PROSPECTUS JANUARY 10, 1994
DREYFUS GROWTH AND INCOME FUND, INC.
DREYFUS GROWTH AND INCOME FUND, INC. (THE "FUND") IS AN OPEN-END, NON-
DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. ITS
GOAL IS LONG TERM CAPITAL GROWTH, CURRENT INCOME AND GROWTH OF INCOME,
CONSISTENT WITH REASONABLE INVESTMENT RISK.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY. YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
PART B (ALSO KNOWN AS THE STATEMENT OF ADDITIONAL INFORMATION), DATED
JANUARY 10, 1994, 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 AND IS INCORPORATED HEREIN BY
REFERENCE. FOR A FREE COPY, WRITE TO THE FUND AT 144 GLENN CURTISS
BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN
TELEPHONING, ASK FOR OPERATOR 666.
THE FUND'S 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 FUND'S SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE FUND'S SHARE PRICE AND INVESTMENT RETURN
FLUCTUATE AND ARE NOT GUARANTEED.
TABLE OF CONTENTS
ANNUAL FUND OPERATING EXPENSES............................. 2
CONDENSED FINANCIAL INFORMATION............................ 2
DESCRIPTION OF THE FUND.................................... 3
MANAGEMENT OF THE FUND..................................... 17
HOW TO BUY FUND SHARES..................................... 18
SHAREHOLDER SERVICES....................................... 20
HOW TO REDEEM FUND SHARES.................................. 22
SHAREHOLDER SERVICES PLAN.................................. 24
DIVIDENDS, DISTRIBUTIONS AND TAXES......................... 24
PERFORMANCE INFORMATION.................................... 25
GENERAL INFORMATION........................................ 26
APPENDIX................................................... 27
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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.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.............................................. .75%
Shareholder Services Fees.................................... .24%
Other Expenses............................................... .29%
Total Fund Operating Expenses................................ 1.28%
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $13 $41 $70 $155
</TABLE>
- -------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF
PAST OR 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 borne by the Fund, and therefore indirectly by
investors, the payment of which will reduce investors' return on an annual
basis. The information in the foregoing table does not reflect any fee
waivers or expense reimbursement arrangements that may be in effect.
You can purchase Fund shares without charge directly from Dreyfus
Service Corporation; you may be charged a nominal fee if you effect
transactions in Fund shares through a securities dealer, bank or other
financial institution. See "Management of the Fund."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst & Young,
the Fund's independent auditors, whose report thereon appears in the
Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available
upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This
information has been derived from information provided in the Fund's
financial statements.
YEAR ENDED
OCTOBER 31,
---------------------
1992(1) 1993
------ ------
PER SHARE DATA:
Net asset value, beginning of year................. $12.50 $13.89
------ ------
Investment Operations:
Investment income-net.............................. .19 .38
Net realized and unrealized gain on investments.... 1.38 2.95
------ ------
Total from Investment Operations................. 1.57 3.33
------ ------
Distributions;
Dividends from investment income-net............... (.18) (.36)
------ ------
Net asset value, end of year....................... $13.89 $16.86
====== ======
TOTAL INVESTMENT RETURN 12.57%(2) 24.24%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............ 1.02%(2) 1.24%
Ratio of investment income to average net assets... 2.30%(2) 2.92%
Decrease reflected in above expense ratios due to
undertaking by The Dreyfus Corporation........... .39%(2) .04%
Portfolio Turnover Rate............................ 127.24%(2) 85.26%
Net Asset, end of year (000's Omitted) $98,532 $1,165,503
- -----------------
(1) From December 31, 1991 (commencement of operations) to October 31, 1992.
(2) Not annualized.
Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to
the address or calling the number set forth on the cover page of this
Prospectus.
(2)
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE - The Fund's goal is to provide you with long term
capital growth, current income and growth of income, consistent with
reasonable investment risk. The Fund's investment objective cannot be
changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of the Fund's outstanding voting shares.
There can be no assurance that the Fund's investment objective will be
achieved.
MANAGEMENT POLICIES - The Fund invests in equity and debt securities
and money market instruments of domestic and foreign issuers. The
proportion of the Fund's assets invested in each type of security will
vary from time to time in accordance with The Dreyfus Corporation's
assessment of economic conditions and investment opportunities.
The equity securities in which the Fund may invest consist of common
stocks, preferred stocks and convertible securities, including those in
the form of American, European and Continental Depository Receipts, as
well as warrants to purchase such securities. See "Certain Portfolio
Securities" below. The Fund will be particularly alert to companies which
offer opportunities for capital appreciation and growth of earnings, while
paying current dividends.
The debt securities (other than convertible debt securities) in which
the Fund may invest must be rated at least Baa by Moody's Investors
Service, Inc. ("Moody's") or at least BBB by Standard & Poor's Corporation
("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps, Inc.
("Duff") or, if unrated, deemed to be of comparable quality by The Dreyfus
Corporation. See "Certain Portfolio Securities" below. Debt securities
rated Baa by Moody's and BBB by S&P, Fitch and Duff are considered
investment grade obligations which lack outstanding investment
characteristics and may have speculative characteristics as well. The
Fund may invest up to 35% of the value of its net assets in convertible
debt securities rated not lower than Caa by Moody's or CCC by S&P, Fitch
or Duff, or, if unrated, deemed to be of comparable quality by The Dreyfus
Corporation. Securities rated Caa by Moody's and CCC by S&P, Fitch or Duff
are considered to have predominantly speculative characteristics with
respect to capacity to pay interest and repay principal and are considered
to be of poor standing. See "Risk Factors - Lower Rated Securities" below
for a discussion of certain risks, and "Appendix" in the Statement of
Additional Information.
The money market instruments in which the Fund may invest consist of
U.S. Government securities, certificates of deposit, time deposits,
bankers' acceptances, short-term investment grade corporate bonds and
other short-term debt instruments, and repurchase agreements, as
described under "Certain Portfolio Securities" below. While the Fund does
not intend to limit the amount of its assets invested in money market
instruments, except to the extent believed necessary to achieve its
investment objective, it does not expect under normal market conditions
to have a substantial portion of its assets invested in money market
instruments. However, when The Dreyfus Corporation determines that
adverse market conditions exist, the Fund may adopt a temporary
defensive posture and invest its entire portfolio in money market
instruments. In addition, the Fund may invest in money market
instruments in anticipation of investing cash positions. To the extent the
Fund is so invested, the Fund's investment objective may not be achieved.
The Fund may engage in various investment techniques such as foreign
exchange transactions, leveraging, short-selling, options and futures
transactions and lending portfolio securities, each of which involves risk.
For a discussion of such investment techniques and their related risks,
see "Investment Techniques" and "Risk Factors - Other Investment
Considerations" below.
CERTAIN PORTFOLIO SECURITIES
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITORY RECEIPTS - The
Fund's assets may be invested in the securities of foreign issuers in the
form of American Depository Receipts ("ADRs") and European Depository
Receipts ("EDRs"). These securities may not necessarily be denominated in
the same currency as the securities into which they may be converted.
ADRs are receipts typically issued by a United States bank or trust
company which evidence ownership of underlying securities issued by a
foreign corporation. EDRs, which are sometimes referred to as Continental
Depository Receipts ("CDRs"), are receipts issued in Europe typically by
(3)
non-United States banks and trust companies that evidence ownership
of either foreign or domestic securities. Generally, ADRs in registered
form are designed for use in the United States securities markets and
EDRs and CDRs in bearer form are designed for use in Europe. The Fund may
invest in ADRs, EDRs and CDRs through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
underlying security and a depository, whereas a depository may establish
an unsponsored facility without participation by the issuer of the
deposited security. Holders of unsponsored depository receipts generally
bear all the costs of such facilities and the depository of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to
pass through voting rights to the holders of such receipts in respect of the
deposited securities.
CONVERTIBLE SECURITIES - The Fund may purchase convertible
securities, which are fixed-income securities, such as bonds or preferred
stock, which may be converted at a stated price within a specified period
of time into a specified number of shares of common stock of the same or
a different issuer. Convertible securities are senior to common stock in a
corporation's capital structure, but usually are subordinated to non-
convertible debt securities. While providing a fixed-income stream
(generally higher in yield than the income derivable from a common stock
but lower than that afforded by a non-convertible debt security of similar
quality), a convertible security also affords an investor the opportunity,
through its conversion feature, to participate in the capital appreciation
of the common stock into which it is convertible.
In general, the market value of a convertible security is the higher of
its "investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common
stock if the security is converted). As a fixed-income security, the market
value of a convertible security generally increases when interest rates
decline and generally decreases when interest rates rise. However, the
price of a convertible security also is influenced by the market value of
the security's underlying common stock. Thus, the price of a convertible
security generally increases as the market value of the underlying stock
increases, and generally decreases as the market value of the underlying
stock declines. Investments in convertible securities generally entail less
risk than investments in the common stock of the same issuer.
U.S. GOVERNMENT SECURITIES - The Fund may purchase securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities,
which include U.S. Treasury securities that differ in their interest rates,
maturities and times of issuance. Treasury Bills have initial maturities of
one year or less; Treasury Notes have initial maturities of one to ten
years; and Treasury Bonds generally have initial maturities of greater
than ten years. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National
Mortgage Association pass-through certificates, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
Home Loan Banks, by the right of the issuer to borrow from the Treasury;
others, such as those issued by the Federal National Mortgage Association,
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of the
agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. Principal and interest may fluctuate based on
generally recognized reference rates or the relationship of rates. While
the U.S. Government provides financial support to such U.S. Government-
sponsored agencies or instrumentalities, no assurance can be given that it
will always do so, since it is not so obligated by law. The Fund will invest
in such securities only when it is satisfied that the credit risk with
respect to the issuer is minimal.
ZERO COUPON SECURITIES - The Fund may invest in zero coupon U.S.
Treasury securities, which are Treasury Notes and Bonds that have been
stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. The Fund also may invest in zero coupon
securities issued by corporations and financial institutions which
constitute a proportionate ownership of the issuer's pool of underlying
U.S. Treasury securities. A zero coupon security pays no interest to its
holder during its life and is sold at a discount to its face value at
maturity. The amount of the discount fluctuates with the market price of
the security. The market prices of zero coupon securities generally are
more volatile than the market prices of securities that pay interest
periodically and are likely
(4)
to respond to a greater
degree to changes in interest rates than non-zero coupon securities having
similar maturities and credit qualities. For a discussion of the potential
tax implication of such investments, see "Risk Factors - Other Investment
Considerations" below, and "Dividends, Distributions and Taxes" in the
Fund's Statement of Additional Information.
BANK OBLIGATIONS - The Fund may purchase certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations
issued by domestic banks, foreign subsidiaries of domestic banks, foreign
branches of domestic banks, and domestic and foreign branches of foreign
banks, domestic savings and loan associations and other banking
institutions. With respect to such securities issued by foreign branches of
domestic banks, foreign subsidiaries of domestic banks, and domestic and
foreign branches of foreign banks, the Fund may be subject to additional
investment risks that are different in some respects from those incurred
by a fund which invests only in debt obligations of U.S. domestic issuers.
Such risks include possible future political and economic developments,
the possible imposition of foreign withholding taxes on interest income
payable on the securities, the possible establishment of exchange controls
or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities
and the possible seizure or nationalization of foreign deposits.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. The
Fund will invest in time deposits of domestic banks that have total assets
in excess of one billion dollars. Time deposits which may be held by the
Fund will not benefit from insurance from the Bank Insurance Fund or the
Savings Association Insurance Fund administered by the Federal Deposit
Insurance Corporation. The Fund will not invest more than 15% of the value
of its net assets in time deposits that are illiquid and in other illiquid
securities. See "Certain Fundamental Policies" below.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. The other short-term obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
REPURCHASE AGREEMENTS - Repurchase agreements involve the
acquisition by the Fund of an underlying debt instrument, subject to an
obligation of the seller to repurchase, and the Fund to resell, the
instrument at a fixed price usually not more than one week after its
purchase. The Fund's custodian or sub-custodian will have custody of, and
will hold in a segregated account, securities acquired by the Fund under a
repurchase agreement. Repurchase agreements are considered by the staff
of the Securities and Exchange Commission to be loans by the Fund. In an
attempt to reduce the risk of incurring a loss on a repurchase agreement,
the Fund will enter into repurchase agreements only with domestic banks
with total assets in excess of one billion dollars, or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price. The Dreyfus
Corporation will monitor on an ongoing basis the value of the collateral to
assure that it always equals or exceeds the repurchase price. Certain
costs may be incurred by the Fund in connection with the sale of the
securities if the seller does not repurchase them in accordance with the
repurchase agreement. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the securities, realization on the
securities by the Fund may be delayed or limited. The Fund will consider
on an ongoing basis the creditworthiness of the institutions with which it
enters into repurchase agreements.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS -
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs. The commercial paper
purchased by the Fund will consist only of direct obligations which, at the
time of their purchase, are (a) rated not lower than Prime-l by Moody's, A-
1 by S&P, F-1 by Fitch or Duff-1 by Duff, (b) issued by companies having
an outstanding unsecured debt issue currently rated not lower than Aa3 by
Moody's or AA- by S&P, Fitch or
(5)
Duff, or (c) if
unrated, determined by The Dreyfus Corporation to be of comparable
quality to those rated obligations which may be purchased by the Fund. The
Fund may purchase floating and variable rate demand notes and bonds,
which are obligations ordinarily having stated maturities in excess of one
year, but which permit the holder to demand payment of principal at any
time or at specified intervals. Variable rate demand notes include variable
amount master demand notes, which are obligations that permit the Fund
to invest fluctuating amounts at varying rates of interest pursuant to
direct arrangements between the Fund, as lender, and the borrower. These
notes permit daily changes in the amounts borrowed. As mutually agreed
between the parties, the Fund may increase the amount under the notes at
any time up to the full amount provided by the note agreement, or decrease
the amount, and the borrower may repay up to the full amount of the note
without penalty. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated
that such instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they are
redeemable at face value, plus accrued interest, at any time. Accordingly,
where these obligations are not secured by letters of credit or other
credit support arrangements, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. In
connection with floating and variable rate demand obligations, The
Dreyfus Corporation will consider, on an ongoing basis, earning power,
cash flow and other liquidity ratios of the borrower, and the borrower's
ability to pay principal and interest on demand. Such obligations
frequently are not rated by credit rating agencies, and the Fund may invest
in them only if at the time of an investment the borrower meets the
criteria set forth above for other commercial paper issuers.
MORTGAGE-RELATED SECURITIES - The Fund may invest in mortgage-
related securities which are collateralized by pools of mortgage loans
assembled for sale to investors by various governmental agencies, such as
the Government National Mortgage Association and government-related
organizations such as the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation, as well as by private issuers
such as commercial banks, savings and loan institutions, mortgage banks
and private mortgage insurance companies, and similar foreign entities.
The mortgage-related securities in which the Fund may invest include
those with fixed, floating and variable interest rates, those with interest
rates that change based on multiples of changes in interest rates and
those with interest rates that change inversely to changes in interest
rates, as well as stripped mortgage-backed securities which are
derivative multiclass mortgage securities. Stripped mortgage-backed
securities usually are structured with two classes that receive different
proportions of interest and principal distributions on a pool of mortgage-
backed securities or whole loans. A common type of stripped mortgage-
backed security will have one class receiving some of the interest and
most of the principal from the mortgage collateral, while the other class
will receive most of the interest and the remainder of the principal. In the
most extreme case, one class will receive all of the interest (the
interest-only or "IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). Although certain mortgage-
related securities are guaranteed by a third party or otherwise similarly
secured, the market value of the security, which may fluctuate, is not so
secured. If the Fund purchases a mortgage-related security at a premium,
all or part of the premium may be lost if there is a decline in the market
value of the security, whether resulting from changes in interest rates or
prepayments in the underlying mortgage collateral. As with other
interest-bearing securities, the prices of certain mortgage-backed
securities are inversely affected by changes in interest rates, while
others may not be. However, though the value of a mortgage-related
security may decline when interest rates rise, the converse is not
necessarily true, since in periods of declining interest rates the
mortgages underlying the security are more likely to prepay. For this and
other reasons, a mortgage-related security's stated maturity may be
shortened by unscheduled prepayments on the underlying mortgages, and,
therefore, it is not possible to predict accurately the security's return to
the Fund. Moreover, with respect to stripped mortgage-backed securities,
if the underlying mortgage securities experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated in the
highest rating category by a nationally recognized statistical rating
organization. In addition, regular payments received in respect of
mortgage-related securities include both interest and principal. No
(6)
assurance can be given as to the return the Fund will receive when
these amounts are reinvested. The Fund also may invest in collateralized
mortgage obligations structured on pools of mortgage pass-through
certificates or mortgage loans. Collateralized mortgage obligations will
be purchased only if rated in one of the two highest rating categories by a
nationally recognized statistical rating organization such as Moody's,
S&P, Fitch or Duff, or, if unrated, deemed to be of comparable quality by
The Dreyfus Corporation. For further discussion concerning the investment
considerations involved see "Risk Factors - Other Investment
Considerations" below, and "Investment Objective and Management
Policies - Portfolio Securities - Mortgage-Related Securities" in the
Fund's Statement of Additional Information.
MUNICIPAL OBLIGATIONS - Municipal obligations are debt obligations
issued by states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, or multistate agencies or authorities. While in general,
municipal obligations are tax exempt securities having relatively low
yields as compared to taxable, non-municipal obligations of similar
quality, certain issues of municipal obligations, both taxable and non-
taxable, offer yields comparable and in some cases greater than the yields
available on other permissible Fund investments. Municipal obligations
generally include debt obligations issued to obtain funds for various
public purposes as well as certain industrial development bonds issued by
or on behalf of public authorities. Municipal obligations are classified as
general obligation bonds, revenue bonds and notes. General obligation
bonds are secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Industrial
development bonds, in most cases, are revenue bonds and generally do not
carry the pledge of the credit of the issuing municipality, but generally
are guaranteed by the corporate entity on whose behalf they are issued.
Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal obligations
include municipal lease/purchase agreements which are similar to
installment purchase contracts for property or equipment issued by
municipalities. Municipal obligations bear fixed, floating or variable rates
of interest, which are determined in some instances by formulas under
which the municipal obligation's interest rate will change directly or
inversely to changes in interest rates or an index, or multiples thereof, in
many cases subject to a maximum and a minimum. Certain municipal
obligations are subject to redemption at a date earlier than their stated
maturity pursuant to call options, which may be separated from the
related municipal obligation and purchased and sold separately. The Fund
will invest in municipal obligations, the ratings of which correspond with
the ratings of other permissible Fund investments. Dividends received by
shareholders on Fund shares which are attributable to interest income
received by the Fund from municipal obligations generally will be subject
to Federal income tax. It is currently the Fund's intention to invest no
more than 25% of its assets in municipal obligations. However, this
percentage may be varied from time to time without shareholder approval.
WARRANTS - The Fund may invest up to 2% of its net assets in
warrants, except that this limitation does not apply to warrants acquired
in units or attached to securities. A warrant is an instrument issued by a
corporation which gives the holder the right to subscribe to a specified
amount of the corporation's capital stock at a set price for a specified
period of time.
ILLIQUID SECURITIES - The Fund may invest up to 15% of the value of its
net assets in securities as to which a liquid trading market does not
exist, provided such investments are consistent with the Fund's
investment objective. Such securities may include securities that are not
readily marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, certain options traded in
the over-the-counter market and securities used to cover such options,
and certain mortgage-backed securities, such as certain collateralized
mortgage obligations and stripped mortgage-backed securities. As to
these securities, the Fund is subject to a risk that should the Fund desire
to sell them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Fund's net assets could be
adversely affected. When purchasing securities that have not
(7)
been registered under the Securities Act of 1933, as amended, and are
not readily marketable, the Fund will endeavor to obtain the right to
registration at the expense of the issuer. Generally, there will be a lapse
of time between the Fund's decision to sell any such security and the
registration of the security permitting sale. During any such period, the
price of the securities will be subject to market fluctuations. However, if
a substantial market of qualified institutional buyers develops pursuant
to Rule 144A under the Securities Act of 1933, as amended, for certain
unregistered securities held by the Fund, the Fund intends to treat such
securities as liquid securities in accordance with procedures approved by
the Fund's Board of Directors. Because it is not possible to predict with
assurance how the market for restricted securities pursuant to Rule 144A
will develop, the Fund's Board of Directors has directed The Dreyfus
Corporation to monitor carefully the Fund's investments in such securities
with particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a
period of time, qualified institutional buyers cease purchasing such
restricted securities pursuant to Rule 144A, the Fund's investing in such
securities may have the effect of increasing the level of illiquidity in the
Fund's portfolio during such period.
INVESTMENT TECHNIQUES - In connection with its investment objective
and policies, the Fund may employ, among others, the following
investment techniques which may involve certain risks.
FOREIGN CURRENCY TRANSACTIONS - The Fund may engage in 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. A forward currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which must be more than two days from the
date of the contract, at a price set at the time of the contract. These
contracts are entered into in the interbank market conducted directly
between currency traders (typically commercial banks or other financial
institutions) and their customers.
OPTIONS ON FOREIGN CURRENCY - The Fund may purchase and sell call
and put options on foreign currency for the purpose of hedging against
changes in future currency exchange rates. Call options convey the right to
buy the underlying currency at a price which is expected to be lower than
the spot price of the currency at the time the option expires. Put options
convey the right to sell the underlying currency at a price which is
anticipated to be higher than the spot price of the currency at the time the
option expires. The Fund may use foreign currency options for the same
purposes as forward currency exchange and futures transactions, as
described herein. See also "Call and Put Options on Specific Securities"
and "Currency Futures and Options on Currency Futures" below.
LEVERAGE THROUGH BORROWING - The Fund may borrow for investment
purposes. This borrowing, which is known as leveraging, generally will be
unsecured, except to the extent the Fund enters into reverse repurchase
agreements described below. The Investment Company Act of 1940
requires the Fund to maintain continuous asset coverage (that is, total
assets including borrowings, less liabilities exclusive of borrowings) of
300% of the amount borrowed. If the 300% asset coverage should decline
as a result of market fluctuations or other reasons, the Fund may be
required to sell some of its portfolio holdings within three days to reduce
the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that
time. Leveraging may exaggerate the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money
borrowed for leveraging will be subject to interest costs that may or may
not be recovered by appreciation of the securities purchased; in certain
cases, interest costs may exceed the return received on the securities
purchased. The Fund also may be required to maintain minimum average
balances in connection with such borrowing or to pay a commitment or
other fee to maintain a line of credit; either of these requirements would
increase the cost of borrowing over the stated interest rate.
Among the forms of borrowing in which the Fund may engage is the
entry into reverse repurchase agreements with banks, brokers or dealers.
These transactions involve the transfer by the Fund of an underlying debt
instrument in return for cash proceeds based on a percentage of the value
of the security. The Fund retains the right to receive interest and
principal payments on the security. At an agreed upon future date, the Fund
repurchases the security at principal, plus accrued interest. In certain
types of agreements, there is no agreed upon repurchase date and interest
payments are calculated daily, often based on the prevailing
(8)
overnight repurchase rate. The Fund will maintain in a segregated
custodial account cash or U.S. Government securities or other high quality
liquid debt securities at least equal to the aggregate amount of its
reverse repurchase obligations, plus accrued interest, in certain cases, in
accordance with releases promulgated by the Securities and Exchange
Commission. The Securities and Exchange Commission views reverse
repurchase transactions as collateralized borrowings by the Fund. These
agreements, which are treated as if reestablished each day, are expected
to provide the Fund with a flexible borrowing tool.
SHORT-SELLING - The Fund may make short sales, which are
transactions in which the Fund sells a security it does not own in
anticipation of a decline in the market value of that security. To complete
such a transaction, the Fund must borrow the security to make delivery to
the buyer. The Fund then is obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement. The price at
such time may be more or less than the price at which the security was
sold by the Fund. Until the security is replaced, the Fund is required to pay
to the lender amounts equal to any dividends or interest which accrue
during the period of the loan. To borrow the security, the Fund also may be
required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is
closed out.
Until the Fund replaces a borrowed security in connection with a short
sale, the Fund will: (a) maintain daily a segregated account, containing
cash or U.S. Government securities, at such a level that (i) the amount
deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and (ii)
the amount deposited in the segregated account plus the amount deposited
with the broker as collateral will not be less than the market value of the
security at the time it was sold short; or (b) otherwise cover its short
position.
The Fund will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date on
which the Fund replaces the borrowed security. The Fund will realize a
gain if the security declines in price between those dates. This result is
the opposite of what one would expect from a cash purchase of a long
position in a security. The amount of any gain will be decreased, and the
amount of any loss increased, by the amount of any premium or amounts in
lieu of dividends or interest the Fund may be required to pay in connection
with a short sale.
The Fund may purchase call options to provide a hedge against an
increase in the price of a security sold short by the Fund. When the Fund
purchases a call option it has to pay a premium to the person writing the
option and a commission to the broker selling the option. If the option is
exercised by the Fund, the premium and the commission paid may be more
than the amount of the brokerage commission charged if the security were
to be purchased directly. See "Call and Put Options on Specific Securities"
below.
The Fund anticipates that the frequency of short sales will vary
substantially in different periods, and it does not intend that any
specified portion of its assets, as a matter of practice, will be invested
in short sales. However, no securities will be sold short if, after effect is
given to any such short sale, the total market value of all securities sold
short would exceed 25% of the value of the Fund's net assets. The Fund
may not sell short the securities of any single issuer listed on a national
securities exchange to the extent of more than 5% of the value of the
Fund's net assets. The Fund may not sell short the securities of any class
of an issuer to the extent, at the time of the transaction, of more than 5%
of the outstanding securities of that class.
In addition to the short sales discussed above, the Fund may make short
sales "against the box," a transaction in which the Fund enters into a
short sale of a security which the Fund owns. The proceeds of the short
sale will be held by a broker until the settlement date at which time the
Fund delivers the security to close the short position. The Fund receives
the net proceeds from the short sale. The Fund at no time will have more
than 15% of the value of its net assets in deposits on short sales against
the box. It currently is anticipated that the Fund will make short sales
against the box for purposes of protecting the value of the Fund's net
assets.
CALL AND PUT OPTIONS ON SPECIFIC SECURITIES - The Fund may invest
up to 5% of its assets, represented by the premium paid, in the purchase of
call and put options in respect of specific securities (or groups or
"baskets" of specific securities) in which the Fund may invest. The Fund
may write covered call and put option
(9)
contracts to
the extent of 20% of the value of its net assets at the time such option
contracts are written. A call option gives the purchaser of the option the
right to buy, and obligates the writer to sell, the underlying security or
securities at the exercise price at any time during the option period.
Conversely, a put option gives the purchaser of the option the right to sell,
and obligates the writer to buy, the underlying security or securities at
the exercise price at any time during the option period. A covered call
option sold by the Fund, which is a call option with respect to which the
Fund owns the underlying security or securities, exposes the Fund during
the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or securities
or to possible continued holding of a security or securities which might
otherwise have been sold to protect against depreciation in the market
price thereof. A covered put option sold by the Fund exposes the Fund
during the term of the option to a decline in price of the underlying
security or securities. A put option sold by the Fund is covered when,
among other things, cash or liquid securities are placed in a segregated
account with the Fund's custodian to fulfill the obligation undertaken.
To close out a position when writing covered options, the Fund may
make a "closing purchase transaction," which involves purchasing an
option on the same security or securities with the same exercise price
and expiration date as the option which it has previously written. To close
out a position as a purchaser of an option, the Fund may make a "closing
sale transaction," which involves liquidating the Fund's position by
selling the option previously purchased. The Fund will realize a profit or
loss from a closing purchase or sale transaction depending upon the
difference between the amount paid to purchase an option and the amount
received from the sale thereof.
The Fund intends to treat options in respect of specific securities that
are not traded on a national securities exchange and the securities
underlying covered call options written by the Fund as illiquid securities.
See "Certain Portfolio Securities - Illiquid Securities" above.
The Fund will purchase options only to the extent permitted by the
policies of state securities authorities in states where shares of the Fund
are qualified for offer and sale.
STOCK INDEX OPTIONS - The Fund may purchase and write put and call
options on stock indexes listed on national securities exchanges or traded
in the over-the-counter market. A stock index fluctuates with changes in
the market values of the stocks included in the index.
The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in the Fund's portfolio
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 the 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. Accordingly, successful
use by the Fund of options on stock indexes will be subject to The Dreyfus
Corporation's 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.
When the Fund writes an option on a stock index, the Fund will place in
a segregated account with its custodian cash or liquid securities in an
amount at least equal to the market value of the underlying stock index
and will maintain the account while the option is open or otherwise will
cover the transaction.
FUTURES TRANSACTIONS - IN GENERAL - The Fund will not be a
commodity pool. However, as an adjunct to its securities activities, the
Fund may engage, to the extent permitted by applicable regulations, in
futures and options on futures transactions, as described below.
The Fund may trade futures contracts and options on futures contracts
in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or, to
the extent permitted under applicable law, on exchanges located outside
the United States, such as the London International Financial Futures
Exchange and the Sydney Futures Exchange Limited. Foreign markets may
offer advantages such as trading in commodities that are not currently
traded in the United States or arbitrage possibilities not available in the
United States. Foreign markets, however, may have greater risk
(10) potential than domestic markets. See "Risk Factors - Foreign
Commodity Transactions" below.
The Fund's commodities transactions must constitute bona fide hedging
or other permissible transactions pursuant to regulations promulgated by
the Commodity Futures Trading Commission (the "CFTC"). In addition, the
Fund may not engage in such transactions if the sum of the amount of
initial margin deposits and premiums paid for unexpired commodity
options, other than for bona fide hedging transactions, would exceed 5% of
the liquidation value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on such contracts it has entered
into; provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. Pursuant to regulations and/or published positions of
the Securities and Exchange Commission, the Fund may be required to
segregate cash or high quality money market instruments in connection
with its commodities transactions in an amount generally equal to the
value of the underlying commodity.
Initially, when purchasing or selling futures contracts the Fund will be
required to deposit with its custodian in the broker's name an amount of
cash or cash equivalents up to approximately 10% of the contract amount.
This amount is subject to change by the exchange or board of trade on
which the contract is traded and members of such exchange or board of
trade may impose their own higher requirements. 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 position, 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 the index or 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." At any time prior to the expiration of a futures
contract, the Fund may elect to close the position by taking an opposite
position, at the then prevailing price, which will operate to terminate the
Fund's existing position in the contract.
Although the Fund intends to purchase or sell futures contracts only if
there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any
particular time. Many 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 or trading may
be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting the Fund to substantial losses. If it is
not possible, or the Fund determines not, to close a futures position in
anticipation of adverse price movements, the Fund will 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 offset partially or completely losses on the futures contract.
However, no assurances 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.
In addition, due to the risk of an imperfect correlation between
securities in the Fund's portfolio that are the subject of a hedging
transaction and the futures contract used as a hedging device, it is
possible that the hedge will not be fully effective in that, for example,
losses on the portfolio securities may be in excess of gains on the futures
contract or losses on the futures contract may be in excess of gains on the
portfolio securities that were the subject of the hedge. In futures
contracts based on indexes, the risk of imperfect correlation increases as
the composition of the Fund's portfolio varies from the composition of the
index. In an effort to compensate for the imperfect correlation of
movements in the price of the securities being hedged and movements in
the price of futures contracts, the Fund may buy or sell futures contracts
in a greater or lesser dollar amount than the dollar amount of the
securities being hedged if the historical volatility of the futures contract
has been less or greater than that of the securities. Such "over hedging"
or "under hedging" may adversely affect the Fund's net investment results
if market movements are not as anticipated when the hedge is established.
Successful use of futures by the Fund also is subject to The Dreyfus
Corporation's ability to predict
(11)
correctly
movements in the direction of the market or interest rates. For example,
if the Fund has hedged against the possibility of a decline in the market
adversely affecting the value of securities held in its portfolio and prices
increase 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. Such sales of securities may, but
will not necessarily, be at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it may be
disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the option exercise period.
The writer of the option is required upon exercise to assume an offsetting
futures position (a short position if the option is a call and a long position
if the option is a put) Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's
futures margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Call options sold by the Fund with respect to futures contracts will be
covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the prices of
which are expected to move relatively consistently with the instruments
underlying, the futures contract. Put options sold by the Fund with respect
to futures contracts will be covered in the same manner as put options on
specific securities as described above.
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES - The
Fund may purchase and sell stock index futures contracts and options on
stock index futures contracts.
A stock index future obligates the seller to deliver (and the purchaser
to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is
made. No physical delivery of the underlying stocks in the index is made.
With respect to stock indexes that are permitted investments, the Fund
intends to purchase and sell futures contracts on the stock index for
which it can obtain the best price with consideration also given to
liquidity.
The Fund may use index futures as a substitute for a comparable market
position in the underlying securities.
There can be no assurance of the Fund's successful use of stock index
futures as a hedging device. In addition to the possibility that there may
be an imperfect correlation, or no correlation at all, between movements
in the stock index future and the portion of the portfolio being hedged, the
price of stock index futures may not correlate perfectly with the
movement in the stock index because of certain market distortions. First,
all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which would distort the normal relationship between the
index and futures markets. Secondly, from the point of view of
speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may
cause temporary price distortions. Because of the possibility of price
distortions in the futures market and the imperfect correlation between
movements in the stock index and movements in the price of stock index
futures, a correct forecast of general market trends by The Dreyfus
Corporation still may not result in a successful hedging transaction.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE
FUTURES CONTRACTS - The Fund may invest in interest rate futures
contracts and options on interest rate futures contracts.
The Fund may purchase call options on interest rate futures contracts
to hedge against a decline in interest rates and may purchase put options
on interest rate futures contracts to hedge its portfolio securities
against the risk of rising interest rates.
The Fund may sell call options on interest rate futures contracts to
partially hedge against declining prices
(12)
of
portfolio securities. If the futures price at expiration of the option is
below the exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline that
may have occurred in the Fund's portfolio holdings. The Fund may sell put
options on interest rate futures contracts to hedge against increasing
prices of the securities which are deliverable upon exercise of the futures
contracts. If the futures price at expiration of the option is higher than
the exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any increase in the price
of securities which the Fund intends to purchase. If a put or call option
sold by the Fund is exercised, the Fund will incur a loss which will be
reduced by the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio securities and
changes in the value of its futures positions, the Fund's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of its portfolio securities.
The Fund also may sell options on interest rate futures contracts as
part of closing purchase transactions to terminate its options positions.
No assurance can be given that such closing transactions can be effected
or that there will be correlation between price movements in the options
on interest rate futures and price movements in the Fund's portfolio
securities which are the subject of the hedge. In addition, the Fund's
purchase of such options will be based upon predictions as to anticipated
interest rate trends, which could prove to be inaccurate.
CURRENCY FUTURES AND OPTIONS ON CURRENCY FUTURES - The Fund may
purchase and sell currency futures contracts and options thereon. See
"Call and Put Options on Specific Securities" above. By selling foreign
currency futures, the Fund can establish the number of U.S. dollars it will
receive in the delivery month for a certain amount of a foreign currency.
In this way, if the Fund anticipates a decline of a foreign currency against
the U.S. dollar, the Fund can attempt to fix the U.S. dollar value of some or
all of the securities held in its portfolio that are denominated in that
currency. By purchasing foreign currency futures, the Fund can establish
the number of U.S. dollars it will be required to pay for a specified amount
of a foreign currency in the delivery month. Thus, if the Fund intends to
buy securities in the future and expects the U.S. dollar to decline against
the relevant foreign currency during the period before the purchase is
effected, the Fund, for the price of the currency future, can attempt to fix
the price in U.S. dollars of the securities it intends to acquire.
The purchase of options on currency futures will allow the Fund, for the
price of the premium it must pay for the option, to decide whether or not
to buy (in the case of a call option) or to sell (in the case of a put option)
a futures contract at a specified price at any time during the period
before the option expires. If the Fund, in purchasing an option, has been
correct in its judgment concerning the direction in which the price of a
foreign currency would move as against the U.S. dollar, it may exercise the
option and thereby take a futures position to hedge against the risk it had
correctly anticipated or close out the option position at a gain that will
offset, to some extent, currency exchange losses otherwise suffered by
the Fund. If exchange rates move in a way the Fund did not anticipate, the
Fund will have incurred the expense of the option without obtaining the
expected benefit. As a result, the Fund's profits on the underlying
securities transactions may be reduced or overall losses incurred.
FUTURE DEVELOPMENTS - The Fund may take advantage of opportunities
in the area of options and futures contracts and options on futures
contracts and any other derivative investment which are not presently
contemplated for use by the Fund or which are not currently available but
which may be developed, to the extent such opportunities are both
consistent with the Fund's investment objective and legally permissible
for the Fund. Before entering into such transactions or making any such
investment, the Fund will provide appropriate disclosure in its prospectus.
LENDING PORTFOLIO SECURITIES - From time to time, the Fund may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain
transactions. Such loans may not exceed 331/3% of the value of the Fund's
total assets. In connection with such loans, the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. The
Fund can increase its income through the investment of such collateral.
The Fund continues to
(13)
be entitled to payments in
amounts equal to the interest, dividends or other distributions payable on
the loaned security and receives interest on the amount of the loan. Such
loans will be terminable at any time upon specified notice. The Fund might
experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Fund.
FORWARD COMMITMENTS - The Fund may purchase securities on a when-
issued or forward commitment basis, which means that the price is fixed
at the time of commitment, but delivery and payment ordinarily take place
a number of days after the date of the commitment to purchase. The Fund
will make commitments to purchase such securities only with the
intention of actually acquiring the securities, but the Fund may sell these
securities before the settlement date if it is deemed advisable. The Fund
will not accrue income in respect of a security purchased on a when-
issued or forward commitment basis prior to its stated delivery date.
Securities purchased on a when-issued or forward commitment basis
and certain other securities held in the Fund's portfolio are subject to
changes in value (both generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest
rates rise) based upon the public's perception of the creditworthiness of
the issuer and changes, real or anticipated, in the level of interest rates.
Securities purchased on a when issued or forward commitment basis may
expose the Fund to risk because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a when-issued or
forward commitment basis can involve the additional risk that the yield
available in the market when the delivery takes place actually may be
higher than that obtained in the transaction itself. A segregated account
of the Fund consisting of cash, cash equivalents or U.S. Government
securities or other high quality liquid debt securities at least equal at all
times to the amount of the when-issued or forward commitments will be
established and maintained at the Fund's custodian bank. Purchasing
securities on a when-issued or forward commitment basis when the Fund
is fully or almost fully invested may result in greater potential
fluctuation in the value of the Fund's net assets and its net asset value
per share.
CERTAIN FUNDAMENTAL POLICIES - The Fund may (i) borrow money to
the extent permitted under the Investment Company Act of 1940, as
amended; and (ii) invest up to 25% of the value of its total assets in the
securities of issuers in a single industry, provided there is no limitation
on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. This paragraph describes
fundamental policies that cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act of 1940)
of the Fund's outstanding voting shares. See "Investment Objective and
Management Policies - Investment Restrictions" in the Statement of
Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES - The Fund may (i)
purchase securities of any company having less than three years'
continuous operation (including operations of any predecessors) if such
purchase does not cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets; (ii) pledge,
hypothecate, mortgage or otherwise encumber its assets, but only to
secure permitted borrowings; and (iii) invest up to 15% of the value of its
net assets in repurchase agreements providing for settlement in more
than seven days after notice and in other illiquid securities. See
"Investment Objective and Management Policies - Investment
Restrictions" in the Statement of Additional Information.
RISK FACTORS
LOWER RATED SECURITIES - You should carefully consider the relative
risks of investing in the higher yielding (and, therefore, higher risk)
convertible securities in which the Fund may invest. These are securities
such as those rated Ba by Moody's or BB by S&P, Fitch or Duff or as low as
those rated Caa by Moody's or CCC by S&P, Fitch or Duff. They generally
are not meant for short-term investing and may be subject to certain
risks with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated convertible
securities. Securities rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate.
Securities rated BB by S&P, Fitch or Duff are regarded as having
predominantly speculative characteristics and, while such obligations
have less near term vulnerability to default than other speculative grade
(14)
debt, they face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payment. Securities rated
Caa by Moody's or CCC by S&P, Fitch or Duff are considered to have
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal and to be of poor standing. The Fund does not
intend to hold such securities until maturity unless current yields on
these securities remain attractive. See "Appendix" in the Statement of
Additional Information for a general description of Moody's, S&P, Fitch
and Duff ratings. The ratings of Moody's, S&P, Fitch and Duff represent
their opinions as to the quality of the obligations which they undertake to
rate. It should be emphasized, however, that ratings are relative and
subjective and, although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value
risk of these securities. Therefore, although these ratings may be an
initial criterion for selection of portfolio investments, The Dreyfus
Corporation also will evaluate these securities and the ability of the
issuers of such securities to pay interest and principal. The Fund's ability
to achieve its investment objective may be more dependent on The Dreyfus
Corporation's credit analysis than might be the case for a fund that
invested in higher rated securities. Once the rating of a portfolio security
has been changed, the Fund will consider all circumstances deemed
relevant in determining whether to continue to hold the security.
The market price and yield of securities rated Ba or lower by Moody's
and BB or lower by S&P, Fitch or Duff are more volatile than those of
higher rated securities. Factors adversely affecting the market price and
yield of these securities will adversely affect the Fund's net asset value.
In addition, the retail secondary market for these securities may be less
liquid than that of higher rated securities; adverse market conditions
could make it difficult at times for the Fund to sell certain securities or
could result in lower prices than those used in calculating the Fund's net
asset value.
The market values of certain lower rated debt securities tend to reflect
individual corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates, and tend to be more sensitive to economic conditions than
are higher rated securities. Companies that issue such securities often
are highly leveraged and may not have available to them more traditional
methods of financing. Therefore, the risk associated with acquiring the
securities of such issuers generally is greater than is the case with
higher rated securities.
INVESTING IN FOREIGN SECURITIES - Foreign securities markets
generally are not as developed or efficient as those in the United States.
Securities of some foreign issuers are less liquid and more volatile than
securities of comparable U.S. issuers. Similarly, volume and liquidity in
most foreign securities markets are less than in the United States and, at
times, volatility of price can be greater than in the United States. The
issuers of some of these securities, such as foreign bank obligations, may
be subject to less stringent or different regulations than are U.S. issuers.
In addition, there may be less publicly available information about a non-
U.S. issuer, and non-U.S. issuers generally are not subject to uniform
accounting and financial reporting standards, practices and requirements
comparable to those applicable to U.S. issuers.
Because stock certificates and other evidences of ownership of such
securities usually are held outside the United States, the Fund will be
subject to additional risks which include possible adverse political and
economic developments, possible seizure or nationalization of foreign
deposits and possible adoption of governmental restrictions that might
adversely affect the payment of principal and interest on the foreign
securities or might restrict the payment of principal and interest to
investors located outside the country of the issuers, whether from
currency blockage or otherwise. Custodial expenses for a portfolio of non-
U.S. securities generally are higher than for a portfolio of U.S. securities.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations. Some currency exchange
costs may be incurred when the Fund changes investments from one
country to another.
Furthermore, some of these securities may be subject to brokerage
taxes levied by foreign governments, which have the effect of increasing
the cost of such investment and reducing the realized gain or increasing
the
(15)
realized loss on such securities at the time of
sale. Income received by the Fund from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries.
Tax conventions between certain countries and the United States,
however, may reduce or eliminate such taxes. All such taxes paid by the
Fund will reduce its net income available for distribution to investors.
FOREIGN CURRENCY EXCHANGE - Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by
the forces of supply and demand in the foreign exchange markets and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
The foreign currency market offers less protection against defaults in
the forward trading of currencies than is available when trading in
currencies occurs on an exchange. Since a forward currency contract is not
guaranteed by an exchange or clearinghouse, a default on the contract
would deprive the Fund of unrealized profits or force the Fund to cover its
commitments for purchase or resale, if any, at the current market price.
FOREIGN COMMODITY TRANSACTIONS - Unlike trading on domestic
commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal
markets so that no common clearing facility exists and a trader may look
only to the broker for performance of the contract. In addition, unless the
Fund hedges against fluctuations in the exchange rate between the U.S.
dollar and the currencies in which trading is done on foreign exchanges
any profits that the Fund might realize in trading could be eliminated by
adverse changes in the exchange rate, or the Fund could incur losses as a
result of those changes. Transactions on foreign exchanges may include
both commodities which are traded on domestic exchanges and those
which are not.
OTHER INVESTMENT CONSIDERATIONS - The Fund's net asset value is not
fixed and should be expected to fluctuate. You should purchase Fund shares
only as a supplement to an overall investment program and only if you are
willing to undertake the risks involved.
The use of investment techniques such as short-selling, engaging in
financial futures and options transactions, leverage through borrowing,
purchasing securities on a forward commitment basis and lending
portfolio securities, and the purchase of certain stripped mortgage-
backed securities and zero coupon securities, involves greater risk than
that incurred by many other funds with similar objectives. Using these
techniques may produce higher than normal portfolio turnover and may
affect the degree to which the Fund's net asset value fluctuates.
Portfolio turnover may vary from year to year, as well as within a year.
The amount of portfolio activity will not be a limiting factor when making
portfolio decisions. Under normal market conditions, the Fund's portfolio
turnover rate generally will not exceed 150%. Higher portfolio turnover
rates are likely to result in comparatively greater brokerage commissions.
In addition, short-term gains realized from portfolio transactions are
taxable to shareholders as ordinary income. See "Portfolio Transactions"
in the Statement of Additional Information.
For the portion of the Fund's portfolio invested in equity securities,
investors should be aware that equity securities fluctuate in value, often
based on factors unrelated to the value of the issuer of the securities, and
that fluctuations can be pronounced. Changes in the value of the Fund's
portfolio securities, regardless of whether the securities are equity or
debt, will result in changes in the value of a Fund share and thus the
Fund's yield and total return to investors.
For the portion of the Fund's portfolio invested in debt securities,
investors should be aware that even though interest-bearing securities
are investments which promise a stable stream of income, the prices of
such securities are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. Certain
securities purchased by the Fund, such as those with interest rates that
fluctuate directly or indirectly based on multiples of a stated index, are
designed to be highly sensitive to changes in interest rates and can
subject the holders thereof to extreme reductions of yield and possibly
loss of principal. The values of fixed-income securities also may be
affected by changes in the credit rating or financial condition of the
issuing entities.
(16)
No assurance can be given as to the liquidity of the market for certain
mortgage-backed securities, such as collateralized mortgage obligations
and stripped mortgage-backed securities. Determination as to the
liquidity of such securities will be made in accordance with guidelines
established by the Fund's Board of Directors. In accordance with such
guidelines, The Dreyfus Corporation will monitor the Fund's investments
in such securities with particular regard to trading activity, availability
of reliable price information and other relevant information.
Certain municipal lease/purchase obligations in which the Fund may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years
unless money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal
lease/purchase obligation that is unrated, The Dreyfus Corporation will
consider, on an ongoing basis, a number of factors including the likelihood
that the issuing municipality will discontinue appropriating funding for
the leased property.
Federal income tax law requires the holder of a zero coupon security to
accrue income with respect to these securities prior to the receipt of
cash payments. To maintain its qualification as a regulated investment
company and avoid liability for Federal income taxes, the Fund may be
required to distribute such income accrued with respect to these
securities and may have to dispose of portfolio securities under
disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.
The Fund's classification as a "non-diversified" investment company
means that the proportion of the Fund's assets that may be invested in the
securities of a single issuer is not limited by the Investment Company Act
of 1940. A "diversified" investment company is required by the
Investment Company Act of 1940 generally, with respect to 75% of its
total assets, to invest not more than 5% of such assets in the securities
of a single issuer and to hold not more than 10% of the outstanding voting
securities of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
which requires that, at the end of each quarter of its taxable year, (i) at
least 50% of the market value of the Fund's total assets be invested in
cash, U.S. Government securities, the securities of other regulated
investment companies and other securities, with such other securities of
any one issuer limited for the purposes of this calculation to an amount
not greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets be invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies). Since a relatively high percentage of the
Fund's assets may be invested in the securities of a limited number of
issuers, some of which may be within the same industry or economic
sector, the Fund's portfolio securities may be more susceptible to any
single economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.
Investment decisions for the Fund are made independently from those of
other investment companies advised by The Dreyfus Corporation. However,
if such other investment companies are prepared to invest in, or desire to
dispose of, securities of the type in which the Fund invests at the same
time as the Fund, available investments or opportunities for sales will be
allocated equitably to each investment company. In some cases, this
procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, was formed in 1947 and serves as the Fund's investment adviser.
As of November 30, 1993, The Dreyfus Corporation managed or
administered approximately $78 billion in assets for more than 1.9
million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the
Fund, subject to the overall authority of the Fund's Board of Directors in
accordance with Maryland law. The Fund's primary investment officer is
Richard Hoey. He has held that position since the Fund's inception and has
been employed by The Dreyfus Corporation since April 1991. From
(17)
April 1990 to March 1991, Mr. Hoey was Chief Economist and a
Managing Director of Barclays de Zoete Wedd. Prior thereto, he was Chief
Economist and a Managing Director of Drexel Burnham Lambert.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .75 of 1%
of the value of the Fund's average daily net assets. The management fee
payable is higher than that paid by most other investment companies. From
time to time, The Dreyfus Corporation may waive receipt of its fees
and/or voluntarily assume certain expenses of the Fund, which would have
the effect of lowering the overall expense ratio of the Fund and increasing
yield to investors at the time such amounts are waived or assumed, as the
case may be. The Fund will not pay The Dreyfus Corporation at a later time
for any amounts it may waive, nor will the Fund reimburse The Dreyfus
Corporation for any amounts it may assume. For the fiscal year ended
October 31, 1993, the Fund paid The Dreyfus Corporation a management
fee at the effective annual rate of .71 of 1% of the value of the Fund's
average daily net assets pursuant to an undertaking in effect. The Dreyfus
Corporation may pay Dreyfus Service Corporation for shareholder and
distribution services from its own monies, including past profits but not
including the management fee paid by the Fund. Dreyfus Service
Corporation may pay part or all of these payments to securities dealers or
others for servicing and distribution.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The
Bank of New York, 110 Washington Street, New York, New York 10286, is
the Fund's Custodian.
HOW TO BUY FUND SHARES
The Fund's distributor is Dreyfus Service Corporation, a wholly-owned
subsidiary of The Dreyfus Corporation, located at 200 Park Avenue, New
York, New York 10166. The shares it distributes are not deposits or
obligations of The Dreyfus Security Savings Bank, F.S.B. and therefore are
not insured by the Federal Deposit Insurance Corporation.
You can purchase Fund shares without a sales charge if you purchase
them directly from Dreyfus Service Corporation; you may be charged a
nominal fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution. Share 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 a securities dealer, bank or other financial institution which has made
an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. The initial investment
must be accompanied by the Fund's Account Application. For full-time or
part-time employees of The Dreyfus Corporation or any of its affiliates or
subsidiaries, directors of The Dreyfus Corporation, Board members of a
fund advised by The Dreyfus Corporation, including members of the Fund'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 The
Dreyfus Corporation 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.
You may purchase Fund shares by check or wire, or 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. 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
(18)
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 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. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900202874/Dreyfus
Growth and Income Fund, Inc. for purchase of Fund shares in your name. 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, please call 1-800-645-6561 after
completing your wire payment 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 financial institution
that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the
Automated Clearing House to The Bank of New York with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and your Fund account number PRECEDED BY THE DIGITS
"1111."
Dreyfus Service Corporation 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 initial investment in the Dreyfus Family of Funds or certain
other products made available by Dreyfus Service Corporation to such
plans or programs exceeds one million dollars. All present holdings of
shares of funds in the Dreyfus Family of Funds by such employee benefit
plans or programs will be aggregated to determine the fee payable with
respect to each such purchase of Fund shares. Dreyfus Service Corporation
reserves the right to cease paying these fees at any time. Dreyfus Service
Corporation 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.
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as
of the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m., New York time), on each day the New York Stock
Exchange is open for business. For purposes of determining net asset
value, options and futures contracts will be valued 15 minutes after the
close of trading on the floor of the New York Stock Exchange. Net asset
value per share is computed by dividing the value of the Fund's net assets
(i.e., the value of its assets less liabilities) by the total number of shares
outstanding. The Fund's investments are valued based on market value or,
where market quotations are not readily available, based on fair value as
determined in good faith by the Board of Directors. Certain securities may
be valued by an independent pricing service approved by the Board of
Directors and are valued at fair value as determined by the pricing
service. For further information regarding the methods employed in
valuing Fund investments, see "Determination of Net Asset Value" in the
Fund's Statement of Additional Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, 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").
(19)
DREYFUS TELETRANSFER PRIVILEGE - You may purchase Fund shares
(minimum $500, 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 an Optional Services Form with
the Transfer Agent. The proceeds will be transferred between the bank
account designated in one of these documents and your Fund account. Only
a bank account maintained in a domestic financial institution which is an
Automated Clearing House 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 Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-
3306.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE - The Exchange Privilege enables you to purchase, in
exchange for shares of the Fund, shares of certain other funds managed or
administered by The Dreyfus Corporation, 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 Privilege, you should consult Dreyfus Service Corporation to
determine if it is available and whether any conditions are imposed on its
use.
To use this Privilege, you must give exchange instructions to the
Transfer Agent in writing, by wire or by telephone. If you previously have
established the Telephone Exchange Privilege, you may telephone exchange
instructions by calling 1-800-221-4060 or, if you are calling from
overseas, call 1-401-455-3306. See "How to Redeem Fund Shares -
Procedures." 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 from Dreyfus Service
Corporation. 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. Telephone exchanges may
be made only if the appropriate "YES" box has been checked on the Account
Application, or a separate signed Optional Services Form is on file with
the Transfer Agent. Upon an exchange into a new account, 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: Exchange Privilege, Wire Redemption Privilege, Telephone
Redemption Privilege, Dreyfus TELETRANSFER Privilege, and the dividend
and capital gain distribution option (except for the Dreyfus Dividend
Sweep Privilege) selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging 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 distributions paid
with respect to the foregoing categories of shares. To qualify, at the time
of your exchange you must notify the Transfer Agent. Any such
qualification is subject to confirmation of your holdings through a check
of appropriate records. See "Shareholder Services" in the Statement of
Additional Information. 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 Securities and
Exchange Commission. The Fund reserves the right to reject any exchange
request in whole or in part. The Exchange Privilege 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 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 other funds
(20)
in the Dreyfus Family of Funds of which you are currently an investor.
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 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 into funds sold with a sales load. See "Shareholder Services" in
the Statement of Additional Information. The right to exercise this
Privilege may be modified or cancelled by the Fund or the Transfer Agent.
You may modify or cancel your exercise of this Privilege at any time by
writing 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 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 Automated Clearing House member may be so
designated. To establish a Dreyfus-AUTOMATIC Asset Builder account, you
must file an authorization form with the Transfer Agent. You may obtain
the necessary authorization form from Dreyfus Service Corporation. You
may cancel your participation in this Privilege or change the amount of
purchase at any time by mailing written notification to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671, or,
if for Dreyfus retirement plan accounts, to The Dreyfus Trust Company,
Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427, and the
notification will be effective three business days following receipt. The
Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE - Dreyfus Government
Direct Deposit Privilege enables you to purchase Fund shares (minimum of
$100 and maximum of $50,000 per transaction) by having Federal salary,
Social Security, or certain veterans', military or other payments from the
Federal government automatically deposited into your Fund account. You
may deposit as much of such payments as you elect. To enroll in Dreyfus
Government Direct Deposit, you must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that you
desire to include in the Privilege. The appropriate form may be obtained
from Dreyfus Service Corporation. 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 DIVIDEND SWEEP PRIVILEGE - Dreyfus Dividend Sweep
Privilege enables you to invest automatically dividends or dividends and
capital gain distributions, if any, paid by the Fund in shares of another
fund 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. If you are investing in
a fund that charges a contingent deferred sales charge, the shares
purchased will be subject on redemption to the contingent deferred sales
charge, if any, applicable to the purchased shares. See "Shareholder
Services" in the Statement of Additional Information. For more
information concerning this Privilege and the funds in the Dreyfus Family
of Funds eligible to participate in this Privilege, or to request a Dividend
Sweep Authorization Form, please call toll free 1-800-645-6561. You may
cancel this Privilege by mailing written notification to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To
select a new fund after cancellation, you must submit a new authorization
form. Enrollment in or cancellation of this Privilege is
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effective three business days following receipt. This Privilege is
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply. The Fund may
modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated. Shares held under Keogh Plans, IRAs or
other retirement plans are not eligible for this Privilege.
DREYFUS PAYROLL SAVINGS PLAN - Dreyfus Payroll Savings Plan
permits you to purchase Fund shares (minimum of $100 per transaction)
automatically on a regular basis. Depending upon your employer's direct
deposit program, you may have part or all of your paycheck transferred to
your existing Dreyfus account electronically through the Automated
Clearing House system 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 from Dreyfus Service Corporation. 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 Dreyfus Service Corporation, The Dreyfus Corporation, the
Fund, the Transfer Agent or any other person, to arrange for transactions
under the Dreyfus Payroll Savings Plan. The Fund may modify or terminate
this Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs, or other retirement
plans are not eligible for this Privilege.
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. An application for the Automatic Withdrawal Plan can
be obtained from Dreyfus Service Corporation. There is a service charge of
50 cents for each withdrawal check. The Automatic Withdrawal Plan may be
ended at any time by you, 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. For details, please contact Dreyfus
Group Retirement Plans, a division of Dreyfus Service Corporation, by
calling toll free 1-800-358-5566.
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.
The Fund imposes no charges when shares are redeemed directly through
Dreyfus Service Corporation. Securities dealers, banks or other financial
institutions may charge a nominal fee for effecting redemption 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 net asset value.
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 Securities and
Exchange Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY
CHECK, BY 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
(22)
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 your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES - You may redeem shares by using the regular redemption
procedure through the Transfer Agent, through the Wire Redemption
Privilege, through the Telephone Redemption Privilege or through the
Dreyfus TELETRANSFER Privilege. Other redemption procedures may be in
effect for clients of certain Service Agents. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities.
You may redeem or exchange Fund shares by telephone if you have
checked the appropriate box on the Fund's Account Application or have
filed an Optional Services Form with the Transfer Agent. If you select a
telephone redemption or exchange privilege, you authorize the Transfer
Agent to act on telephone instructions from any person representing
himself or herself to be you, 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 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.
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 Dreyfus Financial Center, please call one of the telephone numbers
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. If you have any questions 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 an Optional 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 you are
(23)
calling from overseas, call 1-401-455-3306. The Fund reserves the right
to refuse any redemption request, including requests made shortly after a
change in 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 Statement of Additional
Information 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 have checked the
appropriate box on the Fund's Account Application or have filed an
Optional 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 you are calling
from overseas, call 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 telephone redemption 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
the certificates have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE - 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 an Optional 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 Automated
Clearing House member may be so designated. Redemption proceeds will be
on deposit in your account at an Automated Clearing House 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 you are calling from overseas, call 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.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which the
Fund reimburses Dreyfus Service Corporation an amount not to exceed an
annual rate of .25 of 1% of the value of the Fund's average daily net assets
for certain allocated expenses of providing personal services and/or
maintaining shareholder accounts. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder
accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from net investment
income quarterly, and distributes net realized securities gains, if any,
once a year, but it may make distributions on a more frequent basis to
comply with the distribution requirements of the Code, in all events in a
manner consistent with the provisions of the Investment Company Act of
1940. The Fund will not make distributions from net realized securities
gains unless capital loss carryovers, if any, have been utilized or have
expired. You may choose whether to receive dividends and distributions in
cash or to reinvest in additional Fund shares at net asset value. All
expenses are accrued daily and deducted before the declaration of
dividends to investors.
(24)
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and gains
from the sale or other disposition of market discount bonds, paid by the
Fund will be taxable to U.S. shareholders as ordinary income whether
received in cash or reinvested in Fund shares. Depending upon the
composition of the Fund's income, all or a portion of the dividends derived
from net investment income may qualify for the dividends received
deduction allowable to certain U.S. corporations. Distributions from
realized net long-term securities gains of the Fund will be taxable to U.S.
shareholders as long-term capital gains for Federal income tax purposes,
regardless of how long shareholders have held their Fund shares and
whether such distributions are received in cash or reinvested in Fund
shares. The Code provides that the net capital gain of an individual will
not be subject to Federal income tax at a rate in excess of 28%. Dividends
and distributions may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and gains
from the sale or other disposition of market discount bonds, paid by the
Fund to a foreign investor generally are subject to U.S. nonresident
withholding taxes at the rate of 30%, unless the foreign investor claims
the benefit of a lower rate specified in a tax treaty. Distributions from
net realized long-term securities gains paid by the Fund to a foreign
investor as well as the proceeds of any redemptions from a foreign
investor's account, regardless of the extent to which gain or loss may be
realized, generally will not be subject to U.S. nonresident withholding tax.
However, such distributions may be subject to backup withholding, as
described below, unless the foreign investor certifies his non-U.S.
residency status.
Notice as to the tax status of your dividends and distributions will be
mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions
from securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be
realized, paid to a shareholder of the Fund if such shareholder fails to
certify either that the TIN furnished in connection with opening an
account is correct or that such shareholder has not received notice from
the IRS of being subject to backup withholding as a result of a failure to
properly report taxable dividend or interest income on a Federal income
tax return. Furthermore, the IRS may notify the Fund to institute backup
withholding if the IRS determines a shareholder's TIN is incorrect or if a
shareholder has failed to properly report taxable dividend and interest
income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended October 31, 1993 as a "regulated investment company"
under the Code. The Fund intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal income tax to
the extent its earnings are distributed in accordance with applicable
provisions of the Code. In addition, the Fund is subject to a non-deductible
4% excise tax, measured with respect to certain undistributed amounts of
taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as to
Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return and or total
return. Advertisements may also include performance calculated on the
basis of total return.
Current yield refers to the Fund's annualized net investment income per
share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating
current yield, the amount of net investment income per share during that
30-day period, computed in accordance with regulatory requirements, is
compounded by assuming that it is reinvested at a constant rate over a
six-month period. An identical result is then assumed to have occurred
during a second six-month period
(25)
which, when
added to the result for the first six months, provides an "annualized"
yield for an entire one-year period. Calculations of current yield may
reflect absorbed expenses pursuant to any undertaking that may be in
effect. See "Management of the Fund."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund 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 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. Advertisements 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.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and 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 net
asset value per share 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.
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.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Standard & Poor's 500 Composite Stock Price
Index, Standard & Poor's MidCap 400 Index, the Dow Jones Industrial
Average, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on November 15, 1991, and
commenced operations on December 31, 1991. The Fund is authorized to
issue 300 million shares of Common Stock, par value $.001 per share. Each
share has one vote.
Unless otherwise required by the Investment Company Act of 1940,
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 Directors or the appointment of auditors. However,
pursuant to the Fund's By-laws, 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 Director from office
and for any other purpose. Fund shareholders may remove a Director by the
affirmative vote of a majority of the Fund's outstanding voting shares. In
addition, the Board of Directors will call a meeting of shareholders for
the purpose of electing Directors if, at any time, less than a majority of
the Directors then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and sends
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. In New York City, call 1-718-895-1206 (outside
New York City, call collect); on Long Island, call 794-5200.
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.
(26)
APPENDIX
The average distribution of investments in convertible corporate bonds by
ratings for the fiscal year ended October 31, 1993 was as follows:
FITCH INVESTORS MOODY'S INVESTORS STANDARD & POOR'S PERCENTAGE
SERVICE, INC. OR SERVICE, INC. OR CORPORATION OF VALUE
- --------------- ----------------- ----------------- -----------
A A A .27%
BBB Baa BBB 5.46
BB Ba BB 1.11
B B B 4.58
Unrated Unrated Unrated .68(1)
------
12.10%
======
The remaining 87.90% of the Fund's market value was invested primarily
in preferred stocks and common stocks. The information set forth in this
Appendix is a monthly average, and the actual distribution of the Fund's
investments by ratings on any given date will vary. In addition, the
distribution of the Fund's investments by ratings as set forth above should
not be considered as representative of the Fund's future portfolio
composition.
- ----------
1 Included under the Unrated category are securities comprising .68% of
the Fund's market value which, while unrated, have been determined by
The Dreyfus Corporation to be of comparable quality to securities in the
following rating categories: Ba/BB (.56%); Caa/CCC (.11%); and C/C (.01%).
(27)
Dreyfus Service Corporation, 1994
Distributor 010pros5
(Dreyfus Lion Logo)
Growth and Income Fund, Inc.
Prospectus
DREYFUS GROWTH AND INCOME FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JANUARY 10, 1994
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with
the current Prospectus of Dreyfus Growth and Income Fund, Inc.
(the "Fund"), dated January 10, 1994, as it may be revised from
time to time. To obtain a copy of the Fund's Prospectus, please
write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144, or call the following numbers:
Outside New York State -- Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
(Outside New York City -- Call Collect)
On Long Island -- Call 794-5200
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Dreyfus Service Corporation (the "Distributor"), a wholly-
owned subsidiary of the Manager, is the distributor of the Fund's
shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . B-2
Management of the Fund . . . . . . . . . . . . . . . . . . B-10
Management Agreement . . . . . . . . . . . . . . . . . . . B-13
Shareholder Services Plan. . . . . . . . . . . . . . . . . B-14
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . B-15
Redemption of Fund Shares. . . . . . . . . . . . . . . . . B-16
Shareholder Services . . . . . . . . . . . . . . . . . . . B-18
Determination of Net Asset Value . . . . . . . . . . . . . B-21
Dividends, Distributions and Taxes . . . . . . . . . . . . B-22
Performance Information. . . . . . . . . . . . . . . . . . B-24
Portfolio Transactions . . . . . . . . . . . . . . . . . . B-24
Information About the Fund . . . . . . . . . . . . . . . . B-25
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors . . . . . . . . . . . . B-26
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . B-27
Financial Statements . . . . . . . . . . . . . . . . . . . B-33
Report of Independent Auditors . . . . . . . . . . . . . . B-47
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
Portfolio Securities
Bank Obligations
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
have their deposits 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, state banks whose certificates of deposit
("CDs") may be purchased by the Fund are insured by the FDIC
(although such insurance may not be of material benefit to the
Fund, depending on the principal amount of the CDs of each bank
held by the Fund) and are subject to Federal examination and to a
substantial body of Federal law and regulation. As a result of
Federal or state laws and regulations, domestic branches of
domestic banks whose CDs may be purchased by the Fund generally
are required, among other things, to maintain specified levels of
reserves, are limited in the amounts which they can loan to a
single borrower and are subject to other regulation designed to
promote financial soundness. However, not all of such laws and
regulations apply to the foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches
of foreign banks, such as CDs and time deposits ("TDs"), may be
general obligations of the parent banks in addition to the
issuing branch, or may be limited by the terms of a specific
obligation and governmental regulation. Such obligations are
subject to different risks than are those of domestic banks.
These risks include foreign economic and political developments,
foreign governmental restrictions that may adversely affect
payment of principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes on
interest income. These foreign branches and subsidiaries are not
necessarily subject to the same or similar regulatory
requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations, and accounting, auditing
and financial recordkeeping requirements. In addition, less
information may be publicly available about a foreign branch of a
domestic bank or about a foreign bank than about a domestic bank.
Obligations of United States 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 or by Federal or state regulation as well as
governmental action in the country in which the foreign bank has
its head office. A domestic branch of a foreign bank with assets
in excess of $1 billion may be subject to reserve requirements
imposed by the Federal Reserve System or by the state in which
the branch is located if the branch is licensed in that state.
In addition, Federal branches licensed by the Comptroller of
the Currency and branches licensed by certain states ("State
Branches") may be required to: (1) pledge to the regulator, by
depositing assets with a designated bank within the state, a
certain percentage of their assets as fixed from time to time by
the appropriate regulatory authority; and (2) maintain assets
within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable
at or through all of its agencies or branches within the state.
The deposits of Federal and State Branches generally must be
insured by the FDIC if such branches take deposits of less than
$100,000.
In view of the foregoing factors associated with the
purchase of CDs and TDs issued by foreign branches of domestic
banks, by foreign subsidiaries of domestic banks, by foreign
branches of foreign banks or by domestic branches of foreign
banks, the Manager carefully evaluates such investments on a
case-by-case basis.
The Fund may purchase CDs issued by banks, savings and loan
associations and similar thrift institutions with less than $1
billion in assets, which are members of the FDIC, provided the
Fund purchases any such CD in a principal amount of not more than
$100,000, which amount would be fully insured by the Bank
Insurance Fund or the Savings Association Insurance Fund
administered by the FDIC. Interest payments on such a CD are not
insured by the FDIC. The Fund will not own more than one such CD
per such issuer.
Mortgage-Related Securities
Government Agency Securities. Mortgage-related securities
issued by the Government National Mortgage Association ("GNMA")
include GNMA Mortgage Pass-Through Certificates (also known as
"Ginnie Maes") which are guaranteed as to the timely payment of
principal and interest by GNMA and such guarantee is backed by
the full faith and credit of the United States. GNMA is a wholly-
owned U.S. Government corporation within the department of
Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S.
Treasury to make payments under its guarantee.
Government Related Securities. Mortgage-related securities
issued by the Federal National Mortgage Association ("FNMA")
include FNMA Guaranteed Mortgage Pass-Through Certificates (also
known as "Fannie Maes") which are solely the obligations of FNMA
and are not backed by or entitled to the full faith and credit of
the Untied States. FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of principal and interest by
FNMA.
Mortgage-related securities issued by the Federal Home Loan
Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or
"PCs"). FHLMC is a corporate instrumentality of the United
States created pursuant to an Act of Congress, which is owned
entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Bank
and do not constitute a debt or obligation of the United States
or of any Federal Home Loan Bank. Freddie Macs entitle the
holder to timely payment of interest, which is guaranteed by
FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage
loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one
year after it becomes payable.
Management Policies
The Fund engages in the following practices in furtherance
of its objective.
Options Transactions. The Fund may engage in options
transactions, such as purchasing or writing covered call or put
options. The principal reason for writing covered call options
is to realize, through the receipt of premiums, a greater return
than would be realized on the Fund's portfolio securities 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 the Fund may receive may be
adversely affected as new or existing institutions, including
other investment companies, engage in or increase their option-
writing activities.
Options written ordinarily will 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 time 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. The Fund may write (a) in-the-money call
options when the Manager expects that the price of the underlying
security will remain stable or decline moderately during the
option period, (b) at-the-money call options when the Manager
expects that the price of the underlying security will remain
stable or advance moderately during the option period and
(c) out-of-the-money call options when the Manager 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 these circumstances, 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 Fund's obligation 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 the
Fund 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. The
Fund can no longer effect a closing purchase transaction with
respect to an option once it has been assigned an exercise
notice.
While it may choose to do otherwise, the Fund generally will
purchase or write only those options for which the Manager
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, at times have rendered certain
clearing facilities 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 otherwise may interfere with the timely execution of
customers' orders, will not recur. In such event, it might not
be possible to effect closing transactions in particular options.
If as a covered call option writer the Fund is unable to effect a
closing purchase transaction in a secondary market, it will not
be able to sell the underlying security until the option expires
or it delivers the underlying security upon exercise or it
otherwise covers its position.
Stock Index Options. The Fund may purchase and write put
and call options on stock indexes listed on national securities
exchanges or traded in the over-the-counter market. A stock
index fluctuates with changes in the market values of the stocks
included in the 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 a 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.
Futures Contracts and Options on Futures Contracts. Upon
exercise of an option, the writer of the option delivers to the
holder of the option the futures position and the accumulated
balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract.
The potential loss related to the purchase of options on futures
contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at
the time 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 Fund.
Foreign Currency Transactions. If the Fund enters into a
hedging transaction, it will deposit, if required by applicable
regulations, with its custodian cash or readily marketable
securities in a segregated account of the Fund in an amount at
least equal to the value of the Fund's total assets committed to
the consummation of the 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 the contract.
At or before the maturity of a forward contract, the Fund
either may sell a portfolio security and make delivery of the
currency, or retain the security and offset its contractual
obligation to deliver the currency by purchasing a second
contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency which it is
obligated to deliver. 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
loss to the extent movement has occurred in forward contract
prices. 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 cost to the Fund of engaging in currency transactions
varies with factors such as the currency involved, the length of
the contract period and the market conditions then prevailing.
Because transactions in currency exchange usually are conducted
on a principal basis, no fees or commissions are involved. The
use of forward currency exchange contracts does not eliminate
fluctuations in the underlying prices of the securities, but it
does establish a rate of exchange that can be achieved in the
future. If a devaluation generally is anticipated, the Fund may
not be able to contract to sell the currency at a price above the
devaluation level it anticipates. The requirements for
qualification as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"), may cause
the Fund to restrict the degree to which it engages in currency
transactions. See "Dividends, Distributions and Taxes."
Lending Portfolio Securities. To a limited extent, the Fund
may lend its portfolio securities to brokers, dealers and other
financial institutions, provided it receives cash collateral
which at all times is maintained in an amount equal to at least
100% of the current market value of the securities loaned. By
lending its portfolio securities, the Fund can increase its
income through the investment of the cash collateral. For
purposes of this policy, the Fund considers collateral consisting
of U.S. Government securities or irrevocable letters of credit
issued by banks whose securities meet the standards for
investment by the Fund to be the equivalent of cash. From time
to time, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a
"placing broker," a part of the interest earned from the
investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires
that the following conditions must be met whenever portfolio
securities are loaned: (1) the Fund must receive at least 100%
cash collateral 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 Fund must be able to
terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends,
interest or other distributions payable on the loaned securities,
and any increase in market value; (5) the Fund may pay only
reasonable custodian fees in connection with the loan; and
(6) while voting rights on the loaned securities may pass to the
borrower, the Fund's Board of Directors must terminate the loan
and regain the right to vote the securities if a material event
adversely affecting the investment occurs. These conditions may
be subject to future modification.
Risk Factors--Lower Rated Securities. The Fund is permitted
to invest in convertible debt securities rated below Baa by
Moody's Investors Service, Inc. ("Moody's") and below BBB by
Standard & Poor's Corporation ("S&P"), Fitch Investors Service,
Inc. ("Fitch") and Duff & Phelps, Inc. ("Duff") and as low as Caa
by Moody's or CCC by S&P, Fitch or Duff. Such securities, though
higher yielding, are characterized by risk. See in the
Prospectus "Description of the Fund--Risk Factors--Lower Rated
Securities" for a discussion of certain risks and the Appendix
for a general description of Moody's, S&P, Fitch and Duff
ratings. Although ratings may be useful in evaluating the safety
of interest and principal payments, they do not evaluate the
market value risk of these securities. The Fund will rely on the
Manager's judgment, analysis and experience in evaluating the
creditworthiness of an issuer.
Investors should be aware that the market values of many of
these securities tend to be more sensitive to economic conditions
than are higher rated securities. These securities generally are
considered by S&P, Moody's, Fitch and Duff to be, on balance, as
predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than
securities in the higher rating categories.
Companies that issue certain of these securities often are
highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated
with acquiring the securities of such issuers generally is
greater than is the case with the higher rated securities. For
example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of these
securities may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service
its debt obligations also may be affected adversely by specific
corporate developments, forecasts, or the unavailability of
additional financing. The risk of loss because of default by the
issuer is significantly greater for the holders of these
securities because such securities generally are unsecured and
often are subordinated to other creditors of the issuer.
Because there is no established retail secondary market for
many of these securities, the Fund anticipates that such
securities could be sold only to a limited number of dealers or
institutional investors. To the extent a secondary trading
market for these securities does exist, it generally is not as
liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on
market price and yield and the Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity
needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of
a liquid secondary market for certain securities also may make it
more difficult for the Fund to obtain accurate market quotations
for purposes of valuing the Fund's portfolio and calculating its
net asset value. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases,
judgment may play a greater role in valuation because less
reliable, objective data may be available.
These securities may be particularly susceptible to economic
downturns. It is likely that an economic recession could disrupt
severely the market for such securities and may have an adverse
impact on the value of such securities. In addition, it is
likely that any such economic downturn could adversely affect the
ability of the issuers of such securities to repay principal and
pay interest thereon and increase the incidence of default for
such securities.
The Fund may acquire these securities during an initial
offering. Such securities may involve special risks because they
are new issues. The Fund has no arrangement with the Distributor
or any other persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and
other characteristics pertinent to such new issues.
Investment Restrictions. The Fund has adopted investment
restrictions numbered 1 through 7 as fundamental policies.
Fundamental policies cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "Act")) of the Fund's outstanding voting
shares. Investment restrictions numbered 8 through 13 are not
fundamental policies and may be changed by vote of a majority of
the Directors at any time. The Fund may not:
1. Invest in commodities, except that the Fund may invest
in futures contracts and options on futures contracts as
described in the Fund's Prospectus and this Statement of
Additional Information.
2. Purchase, hold or deal in real estate, real estate
limited partnership interests, or oil, gas or other mineral
leases or exploration or development programs, but the Fund may
purchase and sell securities that are secured by real estate and
may purchase and sell securities issued by companies that invest
or deal in real estate. In particular, the Fund may purchase
mortgage-backed securities and real estate investment trust
securities.
3. Borrow money, except to the extent permitted under the
Act. For purposes of this investment restriction, the entry into
options, forward contracts, futures contracts, including those
relating to indexes, and options on futures contracts or indexes
shall not constitute borrowing.
4. Make loans to others, except through the purchase of
debt obligations or the entry into repurchase agreements.
However, the Fund may lend its portfolio securities in an amount
not to exceed 33 1/3% of the value of its total assets. Any loans
of portfolio securities will be made according to guidelines
established by the Securities and Exchange Commission and the
Fund's Board of Directors.
5. Act as an underwriter of securities of other issuers,
except to the extent the Fund may be deemed an underwriter under
the Securities Act of 1933, as amended, by virtue of disposing of
portfolio securities.
6. Invest more than 25% of its assets in the securities of
issuers in any particular industry, provided that there shall be
no limitation on the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
7. Issue any senior security as such term is defined in
Section 18(f) of the Act, except as permitted in Investment
Restriction Nos. 1, 3, 8 and 9.
8. Purchase, sell or write puts, calls or combinations
thereof, except as described in the Fund's Prospectus and this
Statement of Additional Information.
9. Pledge, mortgage or hypothecate its assets, except to
the extent necessary to secure permitted borrowings and to the
extent related to the deposit of assets in escrow in connection
with writing covered put and call options and the purchase of
securities on a when-issued or delayed-delivery basis and
collateral and initial or variation margin arrangements with
respect to options, forward contracts, futures contracts,
including those relating to indexes, and options on futures
contracts or indexes.
10. Purchase warrants in excess of 2% of its net assets.
For purposes of this restriction, such warrants shall be valued
at the lower of cost or market, except that warrants acquired by
the Fund in units or attached to securities shall not be included
within this 2% restriction.
11. Purchase securities of any company having less than
three years' continuous operations (including operations of any
predecessors) if such purchase would cause the value of the
Fund's investments in all such companies to exceed 5% of the
value of its total assets.
12. Invest in the securities of a company for the purpose
of exercising management or control.
13. Enter into repurchase agreements providing for
settlement in more than seven days after notice or purchase
securities which are illiquid, if, in the aggregate, more than
15% of the value of the Fund's net assets would be so invested.
If a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting
from a change in values or assets will not constitute a violation
of such restriction.
The Fund may make commitments more restrictive than the
restrictions listed above so as to permit the sale of Fund shares
in certain states. Should the Fund determine that a commitment
is no longer in the best interest of the Fund and its
shareholders, the Fund reserves the right to revoke the
commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with
information as to their principal business occupations during at
least the last five years, are shown below. Each Director who is
deemed to be an "interested person" of the Fund, as defined in
the Act, is indicated by an asterisk.
Directors and Officers of the Fund
JOHN M. FRASER, JR., Director. President of Fraser Associates, a
service company for planning and arranging corporate meetings and
other events. From September 1975 to June 1978, he was Executive
Vice President of Flagship Cruises, Ltd. Prior thereto, he was
Senior Vice President and Resident Director of the Swedish-
American Line for the United States and Canada. His address is
965 Fifth Avenue, New York, New York 10021.
ROBERT R. GLAUBER, Director. Research Fellow, Center for
Business and Government at the John F. Kennedy School of
Government, Harvard University, since January 1992. He was Under
Secretary of the Treasury for Finance at the U.S. Treasury
Department from May 1989 to January 1992. For more than five
years prior thereto, he was a Professor of Finance at the
Graduate School of Business Administration of Harvard University
and, from 1985 to 1989, Chairman of its Advanced Management
Program. His address is 79 John F. Kennedy Street, Cambridge,
Massachusetts 02138.
JAMES F. HENRY, Director. President of the Center for Public
Resources, a non-profit organization principally engaged in the
development of alternatives to business litigation. He was of
counsel to the law firm of Lovejoy, Wasson & Ashton from October
1975 to December 1976 and from October 1979 to June 1983, and was
a partner of that firm from January 1977 to September 1979. He
was President and a director of the Edna McConnell Clark
Foundation, a philanthropic organization, from September 1971 to
December 1976. His address is c/o Center for Public Resources,
366 Madison Avenue, New York, New York 10017.
ROSALIND GERSTEN JACOBS, Director. Director of Merchandise and
Marketing for Corporate Property Investors, a real estate
investment company. From 1974 to 1976, she was owner and manager
of a merchandise and marketing consulting firm. Prior to 1974,
she was Vice President of Macy's, New York. Her address is c/o
Corporate Property Investors, 305 East 47th Street, New York, New
York 10017.
*IRVING KRISTOL, Director. Consultant to the Manager on economic
matters. He is also John M. Olin Distinguished Fellow of the
American Enterprise Institute for Public Policy Research, co-
editor of The Public Interest magazine and an author or co-editor
of several books. From 1969 to 1988, he was Professor of Social
Thought at the Graduate School of Business Administration, New
York University; from September 1969 to August 1979, he was Henry
R. Luce Professor of Urban Values at New York University; from
1975 to 1990, he was a director of Lincoln National Corporation,
an insurance company; and from 1977 to 1990, he was a director of
Warner-Lambert Company, a pharmaceutical and consumer products
company. His address is c/o The Public Interest, 1112 16th
Street, N.W., Suite 530, Washington, D.C. 20036.
DR. PAUL A. MARKS, Director. President and Chief Executive
Officer of Memorial Sloan-Kettering Cancer Center. He was Vice
President for Health Sciences and Director of the Cancer Center
at Columbia University from 1973 to September 1980, and Professor
of Medicine and of Human Genetics and Development at Columbia
University from 1968 to 1982. He is also a director of Pfizer,
Inc., a pharmaceutical company, Life Technologies, Inc., a life
science company providing products for cell and molecular biology
and microbiology, Biotechnology General, Inc., a biotechnology
development company and National Health Laboratories, a national
clinical diagnostic laboratory. His address is c/o Memorial
Sloan-Kettering Cancer Center, 1275 York Avenue, New York, New
York 10021.
R. MARTIN PERETZ, Director. Editor-in-Chief of The New Republic
magazine and a lecturer in social studies at Harvard University,
where he has been a member of the faculty since 1965. He is a
trustee of the Center for Blood Research at the Harvard Medical
School and a director of Carmel Container Corporation. His
address is c/o The New Republic, 1220 19th Street, N.W.,
Washington, D.C. 20036.
*HOWARD STEIN, Director and Investment Officer. Chairman of the
Board and Chief Executive Officer of the Manager, Chairman of the
Board of the Distributor and an officer, director, trustee or
general partner of other investment companies advised or
administered by the Manager. He is also a director of Avnet, an
electronic parts and equipment company, and a trustee of
Corporate Property Investors, a real estate investment company.
His address is 200 Park Avenue, New York, New York 10166.
*BERT W. WASSERMAN, Director. Executive Vice President and Chief
Financial Officer since January 1990 and a director from January
1990 to March 1993 of Time Warner Inc. From 1981 to 1990, he was
President and a director of Warner Communications Inc. He is
also a member of the Chemical Bank National Advisory Board. His
address is c/o Time Warner Inc., 75 Rockefeller Place, New York,
New York 10019.
Mrs. Jacobs, Messrs. Fraser, Glauber, Henry, Kristol and
Wasserman and Drs. Marks and Peretz are also directors of Dreyfus
A Bonds Plus, Inc., Dreyfus Balanced Fund, Inc., Dreyfus Capital
Growth Fund (A Premier Fund), Dreyfus Growth Opportunity Fund,
Inc., Dreyfus International Equity Fund, Inc. and Dreyfus Money
Market Instruments, Inc. and trustees of Dreyfus Institutional
Money Market Fund and Dreyfus Variable Investment Fund. In
addition, Mr. Glauber is a director of Dreyfus Asset Allocation
Fund, Inc., Dreyfus California Municipal Income, Inc., The
Dreyfus Fund Incorporated, Dreyfus Municipal Income, Inc.,
Dreyfus New York Municipal Income, Inc., Dreyfus Short-Term
Income Fund, Inc. and Dreyfus Worldwide Dollar Money Market Fund,
Inc. and a trustee of Dreyfus Short-Intermediate Municipal Bond
Fund and Dreyfus Institutional Short Term Treasury Fund.
For so long as the Fund's plan described in the section
captioned "Shareholder Services Plan" remains in effect, the
Directors of the Fund who are not "interested persons" of the
Fund, as defined in the Act, will be selected and nominated by
the Directors who are not "interested persons" of the Fund.
The Fund does not pay any remuneration to its officers and
Directors other than fees and expenses to Directors who are not
officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager, which totalled
$17,419 for the fiscal year ended October 31, 1993, for such
Directors as a group.
Officers of the Fund Not Listed Above
RICHARD B. HOEY, President and Investment Officer. Chief
Economist of the Manager since April 1991 and an officer of other
investment companies advised and administered by the Manager.
From April 1990 to March 1991, he was Chief
Economist and a Managing Director of Barclay, de Zoete Wedd.
Prior thereto, he was Chief Economist and a Managing Director of
Drexel Burnham Lambert.
DANIEL C. MACLEAN, Vice President. Vice President and General
Counsel of the Manager, Secretary of the Distributor and an
officer or director of other investment companies advised or
administered by the Manager.
JEFFREY N. NACHMAN, Vice President and Treasurer. Vice
President-Mutual Fund Accounting of the Manager and an officer of
other investment companies advised or administered by the
Manager.
PAUL R. CASTI, JR., Controller. Senior Accounting Manager of the
Fund Accounting Department of the Manager and an officer of other
investment companies advised or administered by the Manager.
MARK N. JACOBS, Secretary. Secretary and Deputy General Counsel
of the Manager and an officer of other investment companies
advised or administered by the Manager.
A. THOMAS SMITH III, Assistant Secretary. Since August 1991,
Assistant General Counsel of the Manager. From January 1989 to
August 1991, Senior Associate with Willkie Farr & Gallagher, and
from January 1986 to December 1988, Staff Attorney in the Chief
Counsel's Office of the U.S. Securities and Exchange Commission,
Division of Investment Management.
CHRISTINE PAVALOS, Assistant Secretary. Assistant Secretary of
the Manager and other investment companies advised or
administered by the Manager.
The address of each officer of the Fund is 200 Park Avenue,
New York, New York 10166.
Directors and officers of the Fund, as a group, owned less
than 1% of the Fund's shares of common stock outstanding on
December 10, 1993.
The following persons are also officers and/or directors of
the Manager: Julian M. Smerling, Vice Chairman of the Board of
Directors; Joseph S. DiMartino, President, Chief Operating
Officer and a director; Alan M. Eisner, Vice President and Chief
Financial Officer; David W. Burke, Vice President and Chief
Administrative Officer; Robert F. Dubuss, Vice President; Elie M.
Genadry, Vice President--Institutional Sales; Peter A.
Santoriello, Vice President; Robert H. Schmidt, Vice President;
Kirk V. Stumpp, Vice President--New Product Development;
Philip L. Toia, Vice President; John J. Pyburn, Assistant Vice
President; Katherine C. Wickham, Assistant Vice President--Human
Resources; Maurice Bendrihem, Controller; and Mandell L. Berman,
Alvin E. Friedman, Lawrence M. Greene, Abigail Q. McCarthy and
David B. Truman, directors.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Management of the Fund."
The Manager provides management services pursuant to the
Management Agreement (the "Agreement") dated December 9, 1991,
with the Fund, which is subject to annual approval by (i) the
Fund's Board of Directors or (ii) vote of a majority (as defined
in the Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by
a majority of the Directors who are not "interested persons" (as
defined in the Act) of the Fund or the Manager, by vote cast in
person at a meeting called for the purpose of voting on such
approval. Shareholders approved the Agreement at a meeting held
on March 30, 1993. The Fund's Board of Directors, including a
majority of the Directors who are not "interested persons" of any
party to the Agreement, last approved the Agreement at a meeting
held on December 6, 1993. The Agreement is terminable without
penalty, on 60 days' notice, by the Fund's Board of Directors or
by vote of the holders of a majority of the Fund's shares, or, on
not less than 90 days' notice, by the Manager. The Agreement
will terminate automatically in the event of its assignment (as
defined in the Act).
The Manager manages the Fund's portfolio of investments in
accordance with the stated policies of the Fund, subject to the
approval of the Fund's Board of Directors. The Manager is
responsible for investment decisions, and provides the Fund with
Investment Officers who are authorized by the Board of Directors
to execute purchases and sales of securities. The Fund's
Investment Officers are Thomas A. Frank, Richard B. Hoey, Howard
Stein and Wolodymyr Wronskyj. The Manager also maintains a
research department with a professional staff of portfolio
managers and securities analysts who provide research services
for the Fund as well as for other funds advised by the Manager.
All purchases and sales are reported for the Directors' review at
the meeting subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne
by the Fund, except to the extent specifically assumed by the
Manager. The expenses borne by the Fund include:
organizational costs, taxes, interest, loan commitment fees,
dividends and interest on securities sold short, brokerage fees
and commissions, if any, fees of Directors who are not officers,
directors, employees or holders of 5% or more of the outstanding
voting securities of the Manager, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory
fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association
fees, outside auditing and legal expenses, costs of maintaining
the Fund's existence, costs of independent pricing services,
costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and
printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing
shareholders, and any extraordinary expenses.
The Manager pays the salaries of all officers and employees
employed by both it and the Fund, maintains office facilities,
and furnishes statistical and research data, clerical help,
accounting, data processing, bookkeeping and internal auditing
and certain other required services. The Manager also may make
such advertising and promotional expenditures, using its own
resources, as it from time to time deems appropriate.
As compensation for the Manager's services, the Fund has
agreed to pay the Manager a monthly management fee at the annual
rate of .75 of 1% of the value of the Fund's average daily net
assets. All fees and expenses are accrued daily and deducted
before declaration of dividends to shareholders. For the period
from December 31, 1991 (commencement of operations) through
October 31, 1992 and for the fiscal year ended October 31, 1993,
the management fees payable by the Fund amounted to $223,707 and
$4,015,305, respectively; however, pursuant to undertakings in
effect, the Manager reduced its fees by $138,635 and
$196,680, respectively resulting in net fees of $85,072 in fiscal
1992, and $3,818,625 in fiscal 1993.
The Manager has agreed that if in any fiscal year the
aggregate expenses of the Fund, exclusive of taxes, brokerage,
interest on borrowings and (with the prior written consent of the
necessary state securities commissions) extraordinary expenses,
but including the management fee, exceed the expense limitation
of any state having jurisdiction over the Fund, the Fund may
deduct from the payment to be made to the Manager under the
Agreement, or the Manager will bear, such excess expense to the
extent required by state law. Such deduction or payment, if any,
will be estimated daily, and reconciled and effected or paid, as
the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not
subject to reduction as the value of the Fund's net assets
increases.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Prospectus entitled
"Shareholder Services Plan."
The Fund has adopted a Shareholder Services Plan (the
"Plan") pursuant to which the Fund reimburses the Distributor for
certain allocated expenses of providing personal services and/or
maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such
as answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to
the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must
be made to the Directors for their review. In addition, the Plan
provides that material amendments of the Plan must be approved by
the Board of Directors, and by the Directors who are not
"interested persons" (as defined in the Act) of the Fund or the
Manager and have no direct or indirect financial interest in the
operation of the Plan, by vote cast in person at a meeting called
for the purpose of considering such amendments. The Plan is
subject to annual approval by such vote of the Directors cast in
person at a meeting called for the purpose of voting on the Plan.
The Plan is terminable at any time by vote of a majority of the
Directors who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Plan.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's
distributor pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in
the Dreyfus Family of Funds and for certain other investment
companies.
Dreyfus TeleTransfer Privilege. 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 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 Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Optional 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."
Transactions Through Securities Dealers. Fund shares may be
purchased and redeemed through securities dealers which may
charge a nominal transaction fee for such services. Some dealers
will place the Fund's shares in an account with their firm.
Dealers also may require that the customer invest more than the
$1,000 minimum investment; the customer not take physical
delivery of share certificates; the customer not request
redemption checks to be issued in the customer's name; fractional
shares not be purchased; or other conditions.
There is no sales or service charge by the Fund or the
Distributor, although investment dealers, banks and other
institutions may make reasonable charges to investors for their
services. The services provided and the applicable fees are
established by each dealer or other institution acting
independently of the Fund. The Fund has been given to understand
that these fees may be charged for customer services including,
but not limited to, same-day investment of client funds; same-day
access to client funds; advice to customers about the status of
their accounts, yield currently being paid or income earned to
date; provision of periodic account statements showing security
and money market positions; other services available from the
dealer, bank or other institution; and assistance with inquiries
related to their investment. Any such fees will be deducted
monthly from the investor's account, which on smaller accounts
could constitute a substantial portion of distributions. Small,
inactive, long-term accounts involving monthly service charges
may not be in the best interest of investors. Investors should
be aware that they may purchase shares of the Fund directly from
the Fund without imposition of any maintenance or service
charges, other than those already described herein. In some
states, banks or other financial institutions effecting
transactions in Fund shares may be required to register as
dealers pursuant to state law.
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.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"How to Redeem 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 and reasonably believed by
the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege
on the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption
proceeds will be transferred by Federal Reserve wire only to the
commercial bank account specified by the investor on the Account
Application or Optional 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 wire redemption proceeds, a written request must be sent
to the Transfer Agent. This request must be signed by each
shareholder, with each signature guaranteed as described below
under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. 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 Automated Clearing House
("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."
Stock Certificates; Signatures. Any certificates
representing Fund shares to be redeemed must be submitted with
the redemption request. Written redemption requests must be
signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on
endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings
associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear
with the signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular
verification. For more information with respect to signature-
guarantees, please call one of the telephone numbers listed on
the cover.
Redemption Commitment. The Fund has committed itself to pay
in cash all redemption requests by any shareholder of record,
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 Securities and Exchange Commission. In
the case of requests for redemption in excess of such amount, the
Board of Directors reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency
or any time a cash distribution would impair the liquidity of the
Fund to the detriment of the existing shareholders. In such
event, the securities would be valued in the same manner as the
Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period
when the New York Stock Exchange is closed (other than customary
weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the Securities and Exchange Commission so
that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such
other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Exchange Privilege. Shares of other 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 distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the
maximum sales load that could have been imposed in connection
with the Purchased Shares (at the time the Purchased Shares were
acquired), without giving effect to any reduced loads, the
difference will be deducted.
To accomplish an exchange under item D above, shareholders
must notify the Transfer Agent of their prior ownership of fund
shares and their account number.
To use this Privilege, an investor must give exchange
instructions to the Transfer Agent in writing, by wire or by
telephone. Telephone exchanges may be made only if the
appropriate "YES" box has been checked on the Account
Application, or a separate signed Optional Services Form is on
file with the Transfer Agent. By using this Privilege, the
investor authorizes the Transfer Agent to act on telephonic,
telegraphic or written exchange instructions from any person
representing himself or herself to be the investor, and
reasonably believed by the Transfer Agent to be genuine.
Telephone exchanges may be subject to limitations as to the
amount involved or the number of telephone exchanges permitted.
Shares issued in certificate form are not eligible for telephone
exchange.
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 IRAs setup under a Simplified Employee Pension Plan ("SEP-
IRAs") with only one participant, the minimum initial investment
is $750. To exchange shares held in Corporate Plans, 403(b)(7)
Plans and 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 Personal Retirement Plans, the shares
exchanged must have a current value of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange
Privilege permits an investor to purchase, in exchange for shares
of the Fund, shares of another fund in the Dreyfus Family of
Funds. This Privilege is available only for existing accounts.
Shares will be exchanged on the basis of relative net asset value
as described above under "Exchange Privilege." 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 his account falls below the amount
designated to be exchanged under this Privilege. In this case,
an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to
the next Auto-Exchange transaction. Shares held under IRA and
other retirement plans are eligible for this Privilege.
Exchanges of IRA shares may be made between IRA accounts and from
regular accounts to IRA accounts, but not from IRA accounts to
regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.
The Exchange Privilege 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.
Optional Services Forms and prospectuses of the other funds
may be obtained from the Distributor, 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144. The Fund reserves the
right to reject any exchange request in whole or in part. The
Exchange Privilege or Dreyfus Auto-Exchange Privilege may be
modified or terminated at any time upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan
permits an investor with a $5,000 minimum account to request
withdrawal of a specified dollar amount (minimum of $50) on
either a monthly or quarterly basis. Withdrawal payments are the
proceeds from sales of Fund shares, not the yield on the shares.
If withdrawal payments exceed reinvested dividends and distribu-
tions, 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 with-
drawal check. Automatic Withdrawal may be terminated at any time
by the investor, the Fund or the Transfer Agent. Shares for
which certificates have been issued may not be redeemed through
to the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep Privilege. Dreyfus Dividend Sweep
Privilege allows investors to invest on the payment date their
dividends or dividends and capital gain distributions, if any,
from the Fund in shares of another fund in the Dreyfus Family of
Funds of which the investor is a shareholder. Shares 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 Personal Retirement
Plans. The Fund makes available to corporations a variety of
prototype pension and profit-sharing plans including a 401(k)
Salary Reduction Plan. In addition, the Fund makes available
Keogh Plans, IRAs, including IRAs set up under SEP-IRAs and IRA
"Rollover Accounts," and 403(b)(7) Plans. Plan support services
also are available. For details, please contact the Dreyfus
Group Retirement Plans, a division of the Distributor, by calling
toll free 1-800-358-5566.
Investors who wish to purchase Fund shares 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 or 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.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"How to Buy Fund Shares."
Valuation of Portfolio Securities. Portfolio securities,
including covered call options written by the Fund, are valued at
the last sale price on the securities exchange or national
securities market on which such securities primarily are traded.
Securities not listed on an exchange or national securities
market, or securities in which there were no transactions, are
valued at the average of the most recent bid and asked prices,
except in the case of open short positions where the asked price
is used for valuation purposes. Bid price is used when no asked
price is available. Any assets or liabilities initially
expressed in terms of foreign currency will be translated into
dollars at the midpoint of the New York interbank market spot
exchange rate as quoted on the day of such translation by the
Federal Reserve Bank of New York or if no such rate is quoted on
such date, at the exchange rate previously quoted by the Federal
Reserve Bank of New York or at such other quoted market exchange
rate as may be determined to be appropriate by the Manager.
Forward currency contracts will be valued at the current cost of
offsetting the contract. Because of the need to obtain prices as
of the close of trading on various exchanges throughout the
world, the calculation of net asset value does not take place
contemporaneously with the determination of prices of a majority
of the portfolio securities. Short-term investments are carried
at amortized cost, which approximates value. Any securities or
other assets for which recent market quotations are not readily
available are valued at fair value as determined in good faith by
the Board of Directors. Expenses and fees, including the
management fee, are accrued daily and taken into account for the
purpose of determining the net asset value of Fund shares.
Restricted securities, as well as securities or other assets
for which market quotations are not readily available, or are not
valued by a pricing service approved by the Board of Directors,
are valued at fair value as determined in good faith by the Board
of Directors. The Board of Directors will review the method of
valuation on a current basis. In making their good faith
valuation of restricted securities, the Directors generally will
take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the
same class of securities for which a public market exists usually
will be valued at market value less the same percentage discount
at which purchased. This discount will be revised periodically
by the Board of Directors if the Directors believe that it no
longer reflects the value of the restricted securities.
Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at
cost. Any subsequent adjustment from cost will be based upon
considerations deemed relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as
observed) on which the New York Stock Exchange is closed
currently are: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, DISTRIBUTION AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Dividends, Distributions and Taxes."
Management of the Fund believes that the Fund qualified for
the fiscal year ended October 31, 1993 as a "regulated investment
company" under the Code. The Fund intends to continue to so
qualify if such qualification is in the best interests of its
shareholders. Qualification as a regulated investment company
relieves the Fund from any liability for Federal income taxes to
the extent its earnings are distributed in accordance with the
applicable provisions of the Code. The term "regulated
investment company" does not imply the supervision of management
or investment practices or policies by any government agency.
Depending on the composition of the Fund's income, all or a
portion of the dividends paid by the Fund from net investment
income may qualify for the dividends received deduction allowable
to certain U.S. corporate shareholders ("dividends received
deduction"). In general, dividend income of the Fund distributed
to qualifying corporate shareholders will be eligible for the
dividends received deduction only to the extent that (i) the
Fund's income consists of dividends paid by U.S. corporations and
(ii) the Fund would have been entitled to the dividends received
deduction with respect to such dividend income if the Fund were
not a regulated investment company. The dividends received
deduction for qualifying corporate shareholders may be further
reduced if the shares of the Fund held by them with respect to
which dividends are received are treated as debt-financed or
deemed to have been held for less than 46 days. In addition, the
Code provides other limitations with respect to the ability of a
qualifying corporate shareholder to claim the dividends received
deduction in connection with holding Fund shares.
Any dividend or distribution paid shortly after an
investor's purchase may have the effect of reducing the aggregate
net asset value of his shares below the cost of his investment.
Such a dividend or distribution would be a return on investment
in an economic sense, although taxable as stated above. In
addition, the Code provides that if a shareholder holds shares of
the Fund for six months or less and has received a capital gain
distribution with respect to such shares, any loss incurred on
the sale of such shares will be treated as a long-term capital
loss to the extent of the capital gain distribution received.
Ordinarily, gains and losses realized from portfolio
transactions will be treated as capital gains and losses.
However, a portion of the gain or loss realized from the
disposition of non-U.S. dollar denominated securities (including
debt instruments, certain financial futures and options, and
certain preferred stock) may be treated as ordinary income or
loss under Section 988 of the Code. In addition, all or a
portion of the gain realized from the disposition of market
discount bonds will be treated as ordinary income under Section
1276. A market discount bond is defined as any bond purchased by
the Fund after April 30, 1993, and after its original issuance,
at a price below its face or accreted value. Finally, all or a
portion of the gain realized from engaging in "conversion
transactions" may be treated as ordinary income under Section
1258. "Conversion transactions," are defined to include certain
forward, futures, option and straddle transactions, transactions
marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by the
Fund from certain financial futures and options transactions
(other than those taxed under Section 988 of the Code) will be
treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Gain or loss will arise upon the exercise
or lapse of such futures and options as well as from closing
transactions. In addition, any such futures or options remaining
unexercised at the end of the Fund's taxable year will be treated
as sold for their then fair market value, resulting in additional
gain or loss to the Fund characterized in the manner described
above.
Offsetting positions held by the Fund involving financial
futures and options may constitute "straddles." Straddles are
defined to include "offsetting positions" in actively traded
personal property. The tax treatment of straddles is governed by
Sections 1092 and 1258 of the Code, which, in certain
circumstances, overrides or modifies the provisions of Sections
988 and 1256. As such, all or a portion of any short or long-
term capital gain from certain "straddle" transactions may be
recharacterized to ordinary income.
If a Fund were treated as entering into straddles by reason
of its futures or options transactions, such straddles could be
characterized as "mixed straddles" if the futures or options
transactions comprising such straddles were governed by Section
1256 of the Code. The Fund may make one or more elections with
respect to "mixed straddles." Depending upon which election is
made, if any, the results to the Fund may differ. If no election
is made, to the extent the straddle rules apply to positions
established by the Fund, losses realized by the Fund will be
deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle and conversion
transactions rules, short-term capital loss on straddle positions
may be recharacterized as long-term capital loss, and long-term
capital gain may be recharacterized as short-term capital gain or
ordinary income.
Investment by the Fund in securities issued or acquired at a
discount, or providing for deferred interest or for payment of
interest in the form of additional obligations could under
special tax rules affect the amount, timing and character of
distributions to shareholders by causing the Fund to recognize
income prior to the receipt of cash payments. For example, the
Fund could be required to accrue a portion of the discount (or
deemed discount) at which the securities were issued each year
and to distribute such income in order to maintain its qualifica-
tion as a regulated investment company. In such case, the Fund
may have to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these
distribution requirements.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Performance Information."
The Fund's average annual total return for the 1 and 1.836
year periods ended October 31, 1993 (the Fund's fiscal year end)
was 24.24% and 20.05%, respectively. Average annual total return
is calculated by determining the ending redeemable value of an
investment purchased at net asset value per share with a
hypothetical $1,000 payment made at the beginning of the period
(assuming the reinvestment of dividends and distributions),
dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in
the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the
Fund's net asset value per share at the beginning of a stated
period from the net asset value per share at the end of the
period (after giving effect to the reinvestment of dividends and
distributions during the period), and dividing the result by the
net asset value per share at the beginning of the period. The
Fund's total return for the period December 31, 1991
(commencement of operations) to October 31, 1993 (the Fund's
fiscal year end) was 39.86%.
From time to time, the Fund may compare its performance
against inflation with the performance of other instruments
against inflation, such as short-term Treasury Bills (which are
direct obligations of the U.S. Government) and FDIC-insured bank
money market accounts. In addition, advertising for the Fund may
indicate that investors may consider diversifying their
investment portfolios in order to seek protection of the value of
their assets against inflation. From time to time, advertising
materials for the Fund may refer to, or include commentary by the
Fund's portfolio manager, Richard B. Hoey, relating to, his
investment strategy, asset growth of the Fund, current or past
business, political, economic or financial conditions and other
matters of general interest to investors. In addition,
from time to time, advertising materials for the Fund may include
information concerning retirement and investing for retirement,
may refer to the approximate number of then-current Fund
shareholders and may refer to Morningstar ratings and related
analysis supporting the ratings.
PORTFOLIO TRANSACTIONS
The Manager supervises the placement of orders on behalf of
the Fund for the purchase or sale of portfolio securities.
Allocation of brokerage transactions, including their frequency,
is made in the best judgment of the Manager and in a manner
deemed fair and reasonable to shareholders. The primary
consideration is prompt execution of orders at the most favorable
net price. Subject to this consideration, the brokers selected
include those that supplement the Manager's research facilities
with statistical data, investment information, economic facts and
opinions. Information so received is in addition to and not in
lieu of services required to be performed by the Manager and the
Manager's fee is not reduced as a consequence of the receipt of
such supplemental information. Such information may be useful to
the Manager in serving both the Fund and other clients which it
advises and, conversely, supplemental information obtained by the
placement of business of other clients may be useful to the
Manager in carrying out its obligation to the Fund. Brokers also
are selected because of their ability to handle special
executions such as are involved in large block trades or broad
distributions, provided the primary consideration is met. Large
block trades, in certain cases, may result from two or more
clients the Manager might advise being engaged simultaneously in
the purchase or sale of the same security. Certain of the Fund's
transactions in securities of foreign issuers may not benefit
from the negotiated commission rates available to the Fund for
transactions in securities of domestic issuers. Foreign exchange
transactions are made with banks or institutions in the interbank
market at prices reflecting a mark-up or mark-down and/or
commission. When transactions are executed in the over-the-
counter market, the Fund will deal with the primary market makers
unless a more favorable price or execution otherwise is
obtainable.
The Fund's portfolio turnover rate for the period December
31, 1991 (commencement of operations) through October 31, 1992,
and for the fiscal year ended October 31, 1993, was 127.24% and
85.26%, respectively. Portfolio turnover may vary from year to
year, as well as within a year. High turnover rates are likely
to result in comparatively greater brokerage expenses. The
overall reasonableness of brokerage commissions paid is evaluated
by the Manager based upon its knowledge of available information
as to the general level of commissions paid by other
institutional investors for comparable services.
For the period December 31, 1991 (commencement of
operations) through October 31, 1992 and for the fiscal year
ended October 31, 1993, the Fund paid total brokerage commissions
of $269,431 and $2,514,974, respectively, none of which was paid
to the Distributor. The above figures for brokerage commissions
do not include gross spreads and concessions on principal
transactions which, where determinable, amounted to $707,068 and
$8,144,062, respectively, for the same periods, none of which was
paid to the Distributor.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"General Information."
Each Fund share has one vote and, when issued and paid for
in accordance with the terms of the offering, is fully paid and
non-assessable. Fund shares are of one class and have equal
rights as to dividends and in liquidation. Shares have no
preemptive, subscription or conversion rights and are freely
transferable.
The Fund will send annual and semi-annual financial
statements to all its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
The Bank of New York, 110 Washington Street, New York, New
York 10286, acts as custodian of the Fund's investments. The
Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671,
is the Fund's transfer and dividend disbursing agent. Neither
The Bank of New York nor The Shareholder Services Group, Inc. has
any part in determining the investment policies of the Fund or
which securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New
York 10004-2696, as counsel for the Fund, has rendered its
opinion as to certain legal matters regarding the due
authorization and valid issuance of the shares of common stock
being sold pursuant to the Fund's Prospectus.
Ernst & Young, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX
Description of certain ratings assigned by Standard & Poor's
Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, Inc. ("Fitch") and Duff & Phelps, Inc. ("Duff"):
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned by S&P. 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 highest 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
obligations 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
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions
to meet timely payments of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the capacity to
pay interest and repay principal.
S&P's letter ratings may be modified by the addition of a plus (+) or
minus (-) sign designation, which is used to show relative standing within
the major rating categories, except in the AAA (Prime Grade) category.
Commercial Paper Rating
The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are
denoted with a plus sign (+) designation.
Moody's
Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and 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 generally are
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment 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 therefore 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.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category.
The modifier 1 indicates a ranking for the security in the higher end of a
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issue, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an adverse
impact on these bonds and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings
on the existence of liquidity necessary to meet the issuer's obligations in
a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
Duff
Bond Ratings
AAA
Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because
of economic conditions.
A
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
BBB
Bonds rated BBB are considered to have below average protection
factors but still considered sufficient for prudent investment.
Considerable variability in risk during economic cycles.
BB
Bonds rated BB are below investment grade but are deemed by Duff as
likely to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the
category.
B
Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating
within this category or into a higher or lower quality rating grade.
CCC
Bonds rated CCC are well below investment grade securities. Such
bonds may be in default or have considerable uncertainty as to timely
payment of interest, preferred dividends and/or principal. Protection
factors are narrow and risk can be substantial with unfavorable economic or
industry conditions and/or with unfavorable company developments.
Plus (+) and minus (-) signs are used with a rating symbol (except
AAA) to indicate the relative position of a credit within the rating
category.
Commercial Paper Rating
The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors which are supported by
ample asset protection. Risk factors are minor.
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS OCTOBER 31, 1993
COMMON STOCKS--57.1%
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<C> <S> <C> <C>
BASIC AND PROCESS INDUSTRIES--5.8% Acerinox................ 80,000 $ 5,402,560
American Infrastructure. 650,000(a,g) 455,000
Cabot................... 140,000 8,032,500
Fluor................... 200,000 8,150,000
Georgia-Pacific......... 50,000 3,212,500
Grupo Carso............. 100,000(a,b) 1,550,000
IMCO Recycling.......... 130,000(a) 1,820,000
Kaiser Resources........ 191,100(a) 3,153,150
Longview Fibre.......... 240,000 4,260,000
Malayan Cement Berhad... 435,000 1,241,490
Morton International.... 75,000 7,125,000
Praxair................. 85,000 1,370,625
Willamette Industries... 50,000 2,087,500
Witco................... 650,000 19,418,750
--------------
67,279,075
--------------
Albany International
CAPITAL GOODS--4.5% "A"..................... 434,500 7,821,000
City Developments....... 775,000 3,420,850
Coltec Industries....... 65,000(a) 1,129,375
Detroit Diesel.......... 38,000(a) 1,330,000
Emerson Electric........ 125,000 7,171,875
Federal Mogul........... 206,800 5,454,350
Grainger (W.W.)......... 104,100 5,686,462
Illinois Tool Works..... 50,000 1,868,750
Keppel.................. 536,000 3,379,480
Loral................... 163,614 5,194,744
Nacco Industries "A".... 5,700 245,813
Sembawang Shipyard...... 539,000 4,486,097
WMX Technologies........ 200,000 4,925,000
--------------
52,113,796
--------------
CONSUMER--5.9% Authentic Fitness....... 62,100(a) 1,692,225
Charming Shoppes........ 50,000 706,250
Coca-Cola FEMSA ADS..... 35,000 980,000
Consolidated Stores..... 105,000(a) 2,126,250
Disney (Walt)........... 50,000 2,137,500
Eastman Kodak........... 200,000 12,600,000
Ethan Allen............. 263,300(a) 6,483,763
Family Dollar Stores.... 50,000 812,500
Genting Berhad.......... 410,000 4,247,600
IBP, Inc................ 575,000 14,662,500
Masco................... 220,000 6,957,500
Maytag.................. 81,000 1,265,625
Paramount
Communications.......... 25,000 2,009,375
Penney (J.C.)........... 50,000 2,600,000
Resorts World Berhad.... 580,000 3,174,340
Seventh Generation...... 34,298(a,c,g) 463,023
Time Warner............. 93,000 4,161,750
UMW Holdings Berhad..... 560,000 1,620,080
--------------
68,700,281
--------------
</TABLE>
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1993
COMMON STOCKS (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<C> <S> <C> <C>
ENERGY--5.0% Baroid.................. 1,392,500 $ 11,488,125
Comercial De Plata...... 540,000 3,484,620
McDermott International. 80,000 2,270,000
Oceaneering
International........... 215,000(a) 3,681,875
Pennzoil................ 220,000 12,595,000
Perez Co................ 540,000 3,333,420
Sonat Offshore Drilling. 145,000 2,990,625
Tenneco................. 130,000 6,630,000
Tidewater............... 100,000 2,275,000
UGI..................... 400,000 9,500,000
--------------
58,248,665
--------------
FINANCIAL--9.1% AT&T Capital............ 170,000 4,441,250
Arab Malaysian.......... 541,000 1,797,743
Banco Latinoamer de
Export "E".............. 75,000 3,262,500
Bank South.............. 200,000 2,925,000
BayBanks................ 45,000 2,025,000
Bolt Beranek/Newman..... 100,000 1,350,000
Brascan................. 700,000 6,737,500
Canadian Imperial Bank.. 300,000 7,191,000
Carolina First.......... 36,225 525,263
City National........... 460,000(a) 3,507,500
Continental............. 100,000 3,262,500
Countrywide Credit
Industries.............. 196,800 6,223,800
Development Bank of
Singapore............... 367,000 3,725,417
Dun & Bradstreet........ 25,000 1,675,000
Equitable of Iowa....... 89,700 3,128,288
First Fidelity Bancorp.. 100,000 4,062,500
First Tennessee
National................ 100,000 3,800,000
Fremont General......... 200,450 5,286,869
Malayan Banking Berhad.. 484,000 3,348,796
Midlantic............... 370,000(a) 8,972,500
Mortgage Information.... 245,959(a,c,g) --
National Bank of Canada. 152,800 1,230,040
National City........... 100,000 2,600,000
Overseas Union Bank..... 856,000 4,317,664
Skandia Forsakrings
Fria.................... 850,000 18,018,300
USF&G................... 200,000 2,725,000
--------------
106,139,430
--------------
HEALTH CARE--2.6% Affymax N.V............. 195,000(a) 3,168,750
Alpha 1 Biomedicals..... 115,000(a) 2,558,750
Genetic Therapy......... 90,000 1,665,000
Gilead Science.......... 702,000(a) 10,003,500
GMIS.................... 102,000(a) 1,479,000
Horizon Healthcare...... 150,000(a) 2,418,750
Medco Containment
Services................ 200,000 7,500,000
Perspective Biosystem... 82,500 2,083,125
--------------
30,876,875
--------------
</TABLE>
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1993
COMMON STOCKS (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<C> <S> <C> <C>
TECHNOLOGY--8.2% Aurora Electronics...... 280,000 $ 1,890,000
First Data.............. 350,000 14,306,250
First Financial
Management.............. 627,200 34,339,200
General Motors Cl. H.... 200,000 7,825,000
Novell.................. 200,000 4,300,000
Olicom A/S.............. 15,000(a) 210,000
PLATINUM technology..... 150,000(a) 1,293,750
Read-Rite............... 300,000(a) 3,562,500
Software Toolworks...... 215,000(a) 3,278,750
Symbol Technologies..... 116,400(a) 1,964,250
Thermo Electron......... 450,000(a) 18,337,500
Xilinx.................. 100,000(a) 3,975,000
--------------
95,282,200
--------------
TELECOMMUNICATIONS--11.7% ALC Communications...... 150,000(a) 4,500,000
British
Telecommunications...... 6,600,000 20,862,600
Cablevision Systems "A". 50,000(a) 3,493,750
Ericsson Cl. B.......... 218,018 12,128,341
GTE..................... 400,000 15,900,000
International Cable
Telecommunications...... 312,500 9,023,438
LDDS Communications..... 203,925(a) 10,247,231
McCaw Cellular Cl. A.... 175,000(a) 9,318,750
MCI Communications...... 90,000 2,565,000
NEXTEL Communications
"A"..................... 200,000(a) 10,875,000
Pacific Telesis Group... 200,000 10,975,000
Tele-Communications "A". 200,000(a) 6,100,000
Telecom de Argentina.... 910,000 4,005,820
Telefonas de Mexico..... 125,000 6,843,750
Telefonica de Argentina. 905,000 4,772,065
Telekom Malaysia........ 375,000 3,166,500
United International
Holdings................ 35,900(a) 1,341,763
--------------
136,119,008
--------------
TRANSPORTATION--1.9% Air France.............. 135 7,704
Burlington Northern..... 80,000 4,500,000
Canadian Pacific........ 321,300 5,421,938
Kirby................... 425,000(a) 8,128,125
Singapore Airlines...... 452,000 3,533,736
--------------
21,591,503
--------------
Factory Stores of
REAL ESTATE--1.7% America................. 125,000 3,531,250
Saul Centers............ 415,000 8,144,375
Sizeler Property........ 137,500 1,873,437
Town & Country Trust.... 293,100 6,631,387
--------------
20,180,449
--------------
</TABLE>
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1993
COMMON STOCKS (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<C> <S> <C> <C>
UTILITIES--.7% Central & South West.... 35,000 $ 1,141,875
Entergy................. 30,000 1,170,000
Pacific Gas & Electric.. 30,000 1,087,500
Tenagra Nasional........ 555,000 2,885,445
Texas Utilities......... 50,000 2,250,000
--------------
8,534,820
--------------
TOTAL COMMON STOCKS
(cost $590,158,596).... $ 665,066,102
==============
CONVERTIBLE PREFERRED STOCKS--19.1%
Tiregator, Ser. B, Cum.,
BASIC AND PROCESS INDUSTRIES--.3% $.50................... 600,000(b) $ 3,000,000
--------------
Cooper Industries, Cum.,
CAPITAL GOODS--.4% $3.50.................. 140,000(b) 4,445,000
--------------
Chrysler, Ser A, Cum.,
CONSUMER--5.4% 4.625%................. 90,000(b) 14,118,750
Ford Motor, Ser A, Cum.,
$4.20.................. 85,000 8,903,750
RJR Nabisco Holdings,
Percs, Cum., $3.34..... 3,300,000 20,212,500
Sears Roebuck, Ser. A,
Cum., $3.75............ 335,200 19,232,100
--------------
62,467,100
--------------
Occidental Petroleum,
ENERGY--1.4% Cum., $3.875........... 175,000(b) 9,668,750
Tenneco, Cum., Ser A.... 125,000 5,171,875
Unocal, Cum., $3.50..... 35,000(b) 2,113,125
--------------
16,953,750
--------------
Ahmanson (H.F.) Ser D,
FINANCIAL--4.2% Cum., 6%............... 85,000 4,196,875
Aon, Ser. B, Cum.,
$3.04.................. 48,000 2,364,000
Bank of New York, Ser A,
Cum., 7.75%............ 12,000 630,000
Carolina First, Cum.,
8.32%.................. 39,500 1,293,625
Carolina First, Ser.
1993, 7.50%............ 48,000 1,434,000
Chemical Banking, 10%... 150,000(b) 12,581,250
Citicorp Ser. 15, Cum.,
Depository Shares,
8.25%.................. 277,100 5,472,725
First United Bank Group,
Ser. A Cum., $2.125.... 50,000 2,625,000
People's Bank, Ser A,
Cum., 8.50%............ 90,000 5,670,000
Washington Mutual
Savings Bank,
Ser. D, Perpetual, 6%.. 5,000 583,750
SunAmerica, Ser. A,
$1.11.................. 663,100 11,604,250
--------------
48,455,475
--------------
Freeport-McMoRan Copper
MINING AND METALS--.9% & Gold
Cum., $1.875........... 250,000 5,406,250
Noranda, Ser. E, Cum.,
6%..................... 300,000(b) 5,229,000
--------------
10,635,250
--------------
</TABLE>
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1993
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<C> <S> <C> <C>
Rouse, Ser. A, Cum.,
REAL ESTATE--.9% 6.50%.................. 192,000 $ 10,872,000
--------------
LCI International, Cum.,
TELECOMMUNICATIONS--1.3% 5%..................... 150,000 4,425,000
Philippine Long Distance
Telephone, Cum.,
Depository Shares,
$1.4375................ 308,750(b) 11,269,375
--------------
15,694,375
--------------
TRANSPORTATION--4.3% AMR, Ser. A, Cum.,
Depository Shares,
$3.00.................. 264,600(b) 14,486,850
Arkansas Best, Ser. A,
Cum., $2.875........... 235,000 11,045,000
Burlington Northern,
Ser. A, Cum., 6 1/4%... 55,000 3,753,750
UAL, Ser. A, $6.25...... 170,000(b) 20,485,000
--------------
49,770,600
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $208,315,127).... $ 222,293,550
==============
CONVERTIBLE CORPORATE NOTES AND BONDS--11.8%
PRINCIPAL
AMOUNT VALUE
----------- --------------
<C> <S> <C> <C>
BASIC AND PROCESS INDUSTRIES--.0% American Infrastructure,
Sub. Deb., 10%,
1/31/1996.............. $ 500,000(g) $ 250,000
--------------
CAPITAL GOODS--.3% Albany International,
Sub. Deb., 5.25%,
3/15/2002.............. 1,000,000 948,750
Hasbro, Sub Deb., 6%,
11/15/1998............. 2,000,000 2,722,500
--------------
3,671,250
--------------
CONSUMER--1.1% Omnicom Group,
Sub. Deb., 4.50%,
9/1/2000............... 9,000,000(b) 9,517,500
Wendy's International
Sub. Deb., 7%,
4/1/2006............... 2,000,000 2,980,000
--------------
12,497,500
--------------
ENERGY--.4% Pennzoil, Sub. Deb.,
4.75%,
10/1/2003.............. 5,000,000 5,112,500
--------------
FINANCIAL--2.9% Banco National de
Mexico,
Sub. Deb. 7%,
12/15/1999............. 7,500,000(b,d) 8,287,500
Fremont General,
Zero Coupon,
10/12/2013............. 12,500,000 4,718,750
Nac Re, Sub. Deb.,
5.25%, 12/15/2002...... 9,050,000(b) 8,642,750
Re Capital
Sub. Deb., 5.50%,
8/1/2000............... 3,000,000 3,210,000
Trenwick, Sub. Deb.,
6%, 12/15/1999......... 7,500,000 8,512,500
--------------
33,371,500
--------------
</TABLE>
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1993
CONVERTIBLE CORPORATE NOTES AND BONDS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------
<C> <S> <C> <C>
HEALTH CARE--.9% Beverly Enterprises,
Sub. Deb., 7.625%,
3/15/2003.............. $ 6,000,000 $ 6,052,500
Omnicare, Sub. Deb.,
5.75%, 10/1/2003....... 4,000,000 4,660,000
--------------
10,712,500
--------------
MEDIA/ENTERTAINMENT--2.8% Management Company
Entertainment
Group, 14%, 1/15/2009.. 7,061,000(e) 1,765
News America Holdings,
Senior Liquid Yield
Option Notes (Gtd. by
News Ltd.)
Zero Coupon, 3/11/2013. 6,000,000(b,f) 2,737,500
Savoy Pictures,
Sub. Deb., 7%,
7/1/2003............... 7,950,000 9,222,000
Time Warner,
Sub. Deb., Zero Coupon,
6/22/2013.............. 50,000,000 20,687,500
--------------
32,648,765
--------------
TECHNOLOGY--1.0% Lam Research,
Sub. Deb., 6%,
5/1/2003............... 4,250,000 5,540,937
Network Equipment
Technology,
Sub. Deb. 7.25%,
5/15/2014.............. 6,910,000 5,743,938
--------------
11,284,875
--------------
TELECOMMUNICATIONS--1.5% General Instrument,
Sub. Deb., 5%,
6/15/2000.............. 7,500,000 10,471,875
IDB Communications
Sub. Deb., 5%,
8/15/2003.............. 6,000,000 6,885,000
--------------
17,356,875
--------------
REAL ESTATE--.9% Continental Homes
Holding,
Sub. Deb. 6.875%,
3/15/2002.............. 5,000,000 5,425,000
Sizeler Properties, Sub.
Deb., 8%, 7/15/2003.... 5,000,000 5,325,000
--------------
10,750,000
--------------
TRANSPORTATION--.0% Air France
Sub. Deb., 4%,
1/1/2000............... 893,193 151,262
--------------
TOTAL CONVERTIBLE CORPORATE
NOTES AND BONDS
(cost $121,673,289).... $ 137,807,027
==============
</TABLE>
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1993
SHORT-TERM INVESTMENTS--11.8%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------
<C> <S> <C> <C>
U.S. Treasury Bills--11.8% 3.10%, 11/18/93........ $ 828,000 $ 826,815
3.12%, 11/26/93........ 36,093,000 36,016,191
3.19%, 12/9/93......... 1,511,000 1,506,295
3.57%, 12/16/93........ 38,727,000 38,584,699
3.20%, 12/23/93........ 32,050,000 31,915,746
3.10%, 1/6/94.......... 11,804,000 11,740,054
3.15%, 1/20/94......... 17,230,000 17,114,314
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $137,704,114).... $ 137,704,114
==============
TOTAL INVESTMENTS (cost $1,057,851,126)....................... 99.8% $1,162,870,793
=========== ==============
CASH AND RECEIVABLES (NET).................................... .2% $ 2,632,065
=========== ==============
NET ASSETS.................................................... 100.0% $1,165,502,858
=========== ==============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
October 31, 1993, these securities amounted to $128,132,350 or 11.0%
of net assets.
(c) Investment in non-controlled affiliate (cost $1,647,863)--see Note
1(c).
(d) Exchangeable for Grupo Financiero Banamex Accival, S.A. de C.V. Ser.
L, Common Stock.
(e) Non-income producing security; interest payment in default.
(f) Exchangeable for News Ltd. ordinary shares.
(g) Securities restricted as to public resale. Investments in restricted
securities, with an aggregate value of $1,168,023 represent
approximately .1% of net assets:
<TABLE>
<CAPTION>
ACQUISITION PURCHASE PERCENTAGE OF
ISSUER DATE PRICE NET ASSETS VALUATION*
- ------ ----------- --------- ------------- ----------
<S> <C> <C> <C> <C>
American Infrastructure 2/14/1991 $ 10.00 .0% $.70/share
6/4/1991
American Infrastructure,
Conv. Sub. Deb., 10%,
1/31/1996 2/14/1991 1,000.00 .0 500.00
Mortgage Information 5/18/1987 1.12 .0 zero
2/1/1988
12/13/1988
Seventh Generation 9/20/1990 40.00 .0 13.50/share
</TABLE>
- -------
*The valuation of these securities has been determined in good faith
under the direction of the Board of Directors.
See notes to financial statements.
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1993
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $1,057,851,126)--see statement............... $1,162,870,793
Cash................................................ 7,601,950
Receivable for investment securities sold........... 34,698,343
Dividends and interest receivable................... 3,989,239
Net unrealized appreciation on forward currency
exchange contracts--Note 3(a)...................... 1,094,882
Receivable for subscriptions to Common Stock........ 166,090
Prepaid expenses.................................... 209,832
--------------
1,210,631,129
LIABILITIES:
Due to The Dreyfus Corporation...................... $ 709,914
Payable for investment securities purchased......... 43,580,809
Payable for Common Stock redeemed................... 25,091
Accrued expenses and other liabilities.............. 812,457 45,128,271
----------- --------------
NET ASSETS........................................... $1,165,502,858
==============
REPRESENTED BY:
Paid-in capital..................................... $1,054,399,997
Accumulated undistributed investment income--net.... 2,675,131
Accumulated undistributed net realized gain on
investments........................................ 2,313,181
Accumulated net unrealized appreciation on
investments--Note 3(b)............................. 106,114,549
--------------
NET ASSETS at value applicable to 69,128,960 shares
outstanding
(300 million shares of $.001 par value Common Stock
authorized)......................................... $1,165,502,858
==============
NET ASSET VALUE, offering and redemption price per
share
($1,165,502,858/69,128,960 shares).................. $16.86
==============
</TABLE>
See notes to financial statements.
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED OCTOBER 31, 1993
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Cash dividends (net of $487,002 foreign taxes
withheld at source).............................. $ 15,548,250
Interest.......................................... 6,729,166
------------
TOTAL INCOME..................................... $ 22,277,416
EXPENSES:
Management fee--Note 2(a)......................... 4,015,305
Shareholder servicing costs--Note 2(b)............ 2,087,253
Registration fees................................. 356,222
Prospectus and shareholders' reports.............. 137,562
Custodian fees.................................... 118,351
Professional fees................................. 86,728
Directors' fees and expenses--Note 2(c)........... 17,419
Dividends on securities sold short................ 4,195
Miscellaneous..................................... 22,680
------------
6,845,715
Less--reduction in management fee due to
undertaking--Note 2(a)........................... 196,680
------------
TOTAL EXPENSES................................... 6,649,035
------------
INVESTMENT INCOME--NET........................... 15,628,381
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--NOTE
3(A):
Net realized gain (loss) on investments:
Long transactions................................. $ 3,613,974
Short sale transactions........................... (610,468)
Net realized (loss) on forward currency exchange
contracts;
Short transactions................................ (639,519)
Net realized gain on financial futures............. 167,940
------------
NET REALIZED GAIN................................. 2,531,927
Net unrealized appreciation (depreciation) on
investments and forward currency exchange
contracts for the year:
Unaffiliated issuers.............................. $103,044,415
Affiliated issuers................................ -- 103,044,415
------------ ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS.. 105,576,342
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS......................................... $121,204,723
============
</TABLE>
See notes to financial statements.
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
1992* 1993
------------ --------------
<S> <C> <C>
OPERATIONS:
Investment income--net.......................... $ 821,323 $ 15,628,381
Net realized gain (loss) on investments......... (218,746) 2,531,927
Net unrealized appreciation on investments for
the year....................................... 3,070,134 103,044,415
------------ --------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... 3,672,711 121,204,723
------------ --------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income--net.......................... (695,208) (13,079,365)
------------ --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold................... 110,295,908 1,177,630,870
Dividends reinvested............................ 646,701 12,383,305
Cost of shares redeemed......................... (15,488,310) (231,168,477)
------------ --------------
INCREASE IN NET ASSETS FROM CAPITAL STOCK
TRANSACTIONS................................... 95,454,299 958,845,698
------------ --------------
TOTAL INCREASE IN NET ASSETS................... 98,431,802 1,066,971,056
NET ASSETS:
Beginning of year............................... 100,000 98,531,802
------------ --------------
End of year (including undistributed investment
income--net:
$126,115 in 1992 and $2,675,131 in 1993)....... $ 98,531,802 $1,165,502,858
============ ==============
SHARES SHARES
------------ --------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................... 8,179,228 75,412,429
Shares issued for dividends reinvested.......... 47,825 788,052
Shares redeemed................................. (1,143,327) (14,163,247)
------------ --------------
NET INCREASE IN SHARES OUTSTANDING.............. 7,083,726 62,037,234
============ ==============
</TABLE>
- -------
*From December 31, 1991 (commencement of operations) to October 31, 1992.
See notes to financial statements.
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This
information has been derived from information provided in the Fund's
financial statements.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
-----------------------
1992(1) 1993
------- ----------
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year......................... $ 12.50 $ 13.89
------- ----------
INVESTMENT OPERATIONS:
Investment income--net..................................... .19 .38
Net realized and unrealized gain on investments............ 1.38 2.95
------- ----------
TOTAL FROM INVESTMENT OPERATIONS........................... 1.57 3.33
------- ----------
DISTRIBUTIONS;
Dividends from investment income--net...................... (.18) (.36)
------- ----------
Net asset value, end of year............................... $ 13.89 $16.86
======= ==========
TOTAL INVESTMENT RETURN 12.57%(2) 24.24%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................... 1.02%(2) 1.24%
Ratio of investment income to average net assets........... 2.30%(2) 2.92%
Decrease reflected in above expense ratios due to
undertaking by the Manager................................ .39%(2) .04%
Portfolio Turnover Rate.................................... 127.24%(2) 85.26%
Net Asset, end of year (000's Omitted)..................... $98,532 $1,165,503
</TABLE>
- -------
(1) From December 31, 1991 (commencement of operations) to October 31,
1992.
(2) Not annualized.
See notes to financial statements.
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a non-diversified open-end management investment company. Dreyfus
Service Corporation ("Distributor") acts as the exclusive distributor of
the Fund's shares, which are sold to the public without a sales charge.
The Distributor is a wholly-owned subsidiary of The Dreyfus Corporation
("Manager").
On May 5, 1993, the Board of Directors approved an Agreement and Plan
of Reorganization providing for the transfer of all or substantially all
of the assets and liabilities of The Dreyfus Convertible Securities Fund,
Inc. to the Fund in a tax free exchange for shares of Common Stock of the
Fund at net asset value and the assumption of stated liabilities (the
"Exchange"). The Exchange was approved by The Dreyfus Convertible
Securities Fund, Inc. shareholders on August 17, 1993, and became
effective after the close of business on September 17, 1993, at which
time the Fund issued 10,948,464 shares valued at $16.35 per share to the
shareholders of The Dreyfus Convertible Securities Fund, Inc. in exchange
for 21,209,406 shares of The Dreyfus Convertible Securities Fund, Inc.
valued at $8.44 per share, representing net assets of $179,007,386.
(A) PORTFOLIO VALUATION: Investments in securities (including options
and financial futures) are valued at the last sales price on the
securities exchange on which such securities are primarily traded or at
the last sales price on the national securities market. Securities not
listed on an exchange or the national securities market, or securities
for which there were no transactions, are valued at the average of the
most recent bid and asked prices, except for open short positions, where
the asked price is used for valuation purposes. Bid price is used when no
asked price is available. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Directors. Short-term investments are carried
at amortized cost, which approximates value. Investments traded in
foreign currencies are translated to U.S. dollars at the prevailing rates
of exchange.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss
from securities transactions are recorded on the identified cost basis.
Dividend income is recognized on the ex-dividend date and interest
income, including, where applicable, amortization of discount on
investments, is recognized on the accrual basis.
(C) AFFILIATED ISSUERS: Issuers in which the Fund held 5% or more of
the outstanding voting securities are defined as "affiliated" in the Act.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-
dividend date. Dividends from investment income-net are declared and paid
on a quarterly basis. Dividends from net realized capital gain are
normally declared and paid annually, but the Fund may make distributions
on a more frequent basis to comply with the distribution requirements of
the Internal Revenue Code. To the extent that net realized capital gain
can be offset by capital loss carryovers it is the policy of the Fund not
to distribute such gain.
(E) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in
the best interests of its shareholders, by complying with the provisions
available to certain investment companies, as defined in applicable
sections of the Internal Revenue Code, and to make distributions of
taxable income sufficient to relieve it from all, or substantially all,
Federal income taxes.
The Fund has an unused capital loss carryover of approximately
$4,568,000 available for Federal income tax purposes to be applied
against future net securities profits, if any, realized subsequent to
October 31, 1993. If not applied, the carryover expires in fiscal 2000.
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .75 of 1% of the
average daily value of the Fund's net assets and is payable monthly. The
Agreement provides for an expense reimbursement from the Manager should
the Fund's aggregate expenses, exclusive of taxes, brokerage, interest on
borrowings and extraordinary expenses, exceed the expense limitation of
any state having jurisdiction over the Fund. The most stringent state
expense limitation applicable to the Fund presently requires
reimbursement of expenses in any full fiscal year that such expenses
(exclusive of certain expenses as described above) exceed 2 1/2% of the
first $30 million, 2% of the next $70 million and 1 1/2% of the excess
over $100 million of the average value of the Fund's net assets in
accordance with California "blue sky" regulations. However, the Manager
had undertaken from November 1, 1992 through January 17, 1993, to waive
receipt of the management fee payable to it by the Fund. The reduction in
management fee, pursuant to the undertaking, amounted to $196,680 for the
year ended October 31, 1993.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund
reimburses the Distributor an amount not to exceed an annual rate of .25
of 1% of the value of the Fund's average daily net assets for servicing
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and
services related to the maintenance of shareholder accounts. During the
year ended October 31, 1993, the Fund was charged an aggregate of
$1,283,982 pursuant to the Shareholder Services Plan.
(C) Certain officers and directors of the Fund are "affiliated
persons," as defined in the Act, of the Manager and/or the Distributor.
Each director who is not an "affiliated person" receives an annual fee of
$1,000 and an attendance fee of $250 per meeting.
NOTE 3--SECURITIES TRANSACTIONS:
(A) The following summarizes the aggregate amount of purchases and
sales of investment securities and securities sold short, excluding
short-term securities and forward currency exchange contracts, during the
year ended October 31, 1993:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- ------------
<S> <C> <C>
Long transactions............................... $1,100,925,993 $383,385,628
Short sale transactions......................... 50,930,189 50,319,721
-------------- ------------
Total.......................................... $1,151,856,182 $433,705,349
============== ============
</TABLE>
In addition, the following summarizes open forward currency exchange
contracts at October 31, 1993:
<TABLE>
<CAPTION>
U.S. DOLLAR
VALUE AT UNREALIZED
FORWARD CURRENCY SALE CONTRACTS PROCEEDS 10/31/93 APPRECIATION
------------------------------- ----------- ----------- ------------
<S> <C> <C> <C>
British Pound, expiring 11/3/93......... $19,381,700 $19,257,550 $ 124,150
Spanish Pesetas, expiring 11/3/93....... 5,297,813 5,184,033 113,780
Swedish Krona, expiring 11/3/93......... 27,756,750 26,899,798 856,952
----------- ----------- ----------
$52,436,263 $51,341,381 $1,094,882
=========== =========== ==========
</TABLE>
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
When executing forward currency exchange contracts, the Fund is
obligated to buy or sell a foreign currency at a specified rate on a
certain date in the future. With respect to sales of forward currency
exchange contracts, the Fund would incur a loss if the value of the
contract increases between the date the forward contract is open and the
date the forward contract is closed. The Fund realizes a gain if the
value of the contract decreases between those dates. With respect to
purchases of forward currency exchange contracts, the Fund would incur a
loss if the value of the contract decreases between the date the forward
contract is open and the date the forward contract is closed. The Fund
realizes a gain if the value of the contract increases between those
dates.
The Fund is engaged in short-selling which obligates the Fund to
replace the security borrowed by purchasing the security at current
market value. The Fund would incur a loss if the price of the security
increases between the date of the short sale and the date on which the
Fund replaces the borrowed security. The Fund would realize a gain if the
price of the security declines between those dates. Until the Fund
replaces the borrowed security, the Fund will maintain daily, a
segregated account with a broker and custodian, of cash and/or U.S.
Government securities sufficient to cover its short position. At October
31, 1993, there were no securities sold short outstanding.
The Fund is engaged in trading financial futures contracts. The Fund is
exposed to market risk as a result of changes in the value of the
underlying financial instruments. Investments in financial futures
require the Fund to "mark to market" on a daily basis, which reflects the
change in the market value of the contract at the close of each day's
trading. Accordingly, variation margin payments are made or received to
reflect daily unrealized gains or losses. When the contracts are closed,
the Fund recognizes a realized gain or loss. These investments require
initial margin deposits with a custodian, which consist of cash or cash
equivalents, up to approximately 10% of the contract amount. The amount
of these deposits is determined by the exchange or Board of Trade on
which the contract is traded and is subject to change. At October 31,
1993, there were no financial futures outstanding.
(B) At October 31, 1993, accumulated net unrealized appreciation on
investments was $106,114,549, consisting of $123,729,654 gross unrealized
appreciation and $17,615,105 gross unrealized depreciation.
At October 31, 1993, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
DREYFUS GROWTH AND INCOME FUND, INC.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS GROWTH AND INCOME FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus Growth and Income Fund, Inc., including the statement of
investments, as of October 31, 1993, and the related statement of
operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and financial
highlights for each of the years indicated therein. 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 audits.
We conducted our audits 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 October 31, 1993 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 audits provide 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 Dreyfus Growth and Income Fund, Inc. at October 31, 1993, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
New York, New York
November 29, 1993
ERNST & YOUNG
