old. Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; President and Director,
Amoskeag Company; Chairman, Howes Leather Company, Inc.; Director, Fiduciary
Trust Company; Chairman, CEO and Director, Fieldcrest-Cannon Inc.; Director,
Lumber Mutual Insurance Company; Director, Barrett Resources, Inc. Age: 59
years old. Address: 40 Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Partner, Reed, Smith, Shaw &
McClay (law firm). Age: 65 years old. Address: 204 Woodcock Drive,
Pittsburgh, PA 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon
Corporation; Director, Medalist Corporation 1992-93; Chairman of the
Board and Director, Rexene Corporation; Director, National Picture
Frame Corporation; Director, Chairman of the Board, Tetra Corporation
1991-1993. From 1988-1989, Director, Rexene Corporation. Age: 71
years old. Address: Way Hallow Road and Woodland Road, Sewickley, PA
15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; Director, The Boston Company,
Inc. ("TBC") and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc. and Florida Hospitality Group; Managing Partner,
Himmel/MKDG, Franklin Federal Partners, Reston Town Center Associates
and Grill 23 & Bar. Age: 47 years old. Address: Himmel/MKDG, 101
Federal Street, 22nd Floor, Boston, Massachusetts 02110.
o+ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant. Age: 76
years old. Address: 1817 Foxcroft Lane, Allison Park, PA 15101.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; President and CEO, LDG
Management Company Inc,; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc., and Medical Reinsurance Underwriters Inc. Age: 46
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o+ROBERT D. MCBRIDE. Trustee of the Trust; Director, Chairman and CEO,
McLouth Steel; Director, Salem Corporation. From 1983-1991, Director,
SMS/Concast, Inc. Age: 66 years old. Address: 15 Waverly Lane,
Grosse Pointe Farms, MI 48236.
o+JOHN L. PROPST. Trustee of the Trust; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 79 years old. Address: 5521 Dunmoyle Street,
Pittsburgh, PA 15217.
o+JOHN L. SCIULLO. Trustee of the Trust; Dean Emeritus and Professor of Law,
Duquesne University School of Law; Director, Urban Redevelopment
Authority of Pittsburgh; Prior to 1993, Dean and Professor of Law,
Duquesne University School of Law. Age: 62 years old. Address: 321
Gross Street, Pittsburgh, PA 15224.
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures,
Inc., prior to February, 1993; Real Estate Development Project Manager and
Vice President, The Gunwyn Company. Age: 44 years old. Address: 25
Braddock Park, Boston, Massachusetts 02116-5816.
RICHARD W. HEALEY. Vice President of the Trust, The Dreyfus/Laurel Tax-Free
Municipal Funds, The Dreyfus/Laurel Funds Trust and the Dreyfus/Laurel
Funds, Inc. (since March 1994); Funds Distributor, Inc., Senior Vice
President (since March 1993); Calvert Group, Vice President of
Marketing (1989 to March 1993); Fidelity Investments, (prior to 1989).
Address: One Exchange Place, Boston, MA 02109.
#MARIE E. CONNOLLY. President and Treasurer of the Trust, The
Dreyfus/Laurel Tax-Free Municipal Funds, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Funds, Inc. (since September 1994); Vice President of the
Trust, The Dreyfus/Laurel Tax-Free Municipal Funds, The Dreyfus/Laurel Funds
Trust and The Dreyfus/Laurel Funds, Inc. (March 1994 to September 1994);
President, Funds Distributor, Inc. (since 1992); Treasurer, Funds
Distributor, Inc. (July 1993 to April 1994); COO, Funds Distributor, Inc.
(since April 1994); Director, Funds Distributor, Inc. (since July 1992);
President, COO and Director, Premier Mutual Fund Services, Inc. (since April
1994); Senior Vice President and Director of Financial Administration, The
Boston Company Advisors, Inc. (December 1988 to May 1993). Address: One
Exchange Place, Boston, MA 02109.
#FREDERICK C. DEY. Vice President of the Trust, The Dreyfus/Laurel
Tax-Free Municipal Funds, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Funds, Inc. (since September 1994); Senior Vice President,
Premier Mutual Fund Services, Inc. (since August 1994); Vice President,
Funds Distributor, Inc. (since August 1994); Fundraising Manager, Swim
Across America (October 1993 to August 1994); General Manager, Spring
Industries (August 1988 to October 1993). Address: Premier Mutual Fund
Services, Inc., 200 Park Avenue, New York, NY 10166.
#ERIC B. FISCHMAN. Vice President of the Trust, The Dreyfus/Laurel
Tax-Free Municipal Funds, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Funds, Inc. (since September 1994); Vice President and
Associate General Counsel, Premier Mutual Fund Services, Inc. (since August
1994); Vice President and Associate General Counsel, Funds Distributor, Inc.
(since August 1994); Staff Attorney, Federal Reserve Board (September 1992
to June 1994); Summer Associate, Venture Economics (May 1991 to September
1991); Summer Associate, Suffolk County District Attorney (June 1990 to
August 1990). Address: Premier Mutual Fund Services, Inc., 200 Park Avenue,
New York, NY 10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994); Assistant
Treasurer/Manager of Treasury Services, Funds Distributor, Inc. (since
July 1994); Vice President, The Boston Company, Inc. (1989 to July
1994). Address: One Exchange Place, Boston, MA 02109.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust, The
Dreyfus/Laurel Tax-Free Municipal Funds, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Funds, Inc. (since September 1994); Senior Vice
President, General Counsel and Secretary, Funds Distributor, Inc. (since
April 1994); Senior Vice President, General Counsel and Secretary, Premier
Mutual Fund Services, Inc. (since August 1994); Counsel, The Boston Company
Advisors, Inc. (February 1992 to March 1994); Associate, Ropes & Gray
(August 1990 to February 1992); Associate, Sidley & Austin (June 1989 to
August 1990). Address: One Exchange Place, Boston, MA 02109.
________________________________
* "Interested person" of The Dreyfus/Laurel Investment Series, as defined
in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by The
Dreyfus Corporation.
The officers and Trustees of the Trust as a group owned beneficially
less than 1% of the total shares of each Fund outstanding as of March 13,
1995.
No officer or employee of Premier (or of any parent or subsidiary
thereof) receives any compensation from the Trust for serving as an officer
or Trustee of the Trust. In addition, no officer or employee of Dreyfus or
Mellon Bank N.A. ("Mellon Bank") (or of any parent or subsidiary thereof)
serves as an officer or Trustee of the Trust. The Dreyfus/Laurel Fund
Family pays each Trustee/Director who is not an officer or employee of
Premier or any of its affiliates $27,000 per annum (and an additional
$75,000 for the Chairman of the Board of Directors/Trustees of The
Dreyfus/Laurel Fund Family). In addition The Dreyfus/Laurel Fund Family
pays each Trustee/Director $1,000 per joint Dreyfus/Laurel Fund Family
meeting attended, plus $750 per joint Dreyfus/Laurel Fund Family Audit
Committee meeting attended, and reimburses each Trustee/Director for travel
and out-of-pocket expenses. For the fiscal year ended August 31, 1994, such
fees for meetings and expenses totaled $18,681.
For the fiscal year ended August 31, 1994, the aggregate amount of fees
and expenses received by each Trustee from the company and all other Funds
in the Dreyfus Family of Funds for which such person is a Board member were
as follows.
<TABLE>
Total
Pension or Compensation From
Aggregate Retirement Benefits Estimated Annual Fund and Fund
Name of Compensation from Accrued as Part of Benefits Upon Complex Paid to
Board Member Fund# Fund's Expenses Retirement Board Member
- ------------- ------------------ -------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $ 767 none none $ 42,250
Francis P.Brennan@ $2,414 none none $117,250
Joseph S. DiMartino* n/a n/a n/a n/a
James M. Fitzgibbons $ 639 none none $ 38,500
J. Tomlinson Fort** none none none none
Arthur L. Goeschel $ 107 none none $ 23,000
Kenneth A. Himmel $ 639 none none $ 38,500
Arch S. Jeffery $ 107 none none $ 23,000
Steven J. Lockwood $ 639 none none $ 38,500
Robert D. McBride $ 107 none none $ 23,000
John L. Propst $ 107 none none $ 23,000
John J. Sciullo $ 107 none none $ 23,000
Roslyn M. Watson $ 742 none none $ 41,500
________________________
# Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $9,927.98 for the Dreyfus/Laurel Fund
Family.
* Joseph S. DiMartino was not a Trustee of the Company as of August 31,
1994.
** Affiliated director - not paid by funds, paid by Mellon Bank
@ Frank Brennan is paid $75,000 to be the Chairman of the Board.
</TABLE>
Advisory Services
The Dreyfus Corporation ("Dreyfus") serves as the investment manager
(the "Manager") for the Funds pursuant to an Investment Management Agreement
with the Trust dated April 4, 1994 (the "Management Agreement"), transferred
from Mellon Bank, N.A. (One Mellon Bank Center, Pittsburgh, PA 15258).
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 each Fund. As
Manager, Dreyfus manages each Fund by making investment decisions based on
such Fund's investment objective, policies and restrictions. For these
services, each Fund pays a fee to Dreyfus at the rates stated in the
Prospectus.
The Management Agreement will continue from year to year provided that
a majority of the Trustees who are not interested persons of the Trust and
either a majority of all Trustees or a majority of the shareholders of each
Fund approve the continuance.
Prior to May 21, 1993, The Boston Company Advisors, Inc. ("Boston
Advisors") served as investment adviser to each Fund pursuant to a written
agreement, which was last approved by the Trustees, including a majority of
the Trustees who are not "interested persons" of the Trust, on July 22,
1992. From May 21, 1993, through April 4, 1994, Boston Advisors served as
investment adviser to each Fund pursuant to a written agreement ("Boston
Advisors Agreement"), which was last approved by the Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust, on
July 21, 1993 and approved by the shareholders of each Fund of the Trust on
December 31, 1993. The Boston Advisors Agreement became effective on May
21, 1993, upon the consummation of the sale of Boston Group Holdings, Inc.,
the parent company of The Boston Company, Inc. ("TBC"), to Mellon Bank
Corporation. Mellon Bank later served as investment manager to each Fund
pursuant to a written agreement ("Mellon Agreement"), which was last
approved by the Trustees, including a majority of the Trustees who are not
"interested person" of the Trust or Mellon Bank, on November 22, 1993,
(subject to shareholder approval) and approved by the shareholders of each
Fund of the trust on March 14 and March 29, 1994. The Mellon Agreement
became effective on April 4, 1994. Boston Advisors is a wholly-owned
subsidiary of TBC, a financial services holding company. TBC is in turn a
wholly-owned subsidiary of Mellon. As stated above, Dreyfus, a wholly-owned
subsidiary of Mellon Bank, is the current Investment Manager pursuant to a
written agreement ("Management Agreement"), which was last approved by the
Trustees on September 23, 1994.
The current Management Agreement provides for a "unitary fee." Under
the unitary fee structure, Dreyfus pays all expenses of each Fund except:
(i) brokerage commissions, (ii) taxes, interest, fees and expenses of the
non-interested Trustees (including counsel expenses), and extraordinary
expenses (which are expected to be minimal), and (iii) the Rule 12b-1 fees
described in this Statement of Additional Information. Under the unitary
fee, Dreyfus provides investment advisory services and provides or arranges
for one or more parties to provide, sub-investment advisory, administrative,
custody, fund accounting and transfer agency services to the Funds. For the
provision of such services directly, or through one or more third parties,
Dreyfus receives as full compensation for all services and facilities
provided by it, a fee computed daily and paid monthly at the annual rate set
forth in each Fund's Prospectus, applied to the average daily net assets of
a Fund's investment portfolio, less the accrued fees and expenses (including
counsel fees) of the non-interested Trustees of the Trust. Previously the
payments to the Investment Manager covered merely the provision of
investment advisory services (and payment for sub-advisory services, as
applicable) and certain specified administrative services. Under this
previous arrangement, each Fund also paid for additional non-investment
advisory expenses, such as custody and transfer agency services, that were
not paid by the investment adviser.
Effective July 31, 1994, the sub-investment advisory agreement (the
"Sub-Advisory Agreement" between PanAgora Asset Management, Inc.
("PanAgora") and the International Fund and Mellon Bank was terminated and
PanAgora ceased providing sub-advisory services to the International Fund.
Prior to July 31, 1994, PanAgora served as sub-investment adviser to the
International Fund pursuant to the Sub-Advisory Agreement, which was
approved by the Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust or PanAgora on November 22, 1993
(subject to shareholder approval), and by the shareholders of the
International Fund on March 14, 1994.
The following table shows the fees paid by each Fund to Boston Advisors
or Mellon Bank (and any fee waivers during the fiscal years ended 1992, 1993
and 1994).
<TABLE>
1994(2) 1993 1992
Fees Fees Fees
Fee Waived Fee Waived(1) Fee Waived(1)
<S> <C> <C> <C> <C> <C> <C>
International Fund $60,559 $27,471 $103,094 $103,094 $234,236 --
Contrarian Fund $39,820 $23,862 $30,566 $30,566 $25,040 $25,040
Short-Term Bond Fund $14,203 $ 9,060 $25,503 $25,503 $23,997 $23,997
</TABLE>
(1) Boston Advisors waived all or a portion of its fees and/or reimbursed
expenses of the Funds from time to time in order to increase each Fund's net
income available for distribution to shareholders.
(2) For the period from April 4, 1994 until the Fund's fiscal year end,
Mellon Bank served as investment manager.
The following table shows the fees paid by Boston Advisors or Mellon
Bank to PanAgora in sub-investment advisory fees for the fiscal years ended
1992, 1993 and the period from September 1, 1993 to July 31, 1994.
1994 1993 1992
Fee Fee Fee
International Fund $35,213 $28,457 $184,630
Dreyfus has agreed that if in any fiscal year the aggregate expenses of
any Fund of the Trust (including fees pursuant to the Management Agreement,
but excluding interest, brokerage expenses, taxes and extraordinary items)
exceed the expense limitation of any state, it will reduce their management
fees by the amount of such excess expense. Such a fee reduction, if any,
will be reconciled on a monthly basis. To the extent these state
regulations permit the exclusion of distribution expenses (see "Distribution
Plan" below), the Trust will exclude such expenses in determining whether
any reduction obligation exists. The most restrictive state expense
limitation applicable to any Fund requires a reduction of fees in any year
that such expenses exceed 2.5% of the first $30 million of average net
assets, 2.0% of the next $70 million average net assets and 1.5% of the
remaining average net assets. A number of factors, including the size of
each Fund, will determine which of these restrictions will be applicable to
a Fund at any given time.
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with a Fund, and in
providing services to a Fund as custodian and fund accountant, as well as
Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by its counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.
Changes in either Federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such or future statutes and regulations, could prevent Mellon Bank or
Dreyfus from continuing to perform all or a part of the above services for
its customers and/or any Fund. If Mellon Bank or Dreyfus were prohibited
from serving a Fund in any of its present capacities, the Trustees would
seek alternative provider(s) of such services.
INVESTMENT POLICIES
The Prospectuses discuss the investment objectives of each Fund and the
policies it employs to achieve those objectives. The following discussion
supplements the description of the Funds' investment policies in the
Prospectuses.
Foreign Securities
The International Fund will invest in securities of foreign issuers,
including investments 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, reevaluation of currencies, future 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 securities 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.
Currency Transactions
The International Fund may engage in currency exchange transactions as
a means of managing certain risks associated with purchasing and selling
securities denominated in foreign securities. Generally, the currency
exchange transactions of the Fund will be conducted on a spot (i.e., cash)
basis at the spot rate for purchasing or selling currency prevailing in the
currency exchange market. This rate under normal market conditions differs
from the prevailing exchange rate in an amount generally less than 0.1% due
to the cost of converting from one currency to another. The Fund also may
deal in forward exchanges between currencies of the different countries in
which it invests as a hedge against possible variations in the exchange
rates between these currencies. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future
date and price set at the time of the contract.
Dealings in forward currency exchanges by the Fund are limited to
hedging involving either specific transactions or aggregate portfolio
positions. Transaction hedging is the purchase or sale of foreign currency
with respect to specific receivables or payables of the Fund generally
arising in connection with the purchase or sale of its portfolio securities.
Position hedging is the sale of foreign currency with respect to portfolio
security positions denominated or quoted in such currency. The Fund will
not speculate in forward currency exchanges. The Fund may position hedge
with respect to a particular currency to an extent greater than the
aggregate market value (at the time of making such sale) of the securities
held in its portfolio denominated or quoted in or currently convertible into
that particular currency. If the Fund enters into a position hedging
transaction, its custodian or sub-custodian bank will place cash or readily
marketable securities in a segregated account of the Fund in an amount equal
to the value of the Fund's total assets committed to the consummation of
such forward contract. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in
the account so that the value of the account will equal the amount of the
Fund's commitment with respect to such contracts. The Fund will not attempt
to hedge all of its foreign portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by Dreyfus. The
Fund will not enter into a position hedging commitment if, as a result
thereof, the Fund would have more than 15% of the value of its total assets
committed to such contracts. The Fund will not enter into a forward
contract with a term of more than one year.
It may not be possible for the Fund to hedge against a devaluation that
is so generally anticipated that the Fund is not able to contract to sell
the currency at a price above the devaluation level it anticipates. The
cost to the Fund of engaging in currency transactions varies with such
factors as the currency involved, the length of the contract period and the
market conditions then prevailing. Since transactions in currency exchanges
are usually conducted on a principal basis, no fees or commissions are
involved.
At or before the maturity of a forward contract, the Fund may either
sell a portfolio security and make delivery of the currency, or it may
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
currency. If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund, at the time of execution of the offsetting
transaction, will incur a gain or a loss (as described below) to the extent
that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the currency. Should forward prices decline during
the period between the Fund's entering into a forward contract for the sale
of a currency and the date it enters into an offsetting contract for the
purchase of the currency, the Fund will realize a gain to the extent the
price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the
Fund will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
The use of forward currency contracts by the Fund will be limited to
the transactions described above. The Fund is not required to enter into
such transactions with regard to its portfolio securities, regardless of
currency denomination, and will not do so unless deemed appropriate by
Dreyfus. The use of forward currency contracts does not eliminate
fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which can be achieved at some future point in
time. In addition, although forward currency contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, they also
tend to limit any potential gain which might result should the value of the
currency increase.
Because the Fund invests in foreign securities, the Fund will hold from
time to time various foreign currencies pending its investment in foreign
securities or conversion into U.S. dollars. Although the Fund values its
assets daily in terms of U.S. dollars, it does not convert its holdings of
foreign currencies into U.S. dollars on a daily basis. When converting
foreign currencies to U.S. dollars, the Fund may incur costs of currency
conversion. A foreign exchange dealer does not charge a fee for conversion,
but it does realize a profit based on the difference, which is known as the
spread, between the prices at which the dealer is buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund
at one rate, while offering a lesser rate of exchange should the Fund desire
to resell that currency to the dealer.
U.S. Government Securities
The Short-Term Bond Fund, to the extent described in its Prospectus,
may invest in U.S. Government Securities that are direct obligations of the
U.S. Treasury, or that are issued by agencies and instrumentalities of the
U.S. Government and supported by the full faith and credit of the U.S.
Government. These include Treasury notes, bills and bonds and securities
issued by the Government National Mortgage Association ("GNMA"), the Federal
Housing Administration, the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. Investments may also be made in U.S. Government Securities
that are not supported by the full faith and credit of the U.S. Government.
These include securities issued by the Federal National Mortgage Association
("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Home
Loan Banks, Tennessee Valley Authority, Student Loan Marketing Association
and District of Columbia Armory Board. Because the U.S. Government is not
obligated by law to provide support to an instrumentality it sponsors, the
Fund will invest in obligations issued by such an instrumentality only when
Dreyfus determines that the credit risk with respect to the instrumentality
does not make its securities unsuitable for investment by such Fund.
The Fund may write covered call and put options on U.S. Government
Securities. Currently, options are traded only on U.S. Treasury obligations
and on GNMA, FNMA and FHLMC securities. If the Fund writes covered call
options on mortgage-backed securities issued by GNMA, FNMA and FHLMC, the
mortgage-backed securities that it holds as cover may, because of scheduled
amortization or unscheduled prepayments, cease to be sufficient cover. If
this occurs, the Fund will compensate for the decline in the value of the
cover by purchasing an appropriate additional amount of mortgage-backed
securities. Options on portfolio securities are discussed in more detail
under "Options on Securities" below.
Bank Obligations
When, in Dreyfus' opinion, a "defensive" investment posture is
warranted, the Funds may invest temporarily and without limitation in high-
grade, short-term money-market instruments, including certificates of
deposit, time deposits, and bankers' acceptances. No Fund may invest 25% or
more of its gross assets in securities or obligations issued by banks.
Certificates of deposit ("CDs") are short-term negotiable obligations
of commercial banks; time deposits ("TDs") are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates; and bankers' acceptances are time drafts drawn on commercial
banks by borrowers usually in connection with international transactions.
Domestic commercial banks organized under Federal law are supervised
and examined by the Comptroller of the Currency and are required to be
members of the Federal Reserve System and to be insured by the Federal
Deposit Insurance Corporation (the "FDIC"). Domestic banks organized under
state law are supervised and examined by state banking authorities but are
members of the Federal Reserve System only if they elect to join. In
addition, all banks whose certificates of deposit may be purchased by the
Trust are insured by the FDIC and are subject to Federal examination and to
a substantial body of Federal law and regulation. As a result of
governmental regulations, domestic branches of domestic banks are, among
other things, generally required to maintain specified levels of reserves,
and are subject to other supervision and regulations designed to promote
financial soundness.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by
governmental regulations. Payment of interest and principal upon
obligations of foreign banks and foreign branches of domestic banks may be
affected by governmental action in the country of domicile of the branch
(generally referred to as sovereign risk). Examples of such action would be
the imposition of currency controls, interest limitations, seizure of
assets, or the declaration of a moratorium. Evidence of ownership of
portfolio securities may be held outside of the United States, and the Trust
may be subject to the risks associated with the holdings of such property
overseas.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal and state
regulation as well as by governmental action in the countries in which the
foreign bank has its head office. In addition, there may be less publicly
available information about a domestic branch of a foreign bank than about a
domestic bank. Dreyfus will carefully consider these factors in making such
investments.
When-Issued Securities and Delayed-Delivery Transactions
To secure an advantageous price or yield, the Funds may purchase U.S.
Government Securities on a when-issued basis and purchase or sell U.S.
Government Securities for delayed-delivery. The Funds will enter into such
transactions for the purpose of acquiring portfolio securities and not for
the purpose of leverage. Delivery of the securities in such cases occurs
beyond the normal settlement periods, but no payment or delivery is made by
a Fund prior to the reciprocal delivery or payment by the other party to the
transaction and no income accrues prior to delivery. In entering into a
when-issued or delayed-delivery transaction, the Funds will rely on the
other party to consummate the transaction and may be disadvantaged if the
other party fails to do so.
U.S. Government Securities are normally subject to changes in value
based upon changes, real or anticipated, in the level of interest rates and
the public's perception of the creditworthiness of the issuers. In general,
U.S. Government Securities tend to appreciate when interest rates decline
and depreciate when interest rates rise. Purchasing these securities on a
when-issued or delayed-delivery basis, therefore, can involve the risk that
the yields available in the market when delivery takes place may actually be
higher than those obtained in the transaction itself. Similarly, the sale
of U.S. Government Securities for delayed delivery can involve the risk that
the prices available in the market when the delivery is made may actually be
higher than those obtained in the transaction itself. In the case of the
purchase by a Fund of when-issued or delayed-delivery securities, a
segregated account in the name of the Fund consisting of cash or liquid high
grade debt securities equal to the amount of the when-issued or delayed-
delivery commitments will be established at the Fund's custodian. For the
purpose of determining the adequacy of the securities in the accounts, the
deposited securities will be valued at market or fair value. If the market
or fair value of the securities declines, additional cash or securities will
be placed in the account daily so that the value of the account will equal
the amount of such commitments by the Fund. On the settlement date, the
Fund will meet its obligations from then-available cash flow, the sale of
securities held in the segregated account, the sale of other securities or,
although it would not normally expect to do so, from the sale of the when-
issued or delayed-delivery securities themselves (which may have a greater
or lesser value than the Fund's payment obligations).
Low-Rated Securities
The Contrarian Fund and the Short-Term Bond Fund may invest in low-
rated and comparable unrated securities. A recession could disrupt the
market for such securities and adversely affect the value of such
securities. Any such economic downturn also could adversely affect the
ability of the issuers of such securities to repay principal and pay
interest thereon.
The ratings of Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Ratings Group ("S&P") generally represent the opinions of those
organizations as to the quality of the securities that they rate. Such
ratings, however, are relative and subjective, are not absolute standards of
quality and do not evaluate the market risk of the securities. Although
Dreyfus uses these ratings as a criterion for the selection of securities
for the Funds, Dreyfus also relies on its independent analysis to evaluate
potential investments for the Funds. The Funds' achievement of their
investment objectives may be more dependent on this internal credit analysis
of low-rated and unrated securities than would be the case for a portfolio
of higher-rated securities.
Subsequent to its purchase by the Funds, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required
for purchase by the Funds. In addition, it is possible that Moody's and S&P
might not timely change their ratings of a particular issue to reflect
subsequent events. None of these events will require the sale of the
securities by the Funds, although Dreyfus will consider these events in
determining whether the Funds should continue to hold the securities. To
the extent that the ratings given by Moody's or S&P for securities may
change as a result of changes in the rating system or due to a corporate
reorganization of Moody's, and/or S&P, Dreyfus will attempt to use
comparable ratings as standards for its investments in accordance with the
investment objectives and policies of the Funds.
Lending of Portfolio Securities
As stated in the Prospectuses, each of the Funds other than the
Contrarian Fund may lend securities from its portfolio to brokers, dealers
and other financial organizations. Such loans, if and when made, may not
exceed 33 1/3% of such Fund's total assets, taken at value. The Funds may
not lend portfolio securities to its affiliates without specific
authorization from the Securities and Exchange Commission (the "SEC").
Loans of portfolio securities by the Funds will be collateralized by cash,
letters of credit or securities issued or guaranteed by the U.S. Government
or its agencies which will be maintained at all times in an amount equal to
at least 100% of the current market value of the loaned securities. From
time to time, the Funds may return a part of the interest earned from the
investment of collateral received for securities loaned to the borrower
and/or a third party, which is unaffiliated with the Funds or acting as a
"finder."
By lending portfolio securities, the Funds can increase their income by
continuing to receive interest on the loaned securities, as well as by
either investing the cash collateral in short-term instruments or by
obtaining yield in the form of interest paid by the borrower when U.S.
Government Securities are used as collateral. Requirements of the SEC,
which may be subject to future modifications, currently provide that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Funds must receive at least 100% cash collateral or equivalent
securities from the borrower; (2) the borrower must increase such collateral
whenever the market value of the securities rises above the level of such
collateral; (3) the Funds must be able to terminate the loan at any time;
(4) the Funds must receive reasonable interest on the loaned securities and
any increase in market value; (5) the Funds may pay only reasonable
custodian fees in connection with the loan; and (6) voting rights on the
loaned securities may pass to the borrower, except that if a material event
adversely affecting the investment occurs, the Trust's Trustees must
terminate the loan and regain the right to vote the securities. The risks
in lending portfolio securities, as well as with other extensions of secured
credit, consist of possible delays in receiving additional collateral or in
the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will be made to firms deemed by
Dreyfus to be of good standing and will not be made unless, in the judgment
of Dreyfus, the consideration to be earned from such loans would justify the
risk.
Options on Securities
The Funds have the ability to write covered put and call options on
their portfolio securities as part of their investment strategies. The
principal reason for writing covered call options on a security is to
attempt to realize, through the receipt of premiums, a greater return than
would be realized on the security alone. In return for a premium, the
writer of a covered call option forfeits the right to any appreciation in
the value of the underlying security above the strike price for the life of
the option (or until a closing purchase transaction can be effected).
Nevertheless, the call writer retains the risk of a decline in the price of
the underlying security. Similarly, the principal reason for writing
covered put options is to realize income in the form of premiums. The
writer of a covered put option accepts the risk of a decline in the price of
the underlying security. The size of the premiums that a Fund may receive
may be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing activities.
The Funds with option-writing authority will write only covered
options. Accordingly, whenever a Fund writes a call option it will continue
to own or have the present right to acquire the underlying security for as
long as it remains obligated as the writer of the option. To support its
obligation to purchase the underlying security if a put option is exercised,
whenever a Fund writes a put option it will either (a) deposit with the
Fund's custodian in a segregated account, cash, U.S. Government Securities
or other high grade debt obligations having a value equal to or greater than
the exercise price of the underlying securities or (b) continue to own an
equivalent number of puts of the same "series" (that is, puts on the same
underlying security having the same exercise prices and expiration dates as
those written by the Fund), or an equivalent number of puts of the same
"class" (that is, puts on the same underlying security) with exercise prices
greater than those that it has written (or, if the exercise prices of the
puts it holds are less than the exercise prices of those it has written, it
will deposit the difference with the Fund's custodian in a segregated
account).
Options written by the Funds will normally have expiration dates
between one and nine months from the date written. The exercise price of
the options may be below, equal to or above the market values of the
underlying securities at the times the options are written. In the case of
call options, these exercise prices are referred to as "in-the-money", "at-
the-money" and "out-of-the-money", respectively.
A Fund may write (a) in-the-money call options when Dreyfus expects
that the price of the underlying security will remain flat or decline
moderately during the option period, (b) at-the-money call options when
Dreyfus expects that the price of the underlying security will remain flat
or advance moderately during the option period and (c) out-of-the-money call
options when Dreyfus expects that the premiums received from writing the
call option, plus the appreciation in market price of the underlying
security up to the exercise price, will be greater than the appreciation in
the price of the underlying security alone. In any of the preceding
situations, if the market price of the underlying security declines and the
security is sold at this lower price, the amount of any realized loss will
be offset wholly or in part by the premium received. Out-of-the-money, at-
the-money and in-the-money put options (the reverse of call options as to
the relation of exercise price to market price) may be utilized in the same
market environments that such call options are used in equivalent
transactions.
So long as the obligation of a Fund as the writer of an option
continues, the Fund may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring it to deliver, in the case of a
call, or take delivery of, in the case of a put, the underlying security
against payment of the exercise price. This obligation terminates when the
option expires or the Fund effects a closing purchase transaction. A Fund
can no longer effect a closing purchase transaction with respect to an
option once it has been assigned an exercise notice. To secure its
obligation to deliver the underlying security when it writes a call option,
or to pay for the underlying security when it writes a put option, a Fund
will be required to deposit in escrow the underlying security or other
assets in accordance with the rules of the Options Clearing Corporation (the
"Clearing Corporation") and the securities exchange on which the option is
written.
An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized national
securities exchange or in the over-the-counter market. In light of this
fact and current trading conditions, the Funds expect to write only call or
put options issued by the Clearing Corporation. The Funds expect to write
options on national securities exchanges and in the over-the-counter market.
The Funds may realize a profit or loss upon entering into a closing
transaction. In cases in which a Fund has written an option, it will
realize a profit if the cost of the closing purchase transaction is less
than the premium received upon writing the original option and will incur a
loss if the cost of the closing purchase transaction exceeds the premium
received upon writing the original option.
Although the Funds will generally write only those options for which
Dreyfus believes there is an active secondary market so as to facilitate
closing transactions, 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, have at times rendered certain of the facilities of national
securities exchanges inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of
orders 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, a Fund is unable to effect a
closing purchase transaction in a secondary market, it will not be able to
sell the underlying security until the option expires or it delivers the
underlying security upon exercise.
In the case of options written by a Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain
physical delivery of the underlying common stocks with respect to which the
Fund has written options may exceed the time within which the Fund must make
delivery in accordance with an exercise notice. In these instances, a Fund
may purchase or temporarily borrow the underlying securities for purposes of
physical delivery. By so doing, the Fund will not bear any market risk,
since the Fund will have the absolute right to receive from the issuer of
the underlying security an equal number of shares to replace the borrowed
stock, but the Fund may incur additional transaction costs or interest
expenses in connection with any such purchase or borrowing.
Although Dreyfus will attempt to take appropriate measures to minimize
the risks relating to a Fund's writing of put and call options, there can be
no assurance that a Fund will succeed in its option-writing program.
Stock Index Options
The Funds have the authority to purchase and write put and call options
on stock indexes listed on national securities exchanges to hedge their
portfolios. A stock index fluctuates with changes in the market values of
the stocks included in the index. Some stock index options are based on a
broad market index such as the New York Stock Exchange Composite index, or
on a narrower market index such as the Standard & Poor's 100. Indexes are
also based on an industry or market segment such as the American Stock
Exchange Oil and Gas Index or the Computer and Business Equipment Index.
Options on stock indexes are similar to options on stock except that
(a) the expiration cycles of stock index options are monthly, while those of
stock options are currently quarterly, and (b) the delivery requirements are
different. Instead of giving the right to take or make delivery of stock at
a specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (i) the amount, if any,
by which the fixed exercise price of the option exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier". Receipt of this cash amount will depend upon the closing level
of the stock index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the exercise price of
the option. The amount of cash received will be equal to such difference
between the closing price of the index and the exercise price of the option
expressed in dollars times a specified multiple. The writer of the option
is obligated, in return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index options prior to
expiration by entering into a closing transaction on an exchange or it may
let the option expire unexercised.
The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in
the portion of a securities portfolio being hedged correlate with price
movements of the stock index selected. Because the value of an index option
depends upon movements in the level of the index rather than the price of a
particular stock, whether a Fund will realize a gain or loss from the
purchase or writing of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of
certain indexes, in an industry or market segment, rather than movements in
the price of a particular stock. Thus, successful use by a Fund of options
on stock indexes will be subject to Dreyfus' ability to predict correctly
movements in the direction of the stock market generally or of a particular
industry. This requires different skills and techniques than predicting
changes in the price of individual stocks, and there can be no assurance
that a Fund will be successful in its use of stock index options.
A Fund will engage in stock index options transactions only when
determined by Dreyfus to be consistent with the Fund's efforts to control
risk. There can be no assurance that such judgment will be accurate or that
the use of these portfolio strategies will be successful. When a Fund
writes an option on a stock index, the Fund will establish a segregated
account with the Fund's custodian in an amount equal to the market value of
the option and will maintain the account while the option is open.
Futures Activities
The Funds may invest in futures contracts and options on futures
contracts that are traded on a United States exchange or board of trade.
These investments may be made by a Fund solely for the purpose of hedging
against changes in the value of its portfolio securities or of securities in
which the Fund intends to invest due to anticipated changes in interest
rates and market conditions, and when the transactions are economically
appropriate to the reduction of risks inherent in the management of the
Fund. The Funds will not purchase or sell futures contracts or purchase
options on futures if, immediately thereafter, more than 33 1/3% of its net
assets would be hedged. In addition, the Funds will not enter into futures
and options contracts for which aggregate initial margin deposits and
premiums exceed 5% of the fair market value of its assets, after taking into
account unrealized profits and unrealized losses on futures contracts into
which it has entered. See "Taxes" below.
Futures Contracts. The purpose of the acquisition or sale of a futures
contract by a Fund is to protect the Fund from fluctuations in rates on
securities without actually buying or selling the securities. Of course,
since the value of portfolio securities will far exceed the value of the
futures contracts sold by the Fund, an increase in the value of the futures
contracts could only mitigate--but not totally offset--the decline in the
value of the portfolio.
No consideration is paid or received by the Fund upon the purchase or
sale of a futures contract. Initially, the Fund will be required to deposit
with the broker an amount of cash or cash equivalents equal to approximately
1% to 10% of the contract amount (this amount is subject to change by the
board of trade on which the contract is traded and members of such board of
trade may charge a higher amount). This amount is known as "initial margin"
and is in the nature of a performance bond or good faith deposit on the
contract which is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied.
Subsequent payments, known as "variation margin," to and from the broker,
will be made daily as the price of securities underlying the futures
contract fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking-to-market." In
addition, when the Fund purchases a futures contract, it must deposit into a
segregated account with its custodian an amount of cash or cash equivalents
equal to the total market value of such futures contract, less the amount of
initial margin for the contract. At any time prior to the expiration of a
futures contract, the Fund may elect to close the position by taking an
opposite position, which will operate to terminate the Fund's existing
position in the contract.
There are several risks in connection with the use of futures contracts
as a hedging device. Successful use of futures contracts by the Fund is
subject to the ability Dreyfus to correctly predict movements in the
direction of interest rates. These predictions involve skills and
techniques that may be different from those involved in the management of
the Fund. In addition, there can be no assurance that there will be a
correlation between movements in the price of the underlying securities and
movements in the price of the securities which are the subject of the hedge.
A decision of whether, when and how to hedge involves the exercise of skill
and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of market behavior or unexpected trends in interest rates.
Positions in futures contracts may be closed out only on the exchange
on which they were entered into (or through a linked exchange ) and no
secondary market exists for those contracts. In addition, although the
Funds intend to purchase or sell futures contracts only if there is an
active market for such contracts, there is no assurance that a liquid market
will exist for the contracts at any particular time. Most futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices could move
to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures trades to substantial losses. In such event, and in
the event of adverse price movements, the Fund would be required to make
daily cash payments of variation margin. In such circumstances, an increase
in the value of the portion of the portfolio being hedged, if any, may
partially or completely offset losses on the futures contract. As described
above, however, no assurance can be given that the price of the securities
being hedged will correlate with the price movements in a futures contract
and thus provide an offset to losses on the futures contract.
If a Fund has hedged against the possibility of an increase in interest
rates adversely affecting the value of securities held in its portfolio and
rates decrease instead, the Fund will lose part or all of the benefit of the
increased value of securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements at a time when it may
be disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices which reflect the decline in interest
rates.
Options on Financial Futures Contracts. A financial futures contract
provides for the future sale by one party and the purchase by the other
party of a certain amount of a specific financial instrument at a specified
price, date, time and place.
The Funds may purchase and write put and call options on financial
futures contracts that are traded on a United States exchange or board of
trade as a hedge against changes in the value of securities which the Fund
intends to purchase due to anticipated changes in interest rates and market
conditions and may enter into closing transactions with respect to such
options to terminate existing positions. There is no guarantee that such
closing transactions can be effected.
An option on a financial futures contract, as contrasted with the
direct investment in such a contract, gives the purchaser the right, in
return for the premium paid, to assume a position in a financial futures
contract at a specified exercise price at any time prior to the expiration
date of the option. The potential loss related to the purchase of an option
on financial futures contracts is limited to the premium paid for the option
(plus transaction costs). Because the value of the option is fixed at the
point of sale, there are no daily cash payments to reflect changes in the
value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of
the Funds.
In addition to the risks that apply to all options transactions, there
are several risks relating to options on financial futures contracts. These
risks include the lack of assurance of a perfect correlation between price
movements in the options on financial futures, on the one hand, and price
movements in the portfolio securities that are the subject of the hedge, on
the other hand. The ability to establish and close out positions on such
options will be subject to the existence of a liquid market, and there can
be no assurance that such a market will be maintained or that closing
transactions will be effected. In addition, there are risks specific to
writing (as compared to purchasing) such options. While the Funds' risk of
loss with respect to purchased put and call options on financial futures
contracts is limited to the premium paid for the option (plus transaction
costs), when a Fund writes such an option it is obligated to a broker for
the payment of initial and variation margin. In addition, the purchase of
put or call options will be based upon predictions as to anticipated market
trends by Dreyfus which could prove to be incorrect. When a Fund writes a
call option or a put option, it will be required to deposit initial margin
and variation margin pursuant to brokers' requirements similar to those
applicable to financial futures contracts. In addition, net option premiums
received for writing options will be included as initial margin deposits.
Portfolio Turnover
While a Fund does not intend to trade in securities for short-term
profits, a Fund will not consider portfolio turnover rate a limiting factor
in making investment decisions. Higher portfolio turnover rates can result
in corresponding increases in brokerage commissions. In addition, to the
extent a Fund realizes short-term gains as a result of more portfolio
transactions, such gains would be taxable to shareholders at ordinary income
tax rates.
A Fund may experience high portfolio turnover due to frequent
redemptions and exchanges. In addition to the results described above, a
high portfolio turnover rate will increase the risk that a Fund may fail to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. Failure to so qualify would cause the
Fund's net investment income and capital gain net income to become subject
to Federal income tax at corporate rates. For a discussion of state
requirements for qualification and regulated investment companies under
Subchapter M and the effect of high portfolio turnover on such
qualification, see "Taxes".
The portfolio turnover rates for the 1993 and 1994 fiscal years for the
International Fund were 202% and 114%, respectively; for the Contrarian
Fund, 39% and 65%, respectively; and for the Short-Term Bond Fund, 6% and
53%, respectively.
Investment Restrictions
The following are fundamental investment restrictions of each Fund.
Each Fund of the Trust may not:
1. Purchase any securities which would cause 25% or more 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 of 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 borrowing, 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. Make loans or lend securities, if as a result thereof more than
one-third the Fund's total assets would be subject to all such loans. For
purposes of this restriction debt instruments and repurchase agreements
shall not be treated as loans.
4. 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.
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
the real estate business or invest or deal in real estate or interests
therein).
6. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
7. Purchase with respect to 75% of a 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 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.
The following are non-fundamental investment restrictions of each Fund
of the Trust:
1. The Trust will not purchase or retain the securities of any issuer
if the officers, directors or Trustees of the Trust, its advisers, or
managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than five percent
of such securities.
2. 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 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.
3. 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 restriction shall not apply to standby commitments,
and (b) this restriction shall not apply to a Fund's transactions in futures
contracts and related options.
4. 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).
5. 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 restriction, 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 Trustees, or its delegate determines
that such securities are liquid, based upon the trading markets for the
specific security.
6. 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.
7. No Fund will purchase oil, gas or mineral leases (a Fund may,
however, purchase and sell the securities of companies engaged in the
exploration, development, production, refining, transporting and marketing
of oil, gas or minerals).
8. 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 securities short.
9. 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 on futures contracts shall not constitute purchasing
securities on margin.
10. No Fund shall purchase any security while borrowing 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.
Each of the foregoing restrictions applies to each Fund unless
otherwise indicated. Under the 1940 Act, a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities
of such Fund, as defined in the 1940 Act. "Majority" means the lesser of
(1) 67% or more of the shares present at a shareholders' meeting, if the
holders of more than 50% of the outstanding shares of such Fund are present
or represented by proxy, or (2) more than 50% of the outstanding shares of
the Trust. Non-fundamental investment restrictions may be changed by vote
of a majority of the Trust's Board of Trustees at any time.
In order to permit the sale of the Funds' shares in certain states, the
Trust may make commitments more restrictive than the investment restrictions
described above. In this regard, the Trust has given a representation that
investments will not be made in oil, gas or other mineral leases. Should
the Trust determine that any such commitment is no longer in the best
interests of the Trust and its shareholders, it will revoke the commitment
by terminating sales of its shares in the state involved. In addition, the
Funds have undertaken not to invest in warrants (other than warrants
acquired by the Fund as part of a unit or attached to securities at the time
of purchase) if, as a result, the investments (valued at the lower of cost
or market) would exceed 5% of the value of the Fund's net assets or if, as a
result, more than 2% of the Fund's net assets would be invested in warrants
not listed on the American Stock Exchange ("AMEX") or the New York Stock
Exchange ("NYSE"). Further, the Funds have given a representation that
investments will not be made in real estate limited partnerships. Should
the Trust determine that any such commitment is no longer in the best
interests of the Trust and its shareholders, it will revoke the commitment
by terminating sales of its shares in the state involved.
Portfolio Transactions
Decisions to buy and sell securities for the Funds are made by Dreyfus
subject to the overall supervision of the Trustees of the Trust. Portfolio
transactions for the Trust are effected by or under the direction of
Dreyfus. The same personnel are also in charge of portfolio transactions
for other accounts of other subsidiaries and affiliates of Dreyfus.
Although investment decisions for the Funds are made independently from
those of the other accounts managed by Dreyfus, investments of the type a
Fund may make may also be made by those other accounts. When a Fund and one
or more other accounts managed Dreyfus are prepared to invest in, or desire
to dispose of, the same security, available investments or opportunities for
sales will be allocated in a manner believed by Dreyfus to be equitable to
each. In some cases, this procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained or disposed of by a
Fund. In other cases, however, it is believed that coordination and the
ability to participate in volume transactions will be to the benefit of the
Funds.
Transactions on U.S. and some foreign stock exchanges on behalf of the
Funds involve the payment of negotiated brokerage commissions. On exchanges
on which commissions are negotiated, the cost of transactions may vary among
different brokers. On most foreign exchanges, commissions are generally
fixed. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price of those securities
includes an undisclosed commission or mark-up. The cost of securities
purchased from underwriters includes an underwriting commission or
concession, and the prices at which securities are purchased from and sold
to dealers include a dealer's mark-up or mark-down. U.S. Government
Securities are generally purchased from underwriters or dealers, although
certain newly-issued U.S. Government Securities may be purchased directly
from the U.S. Treasury or from the issuing agency or instrumentality.
In executing portfolio transactions and selecting brokers or dealers,
Dreyfus seeks the most favorable execution and price available. The
Management Agreement provides that, in assessing the best overall terms
available for any transaction, Dreyfus shall consider factors it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In addition, the Management
Agreement authorizes Dreyfus, in selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available,
to consider the brokerage and research services (as those terms are defined
in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Trust and/or other accounts over which Dreyfus or an affiliate exercises
investment discretion.
The Trustees will periodically review the brokerage commissions paid by
the Trust to determine if the commissions paid over representative periods
of time were fair and reasonable in relation to the benefits inuring to each
Fund. It is possible that certain of the services received will primarily
benefit one or more other accounts for which investment discretion is
exercised, or a Fund other than that for which the transaction was executed.
Conversely, the Trust or any given Fund may be the primary beneficiary of
the service received as a result of portfolio transactions effected for such
other accounts or Funds. The fee of Dreyfus under the Management Agreement
is not reduced by reason of receipt of such brokerage and research services.
The Trustees of the Trust have determined that portfolio transactions
for the Funds may be executed through affiliated broker-dealers of Dreyfus
if, in the judgment of Dreyfus, the use of an affiliated broker is likely
to result in prices and execution that are fair and reasonable and are at
least as favorable as those of other affiliated broker-dealers and if, in
such transactions, the affiliated broker-dealer charges the Funds a rate
consistent with that charged to comparable unaffiliated customers in similar
transactions. Affiliated broker-dealers will not participate in brokerage
commissions given by a Fund to other brokers or dealers. In addition,
pursuant to an exemption granted by the SEC, the Funds may engage in
transactions involving certain money market instruments with particular
affiliates acting as principal. Over-the-counter purchases and sales are
transacted directly with principal market makers except in those cases in
which better prices and executions may be obtained elsewhere.
For the fiscal years ended 1992, 1993 and 1994, the Short-Term Bond
Fund paid no brokerage commissions. The following table sets forth certain
information regarding the Funds' payments of brokerage commissions for the
fiscal years ended August 31, 1992, 1993 and 1994:
International Contrarian
Fund Fund
Total
Brokerage: 1992 $173,021 $ 5,160
1993 $ 88,147* $ 3,242
1994 $ 25,038 $ 6,776
* The decrease in total brokerage amount for the International Fund was
due to increased trading with futures contracts.
For the 1992, 1993 and 1994 fiscal years, brokerage commissions of
$260, $0 and $220, respectively, were paid to Boston Institutional Services,
Inc. ("BISI") by the Contrarian Fund. The percentage of total brokerage
commissions paid to BISI for the 1992, 1993 and 1994 fiscal years by the
Contrarian Fund were 5.04%, 0% and 3.25%, respectively. No brokerage
commissions during the 1992, 1993 and 1994 fiscal years were paid to Lehman
Brothers.
PURCHASE OF FUND SHARES
Shares of the Trust are distributed on a best effort basis by Premier
in those states where shares of the Trust are qualified for sale and Premier
is registered. Shares of the Trust are offered to the public on a
continuous basis and are sold without a front-end sales load.
The Distributor; Sub-Administrator. Premier Mutual Fund Services,
Inc., One Exchange Place, Boston, Massachusetts 02109), a wholly-owned
subsidiary of Institutional Administration Services Inc., serves as the
Funds' distributor pursuant to an agreement with Dreyfus effective October
17, 1994. Premier also acts as distributor for other funds in the Premier
Family of Funds, the Dreyfus/Laurel Family of Funds and for certain other
investment companies. Premier also serves as Sub-Administrator ("Sub-
Administrator") to the Funds pursuant to a Sub-Administration Agreement
effective October 17, 1994.
Dreyfus TeleTransfer Privilege--Investor Shares. Dreyfus TeleTransfer
purchase orders may be made between the hours of 8:00 a.m. and 4:00 p.m.,
New York time, on any business day that The Shareholder Services Group,
Inc., the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"), and the New York Stock Exchange ("NYSE") are open. Such purchases
will be credited to the shareholder's Fund account on the next bank business
day. To qualify to use the Dreyfus TeleTransfer Privilege, the initial
payment for purchase of 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--Investor Shares."
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.
Distribution Plan-Investor Shares. The Securities and Exchange
Commission ("SEC") has adopted Rule 12b-1 under the 1940 Act ("Rule")
regulating the circumstances under which investment companies such as the
Trust 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.
Prior to April 4, 1994, the Investor Shares of each Fund were known as
either the "Retail Class" of shares or the "Institutional Class" of shares.
These two Classes of shares of the Funds were reclassified as a single Class
of shares (the Investor Shares) by the Board of Trustees at a meeting held
on November 22, 1993, subject to certain approvals that were obtained from
each Fund's shareholders at a meeting held on March 14, 1994. At the
November 22, 1993 Board Meeting, the Trustees also approved a new
distribution plan for the Investor Shares (formerly a Fund's Retail and/or
Institutional Class of shares) of each Fund. Shareholders of each Fund's
Retail Class of Shares and Institutional Class of Shares approved the new
distribution plans at a shareholders' meeting held on March 14 and March 29,
1994. These new distribution plans ("Current Plans") were effective on
April 4, 1994.
Prior Plans. Prior to April, 1994, each Fund's Retail shares and
Institutional shares were subject to distribution plans (the "Prior Plans")
that were adopted by the Trust under Section 12(b) of the Act and Rule 12b-
1. Under the Prior Plans, each Fund was authorized to spend up to .25% of
its average daily net assets on activities primarily intended to result in
the sale of such Shares, and up to .15% of its average daily net assets
attributable to the Institutional Class on activities primarily intended to
result in the sale of such Shares.
Under the distribution agreements with the prior distributor, Funds
Distributor, Inc. ("Funds Distributor"), each Fund was authorized to pay, or
reimburse Funds Distributor, for distribution activities (which are the same
as those authorized by the Plans) on behalf of each Fund on a monthly basis,
provided that any payment by a Fund to Funds Distributor, together with any
other payments made by such Fund pursuant to the Prior Plan, shall not
exceed .0208% of its average daily net assets attributable to the Retail
Class for the prior month (.25% on an annualized basis) and .0125% of its
average daily net assets attributable to the Institutional Class for the
prior month (.15% on an annualized basis).
Current Plans. Under the Current Plans, each Fund may spend annually
up to .25% of the average of its net asset values for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to, its Investor Shares.
The Current Plan provides that a report for the amounts expended under
the Current Plan, and the purposes for which such expenditures were
incurred, must be made the Trust's Trustees for their review at least
quarterly. In addition, the Current Plan provides that it may not be
amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Current Plan without approval of a Fund's
shareholders, and that other material amendments of the Current Plan must be
approved by the vote of a majority of the Trustees and of the Trustees who
are not "interested persons" of the Trust (as defined in he 1940 act) and
who do not have any direct or indirect financial interest in the operation
of the Current Plan, cast in person at a meeting called for the purpose of
considering such amendments. The Current Plan is subject to annual approval
by the entire Board of Trustees and the Trustees who are neither interested
persons nor have any direct or indirect financial interest in the operation
of the Current Plan, by vote cast in person at a meeting called for the
purpose of voting on the Current Plan. The Current Plan is terminable, as
to a Fund's class of shares, at any time by vote of a majority of the
Trustees who are not interested persons and have no direct or indirect
financial interest in the operation of the Current Plan or by vote of the
holders of a majority of the outstanding shares of such class of the Fund.
During the 1992, 1993 and 1994 fiscal years, Funds Distributor received
$14,768, $18,221 and $21,482 respectively, in the aggregate from the Trust
under the Plan. For the 1994 fiscal year the distribution expenses incurred
by the Funds totaled approximately $26,357, consisting of approximately
$8,478 for advertising, $0 for printing and mailing of Prospectuses, $1,479
for commissions and $16,400 for other.
CUSTODIAN AND FUND ACCOUNTANT
Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, Pennsylvania
15258, serves as custodian and fund accountant with respect to each Fund.
Mellon Bank provides portfolio and shareholder recordkeeping required for
regulatory and financial reporting purposes. Mellon Bank, as Custodian and
Fund Accountant, has no part in determining the investment policies of the
Fund or which securities are to be purchased or sold by the Fund.
TRANSFER AND DIVIDEND DISBURSING AGENT
The Shareholder Services Group, Inc. ("TSSG"), a subsidiary of First
Data Corporation, is each Fund's transfer and dividend disbursing agent.
TSSG has no part in determining the investment policies of a Fund or which
securities are to be purchased or sold by a Fund.
Counsel and Auditors
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby - 9th Floor,
Washington, D.C., 20036-5891, serves as legal counsel to the Trust.
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania
15218, was appointed by the Fund's Board of Trustees to serve as each Fund's
independent auditors for the year ending August 31, 1994, providing audit
services including (1) examination of the annual financial statements and
limited review of unaudited semiannual financial statements, (2) assistance,
review and consultation in connection with the SEC and (3) review of the
annual federal income tax return and the Pennsylvania excise tax return
filed on behalf of each Fund.
REDEMPTION OF FUND SHARES
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone 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, a 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 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, must be in the amount of $1,000 or more and 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. 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 shares
of a Fund 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--Investor Class. 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. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Fund Shares--Dreyfus
TeleTransfer Privilege--Investor Shares."
Redemption Commitment. Each Fund 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 redemption in excess of such amount, the Board of Trustees
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 a Fund to the detriment of the existing
shareholders. In this event, the securities would be valued in the same
manner as a Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right to redeem shares of a Fund may be
suspended or the date of payment postponed (a) for any period during which
the NYSE is closed (other than for customary weekend or holiday closings);
(b) when trading in the markets the Trust normally uses is restricted or
when an emergency exists as determined by the SEC so that disposal of a
Fund's investments or determination of its net asset value is not reasonably
practicable; or (c) for such other periods as the SEC, by order, may permit
for protection of a Fund's shareholders.
SHAREHOLDER SERVICES
Fund Exchanges. Shares of any Class of a Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such funds purchased
by exchange will be purchased on the basis of relative net asset value per
share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("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, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
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. For Dreyfus-
sponsored Keogh Plans, IRAs and SEP-IRAs with only one participant, the
minimum initial investment is $750. To exchange shares held in Corporate
Plans, 403(b)(7) Plans and IRAs set up under a Simplified Employee Pension
Plan ("SEP-IRAs") with more than one participant, the minimum initial
investment is $100 if the plan has at least $2,500 invested among the funds
in the Dreyfus Family of Funds. To exchange shares held in a personal
retirement plan account, the shares exchanged must have a current value of
at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of a Fund, shares of
the same Class of another fund in the Dreyfus Family of Funds. 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 net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next Dreyfus Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and
from regular accounts to IRA accounts, but not from IRA accounts to regular
accounts. With respect to all other retirement accounts, exchanges may be
made only among those accounts.
Fund exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained from the Distributor. The Funds reserve the right to reject any
exchange request in whole or in part. The Fund exchange service or Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Automatic Withdrawal. 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 completing the
appropriate application available from the Distributor. There is a service
charge of $.50 for each withdrawal check. Automatic Withdrawal may be
terminated at any time by the investor, the Funds or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through
the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from a Fund in shares of the same Class of certain
other funds in 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 net asset value
per share as follows:
A. Dividends and 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 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 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 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.
Corporate Pension/Profit-Sharing and Retirement Plans. The Funds make
available to corporations a variety of prototype pension and profit-sharing
plans including a 401(k) Salary Reduction Plan. In addition, the Funds make
available Keogh Plans, IRAs, including SEP-IRAs and IRA "Rollover Accounts,"
and 403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase shares of a Fund in conjunction with a
Keogh Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request
from the Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a non-
working spousal IRA with a minimum investment of $250.
The 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.
VALUATION OF SHARES
Each Fund's net asset value per share is calculated on each business
day. A business day is any day on which the NYSE is open for business. The
Fund determines net asset value as of the close of business of the regular
session of NYSE (currently 4:00 p.m. Eastern time). The holidays (as
observed) on which the NYSE is closed currently are: New Years Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. The Prospectuses describe the time at which the
net asset value of each Fund is determined for purposes of sales and
redemptions. Generally, a Fund's investments are valued at market value or,
in the absence of a market value with respect to any portfolio securities,
at fair value as determined by or under the direction of the Trust's Board
of Trustees. In determining fair value, the Trustees may employ the
services of an independent pricing service. A security that is primarily
traded on a U.S. or foreign exchange ( including securities traded through
the National Market System) is valued at the last sale price on that
exchange on the date on which the valuation is made or, if there were no
sales during the day, at the mean between the closing bid and asked prices.
Portfolio securities that are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time
a value was established is likely to have changed the value, then the fair
value of those securities will be determined by consideration of other
factors by or under the direction of the Fund's Trust Board of Trustees or
its delegates. Over-the-counter securities that are not traded through the
National Market System and securities listed or traded on certain foreign
exchanges whose operations are similar to U.S. over-the-counter market are
valued on the basis of the bid price at the close of business on each day.
Options are generally valued at the last sale price; in the absence of
last sale price, the last offer price is used. When a Fund writes an
option, an amount equal to the premium received by it is included in the
Fund's statement of assets and liabilities as an asset and as an equivalent
liability. The amount of the liability is subsequently marked-to-market to
reflect the current market value of the option written. When a Fund
purchases a stock index option, the premium paid by the Fund is recorded as
an asset and is subsequently adjusted to the current market value of the
option. Investments in U.S. Government Securities (other than short-term
securities) are valued at the average of the quoted bid and asked prices in
the over-the-counter market.
The value of a futures contract equals the unrealized gain or loss on
the contract, which is determined by marking the contract to the current
settlement price for a like contract acquired on the day on which the
futures contract is being valued. A settlement price may not be used if the
market makes a limit move with respect to the security or index underlying
the futures contract. In such an event, the futures contract will be valued
at a fair market price to be determined by or under the direction of the
Board of Trustees.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost when the Board of Trustees determines that such method of
valuation reflects fair value for the securities. All other securities and
other assets of each Fund are appraised at their fair value as determined in
good faith by the Trustees. In carrying out the Board of Trustees'
valuation policies Dreyfus may consult with independent pricing services
approved by the Board of Trustees.
PERFORMANCE DATA
From time to time, the Funds may quote their yields in advertisements,
shareholder reports or other communications to shareholders. Price/yield
information is generally available by calling the Trust toll free at 1-800-
548-2868.
Each Fund may compare the performance of its Investor and Class R
shares to that of other mutual funds, relevant indices or rankings prepared
by independent services or other financial or industry publications that
monitor mutual fund performance.
Performance rankings as reported in Changing Times, Business Week,
Institutional Investor, The Wall Street Journal, Mutual Fund Forecaster, No
Load Investor, Money Magazine, Morningstar Mutual Fund Values, U.S. News and
World Report, Forbes, Fortune, Barron's, Financial Planning, Financial
Planning on Wall Street, Certified Financial Planner Today, Investment
Advisor, Kiplinger's, Smart Money and similar publications may also be used
in comparing the Fund's performance. Furthermore, a Fund may quote its
Investor and Class R Shares yield in advertisements or in shareholder
reports.
Effective April 4, 1994, the Retail and Institutional Classes of shares
of each Fund were reclassified as a single Class of Shares known as
"Investor Shares" and the Investment Class of shares of each Fund was
renamed as such Fund's "Trust Shares." Effective October 17, 1994, each
Fund's Trust shares were reclassified as Class R shares. The following
performance data for Investor Shares is reflective of each Fund's Investor
Class of Shares' performance. Performance data is not available for the
Class R Shares of the Funds because the Funds did not offer Class R shares
during the fiscal year ended August 31, 1994.
30-Day Yield
The Short-Term Bond Fund's 30-day yield figure described and shown
below is calculated according to a formula prescribed by the SEC. The
formula can be expressed as follows:
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
reimbursement).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the net asset value per share on the last day of
the period.
For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations that were purchased by a Fund at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect
changes in the market values of the debt obligations. Yield information is
useful in reviewing the Funds' performance, but because yields fluctuate,
such information cannot necessarily be used to compare an investment in a
Fund's shares with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed or guaranteed fixed yield for a
stated period of time. Shareholders should remember that yield is a
function of the kind and quality of the instruments in the Funds'
portfolios, portfolio maturity, operating expense and market conditions.
The Funds' yields and total returns will also be affected if Dreyfus waives
its investment management fees.
For the 30-day period ended August 31, 1994, the Short-Term Bond Fund's
yield as computed above was 4.81% for the Investor Shares.
Investors should recognize that in periods of declining interest rates
the Short-Term Bond Fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates the Short-
Term Bond Fund's yield will tend to be somewhat lower. Also, when interest
rates are falling, the inflow of net new money to the Fund from the
continuous sale of its shares will likely be invested in portfolio
instruments producing lower yields than the balance of the Short-Term Bond
Fund's portfolio, thereby reducing the current yield of the Fund. In
periods of rising interest rates, the opposite can be expected to occur.
Total Return
Each Fund's "average annual total return" figures described and shown
below are computed according to a formula prescribed by the SEC. The
formula can be expressed as follows:
P(1+T)1/n = ERV
Where: P = a hypothetical initial payment of
$1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical
$1000 (or other) periods at the end of the 1,
5, or 10 year (or other) periods (or
fractional portion thereof); payment made at
the beginning of the 1, 5, or 10 year
The table below shows the average annual total return for the Funds'
Investor Shares for the specified periods. The average annual total return
for each Fund's Class R Shares is not presented below because no Fund
offered Class R Shares during the entire fiscal year ended on August 31,
1994.
Inter- Short-Term
national(1) Contrarian(2) Bond(3)
For the one-year period
ended 8/31/94 9.64% (2.55)% 0.06%
For the five-year period ended
8/31/94 3.02% 9.88% 6.50%
From commencement of operations
to 8/31/94 3.97% 12.56% 6.65%
(1) The Fund commenced operations on October 12, 1988.
(2) The Fund commenced operations on October 17, 1988.
(3) The Fund commenced operations on October 18, 1988.
Aggregate Total Return
Each Fund's aggregate total return figures described and shown below
represent the cumulative change in the value of an investment in each Fund
for the specified period and are computed by the following formula:
ERV-P
-----
AGGREGATE TOTAL RETURN = P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical $10,000
investment made at the beginning of the 1-, 5- or
10-year period at the end of the 1-, 5- or 10- year
period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
The table below shows the aggregate total return for the Funds'
Investor Shares for the specified periods. The aggregate annual return for
each Fund's Class R Shares is not presented below because no Fund offered
Class R Shares during the entire fiscal year ended on August 31, 1994.
Inter- Short-Term
national(1) Contrarian(2) Bond(3)
For the one-year period
ended 8/31/94 9.64% (2.55)% 0.06%
For the five-year period ended
8/31/94 16.02% 60.19% 37.01%
From commencement of
operations to 8/31/94 25.77% 100.32% 45.18%
(1) The Fund commenced operations on October 12, 1988.
(2) The Fund commenced operations on October 17, 1988.
(3) The Fund commenced operations on October 18, 1988.
The Funds' net investment income changes in response to fluctuations in
interest rates and the expenses of the Funds. Consequently, any given
performance quotation should not be considered as representative of the
Funds' performance for any specified period of time.
TAXES
Each Fund has satisfied, and intends to satisfy, the requirements for
qualifying as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended, (the "Code"). Accordingly, each
Fund will not be liable for Federal income taxes to the extent its taxable
net investment income and capital gain net income are distributed to
shareholders, provided that at least 90% of its net investment income and
net short-term capital gains for the taxable year are distributed.
To qualify as a regulated investment company, among other requirements,
the Fund must earn at least 90% of its gross income from (i) interest, (ii)
dividends, (iii) payments with respect to securities loans, (iv) gains from
the sale or other disposition of stock, securities, or foreign currencies
and (v) other income (including, but not limited to, gains from options,
futures, or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90% Test"). An
additional requirement is that the Fund must earn less than 30% of its gross
income from the disposition of any of the following held for less than three
months (the "30% Test"): (i) stock or securities; (ii) options, futures or
forward contracts (other than on foreign currencies) or (iii) foreign
currencies (or options, futures or forward contracts on foreign currencies)
but only if such currencies (or options, futures or forward contracts) are
not directly related to the Fund's principal business of investing in stock
or securities (or options and futures with respect to stock or securities).
The 30% Test will limit the extent to which the Fund may sell securities
held for less than three months; write options which expire in less than
three months; and effect closing transactions with respect to call or put
options that have been written or purchased within the preceding three
months. (If a Fund purchases a put option for the purpose of hedging an
underlying portfolio security, the acquisition of the option is treated as a
short sale of the underlying security unless, for purposes only of the 30%
Test, the option and the security are acquired on the same date.) Finally,
as discussed below, this requirement may also limit investments by certain
Funds in options on stock indexes, options on nonconvertible debt
securities, futures contracts and options on interest rate futures
contracts.
Taxation of Investments by the Funds
Gains or losses on sales of securities by a Fund will generally be
long-term capital gains or losses if the Fund has held the securities for
more than one year. Gains or losses on sales of securities held for less
than one year will generally be short-term. Debt securities purchased by a
Fund may be treated for Federal income tax purposes as having original issue
discount. Original issue discount represents interest for Federal income
tax purposes and can generally be defined as the excess of the stated
redemption price at maturity of a debt obligation over its issue price.
Original issue discount is treated as income earned by a Fund, whether or
not any income is actually received, and therefore is subject to the
distribution requirements of the Code. Generally, the amount of original
issue discount included in the income of a Fund each year is determined on
the basis of a constant yield to maturity which takes into account the
compounding of accrued interest. In addition, debt securities may be
purchased by a Fund at a discount which exceeds the original issue discount
remaining on the securities, if any, at the time the Fund purchased the
securities. This additional discount represents market discount for income
tax purposes. In the case of any debt security having a fixed maturity date
of more than one year from the date of issue and having market discount, the
gain realized on disposition will be treated as interest to the extent it
does not exceed the accrued market discount on the security (unless a Fund
elects to include such accrued market discount in income in the tax year to
which it is attributable). Generally, market discount is accrued on a
daily basis. A Fund may be required to capitalize, rather than deduct
currently, part or all of any direct interest expense incurred or continued
to purchase or carry any debt security having market discount, unless such
Fund makes the election to include market discount currently. If a Fund
must include original issue discount in income or if a Fund makes an
election to include accrued market discount in income, it may be more
difficult for the Fund to make the distributions required for such Fund to
maintain its status as a regulated investment company under Subchapter M of
the Code or to avoid the 4% excise tax described in the Prospectus.
Options and Futures Transactions. The tax consequences of options and
futures transactions entered into by a Fund will vary depending on the
nature of the underlying security, whether the option is written or
purchased and finally, whether the "straddle" rules, discussed separately
below, apply to the transaction. When a Fund writes a call or a put option
on an equity or convertible debt security, it will receive a premium that
will, subject to the straddle rules, be treated as follows for tax purposes.
If the option expires unexercised, or if the Fund enters into a closing
purchase transaction, the Fund will realize a gain (or a loss if the cost of
the closing purchase transaction exceeds the amount of the premium) without
regard to any unrealized gain or loss on the underlying security. Any such
gain or loss generally will be a short-term capital gain or loss except that
any loss on a "qualified" covered call option that is not treated as part of
a straddle may be treated as a long-term capital loss. To be "qualified"
the option must be exchange traded, must be granted more than 30 days before
the day on which the option expires, must not be a "deep-in-the-money"
option and gain or loss with respect to such option must not be ordinary
income or loss. If a call option written by the Fund is exercised, the Fund
will recognize a capital gain or loss from the sale of the underlying
security, and will treat the premium as additional sales proceeds. Whether
the gain or loss will be long-term or short-term will depend on the holding
period of the underlying security. If a put option written by the Fund is
exercised, the amount of the premium will reduce the tax basis of the
security that the Fund then purchases. If an option with respect to an
equity security that the Fund has purchased expires on the stipulated
expiration date, or if the Fund enters into a closing sale transaction, the
Fund realizes a short-term or long-term (depending on the holding period)
capital loss or gain (depending on whether the proceeds from a sale are
greater or less than the cost of the option) for Federal income tax
purposes. If the Fund exercises a put option with respect to an equity
security, it realizes a capital gain or loss from the sale of the underlying
security (long-term or short-term, depending on the holding period of the
security) and the proceeds from the sale will be decreased by the premium
originally paid. However, because the purchase of a put option is treated
as a short sale for Federal income tax purposes, if a Fund has held the
underlying security for not more than one year or acquired such security
after acquiring the put option and on or before the date such option is
exercised or lapses the holding period of a hedged underlying security will
generally be terminated by such a purchase and will start again only when
the Fund enters into a closing sale transaction with respect to such option,
or it expires. In such case, any gain to the Fund on the exercise or
failure to exercise such put option will be short-term capital gain. If the
Fund exercises a call option, the cost of the security which the Fund
purchases upon exercise will be increased by the premium originally paid.
The Code imposes a special "marked-to-market" system for taxing
"section 1256 contracts". These contracts generally include without
limitation, regulated futures contracts, certain foreign currency contracts
and options on nonconvertible debt securities (including U.S. government
securities), certain stock indexes and futures contracts. The Funds may
invest in section 1256 contracts. In general, gain or loss on section 1256
contracts will be taken into account for tax purposes when actually realized
(by a closing transaction, by exercise, by taking delivery or by other
termination). In addition, any section 1256 contracts held at the end of a
taxable year will be treated as sold at their year-end fair market value
(that is, marked-to-the-market), and the resulting gain or loss will be
recognized for tax purposes in such taxable year. Provided that section
1256 contracts are held as capital assets and are not part of a "mixed"
straddle, both the realized and the unrealized year-end gain or loss from
these investment positions (including premiums on options that expire
unexercised) will be treated as 60% long-term and 40% short-term capital
gain or loss, regardless of the period of time particular positions are
actually held by a Fund.
Straddles. The Code contains other rules applicable to "straddles,"
that is, transactions which create positions which offset positions in
section 1256 or other investment contracts. Those rules, applicable to
"straddle transactions", are intended to eliminate any special tax
advantages for such transactions. "Straddles" are defined to include
"offsetting positions" in actively-traded personal property. Under current
law, it is not clear under what circumstances one investment made by a Fund,
such as an option or futures contract, would be treated as "offsetting"
another investment also held by the Fund, such as the underlying security
(or vice versa) and, therefore, whether the Fund would be treated as having
entered into a straddle. In general, investment positions may be
"offsetting" if there is a substantial diminution in the risk of loss from
holding one position by reason of holding one or more other positions.
If two (or more) positions constitute a straddle, (but such straddle
does not consist solely of section 1256 positions), recognition of a
realized loss from one position (including a marked-to-market loss) must be
deferred to the extent of unrecognized gain in an offsetting position,
successor position or offsetting position to a successor position which is
still held at a Fund's year end. Also, long-term capital gains may be
recharacterized as short-term capital gains, or short-term capital losses as
long-term capital losses. Furthermore, interest and other carrying charges
allocable to personal property that is part of a straddle which does not
consist entirely of section 1256 positions must be capitalized. In
addition, "wash sale" rules apply to prevent the recognition of loss where
an identical or substantially identical position is or has been acquired
within a prescribed period. If a Fund chooses to identify a particular
offsetting position as being one component of a straddle and all other
conditions necessary for qualifying as an "identified straddle" are met, a
realized loss on any component of that straddle will be recognized, no
earlier than upon the liquidation of all of the components of that straddle.
Special rules apply to "mixed" straddles (that is, straddles consisting of a
section 1256 contract and an offsetting position that is not a section 1256
contract). If a Fund makes certain elections, the section 1256 contract
components of such mixed straddles will not be subject to the "60%/40%"
market-to-market rules. If any such election is made, the amount, the
nature (as long- or short-term) and the timing of the recognition of the
Fund's gains or losses from the affected straddle positions will be
determined under rules that will vary according to the type of election
made.
Foreign Currency Transactions. Under section 988 of the Code, special
rules are provided for certain foreign currency transactions. Foreign
currency gains or losses from certain forward contracts, from futures
contracts that are not "regulated futures contracts", and from options other
than non-equity options are treated as ordinary income or loss under section
988. The International Fund may elect to have foreign currency-related
regulated futures contracts and non-equity options subject to ordinary
income or loss treatment under section 988. In addition, in certain
circumstances, the Fund may elect capital gain or loss for foreign currency
transactions. The rules under section 988 may also affect the timing of
income recognized by this Fund.
Taxation of the Funds' Shareholders--Special Considerations
The portion of the dividends received from the Contrarian Fund by their
corporate shareholders that qualifies for the 70% dividends-received
deduction will be reduced to the extent that the Funds hold dividend-paying
stock for less than 46 days (91 days for certain preferred stocks). A
Fund's holding period will not include any period during which the Fund has
reduced its risk of loss from holding the stock by writing certain call
options with respect to substantially identical stock or securities, such as
securities convertible into the stock. The holding period for stock may
also be reduced if a Fund diminishes its risk of loss by holding one or more
positions in substantially similar or related property. Accordingly, the
percentage of dividends from the Contrarian Fund qualifying for the
dividends-received deduction may be less than 100%. Dividends-received
deductions will be allowed only with respect to shares that a corporate
shareholder has held for at least 46 days within the meaning of the same
holding period rules applicable to the Funds. Dividends paid by the
International Fund and the Short-Term Bond Fund do not qualify for the
dividends-received deduction.
Dividends paid by a Fund from net investment income and distributions
of net short-term capital gain will be taxable to shareholders as ordinary
income for Federal income tax purposes, whether received in cash or
reinvested in additional shares. Distributions of net capital gain (the
excess of net long-term capital gains over net short-term capital losses)
will be taxable to shareholders as long-term capital gain, whether paid in
cash or reinvested in additional shares, and regardless of the length of
time the investor has held his or her shares of the Fund.
If a shareholder receives a distribution taxable as long-term capital
gain with respect to shares of a Fund, and redeems or exchanges the shares
before he or she has held them for more than six months, any loss on the
redemption or exchange that is less than or equal to the amount of the
distribution will be treated as a long-term capital loss. Under U.S. tax
laws, domestic corporations, such as the International Fund, and U.S.
citizens are taxable on their worldwide income. To mitigate the effect of
U.S. and foreign taxes on foreign income, qualified taxpayers may treat
certain foreign taxes as a credit against U.S. tax liability or as a
deduction in computing U.S. taxes. If more than 50% of the value of the
total assets of the International Fund at the close of a taxable year
consists of stock or securities in foreign corporations, then the
International Fund may elect to pass through to its shareholders the right
to take the credit or deduction for the qualifying foreign taxes it has
paid. In effect, the shareholders are treated as if they owned directly the
stock of the foreign corporations actually held by the International Fund.
Accordingly, each shareholder must include in income (in addition to
dividends paid by the International Fund) his or her proportionate share of
qualifying foreign taxes the Fund has paid and may treat such amounts as
paid by him or her for purposes of the deduction or credit for foreign taxes
paid.
If a shareholder fails to furnish a correct taxpayer identification
number, fails to fully report dividend or interest income, or fails to
certify that he or she has provided a correct taxpayer identification number
or that he or she is not subject to "backup withholding", then the
shareholder may be subject to a 31% Federal backup withholding tax with
respect to (i) taxable dividends and distributions and (ii) the proceeds of
redemptions or exchanges. The backup withholding tax is not an additional
tax and may be credited against a shareholder's regular Federal income tax
liability. An individual's taxpayer identification number is his or her
social security number.
DESCRIPTION OF THE TRUST
The Trust is a diversified, open-end management investment company
established as a Massachusetts business trust under the laws of the
Commonwealth of Massachusetts by a Master Trust Agreement dated May 26,
1988. On April 4, 1994 the Trust changed its name from "The Boston Company
Investment Series" to "The Laurel Investment Series." and on October 17,
1994, the Trust changed its name from "The Laurel Investment Series" to "The
Dreyfus/Laurel Investment Series".
The Trustees have authority to create an unlimited number of shares of
beneficial interest of separate series, $.001 par value per share. Shares
of three series have been authorized. The Trustees have authority to create
additional series at any time in the future without shareholder approval.
Shares of the three Funds described herein are classified into two classes
of shares- Investor Shares and Class R Shares.
Each share (regardless of Class) has one vote. On each matter
submitted to a vote of shareholders, all shares of each portfolio or Class
shall vote together as a single class, except as to any matter for which a
separate vote of any Fund or Class is required by the 1940 Act, and except
as to any matter which affects the interest of one or more particular Funds
or Classes, in which case only the shareholders of shares of one or more of
the affected Funds or Classes shall be entitled to vote, each as a separate
class.
The assets received by the Trust for the issue or sale of shares of
each Fund and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are specially allocated to such Fund, and
constitute the underlying assets of such Fund. The underlying assets of
each Fund are required to be segregated on the books of account, and are to
be charged with the expenses in respect of such Fund and with a share of the
general expenses of the Trust. Any general expenses of the Trust not
readily identifiable as belonging to a particular Fund shall be allocated by
or under the direction of the Trustees in such manner as the Trustees
determine to be fair and equitable. Each share of each Fund represents an
equal proportionate interest in that Fund with each other share and is
entitled to such dividends and distributions out of the income belonging to
such Funds as are declared by the Trustees. Upon any liquidation of a Fund,
shareholders thereof are entitled to share pro rata in the net assets
belonging to that Fund available for distribution.
The Trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees.
Under the Act, shareholders of record of no less than two-thirds of the
outstanding shares of the Trust may remove a Trustee through a declaration
in writing or by vote cast in person or by proxy at a meeting called for
that purpose. The Trustees are required to call a meeting of shareholders
for the purposes of voting upon the question of removal of any Trustee when
requested in writing to do so by the shareholders of record of not less than
10% of the Trust's outstanding shares.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or a Trustee. The Agreement and Declaration
of Trust provides for indemnification from Trust property for all losses and
expenses of any shareholder held personally liable for the obligations of
the Trust. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the
Trust itself would be unable to meet its obligations, a possibility which
Dreyfus believes is remote. Upon payment of any liability incurred by a
Fund, the shareholder of that Fund paying such liability will be entitled to
reimbursement from the general assets of the Fund. The Trustees intend to
conduct the operations of each Fund in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of such
Fund.
CONTROLLING SHAREHOLDERS
At March 31, 1995, there were no controlling shareholders, as that term
is defined under the 1940 Act, of The Dreyfus/Laurel Investment Series.
PRINCIPAL SHAREHOLDERS
The following shareholder owned 5% or more of the Short-Term Bond
Fund's Investor shares as of March 31, 1995: Boston Safe Deposit & Trust
Co. (a wholly-owned subsidiary of The Boston Company, Inc., which is in turn
a wholly-owned subsidiary of Mellon Bank Corporation), Account 0810003004,
One Cabot Road, Wellington III, Medford, Massachusetts 02156, 12% record.
The following shareholders owned 5% or more of the International Fund's
Investor shares as of March 31, 1995: Mac & Co. 202-T05, Mellon Bank, N.A.,
P.O. Box 320, Pittsburgh, PA 15230-0320, 7% record and Mac & Co. 28L-B01,
Mellon Bank, N.A., P.O. Box 320, Pittsburgh, PA 15230-0320, 6% record.
FINANCIAL STATEMENTS
The Funds' financial statements for the fiscal year ended August 31,
1994, including notes to the financial statements, supplementary information
and the Report of Independent Auditors, are contained in the Annual Reports
for the Funds which accompany this Statement of Additional Information and
are incorporated by reference. APPENDIX
INFORMATION ABOUT SECURITIES RATINGS
Corporate Bond Ratings
Description of Moody's Investors Service, Inc. corporate bond ratings:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally 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 are generally
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 sometime 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 shortcomings.
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 each generic
rating classification from Aa through B. The modifier l indicates that the
security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
Description of Standard & Poor's Corporation corporate bond ratings:
AAA--Bonds rated AAA have the highest rating assigned by S&P to debt
obligations. Capacity to pay interest and repay principal is extremely
strong.
AA--Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small
degree.
A--Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.
BB, B, CCC, CC--Bonds rated BB, B, CCC and CC are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
represents the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Cl: The rating Cl is reserved for income bonds on which no interest is
being paid.
D: Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR: Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
Commercial Paper Ratings
The rating A-1 + is the highest, and A-1 the second highest, commercial
paper rating assigned by S & P. Paper rated A-1 must have either the direct
credit support of an issuer or guarantor that possesses excellent long-term
operating and financial strengths combined with strong liquidity
characteristics (typically, such issuers or guarantors would display credit
quality characteristics which would warrant a senior bond rating of "AA-" or
higher), or the direct credit support of an issuer or guarantor that
possesses above average, long-term fundamental operating and financing
capabilities combined with ongoing excellent liquidity characteristics.
Paper rated A-1 must have the following characteristics: liquidity ratios
are adequate to meet cash requirements; long-term senior debt is rated A or
better; the issuer has access to at least two additional channels of
borrowing; basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances; typically, the issuer's industry is well
established and the issuer has a strong position within the industry; and
the reliability and quality of management are unquestioned.
The rating P-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigned rating are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and the appraisal of
speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6)
trend of earnings over a period of ten years; (7) financial strength of
parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations.
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTMENT IN THE
GROWTH OF $10,000 MERILL LYNCH 1-3 YEAR
MONTH INVESTED IN INVESTOR GOVERNMENT TREASURY
ENDED SHARES OF THE FUND INDEX
<S> <C> <C>
10/18/88 $10,000 --
10/88 $10,012 $10,000
11/88 $ 9,981 $ 9,973
12/88 $10,026 $ 9,996
3/89 $10,234 $10,121
6/89 $10,467 $10,624
9/89 $10,659 $10,778
12/89 $10,877 $11,083
3/90 $11,042 $11,182
6/90 $11,294 $11,495
9/90 $11,477 $11,769
12/90 $11,791 $12,160
3/91 $12,305 $12,427
6/91 $12,341 $12,671
9/91 $12,836 $13,097
12/91 $13,365 $13,579
3/92 $13,291 $13,600
6/92 $13,646 $13,992
9/92 $14,035 $14,408
12/92 $14,023 $14,434
3/93 $14,263 $17,754
6/93 $14,392 $14,913
9/93 $14,553 $15,127
12/93 $14,587 $15,216
3/94 $14,402 $15,140
6/94 $14,486 $15,153
8/94 $14,518 $15,337
</TABLE>
AVERAGE ANNUAL TOTAL RETURN -- INVESTOR SHARES
<TABLE>
<S> <C>
Year Ended 8/31/94 0.06%
Five Years Ended 8/31/94 6.50%
Inception (10/18/88) through 8/31/94 6.56%
<FN>
+ Hypothetical illustration of $10,000 invested in Investor Shares at in-
ception (October 18, 1988) and reinvestment of dividends and capital
gains at net asset value through August 31, 1994.
The Merrill Lynch 1-3 Year Government Treasury Index consists of AAA
U.S. Government and Treasury bonds maturing from 1 to 2.99 years.
Index information is available at month-end only, therefore, the closest
month-end to inception date of the Fund has been used.
This period was one in which short-term bond prices fluctuated and the
results should not be considered as a representation of the dividend in-
come or capital gain or loss which may be realized from an investment in
the Fund today. No adjustment has been made for a shareholder's tax lia-
bility on dividends or capital gains.
NOTE: All figures cited here and on the following pages represent past
performance and do not guarantee future results. Investment return and
principal value of an investment will fluctuate so that an investor's
shares upon redemption may be worth more or less than original cost.
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<S> <C> <C> <C> <C>
U.S. TREASURY
OBLIGATIONS -- 37.2%
$270,000 U.S. Treasury Notes 7.625% 12/31/94 $ 272,263
90,000 U.S. Treasury Notes 5.500 02/15/95 90,143
150,000 U.S. Treasury Notes 7.500 02/29/96 153,382
350,000 U.S. Treasury Notes 5.125 12/31/98 329,301
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $858,898) 845,089
MEDIUM-TERM NOTES -- 20.2%
100,000 Atlantic Richfield Company 10.375 07/15/95 103,750
50,000 Beneficial Corporation 9.500 05/25/95 51,250
150,000 Commercial Credit Group 9.200 06/15/95 153,563
100,000 ITT Financial Corporation 8.375 08/01/95 102,000
50,000 Schering Plough Corporation Zero 12/02/96 43,312
Coupon
5,380 SPNB Home Equity Loan 8.100 06/15/20 5,442
TOTAL MEDIUM-TERM NOTES
(Cost $451,619) 459,317
MORTGAGE-BACKED
SECURITIES -- 5.6%
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) -- 5.3%
19,641 GNMA 10.000 03/15/03 21,219
41,516 GNMA 11.500 07/15/13 46,939
51,705 GNMA II 6.000 07/20/17 51,640
Total GNMA (Cost $113,333) 119,798
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC) -- 0.3%
(Cost $7,555)
7,612 FHLMC 5.417 03/01/19 7,640
TOTAL MORTGAGED-BACKED
SECURITIES
(Cost $120,888) 127,438
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT -- 33.9%
(Cost $770,000)
$770,000 Agreement with Morgan Stanley & Co., 4.650% dated
08/31/94,
to be repurchased at $770,099 on 09/01/94, collater-
alized by
$750,000 U.S. Treasury Bond, 8.125% due 08/15/19 $ 770,000
TOTAL INVESTMENTS
(Cost $2,201,405*) 96.9% 2,201,844
OTHER ASSETS AND LIABILITIES (NET) 3.1 70,743
NET ASSETS 100.0% $2,272,587
<FN>
* Aggregate cost for Federal tax purposes.
</TABLE>
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
SHORT-TERM BOND FUND AUGUST 31, 1994
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost $2,201,405)
(Note 1)
See accompanying schedule:
Securities $1,431,844
Repurchase agreement 770,000 $2,201,844
Cash 6,565
Receivable from investment adviser (Note
2) 71,055
Interest receivable 13,819
Receivable for Fund shares sold 76
TOTAL ASSETS 2,293,359
LIABILITIES
Accrued audit fees $10,558
Accrued shareholder reports expense 3,000
Dividends payable 2,822
Investment management fee payable (Note
2) 2,177
Transfer agent fees payable (Note 2) 252
Accrued Trustees' fees and expenses
(Note 2) 194
Payable for Fund shares redeemed 90
Distribution fee payable (Note 3) 78
Accrued expenses and other payables 1,601
TOTAL LIABILITIES 20,772
NET ASSETS $2,272,587
NET ASSETS consist of:
Distributions in excess of net invest-
ment income $(4,964)
Accumulated net realized loss on invest-
ments sold (150,476)
Unrealized appreciation of investments 439
Par value 192
Paid-in capital in excess of par value 2,427,396
TOTAL NET ASSETS $2,272,587
NET ASSET VALUE
INVESTOR SHARES
Net asset value, offering and redemption
price per share ($2,272,587 / 191,832
shares of beneficial interest outstand-
ing) $11.85
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
SHORT-TERM BOND FUND
FOR THE YEAR ENDED AUGUST 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $175,721
EXPENSES
Shareholder reports expense $29,560
Legal and audit fees 26,789
Registration and filing fees 24,287
Investment advisory fee (Note 2) 9,060
Transfer agent fees (Note 2) 5,665
Investment management fee (Note 2) 5,143
Distribution fee (Note 3) 4,543
Custodian fees (Note 2) 3,098
Trustees' fees and expenses (Note 2) 1,606
Amortization of organization costs (Note
6) 1,051
Other 5,455
Fees waived and/or expenses reimbursed
by investment adviser and custodian
(Note 2) (90,576)
TOTAL EXPENSES 25,681
NET INVESTMENT INCOME 150,040
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS (Notes 1 and 4):
Net realized gain on investments sold
during the year 699
Net unrealized depreciation of in-
vestments during the year (156,593)
NET REALIZED AND UNREALIZED LOSS ON IN-
VESTMENTS (155,894)
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(5,854)
</TABLE>
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
SHORT-TERM BOND FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
8/31/94 8/31/93
<S> <C> <C>
Net investment income $150,040 $269,709
Net realized gain on investments sold
during the year 699 24,532
Net unrealized depreciation of invest-
ments during the year (156,593) (73,490)
Net increase/(decrease) in net assets
resulting from operations (5,854) 220,751
Distributions to shareholders from net
investment income:
Investor Shares (131,766) --
Retail Class -- (266,613)
Institutional Class (13,133) (2,533)
Distributions to shareholders in excess
of net investment income:
Investor Shares (4,675) --
Retail Class -- (558)
Institutional Class (466) (5)
Net increase/(decrease) in net assets
from Fund share transactions (Note 5):
Investor Shares (1,106,873) --
Retail Class -- (1,923,798)
Institutional Class -- 58,871
Net decrease in net assets (1,262,767) (1,913,885)
NET ASSETS:
Beginning of year 3,535,354 5,449,239
End of year (including distributions in
excess of net investment income of
$4,964 at August 31, 1994) $2,272,587 $3,535,354
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
SHORT-TERM BOND FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS (CONTINUED)
Reference is made to page 5 of the Fund's Prospectus dated April 10, 1995.
SHORT-TERM BOND FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Reference is made to page 5 of the Fund's Prospectus dated April 10, 1995.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Laurel Investment Series (the "Trust") (formerly The Boston Company
Investment Series), The Laurel Funds, Inc., The Laurel Funds Trust and The
Laurel Tax-Free Municipal Funds are all registered open-end investment
companies that compose The Laurel Fund Family. The Trust is an investment
company that consists of three funds: the Contrarian Fund, the Short-Term
Bond Fund and the International Fund. This report contains financial
statements for the Short-Term Bond Fund (the "Fund"). The Trust is a Mas-
sachusetts business trust and is registered with the Securities and Ex-
change Commission under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management investment company. Effective
April 4, 1994, the Retail and Institutional Classes of shares were reclas-
sified as a single class of shares known as the Investor Shares, and the
Fund began offering Trust Shares. As of August 31, 1994, the Fund had not
issued any Trust Shares. Investor Shares are designed for the retail in-
vestor and bear a distribution fee. Trust Shares are designed for institu-
tional investors, clients of financial institutions, such as banks, trust
companies or thrift institutions, who have qualified accounts, and bear no
distribution fee. Each class of shares has identical rights and privileges
except with respect to the distribution fee and voting rights on matters
affecting a single class. The following is a summary of significant ac-
counting policies consistently followed by the Fund in the preparation of
its financial statements in accordance with generally accepted accounting
principles.
(A) PORTFOLIO VALUATION
Investments in securities that are traded on a national securities ex-
change are valued at the last reported sales price or, in the absence of a
recorded sale, at the mean of the closing bid and asked prices. Over-the-
counter securities are valued at the closing bid price at the close of
business each day, or, if market quotations for such securities are not
readily available, at fair value, as determined in good faith by the Board
of Trustees. Investments in U.S. Government Securities (other than short-
term securities) are valued at the most recent quoted bid price in the
over-the-counter market. Short-term investments with maturities of 60 days
or less from the valuation day are valued on the basis of amortized cost.
Foreign securities are generally valued at the preceding closing values of
such securities on their respective exchanges, except that when an
occurrence subsequent to the time a value was so established is likely to
have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of
the Board of Trustees or its delegates.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund takes possession of an under-
lying debt obligation subject to an obligation of the seller to repur-
chase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to mar-
ket fluctuations during the Fund's holding period. The value of the col-
lateral is at least equal, at all times, to the total amount of the repur-
chase obligations, including interest. In the event of counterparty de-
fault, the Fund has the right to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is de-
layed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's investment manager, acting under the supervision of the
Board of Trustees, reviews the value of the collateral and the creditwor-
thiness of those banks and dealers with which the Fund enters into repur-
chase agreements to evaluate potential risks.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Securities purchased or sold on a when-issued or delayed-
delivery basis may be settled a month or more after the trade date. Real-
ized gains and losses from securities sold are recorded on the identified
cost basis. Investment income and realized and unrealized gains and losses
are allocated based upon relative net assets of each class.
(D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded on the ex-
dividend date. Dividends from net investment income, if any, of the Fund
are declared on a class level and paid quarterly. The Fund distributes any
net realized capital gains on a Fund level annually. Additional distribu-
tions of net investment income and capital gains for the Fund may be made
at the discretion of the Board of Trustees in order to avoid the 4% nonde-
ductible Federal excise tax. Income distributions and capital gain distri-
butions on a Fund level are determined in accordance with income tax regu-
lations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and
gains on various investment securities held by the Fund, timing differ-
ences and differing characterization of distributions made by the Fund as
a whole. Permanent differences incurred during the year ended August 31,
1994 resulting from different book and tax accounting for certain debt in-
struments have been reclassified to paid-in capital at year end.
(E) FEDERAL TAXES
It is the Fund's intention to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies and by distributing substantially all of
its taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
2. INVESTMENT MANAGEMENT FEE, TRUSTEES' FEES AND OTHER RELATED PARTY
TRANSACTIONS
Effective April 4, 1994, the Trust entered into an investment management
agreement with Mellon Bank, N.A. (the "Manager"), a wholly owned subsid-
iary of Mellon Bank Corporation ("Mellon"), under which the Manager pro-
vides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Trust. The Manager also directs the investment of the Fund
in accordance with its investment objectives, policies and limitations.
For these services, the Fund pays the Manager a fee, calculated daily and
paid monthly, at the annual rate of 0.55% of the value of the Fund's aver-
age daily net assets. Out of its fee, the Manager pays all of the expenses
of the Fund except brokerage, taxes, interest, Rule 12b-1 distribution
fees and expenses, fees and expenses of the non-interested Trustees (in-
cluding counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Trustees (including
counsel). Prior to April 4, 1994, the Trust had an investment advisory
agreement under which the Fund paid The Boston Company Advisors, Inc.
("Boston Advisors") a monthly fee at the annual rate of 0.50% of the value
of its average daily net assets for investment advisory services. For the
year ended August 31, 1994, Boston Advisors, as investment adviser, volun-
tarily waived fees of $9,060 and reimbursed expenses of $78,894.
Effective April 4, 1994, the Fund entered into an administration agreement
with Frank Russell Investment Management Company (the "Administrator") to
serve as the Fund's administrator to provide various administrative and
corporate secretarial services to the Fund. The Administrator's fee is
paid by the Manager out of the management fee described above.
No officer or employee of Mellon or of any parent, subsidiary or affiliate
thereof receives any compensation from The Laurel Fund Family for serving
as an officer or Trustee of The Laurel Fund Family. The Laurel Fund Family
pays each Trustee who is not an officer or employee of Mellon or of any
parent, subsidiary or affiliate thereof, or of the Administrator or any
parent, subsidiary or affiliate thereof, $27,000 per annum, $1,000 for
each Board meeting attended, and $750 for each Audit Committee meeting
attended, and reimburses each Trustee for travel and out-of-pocket ex-
penses. Prior to April 4, 1994, the Trust paid each Trustee $5,000 per
annum, plus $1,000 per meeting attended, plus $250 per Audit Committee
meeting attended, plus reimbursement for travel and out-of-pocket ex-
penses.
Prior to April 4, 1994, the Trust had individual contracts, which con-
tained specific fee provisions, with Boston Safe Deposit and Trust Com-
pany, a wholly owned subsidiary of Mellon, and The Shareholder Services
Group, Inc. to provide custody and transfer agent services, respectively,
to the Fund. For the period ended April 4, 1994, the custodian waived its
fees of $2,622. Effective April 4, 1994, the payment of fees for custody,
accounting and transfer agent services are covered by the investment man-
agement agreement described above. Funds Distributor, Inc. ("Funds Dis-
tributor") continues to act as distributor of the Fund's shares.
3. DISTRIBUTION PLAN
The Fund has adopted a plan of distribution (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to Investor Shares. Under the Plan, the
Fund may pay up to 0.25% of the value of the average daily net assets of
Investor Shares to compensate Funds Distributor for shareholder servicing
activities and for activities primarily intended to result in the sale of
Investor Shares. The Trust Shares bear no distribution fee. Prior to April
4, 1994, under the distribution plan, the Fund was authorized to spend an-
nually up to 0.25% and 0.15%, of its average daily net assets on distribu-
tion expenses for the Retail Class and the Institutional Class, respec-
tively, which classes, on April 4, 1994 were reclassified into Investor
Shares.
Under its terms, the Plan shall remain in effect from year to year, pro-
vided such continuance is approved annually by a vote of a majority of
those Trustees who are not "interested persons" of the Trust and who have
no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended August 31, 1994 aggregated
$1,335,513 and $2,952,141, respectively, for the Fund.
At August 31, 1994, aggregate gross unrealized appreciation for all secu-
rities in which there was an excess of value over tax cost amounted to
$26,289, and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value amounted to $25,850.
5. SHARES OF BENEFICIAL INTEREST
The Trust has the authority to issue an unlimited number of shares of ben-
eficial interest of each Class in each separate series, with a par value
of $.001. The Trust has authority to issue two classes of shares. Effec-
tive April 4, 1994, the Retail and Institutional Classes of shares were
combined and reclassified as a single class of shares known as the Inves-
tor Shares. The table below summarizes transactions in Fund shares for the
periods shown in the accompanying Statement of Changes in Net Assets.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
8/31/94 8/31/93*
(INVESTOR SHARES) (RETAIL CLASS) (INSTITUTIONAL CLASS)
SHARES** AMOUNT*** SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Sold 125,473 $ 1,547,869 147,353 $ 1,852,904 216 $2,706
Issued as rein-
vestment of div-
idends and dis-
tributions 8,894 108,098 13,071 164,107 200 2,515
Redeemed (225,283) (2,762,840) (305,609) (3,841,443) (3,651) (45,716)
Exchanged for In-
stitutional
shares (7,905) (99,366)
Issued in exchange
for Retail
shares -- -- -- -- 7,905 99,366
Net increase/(de-
crease) (90,916) $ (1,106,873) (153,090) $ (1,923,798) 4,670 $ 58,871
<FN>
* The Fund commenced selling Institutional Class shares on February 1, 1993.
Any shares outstanding prior to February 1, 1993 were designated as Retail
Class shares.
** Shares include 51,296 of subscriptions, 1,060 of reinvestments and 5,203
of redemptions for the Institutional Class up to April 4, 1994.
*** Amounts include $635,969 of subscriptions, $13,003 of reinvestments and
$62,943 of redemptions for the Institutional Class up to April 4, 1994.
</TABLE>
6. ORGANIZATION COSTS
The Fund paid all costs in connection with the Fund's organization includ-
ing the fees and expenses of registering and qualifying the Fund's shares
for distribution under Federal and state securities regulations. All such
costs were being amortized on the straight-line method over a period of
five years. These costs were fully amortized during the year ended August
31, 1994.
7. LINE OF CREDIT
The Trust and several affiliated entities participate in a $20 million
line of credit provided by Continental Bank, N.A. under a Line of Credit
Agreement (the "Agreement") dated March 31, 1992, as amended, primarily
for temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of securi-
ties. Under this Agreement, the Trust may borrow up to the amount speci-
fied in its Borrowing Base Certificate. Interest is payable either at the
bank's Money Market Rate or the London Interbank Offered Rate (LIBOR) plus
0.375% on an annualized basis. As amended effective May 21, 1994, the
Trust and the other affiliated entities are charged an aggregated commit-
ment fee of $40,000, which is allocated equally among each of the partici-
pants. The Agreement requires, among other provisions, each participating
fund to maintain a ratio of net assets (not including funds borrowed pur-
suant to the Agreement) to aggregate amount of indebtedness pursuant to
the Agreement of no less than 4 to 1. At August 31, 1994, the Fund had no
outstanding borrowings under this Agreement.
8. CAPITAL LOSS CARRYFORWARD
As of August 31, 1994, the Fund had available for Federal tax purposes un-
used capital loss carryforwards of $133,822 expiring in 1997 and $10,258
expiring in 1999.
9. SUBSEQUENT EVENTS
At a meeting held on September 23, 1994, the Board of Trustees of The Lau-
rel Investment Series approved several changes which became effective Oc-
tober 17, 1994. The name of the Trust became The Dreyfus/Laurel Investment
Series, which consists of Dreyfus/Laurel Short-Term Bond Fund, Dreyfu-
s/Laurel International Fund and Dreyfus/ Laurel Contrarian Fund. The in-
vestment manager became The Dreyfus Corporation. Premier Mutual Fund Ser-
vices, Inc. became each fund's distributor and sub-administrator.
INDEPENDENT AUDITORS' REPORT
KPMG
The Board of Trustees and Shareholders
The Laurel Investment Series Short-Term Bond Fund
We have audited the accompanying statement of assets and liabilities, in-
cluding the portfolio of investments, of the Short-Term Bond Fund of The
Laurel Investment Series (formerly The Boston Company Investment Series),
as of August 31, 1994, and the related statement of operations, statement
of changes in net assets, and the financial highlights for the year then
ended. These financial statements and financial highlights are the respon-
sibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on
our audit. The statement of changes in net assets for the year ended Au-
gust 31, 1993 and financial highlights for the four year period ended Au-
gust 31, 1993 and for the period from October 18, 1988 to August 31, 1989
were audited by other auditors whose report thereon, dated October 8,
1993, expressed an unqualified opinion on that statement and those finan-
cial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1994 by correspondence with the custo-
dian and brokers. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as evalu-
ating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the Short-Term Bond Fund of The Laurel Investment Series as of August
31, 1994, and the results of operations, changes in net assets, and finan-
cial highlights for the year then ended in conformity with generally ac-
cepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
October 21, 1994
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS -- 71.4%
<C> <S> <C>
FRANCE -- 15.2%
200 Air Liquide (L') $ 31,170
500 Alcatel Alsthom Cie Generale d'Electricite 55,435
3,500 AXA Company+ 169,730
400 Banque Nationale de Paris 18,546
200 Carnaudmetalbox SA 6,367
200 Casino Guichard Perrachon Et Cie 6,016
100 Chargeurs 27,727
200 Cie Financiale (Paribas) 13,715
100 Compagnie Bancaire SA 9,625
200 Compagnie De St. Gobain 25,469
500 Compagnie Financiere de Suez 25,524
100 Crecie Par Reesco NV 7,642
200 Danone 30,873
400 Eaux (Cie Generale Des) 41,461
100 Euro Disney SCA 172
100 Finextel 2,454
100 Havas 8,699
200 Lafarge Coppee SA 16,547
200 L'Oreal Group 45,533
200 Lvhm Moet Hennessey 32,984
100 Lyonnause Des Eaux Dunez 10,217
200 Michelin (Cie Gle Des Establ.) 8,784
100 Pechiney International 2,982
100 Pernod-Ricard 6,154
100 Peugeot SA 16,066
700 Rhone-Poulenc SA 17,789
100 Schneider SA 7,850
100 Sefimeg 7,950
100 Simco-Union Pout L'Habitation 8,635
200 Societe Generale 21,545
900 Societe National Elf Aquitaine 69,299
100 Sommer-Allibert 40,628
300 Thompson 8,979
800 Total Cie Francaise Des Petroles, Total 'B' 47,754
200 Unibail 18,620
</TABLE>
6 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
FRANCE (CONTINUED)
150 Union Immobiliere De France $ 14,215
-----------
883,156
-----------
<CAPTION>
GERMANY -- 12.6%
<C> <S> <C>
100 BASF Group AG 20,972
100 Bayer Group AG 24,062
200 Daimler-Benz Group AG 106,063
500 Deutsche Bank AG 232,072
500 Dresdner Bank AG 130,600
70 Mannesmann AG 19,467
300 RWE Aktiengesellschaft 90,233
200 Siemens AG 89,410
50 Viag AG 16,017
-----------
728,896
-----------
<CAPTION>
JAPAN -- 11.9%
<C> <S> <C>
800 Ajinomoto Company 10,713
900 Asahi Chemical Industry 7,159
800 Asahi Glass Company 9,993
400 Bridgestone Company 6,396
500 Canon Inc. 8,744
400 Chugai Pharmaceutical 4,597
800 Dai Nippon Printing 15,189
200 Daido Steel 1,109
700 Dai-Ichi Kango Bank 12,731
2,100 Daikyo Kanko, Inc. 22,035
400 Daishowa Paper Manufacturing 4,077
400 Daiwa House Industry 6,116
600 Denki Kagaku Kogyo 2,488
1,300 Fuji Bank Ltd. 29,359
200 Fuji Photo Film 4,497
800 Fujitsu Ltd. 8,714
900 Hitachi Ltd. 8,922
400 Honda Motor 6,635
220 House Food Industrial Company 4,815
200 Industrial Bank of Japan 6,036
1,700 Itochu & Company 12,163
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 7
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
JAPAN (CONTINUED)
500 Ito-Yokado Company $ 26,481
600 Japan Air Lines 4,545
600 Japan Energy Corporation 2,686
420 Joyo Bank 3,672
1,300 Kajima Corporation 12,939
400 Kamigumi Company 4,437
330 Kandenko Company 6,760
600 Kansai Electric Power 15,589
2,200 Kawasaki Steel Corporation 9,299
1,800 Kinki Nippon Railway Company Ltd. 15,289
1,000 Kirin Brewery Company 11,892
600 Komatsu Ltd. 5,426
200 Kyocera Corporation 14,830
100 Kyushu Electric Power 2,528
200 Maeda Road Construction 3,657
200 Marudai Food Company Ltd. 1,635
400 Matsushita Electric Works 7,035
1,100 Mitsubishi Bank 28,800
2,700 Mitsubishi Heavy Industries 21,180
900 Mitsubishi Kasei Company 4,839
200 Mitsubishi Trust & Banking 2,998
600 Mitsui Marine & Fire 4,797
600 Mitsui Trust & Banking 6,775
400 Mitsui & Company 3,446
800 NEC Corporation 9,753
600 Nikon 5,996
50 Nintendo Company 3,148
400 Nippon Light Metal Company 2,970
800 Nippon Oil Company 5,996
5,100 Nippon Steel Corporation 19,112
800 Nippon Yusen Kaisha 5,204
600 Oji Paper 6,116
1,600 Sakura Bank 22,704
200 Sanwa Shutter Corporation 1,849
220 Seven-Eleven Japan NPV 17,456
400 Shizuoka Bank 5,356
</TABLE>
8 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
JAPAN (CONTINUED)
500 Snow Brand Milk Products Company Ltd. $ 3,937
100 Sony Corporation 6,106
400 Sumitomo Bank Ltd. 7,954
800 Sumitomo Electric Company 11,992
1,100 Sumitomo Trust & Banking 15,059
400 Taiyo Fishery Company+ 1,639
1,000 Takeda Chemical Industries 12,691
800 Tokai Bank 10,553
800 Tokio Marine & Fire 9,913
300 Tokyo Electric Power Company 9,024
1,300 Tokyu Railway Corporation 9,548
1,200 Toyobo Company 5,432
500 Toyota Motor Company 10,792
600 UBE Industries Ltd. 2,446
200 Yakult Honsha 3,278
500 Yamanouchi Pharmaceutical Company 9,593
1,000 Yasuda Trust and Banking Company Ltd. 8,774
2,900 Yokogawa Electric Corporation 29,559
-----------
687,973
-----------
<CAPTION>
SWITZERLAND -- 6.5%
<C> <S> <C>
11 Adia I 2,099
3 Alusuisse-Lonza Holdings AG, Series A 1,569
7 Alusuisse-Lonza Holdings AG, Series B 3,640
13 Brown Boveri & Cie AG, Series A 11,789
9 Brown Boveri & Cie AG, Series B 1,521
51 Ciba Geigy AG 30,894
37 Credit Suisse Holdings 15,345
75 CS Holdings 6,001
10 Forbo Holdings AG 20,098
3 Grand Magasin Jelmoli 403
24 Holderbank Financier Glaris AG 6,934
6 Merkur Holdings 1,654
68 Nestle SA 62,689
2 Roche Holdings, AG 18,032
12 Roche Holdings, AG Genuscheine NPV 54,998
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 9
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
SWITZERLAND (CONTINUED)
55 Sandoz Group AG $ 28,555
1 Schindler Holdings AG 1,157
23 Schweiz Ruckversicherungs 9,537
36 Schweizerische Bankgesellschaft 31,755
86 Schweizerischer Bankverein 17,883
11 Sika Finanz AG 1,335
33 SMH AG Neuenburg 6,736
2 Societe Generale de Surveillance 3,065
4 Sulzer AG 2,898
3 Swiss Air AG 1,984
38 Union Bank Of Switzerland 8,908
25 Zurich Versicherungs 24,220
-----------
375,699
-----------
<CAPTION>
BELGIUM -- 6.4%
<C> <S> <C>
135 ACEC Union Miniere NPV+ 11,124
20 Bekaert SA 16,511
45 CBR Cimenteries NPV 17,103
279 Delhaize "Le Lion" 10,980
314 Electrabel NPV Common 55,899
50 Electrabell-Pr Reunies 8,993
500 Fortis AG 39,048
109 Generale de Banque 27,783
23 Gevaert Photo Prod NPV 6,810
28 Glaverbal NPV 4,330
144 Group Brussels Lambert SA 19,348
20 Kredietbank Afv NPV 4,157
75 Kredietbank NPV 15,704
195 Petrofina SA NPV 62,504
110 Royale Belge NPV 17,748
50 Solvay Et Cie, Series A, NPV 24,597
25 Tractobel 7,879
60 Tractobel Cap NPV 19,278
-----------
369,796
-----------
</TABLE>
10 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
AUSTRIA -- 6.0%
100 BWT Benchiser Wassertechnik AG $ 15,168
100 Constantia Industry Holdings 8,856
500 Creditanstalt Bank 31,424
100 Ea Generali AG 29,087
100 Lenzing AG 11,545
200 Oesterreichische 11,904
600 Oesterreichische El Wirtsch 38,680
500 Omev AG 46,305
200 Radex Heraklith 8,326
200 Steyer-Daimler Puch AG 4,244
100 Universale-Bau AG 7,463
200 Veitscher 6,725
100 Wienerberger Baust 34,841
1,000 Z-Laenderbank Bank Austria AG 84,023
100 Z-Landerbank 5,485
-----------
344,076
-----------
<CAPTION>
ITALY -- 5.3%
<C> <S> <C>
500 Aedes SpA di Risp 2,151
300 Aedes SpA Lig Lomb 2,464
900 Alitalia Linee Priv 666
500 Alitalia-Linee Aeree Italiane 283
2,000 Assicurazioni Generali 52,836
1,000 Banca Commerciale Italiana SpA 2,398
700 Banco Ambrosiano Veneto 1,922
300 Banco Ambrosiano Veneto di Risp 512
1,650 Banco Nazionale Del Agricoltra 1,662
200 Benetton 3,139
100 Cartiere Burgo 600
300 Cementir SpA 330
500 Cogefar-Impresit Construzioni 664
1,600 Credito Italiano SpA 2,278
1,700 Dalmine SpA 446
800 Edison 3,660
100 Falck Acc Ferr Lamb 320
10,200 Fiat SpA 40,742
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 11
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
ITALY (CONTINUED)
700 Fiat SpA di Risp $ 1,699
500 Fidis 1,756
700 Finanziaria Cirio Bertolli De Rica SpA 484
600 Finanziaria Italgel SpA 583
300 Gildini 841
700 Instituto Banca San Paolo di Torino 4,228
100 Italcementi 778
100 Italcementi di Risp 386
600 Italgas 2,027
100 La Previdente 924
5,200 Mediobanca SpA 47,348
4,800 Montedison SpA 4,255
900 Montedison SpA di Risp 634
1,200 Olivetti & Group SpA 1,617
200 Olivetti & Group SpA di Risp 218
1,100 Parmalat Finanziaria SpA 1,371
1,400 Pirelli SpA 2,272
200 Pirelli Risp 251
300 RAS 4,879
300 RAS di Risp 2,857
200 Rinascente 1,262
1,000 Rinascente di Risp 3,385
700 Risanamento Napo 12,845
200 Saffa SpA, Class A 699
400 Saipem 991
100 Sasib 563
200 Sirti SpA 1,527
500 SME (Meridionale Finanziaria) 1,196
600 Smi (Soc Metal Ital) 357
500 Snia Bpd 694
500 Snia Bpd di Risp 399
400 Snia Bpd Risp 557
200 S.A.I. di Risp 1,417
100 S.A.I. (Societa Assicuratrice Industriale) 1,288
30,680 Telecom Italia SpA 89,689
1,540 Telecom Italia SpA di Risp 3,796
-----------
317,146
-----------
</TABLE>
12 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
SPAIN -- 4.5%
500 Autopista Cesa $ 4,719
1,800 Banco Bilbao Vizcaya 42,297
1,300 Banco Central Hispano Americans 26,127
800 Banco de Santander 32,462
300 Banco Espanol De Credito 2,384
900 Empresa Nacional De Elec 40,234
50 Gas Natural SDG SA 3,989
3,300 Iberdrola I 22,192
1,100 Repsol SA 35,305
3,600 Telefonica Nacional d'Espana 49,931
-----------
259,640
-----------
<CAPTION>
FINLAND -- 2.0%
<C> <S> <C>
100 Amer Group, Series A 2,312
100 Cultor Oy, Series 1 2,645
2,800 Kansallis-Osake-Pankki 5,924
500 Kesko Group 5,485
50 Kone Corp Free, Series B 5,407
400 Kymmene Stromberg 10,971
100 Metra AB 3,272
100 Metra AB, Series B 3,291
200 Nokia Group AB 21,708
600 Outokumpu Oy, Series A 12,460
100 Pohjola Insurance Co., Series A 1,352
100 Pohjola Insurance Co., Series B 1,215
800 Repola 17,241
100 Sampo, Series A 5,194
175 Stockmann AB, Series B 7,817
2,600 Unitas 6,877
-----------
113,171
-----------
<CAPTION>
HONG KONG -- 0.7%
<C> <S> <C>
200 Cheung Kong (Holdings) 1,012
240 China Light & Power 1,239
1,100 Hang Seng Bank Ltd 7,900
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 13
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
HONG KONG (CONTINUED)
700 Hong Kong Telecommunications 1,540
2,100 HSBC Holdings $ 24,729
200 Hutchison Whampoa 1,002
220 Sun Hung Kai Properties 1,623
-----------
39,045
-----------
<CAPTION>
NETHERLANDS -- 0.3%
<C> <S> <C>
100 ABN Amro Holdings 3,378
100 Royal Dutch Petroleum 11,277
-----------
14,655
-----------
TOTAL COMMON STOCKS (Cost $4,012,205) 4,133,253
-----------
<CAPTION>
PREFERRED STOCKS -- 0.5%
<C> <S> <C>
300 Credit Anstalt Bank 18,450
100 Nokia 10,873
-----------
TOTAL PREFERRED STOCKS (Cost $26,556) 29,323
-----------
<CAPTION>
RIGHTS -- 0.1%
<C> <S> <C>
1,000 Banca Commerciale Italiana SpA, expire 09/07/94+ 389
200 Lvmh Moet Hennessy, expire 10/03/94+ 3,291
100 Pernod-Ricard, expire 09/07/94+ 1,211
300 RAS di Risp, expire 09/07/94+ 196
-----------
TOTAL RIGHTS (Cost $4,756) 5,087
-----------
<CAPTION>
WARRANTS -- 0.0%
<C> <S> <C>
112 CS Holdings, expire 12/16/94+ 406
100 Euro Disney, expire 07/11/04+ 17
3 Grand Nagasin Jelmoli, expire 7
48 Holderbank Financiere Glaris, expire 01/19/95+ 61
-----------
TOTAL WARRANTS (Cost $569) 491
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
U.S. TREASURY OBLIGATION -- 0.7% (Cost $44,890)
$ 45,000 U.S. Treasury Bill, 4.500%++ due 09/22/94+++ 44,890
-----------
</TABLE>
14 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
COMMERCIAL PAPER -- 12.2%
<C> <S> <C>
$352,000 Ford Motor Credit Corporation, 4.700% due 09/01/94 $ 352,000
352,000 General Electric Capital Corporation, 4.750% due 09/01/94 352,000
-----------
TOTAL COMMERCIAL PAPER (Cost $704,000) 704,000
-----------
TOTAL INVESTMENTS (Cost $4,792,976*) 84.9% 4,917,044
<CAPTION>
CONTRACTS
<C> <S> <C>
FUTURES -- LONG POSITION --
10 Eurotop, September 1994 1,235,000
2 Nikkei, September 1994 206,850
-----------
TOTAL FUTURES -- LONG POSITION (Cost $1,408,270) 24.9 1,441,850
OTHER ASSETS AND LIABILITIES (NET) (9.8) (565,939)
------ ----------
NET ASSETS 100.0% $ 5,792,955
------ ----------
------ ----------
------------------------------------------------------------------------------------
<FN>
* AGGREGATE COST FOR FEDERAL TAX PURPOSES.
+ NON-INCOME PRODUCING SECURITY.
++ ANNUALIZED YIELD AT DATE OF PURCHASE (UNAUDITED).
+++ $45,000 IN PRINCIPAL OF U.S. TREASURY BILLS HAS BEEN PLEDGED AS COLLATERAL
FOR INITIAL MARGIN FOR FUTURES CONTRACTS.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 15
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND (UNAUDITED)
AT AUGUST 31, 1994, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS:
<TABLE>
<CAPTION>
% OF NET VALUE
ASSETS (NOTE 1)
<S> <C> <C>
COMMON STOCKS:
Banking 17.1% $ 988,943
Financial Services 10.0 581,641
Utilities 10.0 580,327
Manufacturing 6.6 382,658
Durable Goods 5.4 313,823
Chemicals 3.1 179,875
Food and Household Products 3.1 179,608
Oil and Gas 3.0 169,644
Telecommunications 2.7 152,935
Basic Industry 1.9 113,872
Transportation 1.2 70,685
Consumer Services 1.1 62,350
Construction and Housing 1.0 54,189
Mining and Metals 0.9 52,676
Other 4.3 250,027
------ -----------
TOTAL COMMON STOCKS 71.4 4,133,253
PREFERRED STOCKS 0.5 29,323
RIGHTS 0.1 5,087
WARRANTS 0.0 491
U.S. TREASURY OBLIGATIONS 0.7 44,890
COMMERCIAL PAPER 12.2 704,000
------ -----------
TOTAL INVESTMENTS 84.9 4,917,044
FUTURES--LONG POSITION 24.9 1,441,850
OTHER ASSETS AND LIABILITIES (Net) (9.8) (565,939)
------ -----------
NET ASSETS 100.0% $ 5,792,955
------ -----------
------ -----------
</TABLE>
16 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of ASSETS and LIABILITIES
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND AUGUST 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments, at value (Cost $4,792,976) (Note 1)
See accompanying schedule $ 4,917,044
Cash and foreign currency (Cost $670,932) 668,443
Receivable from investment adviser (Note 2) 145,291
Dividends and interest receivable 43,838
Receivable for Fund shares sold 68,670
------------
TOTAL ASSETS 5,843,286
------------
------------
LIABILITIES
Investment management fee payable (Note 2) $ 14,086
Payable for Fund shares purchased 7,695
Daily variation margin on open futures contracts (Note 1) 3,650
Transfer agent fees payable (Note 2) 760
Accrued Trustees' fees and expenses (Note 2) 447
Distribution fee payable (Note 3) 193
Accrued expenses and other payables 23,500
---------
TOTAL LIABILITIES 50,331
------------
NET ASSETS $ 5,792,955
------------
------------
NET ASSETS consist of:
Undistributed net investment income $ 74,036
Accumulated net realized loss on investments, futures
contracts and currency transactions (1,901,540)
Net unrealized appreciation of investments, futures
contracts, foreign currency transactions and net other
assets 151,446
Par value 414
Paid-in capital in excess of par value 7,468,599
------------
TOTAL NET ASSETS $ 5,792,955
------------
------------
NET ASSETS VALUE
INVESTOR SHARES
Net asset value, offering and redemption price per share
($5,792,955 DIVIDED BY 414,039 shares of beneficial
interest outstanding) $13.99
------
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 17
................................................................................
<PAGE>
STATEMENT of OPERATIONS
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
FOR THE YEAR ENDED AUGUST 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of withholding taxes of $12,761) $ 95,849
Interest 36,540
----------
TOTAL INVESTMENT INCOME 132,389
EXPENSES
Investment management fee (Note 2) $ 33,088
Shareholder reports expense 32,024
Legal and audit fees 28,231
Investment advisory fee (Note 2) 27,471
Registration and filing fees 24,542
Custodian fees (Note 2) 20,058
Trustees' fees and expenses (Note 2) 15,572
Transfer agent fees (Note 2) 14,297
Distribution fee (Note 3) 9,001
Amortization of organization costs (Note 6) 923
Other 10,002
Fees waived and/or expenses reimbursed by adviser and
distributor (Notes 2 and 3) (121,384)
----------
TOTAL EXPENSES 93,825
----------
NET INVESTMENT INCOME 38,564
----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(Notes 1 and 4):
Net realized gain on:
Securities transactions 314,583
Futures contracts 238,016
Forward foreign exchange contracts and foreign
currency 35,535
----------
Net realized gain on investments during the year 588,134
Net change in unrealized depreciation of:
Securities (121,509)
Futures contracts 6,060
Currencies and net other assets (312)
----------
Net unrealized depreciation of investments during the
year (115,761)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 472,373
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 510,937
----------
----------
</TABLE>
18 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of CHANGES in NET ASSETS
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
8/31/94 8/31/93
<S> <C> <C>
Net investment income $ 38,564 $ 49,741
Net realized gain on investments, forward foreign exchange contracts,
futures contracts and currency transactions during the year 588,134 623,351
Net unrealized appreciation/(depreciation) on investments, futures
contracts, currencies and net other assets during
the year (115,761) 1,110,818
------------ ------------
Net increase in net assets resulting from operations 510,937 1,783,910
Net increase/(decrease) in net assets from Fund share transactions (Note
5):
Investor Shares 1,496,568 --
Retail Class -- (9,764,428)
Institutional Class -- 331,278
------------ ------------
Net increase/(decrease) in net assets 2,007,505 (7,649,240)
NET ASSETS:
Beginning of year 3,785,450 11,434,690
------------ ------------
End of year (including undistributed net investment income of $74,036 at
August 31, 1994) $ 5,792,955 $ 3,785,450
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 19
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
Reference is made to page 4 of the Fund's Prospectus dated April 10, 1995.
20 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
................................................................................
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 21
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS
................................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Laurel Investment Series (the "Trust") (formerly The Boston Company
Investment Series), The Laurel Funds, Inc., The Laurel Funds Trust and The
Laurel Tax-Free Municipal Funds are all registered open-end investment
companies that compose The Laurel Fund Family. The Trust is an investment
company that consists of three funds: the Contrarian Fund, the Short-Term Bond
Fund and the International Fund. This report contains financial statements for
the International Fund (the "Fund"). The Trust is a Massachusetts business
trust and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. Effective April 4, 1994, the Retail and
Institutional Classes of shares were reclassified as a single class of shares
known as the Investor Shares, and the Fund began offering Trust Shares. As of
August 31, 1994, the Fund had not issued any Trust Shares. Investor Shares are
designed for the retail investor and bear a distribution fee. Trust Shares are
designed for institutional investors, clients of financial institutions, such
as banks, trust companies or thrift institutions, who have qualified accounts,
and bear no distribution fee. Each class of shares has identical rights and
privileges except with respect to the distribution fee and voting rights on
matters affecting a single class. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements in accordance with generally accepted accounting
principles.
(A) PORTFOLIO VALUATION
Investments in securities that are traded on a national securities exchange
are valued at the last reported sales price or, in the absence of a recorded
sale, at the mean of the closing bid and asked prices. Over-the-counter
securities are valued at the closing bid price at the close of business each
day, or, if market quotations for such securities are not readily available,
at fair value, as determined in good faith by the Board of Trustees.
Investments in U.S. Government Securities (other than short-term securities)
are valued at the most recent quoted bid price in the over-the-counter market.
Short-term investments with maturities of 60 days or less from the valuation
day are valued on the basis of amortized cost. Foreign securities are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
value was so established is likely to have changed such value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees or its delegates.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund
to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market
22
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
fluctuations during the Fund's holding period. The value of the collateral is
at least equal, at all times, to the total amount of the repurchase
obligations, including interest. In the event of counterparty default, the
Fund has the right to use the collateral to offset losses incurred. There is
potential loss to the Fund in the event the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities, including the
risk of a possible decline in the value of the underlying securities during
the period while the Fund seeks to assert its rights. The Fund's investment
manager, acting under the supervision of the Board of Trustees, reviews the
value of the collateral and the creditworthiness of those banks and dealers
with which the Fund enters into repurchase agreements to evaluate potential
risks.
(C) FUTURES CONTRACTS ACCOUNTING PRINCIPLES
The Fund may enter into futures contracts. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the initial margin. Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are recorded as
unrealized gains or losses. The Fund recognizes a realized gain or loss when
the contract is closed.
The use of futures contracts as a hedging device involves several risks. The
change in value of futures contracts primarily corresponds with the value of
their underlying instruments, which may not correlate with the change in value
of the hedged investments. In addition, the Fund may not be able to enter into
a closing transaction because of an illiquid secondary market.
(D) FORWARD FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in forward foreign currency contracts. Forward foreign
currency contracts are valued at the forward rate and are marked-to-market
daily. The change in market value is recorded by the Fund as an unrealized
gain or loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations
in the underlying prices of the Fund's investment securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that
might result should the value of the currency increase. In addition, the Fund
could be exposed to risks if the counterparties to the contracts are unable to
meet the terms of their contracts.
(E) FOREIGN CURRENCY
The books and records of the Fund are maintained in United States (U.S.)
dollars. Foreign currencies, investments and other assets and liabilities are
translated into U.S.
23
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
dollars at the exchange rates prevailing at the end of the period, and
purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions. Unrealized gains and
losses which result from changes in foreign currency exchange rates have been
included in the unrealized appreciation/(depreciation) of foreign currency and
net other assets. Net realized foreign currency gains and losses resulting
from changes in exchange rates include foreign currency gains and losses
between trade date and settlement date on investment securities transactions,
foreign currency transactions and the difference between the amounts of
interest and dividends recorded on the books of the Fund and the amount
actually received. The portion of foreign currency gains and losses related to
fluctuation in exchange rates between the initial purchase trade date and
subsequent sale trade date is included in realized gains and losses on
investment securities sold.
(F) SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income is
recorded on the ex-dividend date except that certain dividends from foreign
securities are recorded as soon as the Fund is informed of the ex-dividend
date. Interest income is recorded on the accrual basis. Securities purchased
or sold on a when-issued or delayed-delivery basis may be settled a month or
more after the trade date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Investment income and realized and
unrealized gains and losses are allocated based upon the relative net assets
of each class.
(G) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Dividends from net investment income, if any, of the Fund are declared
on a class level and paid semi-annually. The Fund distributes any net realized
capital gains on a Fund level annually. Additional distributions of net
investment income and capital gains for the Fund may be made at the discretion
of the Board of Trustees in order to avoid the 4% nondeductible Federal excise
tax. Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations, which may differ from
generally accepted accounting principles. These differences are primarily due
to differing treatments of income and gains on various investment securities
held by the Fund, timing differences and differing characterization of
distributions made by the Fund as a whole. Permanent differences incurred
during the year ended August 31, 1994 resulted from different book and tax
accounting for certain investment securities.
(H) FEDERAL TAXES
It is the Fund's intention to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies and by distributing substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax provision
is required.
24
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
2. INVESTMENT MANAGEMENT FEE, TRUSTEES' FEES
AND OTHER RELATED PARTY TRANSACTIONS
Effective April 4, 1994, the Trust entered into an investment management
agreement with Mellon Bank, N.A. (the "Manager"), a wholly owned subsidiary of
Mellon Bank Corporation ("Mellon"), under which the Manager provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Trust. The Manager also directs the investment of the Fund in accordance with
its investment objectives, policies and limitations. For these services, the
Fund pays the Manager a fee, calculated daily and paid monthly, at the annual
rate of 1.50% of the value of the Fund's average daily net assets. Out of its
fee, the Manager pays all of the expenses of the Fund except brokerage, taxes,
interest, Rule 12b-1 distribution fees and expenses, fees and expenses of the
non-interested Trustees (including counsel fees) and extraordinary expenses.
In addition, the Manager is required to reduce its fee in an amount equal to
the Fund's allocable portion of fees and expenses of the non-interested
Trustees (including counsel). Prior to April 4, 1994, the Trust had an
investment advisory agreement under which the Fund paid The Boston Company
Advisors, Inc. ("Boston Advisors") a monthly fee at the annual rate of 0.95%
of the value of its average daily net assets for investment advisory services.
For the period ended August 31, 1994, Boston Advisors, as investment adviser,
voluntarily waived fees of $27,471 and reimbursed expenses of $93,444.
From September 1, 1993 to July 31, 1994, PanAgora Asset Management, Inc.
("PanAgora") served as sub-investment adviser for the Fund. Fifty percent of
the outstanding voting stock of PanAgora is owned by Nippon Life Insurance
Company, and fifty percent is owned by Lehman Brothers. PanAgora was paid a
fee by Mellon at an annual rate of 0.75% of the value of the Fund's average
daily net assets. The Fund paid no direct sub-investment advisory fee to
PanAgora.
Effective April 4, 1994, the Fund entered into an administration agreement
with Frank Russell Investment Management Company (the "Administrator") to
serve as the Fund's administrator to provide various administrative and
corporate secretarial services to the Fund. The Administrator's fee is paid by
the Manager out of the management fee described above.
No officer or employee of Mellon or of any parent, subsidiary or affiliate
thereof receives any compensation from The Laurel Fund Family for serving as
an officer or Trustee of The Laurel Fund Family. The Laurel Fund Family pays
each Trustee who is not an officer or employee of Mellon or of any parent,
subsidiary or affiliate thereof, or of the Administrator or any parent,
subsidiary or affiliate thereof, $27,000 per annum, $1,000 for each Board
meeting attended, and $750 for each Audit Committee meeting attended, and
reimburses each Trustee for travel and out-of-pocket expenses. Prior to April
4, 1994,
25
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
the Trust paid each Trustee $5,000 per annum, plus $1,000 per meeting
attended, plus $250 per Audit Committee meeting attended, plus reimbursement
for travel and out-of-pocket expenses.
Prior to April 4, 1994, the Trust had individual contracts, which contained
specific fee provisions, with Boston Safe Deposit and Trust Company, a wholly
owned subsidiary of Mellon, and The Shareholder Services Group, Inc. to
provide custody and transfer agent services, respectively, to the Fund.
Effective April 4, 1994, the payment of fees for custody, accounting and
transfer agent services are covered by the investment management agreement
described above. Funds Distributor, Inc. ("Funds Distributor") continues to
act as distributor of the Fund's shares.
3. DISTRIBUTION PLAN
The Fund has adopted a plan of distribution (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to Investor Shares. Under the Plan, the Fund
may pay up to 0.25% of the value of the average daily net assets of Investor
Shares to compensate Funds Distributor for shareholder servicing activities
and for activities primarily intended to result in the sale of Investor
Shares. The Trust Shares bear no distribution fee. Prior to April 4, 1994,
under a distribution plan, the Fund was authorized to spend annually up to
0.25% and 0.15% of its average daily net assets on distribution expenses for
the Retail Class and the Institutional Class, respectively, which classes, on
April 4, 1994, were reclassified into Investor Shares. For the year ended
August 31, 1994, Funds Distributor waived $469 in distribution fees.
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of a majority of those
Trustees who are not "interested persons" of the Trust and who have no direct
or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan.
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended August 31, 1994 aggregated
$5,699,111 and $4,292,965, respectively, for the Fund.
At August 31, 1994, aggregate gross unrealized appreciation for all securities
in which there was an excess of value over tax cost amounted to $280,064, and
aggregate gross unrealized depreciation for all securities in which there was
an excess of tax cost over value amounted to $155,996 for the Fund.
5. SHARES OF BENEFICIAL INTEREST
The Trust has the authority to issue an unlimited number of shares of
beneficial interest of each Class in each separate series, with a par value of
$.001. The Trust has authority
26
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
to issue two classes of shares. Effective April 4, 1994, the Retail and
Institutional Classes of shares were combined and reclassified as a single
class of shares known as the Investor Shares. The table below summarizes
transactions in Fund shares for the periods shown in the accompanying
Statement of Changes in Net Assets.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 1994 AUGUST 31, 1993*
(INVESTOR (INSTITUTIONAL CLASS)
SHARES) (RETAIL CLASS)
SHARES** AMOUNT*** SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------
Sold 910,492 $11,309,382 861,657 $ 9,316,148 111,096 $ 1,277,509
Redeemed (793,030) (9,812,814 ) (1,621,049) (18,868,909) (101,637) (1,157,898)
Exchanged for Institutional
shares (20,772) (211,667)
Issued in exchange for Retail
shares -- -- -- -- 20,772 211,667
-------- ------------ ---------- ------------ -------- ------------
-------- ------------ ---------- ------------ -------- ------------
Net increase/(decrease) 117,462 $ 1,496,568 (780,164) $ (9,764,428) 30,231 $ 331,278
-------- ------------ ---------- ------------ -------- ------------
-------- ------------ ---------- ------------ -------- ------------
------------------------------------------------------------------------------------
<FN>
* THE FUND COMMENCED SELLING INSTITUTIONAL CLASS SHARES ON FEBRUARY 1, 1993.
ANY SHARES OUTSTANDING PRIOR TO FEBRUARY 1, 1993 WERE DESIGNATED AS RETAIL
CLASS SHARES.
** SHARES INCLUDE 273,052 OF SUBSCRIPTIONS AND 255,176 OF REDEMPTIONS FOR THE
INSTITUTIONAL CLASS UP TO APRIL 4, 1994.
*** AMOUNTS INCLUDE $3,497,501 OF SUBSCRIPTIONS AND $3,369,970 OF REDEMPTIONS
FOR THE INSTITUTIONAL CLASS UP TO APRIL 4, 1994.
</TABLE>
6. ORGANIZATION COSTS
The Fund paid all costs in connection with the Fund's organization including
the fees and expenses of registering and qualifying the Fund's shares for
distribution under Federal and state securities regulations. All such costs
were being amortized on the straight-line method over a period of five years.
These costs were fully amortized during the year ended August 31, 1994.
7. LINE OF CREDIT
The Trust and several affiliated entities participate in a $20 million line of
credit provided by Continental Bank, N.A. under a Line of Credit Agreement
(the "Agreement") dated March 31, 1992, as amended, primarily for temporary or
emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. Under this
Agreement, the Trust may borrow up to the amount specified in its Borrowing
Base Certificate. Interest is payable either at the bank's Money Market Rate
or the London Interbank Offered Rate (LIBOR) plus 0.375% on an annualized
basis. As amended effective May 21, 1994, the Trust and the other affiliated
entities are charged an aggregated commitment fee of $40,000, which is
allocated equally among each of the
27
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
participants. The Agreement requires, among other provisions, each
participating fund to maintain a ratio of net assets (not including funds
borrowed pursuant to the Agreement) to aggregate amount of indebtedness
pursuant to the Agreement of no less than 4 to 1. At August 31, 1994, the Fund
had no outstanding borrowings under this Agreement.
8. CAPITAL LOSS CARRYFORWARDS
As of August 31, 1994, the Fund had available for Federal tax purposes unused
capital loss carryforwards of $1,871,098 expiring in the year 2001.
9. SUBSEQUENT EVENTS
At a meeting held on September 23, 1994, the Board of Trustees of The Laurel
Investment Series approved several changes which became effective October 17,
1994. The name of the Trust became The Dreyfus/Laurel Investment Series, which
consists of Dreyfus/Laurel Short-Term Bond Fund, Dreyfus/Laurel International
Fund and Dreyfus/ Laurel Contrarian Fund. The Dreyfus Corporation became the
investment manager. Premier Mutual Fund Services, Inc. became each fund's
distributor and sub-administrator.
28
................................................................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
................................................................................
[LOGO]
The Board of Trustees and Shareholders
The Laurel Investment Series International Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of the International Fund of The
Laurel Investment Series (formerly The Boston Company Investment Series), as
of August 31, 1994, and the related statement of operations, statement of
changes in net assets, and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The
statement of changes in net assets for the year ended August 31, 1993 and
financial highlights for the four year period ended August 31, 1993 and for
the period from October 12, 1988 to August 31, 1989 were audited by other
auditors whose report thereon, dated October 8, 1993, expressed an unqualified
opinion on that statement and those financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of August 31, 1994 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
International Fund of The Laurel Investment Series as of August 31, 1994, and
the results of operations, changes in net assets, and financial highlights for
the year then ended in conformity with general accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
October 21, 1994
29
<TABLE>
<CAPTION>
GROWTH OF $10,000
GROWTH OF $10,000 INVESTMENT IN THE
MONTH INVESTED IN INVESTOR STANDARD & POOR'S
ENDED SHARES OF THE FUND 500 INDEX
<S> <C> <C>
10/17/88 $10,000 --
10/88 $9,967 $10,000
11/30/88 -- $9,857
12/88 $10,062 $10,029
3/89 $10,715 $10,739
6/89 $11,602 $11,686
9/89 $12,271 $12,935
12/89 $11,805 $13,201
3/90 $11,447 $12,805
6/90 $12,301 $13,609
6/90 $10,244 $11,741
12/90 $10,798 $12,791
3/91 $13,076 $14,646
6/91 $13,056 $14,611
9/91 $14,476 $15,391
12/91 $15,290 $16,680
3/92 $15,377 $16,259
6/92 $14,750 $16,567
9/92 $15,603 $17,090
12/92 $16,909 $17,950
3/93 $18,513 $18,734
6/93 $19,032 $18,323
9/93 $20,660 $19,308
12/93 $10,492 $19,757
3/94 $19,222 $19,010
6/94 $18,908 $19,088
8/94 $20,032 $20,521
</TABLE>
AVERAGE ANNUAL TOTAL RETURN -- INVESTOR SHARES
<TABLE>
<CAPTION>
<S> <C>
Year Ended 8/31/94 (2.55)%
Five Years Ended 8/31/94 9.88%
Inception (10/17/88) through 8/31/94 12.56%
<FN>
+ Hypothetical illustration of $10,000 invested in Investor Shares at in-
ception (October 17, 1988) and reinvestment of dividends and capital
gains at net asset value through August 31, 1994.
The Standard & Poor's Composite Index of 500 Common Stocks ("Standard &
Poor's 500") is an unmanaged index used to portray the pattern of common
stock price movement.
Index information is available at month-end only, therefore, the closest
month-end to inception date of the Fund has been used.
This period was one in which common stock prices fluctuated and the re-
sults should not be considered as representative of dividend income or
capital gain or loss which may be realized from an investment in the
Fund today. No adjustment has been made for a shareholder's tax liabil-
ity on dividends or capital gains.
NOTE: All figures cited here and on the following pages represent past
performance and do not guarantee future results. Investment return and
principal value of an investment will fluctuate so that an investor's
shares upon redemption may be worth more or less than original cost.
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMON STOCKS -- 96.0%
BASIC INDUSTRIES -- 14.7%
2,000 Alumax, Inc.+ $ 61,250
1,400 Broken Hill Proprietary Ltd. ADR 85,575
1,500 IMC Fertilizer Group, Inc. 60,188
2,000 Inco Ltd. 57,500
2,800 Pentair, Inc. 114,100
3,000 Stone Container Corporation 59,250
437,863
ENERGY -- 14.5%
191 El Paso Natural Gas Company 6,279
19,600 Global Marine, Inc.+ 78,400
9,400 Parker Drilling Company+ 52,875
10,500 Rowan Companies, Inc.+ 77,438
3,300 Tidewater, Inc. 74,662
6,900 Varco International, Inc.+ 43,125
7,800 Weatherford International, Inc.+ 94,575
427,354
UTILITIES/GAS -- 12.3%
3,700 MCI Communications Corporation 89,956
1,400 Telecom Corporation, New Zealand ADR 70,175
1,100 Telefonica de Espana ADR 45,512
1,600 Telefonos de Mexico ADR 100,400
1,300 Telephone and Data Communications 56,550
362,593
CONSUMER SERVICES -- 11.0%
208 Cellular Communications, Puerto Rico+ 6,396
1,400 Comcast Corporation, Class A 22,400
3,700 Comcast Corporation, Class A, Special (non-voting) 59,200
4,000 Home Shopping Network, Inc.+ 47,000
4,300 Levitz Furniture, Inc.+ 40,313
1,300 NEXTEL Communications, Inc., Class A 33,963
1,600 Rogers Cantel Mobile Communications, Inc.+ 47,200
2,100 Viacom, Inc., Class B+ 69,300
325,772
HEALTH CARE -- 11.0%
2,500 Alza Corporation 58,750
1,700 FHP International Corporation+ 45,900
2,000 Genzyme Corporation+ 68,000
2,200 Healthtrust-The Hospital Company+ 67,650
900 Schering-Plough Corporation 62,887
700 SmithKline Beecham ADR 21,788
324,975
CONSUMER DURABLES -- 9.0%
2,000 Champion Enterprises, Inc.+ 73,000
6,600 Fedders Corporation+ 50,325
3,600 Fleetwood Enterprises 94,950
3,400 River Oaks Furniture, Inc.+ 48,450
266,725
FINANCIAL SERVICES -- 9.0%
3,375 Charter One Financial, Inc. 80,156
2,000 MGIC Investment Corporation 61,500
2,600 Phoenix Re Corporation, Class A 68,900
1,000 Transatlantic Holdings, Inc. 53,875
264,431
TRANSPORTATION -- 8.9%
4,100 Builders Transportation, Inc.+ 51,762
3,000 Canadian Pacific Ltd. ADR 52,875
2,300 Comair Holdings, Inc. 60,950
2,100 SkyWest, Inc. 58,275
1,500 Werner Enterprises, Inc. 37,875
261,737
TECHNOLOGY -- 2.7%
5,200 TANDEM COMPUTERS, INC.+ 78,650
CAPITAL GOODS -- 2.7%
2,300 Trinity Industries Inc. 78,200
OTHER -- 0.2%
920 Mesa Incorporated+ 5,175
TOTAL COMMON STOCKS
(Cost $2,340,960) 2,833,475
PRINCIPAL
AMOUNT
CORPORATE BOND (Cost $79,288) -- 0.8%
$ 100,000 Nu Med, Inc., Sr. Sub. Deb.,
13.750% due 09/15/1995 22,750
TOTAL INVESTMENTS
(Cost $2,420,248*) 96.8% 2,856,225
OTHER ASSETS AND LIABILITIES (NET) 3.2 93,905
NET ASSETS 100.0% $2,950,130
<FN>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
CONTRARIAN FUND AUGUST 31, 1994
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost $2,420,248)
(Note 1)
See accompanying schedule $2,856,225
Cash 77,403
Receivable from investment adviser (Note
2) 39,304
Receivable for Fund shares sold 6,354
Dividends receivable 829
TOTAL ASSETS 2,980,115
LIABILITIES
Accrued audit fees $10,558
Accrued shareholder reports expense 8,500
Investment management fee payable (Note
2) 6,263
Payable for Fund shares redeemed 1,929
Transfer agent fees payable (Note 2) 375
Accrued Trustees' fees and expenses
(Note 2) 259
Distribution fee payable (Note 3) 101
Accrued expenses and other payables 2,000
TOTAL LIABILITIES 29,985
NET ASSETS $2,950,130
NET ASSETS consist of:
Accumulated net realized gain on invest-
ments sold $193,263
Unrealized appreciation of investments 435,977
Par value 178
Paid-in capital in excess of par value 2,320,712
TOTAL NET ASSETS $2,950,130
NET ASSET VALUE
INVESTOR SHARES
Net asset value, offering and redemption
price per share ($2,950,130 / 178,023
shares of beneficial interest outstand-
ing) $16.57
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
CONTRARIAN FUND
FOR THE YEAR ENDED AUGUST 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding
taxes of $1,042) $32,677
Interest 9,727
TOTAL INVESTMENT INCOME 42,404
EXPENSES
Legal and audit fees $30,289
Investment advisory fee (Note 2) 23,862
Registration and filing fees 22,733
Shareholder reports expense 19,588
Investment management fee (Note 2) 15,958
Distribution fee (Note 3) 7,938
Custodian fees (Note 2) 6,275
Transfer agent fees (Note 2) 6,167
Trustees' fees and expenses (Note 2) 1,503
Amortization of organization costs (Note
6) 944
Other 394
Fees waived and/or expenses reimbursed
by adviser and custodian (Note 2) (68,515)
TOTAL EXPENSES 67,136
NET INVESTMENT LOSS (24,732)
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS (Notes 1 and 4):
Net realized gain on investments sold
during the year 284,533
Net unrealized depreciation of in-
vestments during the year (437,148)
NET REALIZED AND UNREALIZED LOSS ON IN-
VESTMENTS (152,615)
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(177,347)
</TABLE>
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
CONTRARIAN FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
8/31/94 8/31/93
<S> <C> <C>
Net investment loss $(24,732) $(24,662)
Net realized gain on investments sold
during the year 284,533 111,782
Net unrealized appreciation/(deprecia-
tion) of investments during the year (437,148) 856,211
Net increase/(decrease) in net assets
resulting from operations (177,347) 943,331
Distribution to shareholders from net
realized gain on investments:
Investor Shares (166,692) --
Retail Class -- (182,355)
Institutional Class (9,767) --
Net increase/(decrease) in net assets
from Fund share transactions (Note 5):
Investor Shares (316,038) --
Retail Class -- 25,744
Institutional Class -- 167,243
Net increase/(decrease) in net assets (669,844) 953,963
NET ASSETS:
Beginning of year 3,619,974 2,666,011
End of year $2,950,130 $3,619,974
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
CONTRARIAN FUND
Reference is made to pages 5 & 6 of the Fund's Prospectus dated April 10, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS (CONTINUED)
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Laurel Investment Series (the "Trust") (formerly The Boston Company
Investment Series), The Laurel Funds, Inc., The Laurel Funds Trust and The
Laurel Tax-Free Municipal Funds are all registered open-end investment
companies that compose The Laurel Fund Family. The Trust is an investment
company that consists of three funds: the Contrarian Fund, the Short-Term
Bond Fund and the International Fund. This report contains financial
statements for the Contrarian Fund (the "Fund"). The Trust is a Massachu-
setts business trust and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. Effective April 4,
1994, the Retail and Institutional Classes of shares were reclassified as
a single class of shares known as the Investor Shares, and the Fund began
offering Trust Shares. As of August 31, 1994, the Fund had not issued any
Trust Shares. Investor Shares are designed for the retail investor and
bear a distribution fee. Trust Shares are designed for institutional in-
vestors, clients of financial institutions, such as banks, trust companies
or thrift institutions, who have qualified accounts, and bear no distribu-
tion fee. Each class of shares has identical rights and privileges except
with respect to the distribution fee and voting rights on matters affect-
ing a single class. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its fi-
nancial statements in accordance with generally accepted accounting prin-
ciples.
(A) PORTFOLIO VALUATION
Investments in securities that are traded on a national securities ex-
change are valued at the last reported sales price or, in the absence of a
recorded sale, at the mean of the closing bid and asked prices. Over-the-
counter securities are valued at the closing bid price at the close of
business each day, or, if market quotations for such securities are not
readily available, at fair value, as determined in good faith by the Board
of Trustees. Investments in U.S. Government Securities (other than short-
term securities) are valued at the most recent quoted bid price in the
over-the-counter market. Short-term investments with maturities of 60 days
or less from the valuation day are valued on the basis of amortized cost.
Foreign securities are generally valued at the preceding closing values of
such securities on their respective exchanges, except that when an occur-
rence subsequent to the time a value was so established is likely to have
changed such value, then the fair value of those securities will be deter-
mined by consideration of other factors by or under the direction of the
Board of Trustees or its delegates.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund takes possession of an under-
lying debt obligation subject to an obligation of the seller to repur-
chase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to mar-
ket fluctuations during the Fund's holding period. The value of the col-
lateral is at least equal, at all times, to the total amount of the repur-
chase obligations, including interest. In the event of counterparty de-
fault, the Fund has the right to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is de-
layed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's investment manager, acting under the supervision of the
Board of Trustees, reviews the value of the collateral and the creditwor-
thiness of those banks and dealers with which the Fund enters into repur-
chase agreements to evaluate potential risks.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income
is recorded on the ex-dividend date, except that certain dividends from
foreign securities are recorded as soon as the Fund is informed of the ex-
dividend date. Interest income is recorded on the accrual basis. Securi-
ties purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date. Realized gains and losses
from securities sold are recorded on the identified cost basis. Investment
income and realized and unrealized gains and losses are allocated based
upon relative net assets of each class.
(D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded on the ex-
dividend date. Dividends from net investment income, if any, of the Fund
are declared on a class level and paid quarterly. The Fund distributes any
net realized capital gains on a Fund level annually. Additional distribu-
tions of net investment income and capital gains for the Fund may be made
at the discretion of the Board of Trustees in order to avoid the 4% nonde-
ductible Federal excise tax. Income distributions and capital gain distri-
butions on a Fund level are determined in accordance with income tax regu-
lations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and
gains on various investment securities held by the Fund, timing differ-
ences and differing characterization of distributions made by the Fund as
a whole. Permanent differences incurred during the year ended August 31,
1994 resulting from a tax basis net operating loss were reclassified to
paid-in capital at year end.
(E) FEDERAL TAXES
It is the Fund's intention to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies and by distributing substantially all of
its taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
2. INVESTMENT MANAGEMENT FEE, TRUSTEES' FEES AND OTHER RELATED PARTY
TRANSACTIONS
Effective April 4, 1994, the Trust entered into an investment management
agreement with Mellon Bank, N.A. (the "Manager"), a wholly owned subsid-
iary of Mellon Bank Corporation ("Mellon"), under which the Manager pro-
vides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Trust. The Manager also directs the investment of the Fund
in accordance with its investment objectives, policies and limitations.
For these services, the Fund pays the Manager a fee, calculated daily and
paid monthly, at the annual rate of 1.25% of the value of the Fund's aver-
age daily net assets. Out of its fee, the Manager pays all of the expenses
of the Fund except brokerage, taxes, interest, Rule 12b-1 distribution
fees and expenses, fees and expenses of the non-interested Trustees (in-
cluding counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Trustees (including
counsel). Prior to April 4, 1994, the Trust had an investment advisory
agreement under which the Fund paid The Boston Company Advisors, Inc.
("Boston Advisors") a monthly fee at the annual rate of 1.00% of the value
of its average daily net assets for investment advisory services. For the
year ended August 31, 1994, Boston Advisors, as investment adviser, volun-
tarily waived fees of $23,862 and reimbursed expenses of $38,378.
Effective April 4, 1994, the Fund entered into an administration agreement
with Frank Russell Investment Management Company (the "Administrator") to
serve as the Fund's administrator to provide various administrative and
corporate secretarial services to the Fund. The Administrator's fee is
paid by the Manager out of the management fee described above.
No officer or employee of Mellon or of any parent, subsidiary or affiliate
thereof receives any compensation from The Laurel Fund Family for serving
as an officer or Trustee of The Laurel Fund Family. The Laurel Fund Family
pays each Trustee who is not an officer or employee of Mellon or of any
parent, subsidiary or affiliate thereof, or of the Administrator or any
parent, subsidiary or affiliate thereof, $27,000 per annum, $1,000 for
each Board meeting attended, and $750 for each Audit Committee meeting at-
tended, and reimburses each Trustee for travel and out-of-pocket expenses.
Prior to April 4, 1994, the Trust paid each Trustee $5,000 per annum, plus
$1,000 per meeting attended, plus $250 per Audit Committee meeting at-
tended, plus reimbursement for travel and out-of-pocket expenses.
Prior to April 4, 1994, the Trust had individual contracts, which con-
tained specific fee provisions, with Boston Safe Deposit and Trust Com-
pany, a wholly owned subsidiary of Mellon, and The Shareholder Services
Group, Inc. to provide custody and transfer agent services, respectively,
to the Fund. For the period ended April 4, 1994, the custodian waived its
fees of $6,275. Effective April 4, 1994, the payment of fees for custody,
accounting and transfer agent services are covered by the investment man-
agement agreement described above. Funds Distributor, Inc. ("Funds Dis-
tributor") continues to act as distributor of the Fund's shares.
3. DISTRIBUTION PLAN
The Fund has adopted a plan of distribution (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to Investor Shares. Under the Plan, the
Fund may pay up to 0.25% of the value of the average daily net assets of
Investor Shares to compensate Funds Distributor for shareholder servicing
activities and for activities primarily intended to result in the sale of
Investor Shares. The Trust Shares bear no distribution fee. Prior to April
4, 1994, under a distribution plan, the Fund was authorized to spend annu-
ally up to 0.25% and 0.15% of its average daily net assets on distribution
expenses for the Retail Class and the Institutional Class, respectively,
which classes, on April 4, 1994, were reclassified into Investor Shares.
Under its terms, the Plan shall remain in effect from year to year, pro-
vided such continuance is approved annually by a vote of a majority of
those Trustees who are not "interested persons" of the Trust and who have
no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended August 31, 1994 aggregated
$2,205,841 and $2,579,588, respectively, for the Fund.
At August 31, 1994, aggregate gross unrealized appreciation for all secu-
rities in which there was an excess of value over tax cost amounted to
$582,246 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value amounted to $146,269.
5. SHARES OF BENEFICIAL INTEREST
The Trust has the authority to issue an unlimited number of shares of ben-
eficial interest of each class in each separate series, with a par value
of $.001. The Trust has authority to issue two classes of shares. Effec-
tive April 4, 1994, the Retail and Institutional Classes of shares were
combined and reclassified as a single class of shares known as the Inves-
tor Shares. The table below summarizes transactions in Fund shares for the
periods shown in the accompanying Statement of Changes in Net Assets.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
8/31/94 8/31/93*
(INVESTOR SHARES) (RETAIL CLASS) (INSTITUTIONAL CLASS)
SHARES** AMOUNT*** SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Sold 136,619 $ 2,337,972 261,416 $ 3,615,652 682 $77,876
Issued as rein-
vestment of div-
idends and dis-
tributions 10,218 171,464 9,485 134,019 -- --
Redeemed (172,032) (2,825,474) (258,473) (3,629,195) (334) (5,365)
Exchanged for In-
stitutional
shares -- -- (6,216) (94,732) -- --
Issued in exchange
for Retail
shares -- -- -- -- 6,216 94,732
Net increase/de-
crease (25,195) $ (316,038) 6,212 $25,744 6,564 $167,243
<FN>
* The Fund commenced selling Institutional Class shares on February 1,
1993. Any shares outstanding prior to February 1, 1993 were designated
as Retail Class shares.
** Shares include 18,936 of subscriptions, 339 of reinvestments and 3,836
of redemptions for the Institutional Class up to April 4, 1994.
*** Amounts include $329,352 of subscriptions, $5,688 of reinvestments and
$66,208 of redemptions for the Institutional Class up to April 4,
1994.
</TABLE>
6. ORGANIZATION COSTS
The Fund paid all costs in connection with the Fund's organization includ-
ing the fees and expenses of registering and qualifying the Fund's shares
for distribution under Federal and state securities regulations. All such
costs were being amortized on the straight-line method over a period of
five years. These costs were fully amortized during the year ended August
31, 1994.
7. LINE OF CREDIT
The Trust and several affiliated entities participate in a $20 million
line of credit provided by Continental Bank, N.A. under a Line of Credit
Agreement (the "Agreement") dated March 31, 1992, as amended, primarily
for temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of securi-
ties. Under this Agreement, the Trust may borrow up to the amount speci-
fied in its Borrowing Base Certificate. Interest is payable either at the
bank's Money Market Rate or the London Interbank Offered Rate (LIBOR) plus
0.375% on an annualized basis. As amended effective May 21, 1994, the
Trust and the other affiliated entities are charged an aggregated commit-
ment fee of $40,000, which is allocated equally among each of the partici-
pants. The Agreement requires, among other provisions, each participating
fund to maintain a ratio of net assets (not including funds borrowed pur-
suant to the Agreement) to aggregate amount of indebtedness pursuant to
the Agreement of no less than 4 to 1. At August 31, 1994, the Fund had no
outstanding borrowings under this Agreement. During the year ended August
31, 1994, the Fund had an average outstanding balance of $822 with an in-
terest rate of 3.875%. Interest expense totalled $32 for the year ended
August 31, 1994.
8. SUBSEQUENT EVENTS
At a meeting held on September 23, 1994, the Board of Trustees of The
Laurel Investment Series approved several changes which became effective
October 17, 1994. The name of the Trust became The Dreyfus/Laurel Invest-
ment Series, which consists of Dreyfus/Laurel Short-Term Bond Fund,
Dreyfus/Laurel International Fund and Dreyfus/ Laurel Contrarian Fund. The
investment manager became The Dreyfus Corporation. Premier Mutual Fund
Services, Inc. became each fund's distributor and sub-administrator.
INDEPENDENT AUDITORS' REPORT
KPMG
The Board of Trustees and Shareholders
The Laurel Investment Series Contrarian Fund
We have audited the accompanying statement of assets and liabilities, in-
cluding the portfolio of investments, of the Contrarian Fund of The Laurel
Investment Series (formerly The Boston Company Investment Series), as of
August 31, 1994, and the related statement of operations, statement of
changes in net assets, and the financial highlights for the year then
ended. These financial statements and financial highlights are the respon-
sibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on
our audit. The statement of changes in net assets for the year ended Au-
gust 31, 1993 and financial highlights for the four year period ended Au-
gust 31, 1993 and for the period from October 17, 1988 to August 31, 1989
were audited by other auditors whose report thereon, dated October 8,
1993, expressed an unqualified opinion on that statement and those finan-
cial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1994 by correspondence with the custo-
dian and brokers. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as evalu-
ating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the Contrarian Fund of The Laurel Investment Series as of August 31,
1994, and the results of operations, changes in net assets, and financial
highlights for the year then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
October 21, 1994
THE DREYFUS/LAUREL INVESTMENT SERIES
Part C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in the Prospectus (Part A):
Financial Highlights
Included in the Statement of Additional
Information (Part B):
Financial Statements for the fiscal year ended
August 31, 1994
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statement
Report of Independent Accountants
Included in Part C:
None
(b) Exhibits:
Exhibits No. Description of Exhibit
(1) (a) Amended and Restated Master Trust Agreement is
incorporated by reference to Post-Effective Amendment No. 9.
(1) (b) Amendment No. 1 to Registrant's Amended and
Restated Master Trust Agreement filed on February 7, 1994.
(1) (c) Amendment No. 2 to Registrant's Amended and
Restated Master Trust Agreement filed on March 31, 1994.
(1)d) Amendment No. 3 to Registrant's Amended and Restated
Master Trust Agreement filed on December 19, 1994.
(2) By-Laws of the Trust are incorporated by reference to
the Registrant's Registration Statement (No. 33-43847) as filed on May
31, 1988 ("Registration Statement").
(3) Not Applicable
(4) Specimen Certificate for shares of the Laurel
Investment Series shall be filed by amendment.
(5) (a) Investment Management Agreements between the
Registrant and Mellon Bank, N.A. dated April 4, 1994 is incorporated by
reference to Post-Effective Amendment No. 13 filed on December 30, 1994.
(5) (b) Sub-Advisory Agreements between Mellon Bank,
N.A. and PanAgora Asset Management, Inc. dated April 4, 1994 relating to
the International Fund and the Asset Allocation Fund, respectively is
incorporated by reference to Post-Effective Amendment No. 13 filed on December
30, 1994.
(5) (c) Assignment Agreement among the Registrant,
Mellon Bank, N.A., dated as of October 17, 1994, (relating to Investment
Management Agreement dated April 4, 1994) is incorporated by reference to Post-
Effective Amendment No. 13 filed on December 30, 1994.
)
(6) (a) Form of Distribution Agreement between the
Registrant and TBC Funds Distributor, Inc. (currently known as Funds
Distributor, Inc.) is incorporated by reference to the Registration
Statement as filed on May 31, 1988.
(6) (b) Amendment No. 1 to the Distribution Agreement
dated November 1, 1992 is incorporated by reference to Post-Effective
Amendment No. 7 filed on August 31, 1993.
(6) (c) Form of Distribution Agreement between
Registrant and Funds Distributor, Inc. is incorporated by reference to Post-
Effective Amendment No. 13 filed on December 30, 1994.
(6) (d) Forms of Selling Agreements between the
Registrant's Distributor and certain banks, brokers, dealers and other
financial institutions will be filed by amendment.
(6)(e) Distribution Agreement between the Reegistrant
and Premier Mutual Fund Services, Inc., dated as of October 17, 1994,
is incorporated by reference to Post-Effective Amendment No. 13 filed on
December 30, 1994.
(7) Not Applicable.
(8) (a) Custody and Fund Accounting Agreement between
Registrant and Mellon Bank, N.A., dated April 4, 1994 is incorporated by
reference to Post-Effective Amendment No. 13 filed on December 30, 1994.
(8)(b) Amendment to Custody and Fund Accounting
Agreement, dated August 1,1994, is incorporated by reference to Post-Effective
Amendment No. 13 filed on December 30, 1994.
(8)(c) Subcustodian Agreement between the Registrant
and Mellon Bank, N.A. Dated April 4, 1994, is incorporated by reference to
Post-Effective Amendment No. 13 filed on December 30, 1994.
(9) (a) Form of Transfer Agency Agreement between the
Registrant and Boston Safe Deposit and Trust Company (currently known as
The Shareholder Services Group) is incorporated by reference to the
Registration Statement as filed on May 31, 1988.
(9) (b) Supplement to the Transfer Agent Agreement
for Registrant dated April 4, 1994, is incorporated by reference to Post-
Effective Amendment No. 13 filed on December 30, 1994.
(9) (c) Administration Agreement between the Registrant
and Frank Russell Investment Management Company dated April 4, 1994 is
incorporated by reference to Post-Effective Amendment No. 13 filed on December
30, 1994.
(9) (d) Sub-Administration Agreement is incorporated by reference to
Post-Effective Amendment No. 13 filed on December 30, 1994.
(9) (d) (1) Amendment to Sub-Administration Agreement is incorporated by
reference to Post-Effective Amendment No. 13 filed on December 30, 1994.
(10) Opinion of Counsel is incorporated by reference to
the Registration Statement and to Post-Effective Amendment No. 13 filed on
December 30, 1994 Consent of Counsel is filed herewith.
(11)(a) Consent of Independent Accountants: KPMG Peat Marwick
(11)(b) Consent of Independent Accountants: Coopers & Lybrand.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable
(15) (a) Restated Distribution Plan (relating to Investor
Shares) is incorporated by reference to Post-Effective Amendment No. 13 filed
on December 30, 1994.
(16) Performance Data is incorporated by reference to Post-
Effective Amendment No. 3 as filed on October 31, 1990.
Other Exhibits
- --------------
(a) Powers of Attorney of the Trustees and Officers dated April 5, 1995
Item 25.
Persons Controlled By or Under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
Set forth below are the number of record holders,
as of March 31, 1995 of each class of securities
of the Registrant.
Series Number of Record Holders
Investor Class R
International Fund Shares 721 0
Contrarian Fund Shares 412 0
Short-Term Bond Fund Shares 175 0
Item 27. Indemnification
Under a provision of the Registrant's Agreement and
Declaration of Trust (the "Declaration of Trust"), any past or present
trustee or officer of the Registrant is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably
incurred by him/her in connection with any action, suit or proceeding to
which he/she may be a party or otherwise involved by reason of his being
or having been a trustee or officer of Registrant. This provision does
not authorize indemnification where it is determined, in the manner
specified in the Declaration of Trust, that such trustee or officer has
not acted in good faith in the reasonable belief that his actions were
in the best interest of Registrant. Moreover, this provision does not
authorize indemnification where such trustee or officer is finally
adjudged to have been liable to Registrant or its shareholders by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of this duties.
Item 28. Business and Other Connections of Investment Adviser
Investment Adviser - The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") and subsidiary companies comprise a
financial service organization whose business consists primarily of
providing investment management services as the investment adviser,
manager and distributor for sponsored investment companies registered
under the Investment Company Act of 1940 and as an investment adviser to
institutional and individual accounts. Dreyfus also serves as sub-
investment adviser to and/or administrator of other investment
companies. Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus , serves primarily as a registered broker-dealer of shares of
investment companies sponsored by Dreyfus and of other investment
companies for which Dreyfus acts as investment adviser, sub-investment
adviser or administrator. Dreyfus Management, Inc., another wholly-
owned subsidiary, provides investment management services to various
pension plans, institutions and individuals
Officers and Directors of Investment Adviser
Name and Position
with Dreyfus
Other Business
MANDELL L. BERMAN Real estate consultant and private investor
Director
29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034
Past Chairman of the Board of Trustees of
Skillman Foundation.
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and Chief
Director Executive Officer:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
- 6 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 9103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director
535 Madison Avenue
New York, New York 10022;
Director and member of the Executive Committee of
Avnet, Inc.**
Lawrence M. Greene Director:
Director Dreyfus America Fund
DAVID B. TRUMAN Educational consultant;
Director
Past President of the Russell Sage Foundation
230 Park Avenue
New York, New York 10017;
Past President of Mount Holyoke College
South Hadley, Massachusetts 01075;
Former Director:
Student Loan Marketing Association
1055 Thomas Jefferson Street, N.W.
Washington, D.C. 20006;
Former Trustee:
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017
HOWARD STEIN Chairman of the Board:
Chairman of the
Board and Chief Dreyfus Acquisition Corporation*;
Executive Officer
The Dreyfus Consumer Credit Corporation*;
Dreyfus Land Development Corporation*;
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Dreyfus Management, Inc.*;
Dreyfus Service Corporation;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++
The Dreyfus Fund International Limited+++++
World Balanced Fund+++
Dreyfus Partnership Management, Inc.*;
Dreyfus Personal Management, Inc. *;
Dreyfus Precious Metals, Inc.*;
Dreyfus Realty Advisors, Inc.+++;
Dreyfus Service Organization, Inc.*;
The Dreyfus Trust Company++;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York;
JULIAN M. SMERLING None
Director
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Robert E. Riley Director:
President, Chief Dreyfus Service Corporation
Operating Officer
and Director
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of
the Board The Boston Company
One Boston Place
Boston, Massachusetts 02108
Vice Chairman of the Board:
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
LAWRENCE S. KASH Chairman, President and Chief Executive Officer:
Vice Chairman,
Distribution The Boston Advisers, Inc.
and a Director 53 State Street
Exchange Place
Boston, Massachusetts 02109
President:
The Boston Company
One Boston Place
Boston, Massachusetts 02108;
Laurel Capital Advisors
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Group Holdings, Inc.
Executive Vice President
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Safe Deposit & Trust
One Boston Place
Boston, Massachusetts 02108
PAUL H. SNYDER Director:
Vice President and
Chief Financial Pennsylvania Economy League
Officer Philadelphia, Pennsylvania;
Children's Crisis Treatment Center
Philadelphia, Pennsylvania;
Director and Vice President:
Financial Executives Institute
Philadelphia Chapter
Philadelphia, Pennsylvania;
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
BARBARA E. CASEY President:
Vice President,
Retirement Services Dreyfus Retirement Services;
Executive Vice President:
Boston Safe Deposit & Trust Co.
One Boston Place
Boston, Massachusetts 02108;
DIANE M. COFFEY None
Vice President,
Corporate
Communications
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Henry D. Gottman Executive Vice President
Vice President-Retal Dreyfus Service Corporation
Sales and Service Vice President:
Dreyfsu Precious Metals
ELIE M. GENADRY President:
Vice President,
Institutioanl Sales
Institutional Services Division of Dreyfus
Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*:
Group Retirement Plans Division of Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation *:
Dreyfus Service Organization, Inc.*;
Vice President:
The Dreyfus Trust Company++;
Vice President-Sales:
The Dreyfus Trust Company (N.J.)++;
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and
General Counsel Dreyfus Previous Metals, Inc.*;
Director and Vice President:
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company (N.J.)++;
Director and Secretary:
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation *;
The Truepenny Corporation+;
Director:
The Dreyfus Trust Company++;
Secretary:
Seven Six Seven Agency, Inc.*;
JEFFREY N. NACHMAN None
Vice President,
Mutual Fund Accounting
PHILIP L. TOIA Chairman of the Board and Vice President;
Vice Chairman,
Operations and Dreyfus Thrift & Commerce****;
Administration
Director:
The Dreyfus Security Savings Bank F.S.B.+;
Senior Loan Officer and Director:
The Dreyfus Trust Company++;
Vice President:
The Dreyfus Consumer Credit Corporation*;
President and Director:
Dreyfus Personal Management, Inc.*;
Director:
Dreyfus Realty Advisors, Inc.+++;
Formerly, Senior Vice President:
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
The Chase Manhattan Bank, N.A. and The Chase
Manhattan Capital Markets Corporation
One Chase Manhattan Plaza
New York, New York 10081
KATHERINE C. Formerly, Assistant Commissioner:
WICKHAM Department of Parks and Recreation of the City of
Vice President, New York
Human Resources 830 Fifth Avenue
New York, New York 10022
MAURICE BENDRIHEM Treasurer:
Controller
Dreyfus Partnership Management, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)++;
The Dreyfus Consumer Credit Corporation*;
Assistant Treasurer:
Dreyfus Precious Metals*
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
MARK N. JACOBS Secretary:
Vice President,
Fund Legal and The Dreyfus Consumer Credit Corporation*;
Compliance, and
Secretary Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.*;
Major Trading Corporation*;
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
The Truepenny Corporation*
___________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 45 Broadway, New
York, New York 10006.
**** The address of the business so indicated is Five Triad Center,
Salt Lake City, Utah 84180.
+ The address of the business so indicated is Atrium Building, 80
Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller
Plaza, New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama
Islands.
Item 29. Principal Underwriter
(a) Premier Mutual Fund Services, Inc. ("Premier") currently serves as
the distributor for The Dreyfus/Laurel Investment Series.
Premier is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities
Dealers, Inc. Premier is a wholly-owned subsidiary of Institutional
Administration Services, Inc., the parent company of which is Boston
Institutional Group, Inc.
Premier also currently serves as the exclusive distributor or principal
underwriter for the following investment companies:
1) Comstorck Partners Strategy Fund, 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 Money Market Fund, Inc.
7) Dreyfus BASIC Municipal Fund, Inc.
8) Dreyfus BASIC U.S. Government Money Market Fund
9) Dreyfus California Intermediate Municipal Bond Fund
10) Dreyfus California Tax Exempt Bond Fund, Inc.
11) Dreyfus California Tax Exempt Money Market Fund
12) Dreyfus Capital Value Fund, Inc.
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connection Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money market Fund, Inc.
17) The Dreyfus Convertible Securities Fund, inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money market Fund
21) Dreyfus Focus Funds, Inc.
22) The Dreyfus Fund Incorporated
23) Dreyfus Global Bond Fund, Inc.
24) Dreyfus Global Growth, L.P. (A Strategic Fund)
25) Dreyfus Global Investing, Inc.
26) Dreyfus GNMA Fund, Inc.
27) Dreyfus Government Cash Management
28) Dreyfus Growth and Income Fund, Inc.
29) Dreyfus Growth Opportunity Fund, Inc.
30) Dreyfus Institutional 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 Equity Fund, Inc.
35) Dreyfus Investors GNMA Fund
36) The Dreyfus Leverage Fund, Inc.
37) Dreyfus Life and Annuity Index Fund, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus Michigan Municipal Money Market Fund, Inc.
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York ax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus Ohio Municipal Money Market Fund, Inc.
57) Dreyfus 100% U.S. Treasury Intermediate Term Fund
58) Dreyfus 100% U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus 100% U.S. Treasury Short Term Fund
61) Dreyfus Pennsylvania Intermediate Municipal bond Fund
62) Dreyfus Short-Intermediate Government Fund
63) Dreyfus Short-Intermediate Municipal Bond Fund
64) Dreyfus Short-Term Income Fund, Inc.
65) The Dreyfus Socially Responsible Growth Fund, Inc.
66) Dreyfus Strategic Growth, L.P.
67) Dreyfus Strategic Income
68) Dreyfus Strategic Investing
69) Dreyfus Tax Exempt Cash Management
70) Dreyfus Treasury Cash Management
71) Dreyfus Treasury Prime Cash Management
72) Dreyfus Variable Investment Fund
73) Dreyfus-Wiltshire Target Funds, Inc.
74) Dreyfus Worldwide Dollar Money Market Fund, Inc.
75) First Prairie Cash Management
76) First Prairie Diversified Asset Fund
77) First Prairie Money Market Fund
78) First Prairie Municipal Money Market Fund
79) First Prairie Tax Exempt Bond Fund, Inc.
80) First Prairie U.S. Government Income Fund
81) First Prairie U.S. Treasury Securities Cash Management
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
84) General Government Securities Money Market Fund, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Fund, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
90) Pacific American Fund
91) Peoples Index Fund, Inc.
92) Peoples S&P MidCap Index Fund, Inc.
93) Premier Insured Municipal Bond Fund
94) Premier California Municipal bond Fund
95) Premier GNMA Fund
96) Premier Growth Fund, Inc.
97) Premier Municipal Bond Fund
98) Premier New York Municipal bond Fund
99) Premier State Municipal Bond Fund
100) the Dreyfus/Laurel Funds Trust
101) The Dreyfus/Laurel Tax-Free Municipal Funds
(b) The names of the principal executive officers of Premier together
with their respective positions with Premier and their positions and
offices with the registrant, are set forth below.
Name
and Address
Position and
Office(s) with
Premier
Position and
Office(s) with
Registrant
Marie E. Connolly*
Director, President
& Chief Operating
Officer
President &
Treasurer
John E. Pelletier*
Senior Vice
President &
General Counsel
Vice President &
Secretary
Joseph F. Tower,
III*
Senior vice
President & Chief
Financial Officer
Assistant Treasurer
John J. Fyburn**
Vice President
Assistant Treasurer
Jean M. O'Leary*
Assistant Secretary
N/A
Eric B. Fischman**
Vice President &
Associate General
Counsel
Vice President &
Assistant Secretary
Frederic C. Dey**
Senior Vice
President
Vice President &
Assistant Treasurer
Ruth D. Leibert**
Assistant Vice
President
Assistant Secretary
Paul D. Furcinito
Assistant Vice
President
Assistant Secretary
* Address: Funds Distributor, Inc., Exchange Place, Boston, MA 02109
**Address: Premier Mutual Fund Services, Inc., 200 Park Avenue, new
York, NY 10166.
Item 30. Location of Accounts and Records
(1) The Dreyfus/Laurel Tax-Free Municipal Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
(2) Mellon Bank, N.A.
c/o The Boston Company Advisers, Inc.
4th Floor
One Exchange Place
Boston, MA 02109
(3) Mellon Bank, N.A.
c/o The Boston Company, Inc.
5th Floor
One Boston Place
Boston, MA 02108
(4) Mellon Bank, N.A.
The Park Square Building
31 St. James Avenue
Boston, MA 02116
(5) The Shareholder Services Group, Inc.
1 America Express Plaza
Providence, RI 02903
(6) Mellon Bank, N.A.
One Mellon Bank Center
39th Floor
Pittsburgh, PA 15258
(7) The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Item 31. Management Services
Not applicable.
Item 32. Undertakings
a(i). Not applicable.
b(ii). Not applicable.
Rule 485(b)(3) Certification
The Registrant hereby certifies that it meets all of the
requirements for effectiveness pursuant to Rule 485(b) under the
Securities Act of 1933.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant, The Dreyfus/Laurel Investment Series (formerly The Laurel
Investment Series), has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Boston, the Commonwealth of Massachusetts
on the 7th day of April, 1995.
THE DREYFUS/LAUREL INVESTMENT SERIES
s/Marie E. Connolly*
___________________________
Marie E. Connolly
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
s/Marie E. Connolly* President, Treasurer 4/7/95
Marie E. Connolly
Signature Title Date
/s/Francis P. Brennan* Trustee, 4/7/95
Francis P. Brennan Chairman of the Board
/s/Ruth Marie Adams* Trustee 4/7/95
Ruth Marie Adams
/s/Joseph S. DiMartino* Trustee 4/7/95
Joseph S. DiMartino
/s/James M. Fitgibbons* Trustee 4/7/95
James M. Fitzgibbons
/s/Kenneth A. Himmel* Trustee 4/7/95
Kenneth A. Himmel
/s/Stephen J. Lockwood* Trustee 4/7/95
Stephen J. Lockwood
/s/Roslyn M. Watson* Trustee 4/7/95
Roslyn M. Watson
/s/J. Tomlinson Fort* Trustee 4/7/95
J. Tomlinson Fort
/s/Arthur L. Goeschel* Trustee 4/7/95
Arthur L. Goeschel
/s/Arch S. Jeffery* Trustee 4/7/95
Arch S. Jeffery
/s/Robert D. McBride* Trustee 4/7/95
Robert D. McBride
/s/John L. Propst* Trustee 4/7/95
John L. Propst
/s/John J. Sciullo* Trustee 4/7/95
John J. Sciullo
*By: Eric B. Fischman
-------------
Eric B. Fischman
Attorney-in-Fact
April 7, 1995
The Dreyfus/Laurel Investment Series
200 Park Avenue - 55th Floor
New York, New York 10166
Dear Sir or Madam:
In connection with the filing of Post-Effective Amendment No.
14 to the Registration Statement on Form N-1A (File No. 33-43847)
of The Dreyfus/Laurel Investment Series which you are about to file
with the Securities and Exchange Commission, we hereby consent to
the reference to our firm as "Legal Counsel" in the Statements of
Additional Information incorporated by reference into the
Prospectuses.
Sincerely yours,
Thomas M. Leahey
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The Dreyfus/Laurel Investment Series
We hereby consent to the following with respect to Post-
Effective Amendment No. 14 to the Registration Statement (File No.
33-43847) on Form N-1A under the Securities Act of 1933, as
amended, of The Dreyfus/Laurel Investment Series (formerly The
Laurel Investment Series and previously The Boston Company
Investment Series):
1. The incorporation by reference of our report dated
October 8, 1993 accompanying the financial statements of
the Contrarian Fund (a series of The Dreyfus/Laurel
Investment Series) for the year ended August 31, 1993
into the Statement of Additional Information.
2. The incorporation by reference of our report dated
October 8, 1993 accompanying the financial statements of
the Short-Term Bond Fund (a series of The Dreyfus/Laurel
Investment Series) for the year ended August 31, 1993
into the Statement of Additional Information.
3. The incorporation by reference of our report dated
October 8, 1993 accompanying the financial statements of
the International Fund (a series of the Dreyfus/Laurel
Investment Sreies) for the year ended August 31, 1993
into the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 5, 1995
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Frederick C. Dey, Eric
B. Fischman, Ruth D. Leibert and John E. Pelletier and each of them, with
full power to act without the other, his or her true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for
him or her and in his or her name, place and stead, in any and all
capacities (until revoked in writing) to sign any and all amendments to
the Registration Statement for The Dreyfus/Laurel Investment Series
(including post-effective amendments and amendments thereto), and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/Ruth Marie Adams /s/Arch S. Jeffery
- ----------------------------- ----------------------------
Ruth Marie Adams, Trustee Arch S. Jeffery, Trustee
/s/Francis P. Brennan /s/Stephen J. Lockwood
- ----------------------------- ----------------------------
Francis P. Brennan, Trustee Stephen J. Lockwood, Trustee
/s/Joseph S. DiMartino /s/Robert D. McBride
- ----------------------------- ---------------------------
Joseph S. DiMartino, Trustee Robert D. McBride, Trustee
/s/James M. Fitzgibbons /s/John L. Propst
- ----------------------------- ---------------------------
James M. Fitzgibbons, Trustee John L. Propst, Trustee
/s/J. Tomlinson Fort /s/John J. Sciullo
- ----------------------------- ---------------------------
J. Tomlinson Fort, Trustee John J. Sciullo, Trustee
/s/Arthur L. Goeschel /s/Roslyn M. Watson
- ----------------------------- ---------------------------
Arthur L. Goeschel, Trustee Roslyn M. Watson, Trustee
/s/Kenneth A. Himmel
- -----------------------------
Kenneth A. Himmel, Trustee
Dated: April 5, 1995
POWER OF ATTORNEY
The undersigned, hereby constitutes and appoints Frederick C. Dey,
Eric B. Fischman, Ruth D. Leibert and John E. Pelletier and each of them,
with full power to act without the other, her true and lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for
her and in her name, place and stead, in any and all capacities (until
revoked in writing) to sign any and all amendments to the Registration
Statement for The Dreyfus/Laurel Funds Investment Series (including post-
effective amendments and amendments thereto), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and
perform each and every act and thing ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/Marie E. Connolly
- ----------------------------------------
Marie E. Connolly, President & Treasurer
Dated: April 5, 1995
