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PROSPECTUS February 28, 1995
Dreyfus Growth and Income Fund, Inc.
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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.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED FEBRUARY 28, 1995,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION 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.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM
TIME TO TIME.
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TABLE OF CONTENTS
Annual Fund Operating Expenses.................... 3
Condensed Financial Information................... 3
Description of the Fund........................... 4
Management of the Fund............................ 18
How to Buy Fund Shares............................ 19
Shareholder Services.............................. 21
How to Redeem Fund Shares......................... 24
Shareholder Services Plan......................... 27
Dividends, Distributions and Taxes................ 27
Performance Information........................... 28
General Information............................... 29
Appendix.......................................... 30
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C>
Management Fees ......................................................................... .75%
Other Expenses........................................................................... .39%
Total Fund Operating Expenses............................................................ 1.14%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Example: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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: $12 $36 $63 $139
</TABLE>
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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%.
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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. You can purchase Fund shares without charge directly from the Fund's
distributor; 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" and "Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, 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 the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------
1992(1) 1993 1994
------- ------ -----
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year............................. $12.50 $13.89 $16.86
------- ------- ------
INVESTMENT OPERATIONS:
Investment income-net.......................................... .19 .38 .34
Net realized and unrealized gain (loss) on investments......... 1.38 2.95 (.34)
------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS............................... 1.57 3.33 -_
------- ------- ------
DISTRIBUTIONS:
Dividends from investment income-net............................ (.18) (.36) (.33)
Dividends from net realized gain on investments................. -- -- (.04)
------- ------- ------
TOTAL DISTRIBUTIONS............................................. (.18) (.36) (.37)
------- ------- ------
Net assets value, end of year.................................. $13.89 $16.86 $16.49
___- ====== ====== =======
TOTAL INVESTMENT RETURN.......................................... 12.57%(2) 24.24% .05%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......................... 1.02%(2) 1.24% 1.14%
Ratio of investment income to average net assets................ 2.30%(2) 2.92% 2.18%
Decrease reflected in above expense ratios due to
undertaking by The Dreyfus Corporation......................... .39%(2) .04% --
Portfolio Turnover Rate......................................... 127.24%(2) 85.26% 97.47%
Net Asset, end of year (000's Omitted).......................... $98,532 $1,165,503 $1,717,733
</TABLE>
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(1) From December 31, 1991 (commencement of operations) to October 31, 1992.
(2) Not annualized.
Page 3
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.
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 Credit Rating Co.
("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. See "Appendix." 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
Page 4
involves risk. For a discussion of such investment techniques and their
related risks, see "Investment Techniques" and "Risk Factors _
Other Investment Considerations" below. Options and futures transactions
involve so-called "derivative securities."
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 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.
CONVERTIBLE SECURITIES _ The Fund may purchase convertible securities, which
are fixed-income securities, such as bonds or preferred stock, that may be
converted at either a stated price or stated rate into underlying shares of
common stock. Convertible securities have general characteristics similar to
both fixed-income and equity securities. Although to a lesser extent than
with fixed-income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends
to increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stock, and,
therefore, also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
As fixed-income securities, convertible securities are investments
that provide for a stable stream of income with generally higher yields than
common stocks. Of course, like all fixed-income securities, there can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. Convertible securities, however, generally
offer lower interest or dividend yields than non-convertible securities of
similar quality because of the potential for capital appreciation. A
convertible security, in addition to providing fixed income, offers the
potential for capital appreciation through the conversion feature, which
enables the holder to benefit from increases in the market price of the
underlying common stock. There can be no assurance of capital appreciation,
however, because securities prices fluctuate.
Convertible securities generally are subordinated to other similar
but non-convertible securities of the same issuer, although convertible
bonds, as corporate debt obligations, enjoy seniority in right of payment to
all equity securities, and convertible preferred stock is senior to common
stock, of the same issuer. Because of the subordination feature, however,
convertible securities typically have lower ratings than similar
non-convertible securities.
MONEY MARKET INSTRUMENTS _ The Fund may invest, in the circumstances
described under "Management Policies" above, in the following types of money
market instruments:
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. Some obligations issued or guaranteed
by U.S. Government agencies and instrumentalities, for example,
Page 5
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 obligati
ons 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 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.
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.
Page 6
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. 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.
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
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.
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. Mortgage-related securities are a
form of derivative security. The mortgage-related securities which may be
purchased by the Fund 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.
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 pay-
Page 7
ments received in respect of mortgage-related securities include both interest
and principal. No 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. Dividends received by shareholders on Fund shares which are
attributable to interest income received by the Fund from municipal
obligations generally will not be subject to Federal income tax. 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 int
erest 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. 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.
INVESTMENT TECHNIQUES
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
Page 8
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 up
to 331/3% of the value of its total assets. This borrowing, which is known as
leveraging, generally will be unsecured, except to the extent the Fund enters
into reverse repurchase agreements described below. Leveraging will
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.
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.
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. 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. 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 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 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
Page 9
writer to sell, the underlying security 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 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, exposes the Fund during the term of the
option to possible loss of opportunity to realize appreciation in the market
price of the underlying security or to possible continued holding of a
security which might otherwise have been sold to protect against depreciation
in its market price. 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. 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. Similarly, the principal reason for writing
covered put options is to realize income in the form of premiums. 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,"by purchasing an option on the same
security 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 indices 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 is not a commodity pool.
However, as a substitute for a comparable market position in the underlying
securities or for hedging purposes, the Fund may engage 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
Page 10
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 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. To the
extent the Fund engages in the use of futures and options on futures for
other than bona fide hedging purposes, the Fund may be subject to additional
risk.
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.
To the extent the Fund is engaging in a futures transaction as a
hedging device, because of the risk of an imperfect correlation between
securities in the Fund's portfolio that are the subject of a hedging
trans-
Page 11
action and the futures contract used as a hedging device, it is possible
that the hedge will not be fully effective if, for example, losses on the
portfolio securities exceed gains on the futures contract or losses on the
futures contract exceed gains on the portfolio securities. For 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 the market does not move 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 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.
Furthermore, if in such circumstances the Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. The Fund
may have to sell such 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 as a substitute for a comparable market position in the
underlying securities or for hedging purposes.
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 indices for which
it can obtain the best price with consideration also given to liquidity.
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
Page 12
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.
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 as a substitute for a comparable
market position or to hedge against adverse movements in interest rates.
To the extent the Fund has invested in interest rate futures
contracts or options on interest rate futures contracts as a substitute for a
comparable market position, the Fund will be subject to the investment risks
of having purchased the securities underlying the contract.
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 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 a 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
Page 13
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 investments 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 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
Page 14
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
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;
Page 15
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
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.
Page 16
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. These risks are described above under
"Investment Techniques"and "Certain Portfolio Securities." In addition, using
these techniques may produce higher than normal portfolio turnover and may
affect the degree to which the Fund's net asset value fluctuates. 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 or transactions costs. Short-term
gains realized from portfolio transactions are taxable to shareholders as
ordinary income. See "Portfolio Transactions" in the Statement of Additional
Information.
The Fund's ability to engage in certain short-term transactions may
be limited by the requirement that, to qualify as a regulated investment
company, it must earn less than 30% of its gross income from the disposition
of securities held for less than three months. This 30% test limits the
extent to which the Fund may sell securities held for less than three months,
effect short sales of securities held for less than three months, write
options expiring in less than three months and invest in certain futures
contracts, among other strategies. However, portfolio turnover will not
otherwise be a limiting factor in making investment decisions.
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 des
igned 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.
See "Lower Rated Securities" above.
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
Page 17
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.
The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank, N.A.,
which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As
of January 31, 1995, The Dreyfus Corporation managed or administered
approximately $70 billion in assets for more than 1.9 million investor
accounts nationwide.
Page 18
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 portfolio manager 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 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. The Fund's other portfolio managers are identified
under "Management of the Fund"in the Fund's Statement of Additional
Information. The Dreyfus Corporation also provides research services for the
Fund, as well as for other funds advised by The Dreyfus Corporation, through
a professional staff of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$193 billion in assets as of December 31, 1994, including approximately $70
billion in mutual fund assets. As of December 31, 1994, various subsidiaries
of Mellon provided non-investment services, such as custodial or
administration services, for approximately $654 billion in assets, including
approximately $74 billion in mutual fund assets.
For the fiscal year ended October 31, 1994, the Fund paid The Dreyfus
Corporation a monthly management fee at the annual rate of .75 of 1% of the
value of the Fund's average daily net assets. The management fee 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.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers or others in respect of these services.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor is a wholly-owned subsidiary of Institutional Administration
Services, Inc., a provider of mutual fund administration services, the parent
company of which is Boston Institutional Group, Inc.
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
You can purchase Fund shares without a sales charge if you purchase
them directly from the Distributor; 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
Page 19
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 ad
vised 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 investments should be
sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Neither initial nor subsequent investments should be
made by third party check. Purchase orders may be delivered in person only to
a Dreyfus Financial Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND
WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the nearest
Dreyfus Financial Center, please call one of the telephone numbers listed
under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. 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 registratio
n 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
Page 20
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."
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs, or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds one million dollars. 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. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from the
Fund, including past profits or any other source available to it.
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").
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 a Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between the bank account designated in one of
these documents and your Fund account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House 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
FUND EXCHANGES _ You may 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
Page 21
to you. If you desire to use this service, please call 1-800-645-6561 to
determine if it is available and whether any conditions are imposed on its
use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of Personal Retirement Plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the relevant "NO"box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, or by a separate signed Shareholder Services
Form, also available by calling 1-800-645-6561. If you 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." 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: Telephone Exchange Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege,
and the dividend and capital gain distribution option (except for Dreyfus
Dividend Sweep) 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 availability of Fund exchanges may be modified or terminated at any
time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize 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 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.
Page 22
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 by calling
1-800-645-6561. You may cancel your participation in this Privilege or change
the amount of purchase at any time by mailing written notification to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671,
or, if for Dreyfus retirement plan accounts, to The Dreyfus Trust Company,
Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427, and the
notification will be effective three business days following receipt. The
Fund may modify or terminate this Privilege at any time or charge a service
fee. No such fee currently is contemplated.
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 by calling 1-800-645-6561.
Death or legal incapacity will terminate your participation in this Privilege.
You may elect at any time to terminate your participation by notifying in
writing the appropriate Federal agency. Further, the Fund may
terminate your participation upon 30 days' notice to you.
DREYFUS DIVIDEND OPTIONS _ Dreyfus Dividend Sweep enables you to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by the Fund in shares of 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. Dreyfus
Dividend ACH permits you to transfer electronically dividends or dividends
and capital gain distributions, if any, from the Fund to a designated bank
account. Only an account maintained at a financial institution which is an
Automated Clearing House member may be so designated. Banks may charge a fee
for this service.
For more information concerning these privileges, or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may
not be used to open new accounts. Minimum subsequent
Page 23
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
DREYFUS 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 by calling 1-800-645-6561. You may
change the amount of purchase or cancel the authorization only by written
notification to your employer. It is the sole responsibility of your
employer, not 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 by calling
1-800-645-6561. There is a service charge of 50cents 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. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
HOW TO REDEEM FUND SHARES
GENERAL _ You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
The Fund imposes no charges when shares are redeemed directly through
the Distributor. 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
Page 24
WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC
ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR
IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER
THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE,
DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED
TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if 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, the Wire Redemption Privilege, the Telephone
Redemption Privilege or the Dreyfus TELETRANSFER Privilege. The Fund makes
available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, 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."
Page 25
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE _ You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day)made out to the owners of record and mailed to your address.
Redemption proceeds of less than $1,000 will be paid automatically by check.
Holders of jointly registered Fund or bank accounts may have redemption
proceeds of not more than $250,000 wired within any 30-day period. You may
telephone redemption requests 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 redemption request, including requests made shortly after a change
of address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at any time by the Transfer
Agent or the Fund. The Fund's 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 a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if 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 a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between your Fund account and the bank account designated in one
of these documents. Only such an account maintained in a domestic financial
institution which is an 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 not more than $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.
Page 26
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus 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.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
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 generally 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 all or a
portion of any gains realized from the sale or other disposition of certain
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
Page 27
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, 1994 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 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,
Page 28
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; on Long Island, call 794-5452.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 29
Appendix
The average distribution of investments in convertible corporate
bonds by ratings for the fiscal year ended October 31, 1994 was as follows:
<TABLE>
<CAPTION>
FITCH INVESTORS MOODY'S INVESTORS STANDARD & POOR'S PERCENTAGE
SERVICE, INC. OR SERVICE, INC. OR CORPORATION OF VALUE
________ __________ __________ ______
<S> <C> <C> <C>
AA A AA .12%
A A A .18
BBB Ba BBB 3.13
BB BB BB 3.84
B B B 3.29
Unrated Unrated Unrated 2.51(1)
_____
13.07%
========
</TABLE>
The remaining 86.93% 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 2.51% 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 (.21%); B/B (2.28%); and C/C (.02%).
Page 30
DREYFUS
Growth
and
Income
Fund, Inc.
Prospectus
(Lion Logo)
Registration Mark
Copy Rights1995 Dreyfus Service Corporation
010P6022895
__________________________________________________________________________
DREYFUS GROWTH AND INCOME FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
FEBRUARY 28, 1995
__________________________________________________________________________
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 February 28,
1995, 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:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5254
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . . . . . . . B-2
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . B-12
Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . B-15
Shareholder Services Plan. . . . . . . . . . . . . . . . . . . . . . . B-17
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . B-18
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . B-19
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . B-21
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . B-24
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . B-25
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . B-26
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . B-27
Information About the Fund . . . . . . . . . . . . . . . . . . . . . . B-28
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . . B-28
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . B-35
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . B-50
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.
American, European and Continental Depository Receipts. 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.
Municipal Obligations. Municipal obligations generally include debt
obligations issued to obtain funds for various public purposes as well as
certain industrial development bonds issued by or on behalf of public
authorities. Municipal obligations are classified as general obligation
bonds, revenue bonds and notes. General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are payable from the revenue
derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue
source, but not from the general taxing power. Industrial development
bonds, in most cases, are revenue bonds 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 by 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.
Repurchase Agreements. 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 the resale price. The Manager will monitor on an ongoing
basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. 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.
Variable rate demand notes include variable amount master demand notes,
which are obligations that permit the Portfolio 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 Manager 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 in the Fund's
Prospectus for other commercial paper issuers.
Illiquid Securities. When purchasing securities that have not 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 Manager 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 restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level
of illiquidity in its investment portfolio during such period.
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.
Leverage Through Borrowing. The Fund may borrow for investment
purposes. 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 the time. The Fund
may also 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. To the extent the Fund enters
into a reverse repurchase agreement, 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. 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.
Options Transactions. The Fund may engage in options transactions,
such as purchasing or writing covered call or put options. 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. 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 indices 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 indices 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 Credit
Rating Co. ("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 indices, and
options on futures contracts or indices 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 indices, and options on futures contracts or indices.
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 of the Fund
*DAVID P. FELDMAN, Director. Corporate Vice President-Investment
Management of AT&T. He is also a trustee of Corporate Property
Investors, a real estate investment company. His address is One Oak
Way, Berkeley Heights, New Jersey 07922.
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 133 East 64th Street,
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. He is also a director of
MidOcean Reinsurance Co. Ltd., and Cooke & Bieler, Inc., investment
counselors. 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. 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 May 1981 to December 1994, he was consultant to the
Manager on economic matters. 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. From 1976 to 1991, he was a director of Charles H. Revson
Foundation. From 1992 to 1993, he was a director of Biotechnology
General, Inc., a biotechnology development company. 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, National Health
Laboratories, a national clinical diagnostic laboratory and Tulerik,
Inc., a biotechnology company. 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 Leukosite Inc., a biopharmaceutical company. He was a
director of Bank Leumi Trust Company of New York from 1988 to 1989
and Carmel Container Corporation from 1988 to 1991. His address is
c/o The New Republic, 1220 19th Street, N.W., Washington, D.C. 20036.
*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 a member
of the Office of the President and a director of Warner
Communications Inc. He is also a member of the Chemical Bank
National Advisory Board, a trustee of the Baruch School of the
College of the City of New York and a director of The Dreyfus Germany
Fund. 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 Global Bond Fund, Inc., Dreyfus Growth Opportunity Fund,
Inc., Dreyfus International Equity Fund, Inc., Dreyfus International
Recovery Fund, Inc. and Dreyfus Money Market Instruments, Inc. and
trustees of Dreyfus Institutional Money Market Fund and Dreyfus Variable
Investment Fund. Mrs. Jacobs is also a trustee of Dreyfus BASIC U.S.
Government Money Market Fund, Dreyfus California Intermediate Municipal
Bond Fund, Dreyfus Connecticut Intermediate Municipal Bond Fund, Dreyfus
Massachusetts Intermediate Municipal Bond Fund, Dreyfus New Jersey
Intermediate Municipal Bond Fund, Dreyfus Pennsylvania Intermediate
Municipal Bond Fund, Dreyfus Strategic Income, Dreyfus Strategic Investing
and a director of Dreyfus BASIC Money Market Fund, Inc. and Dreyfus
Strategic Governments Income, Inc. Mr. Fraser is also a director of The
Dreyfus Focus Funds, Inc. 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., The 401(k) Fund
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 $44,640 for the fiscal year ended October 31,
1994, for such Directors as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991
to July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., a wholly-owned subsidiary of The Boston Company,
Inc. Prior to December 1991, she served as Vice President and
Controller, and later as Senior Vice President, of The Boston Company
Advisors, Inc.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President
and General Counsel of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
February 1992 to July 1994, he served as Counsel for The Boston
Company Advisors, Inc. From August 1990 to February 1992, he was
employed as an Associate at Ropes & Gray, and prior to August 1990,
he was employed as an Associate at Sidley & Austin.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September
1992 to August 1994, he was an attorney with the Board of Governors
of the Federal Reserve System.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to
August 1994, he was Manager of the High Performance Fabric Division
of Springs Industries Inc.
JOSEPH S. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in
the Corporate Finance and Treasury areas.
JOHN J. PYBURN, Assistant Treasurer. Vice President of the Distributor
and an officer of other investment companies advised or administered
by the Manager. From 1984 to July 1994, he was Assistant Vice
President in the Mutual Fund Accounting Department of the Manager.
PAUL FURCINITO, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From January 1992 to July 1994, he was
a Senior Legal Product Manager, and from January 1990 to January
1992, he was a mutual fund accountant, for The Boston Company
Advisors, Inc.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts and, prior thereto, was
employed as a Research Assistant for the Bureau of National Affairs.
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 21, 1994.
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 August 24, 1994, 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.
The Agreement was approved by shareholders at a meeting held on August 2,
1994, and was last approved by the Fund's Board of Directors, including a
majority of the Directors who are not "interested persons" of any party to
the Agreement, at a meeting held on September 12, 1994. 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 following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Robert E. Riley, President, Chief
Operating Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution; Philip L. Toia, Vice Chairman-Operations and Administration;
Paul H. Snyder, Vice President and Chief Financial Officer; Daniel C.
Maclean, Vice President and General Counsel; Robert F. Dubuss, Vice
President; Elie M. Genadry, Vice President-Wholesale; Henry D. Gottmann,
Vice President-Retail; Jeffrey N. Nachman, Vice President-Mutual Fund
Accounting; Daine M. Coffey, Vice President-Corporate Communications;
Barbara E. Casey, Vice President-Retirement Services; Katherine C.
Wickham, Vice President-Human Resources; Mark N. Jacobs, Vice President-
Fund Legal and Compliance; Maurice Bendrihem, Controller; and Mandell L.
Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene, Julian M.
Smerling and David B. Truman, directors.
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 portfolio managers who are
authorized by the Board of Directors to execute purchases and sales of
securities. The Fund's portfolio managers 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 maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. 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 years ended
October 31, 1993 and 1994, the management fees payable by the Fund
amounted to $223,707, $4,015,305 and $11,591,497, respectively; however,
pursuant to undertakings in effect, the Manager reduced its fees by
$138,635 and $196,680 for fiscal 1992 and 1993, 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 Dreyfus Service Corporation, a
wholly-owned subsidiary of the Manager, 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.
For the fiscal year ended October 31, 1994, the amount charged to the
Fund under the Shareholder Services Plan was $2,636,592.
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
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request
must be in writing and signature-guaranteed. See "Redemption of Fund
Shares--Dreyfus TeleTransfer Privilege."
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
Shareholder Services Form. Redemption proceeds, if wired, must be in the
amount of $1,000 or more and will be wired to the investor's account at
the bank of record designated in the investor's file at the Transfer
Agent, if the investor's bank is a member of the Federal Reserve System,
or to a correspondent bank if the investor's bank is not a member. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-
654-7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive 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."
Fund Exchanges. 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 request an exchange, an investor must give exchange instructions
to the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the relevant "NO" box on the
account application, indicating that the investor specifically refuses
this Privilege. By using Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic 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 "Fund
Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if 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.
Fund exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service 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 distributions, the investor's shares will be reduced and
eventually may be depleted. There is a service charge of $.50 for each
withdrawal 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. Dreyfus Dividend Sweep 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.
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 certain 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, 1994 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 any
gains realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income under Section 1276.
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 of the Code. 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 qualification
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 2,836 year
periods ended October 31, 1994 (the Fund's fiscal year end) was .05%, and
12.58%, 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, 1994 (the Fund's fiscal year
end) was 39.93%.
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
years ended October 31, 1993, and 1994 was 127.24%, 85.26% and 97.47%,
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 years ended October 31, 1993 and 1994,
the Fund paid total brokerage commissions of $269,431, $2,514,974 and
$4,007,219, 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, $8,144,062 and $5,342,104, 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 LLP, 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 Credit Rating Co.
("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.
<TABLE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS
OCTOBER 31, 1994
COMMON STOCKS--55.4% SHARES VALUE
---------------- ----------------
<S> <C> <C> <C>
BASIC AND PROCESS INDUSTRIES--11.4% Air Products & Chemicals 400,000 $ 19,100,000
American Infrastructure....... 650,000 (a,f) 455,000
Bethlehem Steel............... 50,000 (a) 950,000
Cabot......................... 400,000 11,400,000
Corning....................... 130,000 4,420,000
Dow Chemical.................. 175,000 12,862,500
Eastman Chemical.............. 235,700 12,727,800
Ethyl......................... 230,000 2,616,250
Ferro......................... 225,000 5,765,625
Fluor......................... 225,000 11,137,500
Foster Wheeler................ 290,000 10,440,000
Geon.......................... 100,000 3,000,000
Georgia-Pacific............... 200,000 14,775,000
Grupo Carso................... 100,000 (a,b) 2,175,000
IMC Fertilizer Group.......... 75,000 (a) 3,187,500
IMCO Recycling................ 130,000 (a) 1,885,000
Jacobs Engineering Group...... 61,300 (a) 1,310,288
Kaiser Resources.............. 140,000 (a) 1,085,000
Longview Fibre................ 501,000 8,391,750
Lyondell Petrochem............ 100,000 2,737,500
Methanex...................... 300,000 (a) 4,481,250
Mitsubishi Gas Chemical....... 290,000 1,601,135
Morton International.......... 175,000 4,987,500
Olin.......................... 43,300 2,376,087
Praxair....................... 85,000 1,965,625
Sumitomo Chemical............. 280,000 1,652,838
Teijin........................ 260,000 1,540,144
Tyco International............ 309,165 14,917,211
USX-U.S. Steel Group.......... 150,000 5,625,000
Union Carbide................. 200,000 6,625,000
Willamette Industries......... 100,000 4,650,000
Witco......................... 535,000 14,980,000
----------------
195,823,503
----------------
CAPITAL GOODS--6.7% Albany International, Cl. A 904,800 17,869,800
Boeing........................ 125,000 5,484,375
Brown Boveri & Cie Ag......... 3,125 2,681,059
CBI Industries................ 400,000 9,250,000
Cooper Industries............. 175,000 6,540,625
Deere & Co.................... 75,000 5,381,250
Emerson Electric.............. 155,400 9,440,550
General Electric.............. 450,000 21,993,750
Illinois Tool Works........... 125,000 5,609,375
Keppel........................ 300,000 2,758,856
Sembawang Shipyard............ 300,000 2,329,700
WMX Technologies.............. 600,000 17,625,000
Wheelabrator Technologies..... 525,000 7,284,375
----------------
114,248,715
----------------
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
---------------- ----------------
CONSUMER--3.7% Authentic Fitness 432,200 (a) $ 6,537,025
Consolidated Stores........... 100,000 (a) 1,812,500
Cracker Barrel Old Country Store 100,000 2,200,000
Genting Berhad................ 112,500 1,034,129
IBP........................... 500,000 17,062,500
Labatt (John)................. 100,000 1,524,390
Maytag........................ 81,000 1,285,875
McDonald's.................... 100,000 2,875,000
Penney (J.C.)................. 100,000 5,062,500
PepsiCo....................... 50,000 1,750,000
Philip Morris Cos............. 150,000 9,187,500
Premark International......... 100,000 4,475,000
Price/Costco.................. 400,000 (a) 6,300,000
Resorts World Berhad.......... 125,000 792,099
Seventh Generation............ 102,894 (a,f) 219,936
United Motor Works Holdings Berhad 691,000 1,810,953
----------------
63,929,407
----------------
ENERGY--8.4% Amerada Hess.......... 200,000 9,950,000
Amoco......................... 150,000 9,506,250
Chevron....................... 100,000 4,500,000
Coastal....................... 100,000 2,850,000
Comercial De Plata ........... 263,240 887,296
Dresser Industries............ 817,000 17,259,125
Exxon......................... 150,000 9,431,250
Imperial Oil.................. 200,000 7,169,253
Mobil......................... 50,000 4,300,000
Nova.......................... 600,000 5,925,000
Occidental Petroleum.......... 575,000 12,578,125
Oceaneering International..... 190,000 (a) 2,446,250
Parker & Parsley Petroleum.... 247,000 6,175,000
Phillips Petroleum............ 200,000 7,375,000
Schlumberger.................. 250,000 14,687,500
Texaco........................ 100,000 6,537,500
Tidewater..................... 100,000 2,287,500
UGI........................... 400,000 8,050,000
Western Atlas................. 250,000 (a) 11,500,000
Western Gas Resources......... 55,000 1,072,500
----------------
144,487,549
----------------
FINANCIAL--4.0% AT&T Capital 150,000 3,487,500
AmSouth Bancorp............... 150,000 4,462,500
Bank of Boston................ 300,000 8,625,000
Boatmen's Bancshares.......... 150,000 4,443,750
Brascan....................... 700,000 10,850,000
City National................. 90,000 (a) 990,000
Development Bank of Singapore. 100,000 1,062,670
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
---------------- ----------------
FINANCIAL (CONTINUED) Equitable of Iowa 89,700 $ 3,173,138
First Fidelity Bancorp........ 100,000 4,500,000
Great Western Financial....... 150,000 2,681,250
Hibernia, Cl. A............... 100,000 800,000
Malayan Banking Berhad........ 200,000 1,361,236
Mercantile Bancorp............ 125,000 4,343,750
Midlantic..................... 300,000 8,400,000
Mortgage Information.......... 245,959 (a,c,f) 482,079
Norwest....................... 110,000 2,695,000
Overseas Union Bank........... 220,000 1,258,856
Shawmut National.............. 200,000 4,125,000
----------------
67,741,729
----------------
HEALTH CARE--5.7% A.L. Pharmaceutical, Cl. A 179,200 3,203,200
Abbott Laboratories........... 130,000 4,030,000
Advanced Tissue Science....... 425,100 (a) 3,135,112
Affymax N.V................... 250,000 (a) 4,250,000
Coastal Healthcare Group...... 200,000 (a) 6,300,000
Columbia/HCA Healthcare....... 150,420 6,261,233
Gilead Sciences............... 985,000 (a) 8,372,500
HealthCare & Retirement....... 150,000 (a) 4,031,250
Hillhaven .................... 100,000 (a) 2,225,000
Johnson & Johnson............. 130,000 7,101,250
Marion Merrell Dow............ 150,000 3,825,000
Merck & Co.................... 130,000 4,647,500
National Health Labs Holdings. 90,000 1,293,750
National Medical Enterprises.. 200,000 (a) 2,900,000
Noven Pharmaceuticals......... 50,000 (a) 762,500
Schering-Plough............... 280,000 19,950,000
SmithKline Beecham A.D.R...... 300,000 9,150,000
Upjohn........................ 50,000 1,650,000
Warner-Lambert................ 50,000 3,812,500
----------------
96,900,795
----------------
INSURANCE--.8% Fremont General 200,450 4,936,081
Skandia Forsakrings Fria...... 305,000 5,577,581
SunAmerica.................... 90,000 3,498,750
----------------
14,012,412
----------------
MEDIA/ENTERTAINMENT--.3% Disney (Walt) 45,000 1,771,875
Gaylord Entertainment, Cl. A.. 100,000 1,962,500
Valassis Communications....... 120,000 (a) 1,830,000
----------------
5,564,375
----------------
MINING AND METALS--.6% Alcan Aluminium 130,000 3,477,500
FreeportMcMoRan............... 300,000 5,512,500
Huntco, Cl. A................. 50,000 1,125,000
LTV........................... 50,000 (a) 956,250
----------------
11,071,250
----------------
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
---------------- ----------------
REAL ESTATE--.8% Crescent Real Estate Eq 230,100 $ 6,212,700
Factory Stores of America..... 125,000 2,593,750
Saul Centers.................. 194,800 2,946,350
Sizeler Property Investments.. 137,500 1,512,500
----------------
13,265,300
----------------
TECHNOLOGY--2.7% AMP................ 250,000 18,906,250
Aurora Electronics............ 109,100 (a) 518,225
First Financial Management.... 155,000 8,680,000
General Instrument............ 150,000 (a) 5,025,000
PLATINUM Technology........... 325,000 (a) 7,190,625
Read-Rite .................... 315,000 (a) 5,473,125
----------------
45,793,225
----------------
TELECOMMUNICATIONS--6.8% AT&T 1,000,000 55,000,000
DDI........................... 70 634,262
GTE........................... 200,000 6,150,000
IDB Communications Group...... 515,000 4,763,750
IntelCom Group................ 325,000 (a) 4,956,250
LDDS Communications........... 650,000 (a) 15,275,000
MCI Communications............ 210,000 4,830,000
MFS Communications............ 100,000 (a) 3,700,000
Nippon Telegraph & Telephone.. 680 6,350,877
Sprint........................ 200,000 6,525,000
Tele-Communications, Cl. A.... 200,000 (a) 4,525,000
Telecom Argentina S.A., Cl. B. 100,000 608,122
US West....................... 100,000 3,762,500
----------------
117,080,761
----------------
TRANSPORTATION--3.1% Air France 135 (a) 7,418
American Freightways.......... 50,000 (a) 1,062,500
Burlington Northern........... 80,000 3,990,000
CSX........................... 125,000 9,062,500
Canadian Pacific.............. 1,121,300 17,940,800
Conrail....................... 150,000 8,156,250
Kirby......................... 223,500 (a) 3,743,625
M.S. Carriers................. 50,000 (a) 1,175,000
Overseas Shipholding.......... 370,000 8,741,250
----------------
53,879,343
----------------
UTILITIES--.4%. Central & South West 110,000 2,475,000
Cia Naviera Perez S.A......... 187,500 (a) 1,012,703
Entergy....................... 155,000 3,623,125
----------------
7,110,828
----------------
TOTAL COMMON STOCKS
(cost $ 921,331,022) $ 950,909,192
================
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1994
CONVERTIBLE PREFERRED STOCKS--9.2% SHARES VALUE
---------------- ----------------
BASIC AND PROCESS INDUSTRIES--.3% Bowater, Ser. B, Cum., 7% 60,000 $ 1,560,000
Tiregator, Ser. B, Cum., $.50. 600,000 (a,f) 3,000,000
----------------
4,560,000
----------------
CAPITAL GOODS--.8% Westinghouse, Electric, Ser. C, Cum., $1.30 990,000 (b) 14,602,500
----------------
CONSUMER--3.4% Chrysler, Ser. A, Cum., 4.625% 90,000 (b) 12,228,750
Ford Motor, Ser. A, Cum., $4.20 35,000 3,386,250
RJR Nabisco Holdings, Cum., $3.34 . 2,125,500 14,878,500
RJR Nabisco Holdings, Ser. C, Cum., $.6012 2,400,000 16,500,000
Sears Roebuck, Ser. A, Cum., $3.75 209,500 11,862,937
----------------
58,856,437
----------------
ENERGY--1.1% Occidental Petroleum, Cum., $3.875 100,000 (b) 5,406,250
Occidental Petroleum, Cum., $3.00 80,000 4,020,000
Tenneco, Ser. A, Cum., $2.80.. 67,700 2,818,012
Unocal, Cum., $3.50........... 35,000 (b) 1,933,750
Western Gas Resources, Cum., $2.625 145,000 4,966,250
----------------
19,144,262
----------------
FINANCIAL--1.2% Carolina First, Ser. 1993, 7.50% 48,000 1,374,000
Chemical Banking, 10%......... 85,000 6,247,500
Citicorp, Ser. 15, Cum.,
Depositary Shares, 8.25% 277,100 5,438,088
People's Bank, Ser. A, Cum., 8.50% 90,000 6,907,500
----------------
19,967,088
----------------
MINING AND METALS--.7% Newmont Mining, Cum., $2.75 100,000 (b) 6,000,000
Noranda, Ser. E, Cum., 6%..... 300,000 5,875,832
----------------
11,875,832
----------------
REAL ESTATE--.9% Rouse, Ser. A, Cum., 6.50% 192,000 9,552,000
Tanger Factory, Ser. A, Cum., $1.575 299,800 6,145,900
----------------
15,697,900
----------------
TELECOMMUNICATIONS--.2% LCI International, Cum., 5% 85,000 2,826,250
----------------
TRANSPORTATION--.6% AMR, Ser. A, Cum.,
Depositary Shares, $3.00 175,000 (b) 7,339,062
Arkansas Best, Ser. A, Cum., $2.875 75,000 3,271,875
----------------
10,610,937
----------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $ 149,185,247) $ 158,141,206
================
PRINCIPAL
CONVERTIBLE CORPORATE NOTES & BONDS--9.9% AMOUNT
----------------
BASIC AND PROCESS INDUSTRIES--1.7% American Infrastructure, Sub. Deb.,
10%, 1/31/1996................. $ 500,000 (f) $ 250,000
CEMEX SA, de, C.V. Sub. Deb.,
4.25%, 11/1/1997............... 15,000,000 (b) 15,468,750
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
PRINCIPAL
CONVERTIBLE CORPORATE NOTES & BONDS (CONTINUED) AMOUNT VALUE
---------------- ----------------
BASIC & PROCESS
INDUSTRIES (CONTINUED) Riverwood International, Sub. Deb.:
6.75%,9/15/2003................ $ 2,950,000 $ 3,326,125
6.75%,9/15/2003................ 9,350,000 (b) 10,612,250
----------------
29,657,125
----------------
CAPITAL GOODS--.5% Leibert, Sub. Deb.,
8%, 11/15/2010................. 3,900,000 8,857,875
Rohr, Sub. Notes.,
7.75%, 5/15/2004............... 500,000 570,000
----------------
9,427,875
----------------
CONSUMER--.6% Omnicom Group, Sub. Deb.,
4.50%, 9/1/2000................ 3,000,000 (b) 3,187,500
Pep Boys, Sub. Notes.,
4%, 9/1/1999................... 3,750,000 4,012,500
Wendy's International, Sub. Deb.,
7%, 4/1/2006................... 2,000,000 2,580,000
----------------
9,780,000
----------------
FINANCIAL--.1% Banco Nacional de Mexico, Sub. Deb.
(Gtd. by Grupo Financiero Banamex
Accival S.A. de C.V.),
7%, 12/15/1999.............. 2,000,000 (b,d) 2,225,000
----------------
HEALTH CARE--1.1% Beverly Enterprises, Sub. Deb.,
7.625%, 3/15/2003.............. 5,000,000 4,875,000
Genesis Health Ventures, Sub. Deb.,
6%, 11/30/2003................. 6,000,000 8,302,500
Omnicare, Sub. Deb.,
5.75%, 10/1/2003............... 4,000,000 5,330,000
----------------
18,507,500
----------------
INSURANCE--1.1%.. Nac Re, Sub. Deb.,
5.25%, 12/15/2002.............. 10,050,000 (b) 8,492,250
Re Capital, Sub. Deb.,
5.50%, 8/1/2000.............. 2,000,000 1,882,500
Trenwick, Sub. Deb.,
6%, 12/15/1999................. 8,000,000 7,760,000
----------------
18,134,750
----------------
MEDIA/ENTERTAINMENT--.7% News America Holdings, Senior Liquid Yield
Option Notes (Gtd. by News Ltd.),
Zero Coupon, 3/11/2013......... 6,000,000 (e) 2,370,000
Time Warner, Sub. Deb.,
Zero Coupon, 6/22/2013......... 25,000,000 9,062,500
----------------
11,432,500
----------------
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
PRINCIPAL
CONVERTIBLE CORPORATE NOTES & BONDS (CONTINUED) AMOUNT VALUE
---------------- ----------------
MINING AND METALS--.7% Inco, Sub. Deb.,
5.75%, 7/1/2004................ $ 11,000,000 $ 12,856,250
----------------
REAL ESTATE--.8% Continental Homes Holding, Sub. Deb.,
6.875%, 3/15/2002.............. 3,250,000 2,835,625
Liberty Property Trust, Sub. Deb.,
8%, 7/1/2001................... 6,000,000 5,722,500
Sizeler Properties, Sub. Deb.,
8%, 7/15/2003.................. 5,000,000 4,643,750
----------------
13,201,875
----------------
TECHNOLOGY--2.5% Network Equipment Technology, Sub. Deb.,
7.25%, 5/15/2014............... 6,160,000 5,798,100
Seagate Technology, Sub. Deb.,
5%, 11/1/2003.................. 12,000,000 (b) 13,080,000
Thermo Electron, Euro Sub. Deb.:
4.625%, 8/1/1997............... 8,500,000 12,558,750
4.875%, 8/1/1997............... 8,000,000 11,820,000
----------------
43,256,850
----------------
TRANSPORTATION--.1% Air France, Sub. Deb.,
4%, 1/1/2000................... 893,193 173,436
Delta AirLines, Sub. Deb.,
3.23%, 6/15/2003............... 3,000,000 2,152,500
----------------
2,325,936
----------------
TOTAL CONVERTIBLE CORPORATE
NOTES AND BONDS
(cost $ 161,542,604) $ 170,805,661
================
SHORT-TERM INVESTMENTS--27.4%
U.S. TREASURY BILLS: 4.25%, 11/3/1994 $ 22,303,000 $ 22,295,658
4.81%, 11/10/1994............. 76,362,000 76,267,395
3.20%, 11/17/1994............. 68,027,000 67,884,694
4.595%, 11/25/1994............ 40,508,000 40,387,318
4%, 12/1/1994................. 10,265,000 10,226,902
4.65%, 12/8/1994.............. 19,676,000 19,582,954
3%, 12/15/1994................ 17,734,000 17,632,030
4.545%, 12/22/1994............ 37,816,000 37,557,085
3.85%, 1/5/1995............... 36,239,000 35,919,434
3.52%, 1/12/1995.............. 8,588,000 8,502,843
4.71%, 1/19/1995.............. 100,000,000 98,891,110
3.50%, 2/9/1995............... 36,320,000 35,801,340
----------------
TOTAL SHORT-TERM INVESTMENTS
(cost $ 470,948,763) $ 470,948,763
================
TOTAL INVESTMENTS (cost $ 1,703,007,636) .......................... 101.9% $1,750,804,822
====== ================
LIABILITIES, LESS CASH AND RECEIVABLES............................. (1.9%) $ (33,071,429)
====== ================
NET ASSETS............................................................... 100.0% $1,717,733,393
====== ================
</TABLE>
DREYFUS GROWTH AND INCOME FUND, INC.
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,
1994, these securities amounted to $102,751,062 or approximately 6.0% of
net assets.
(c) Investment in non-controlled affiliate (cost $275,959)-See Note
1(c).
(d) Exchangeable for Grupo Financiero Banamex Accival, S.A. de C.V.,
Ser. L, Common Stock.
(e) Exchangeable for News Ltd. ordinary shares.
(f) Securities restricted as to public resale. Investments in restricted
securities, with an aggregate value of $4,407,015 represent approximately
.3% of net assets:
<TABLE>
ACQUISITION PURCHASE PERCENTAGE OF
ISSUER DATE PRICE NET ASSETS VALUATION(1)
- ------ ------------ ---------- --------------- ------------
<S> <C> <C> <C> <C>
American Infrastructure 2/14/1991 $ 10.00 .0%(2) $.70/share
6/4/1991 10.00
American Infrastructure,
Conv. Sub. Deb., 10%, 1/31/1996 2/14/1991 1,000.00 .0%(2) $500.00
Mortgage Information 5/18/1987 1.12 .0%(2) $1.96/share
2/1/1988 1.12
12/13/1988 1.12
Seventh Generation 9/20/1990 13.33 .0%(2) $2.1375/share
Tiregator 3/31/1993 5.00 .2% cost
- ----------------
(1) The valuation of these securities has been determined in good faith
under the direction of the Board of Directors.
(2) Less than .1% of net assets.
</TABLE>
See notes to financial statements.
<TABLE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $1,703,007,636)_see statement................................... $1,750,804,822
Cash.................................................................... 11,760,570
Receivable for investment securities sold............................... 53,982,236
Dividends and interest receivable....................................... 5,685,975
Receivable for subscriptions to Common Stock............................ 10,859
Prepaid expenses........................................................ 172,533
----------------
1,822,416,995
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 1,092,472
Payable for investment securities purchased............................. 102,762,140
Payable for Common Stock redeemed....................................... 17,502
Accrued expenses and other liabilities.................................. 811,488 104,683,602
--------------- ---------------
NET ASSETS ................................................................ $1,717,733,393
==============
REPRESENTED BY:
Paid-in capital......................................................... $1,647,312,366
Accumulated undistributed investment income_net......................... 5,168,750
Accumulated undistributed net realized gain on investments.............. 17,455,091
Accumulated net unrealized appreciation on investments_Note 4(b)........ 47,797,186
----------------
NET ASSETS at value applicable to 104,192,902 shares outstanding
(300 million shares of $.001 par value Common Stock authorized)......... $1,717,733,393
==============
NET ASSET VALUE, offering and redemption price per share
($1,717,733,393 / 104,192,902 shares)................................... $16.49
======
See notes to financial statements.
</TABLE>
<TABLE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1994
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Cash dividends (net of $288,067 foreign taxes withheld at source)..... $ 28,465,524
Interest.............................................................. 22,732,160
-------------
TOTAL INCOME...................................................... $51,197,684
EXPENSES:
Management fee_Note 3(a).............................................. 11,591,497
Shareholder servicing costs_Note 3(b)................................. 4,991,846
Registration fees..................................................... 302,417
Custodian fees........................................................ 247,069
Prospectus and shareholders' reports.................................. 143,188
Professional fees..................................................... 140,911
Directors' fees and expenses_Note 3(c)................................ 44,640
Dividends on securities sold short.................................... 40,500
Miscellaneous......................................................... 50,801
-------------
TOTAL EXPENSES.................................................... 17,552,869
-------------
INVESTMENT INCOME--NET............................................ 33,644,815
-------------
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS--NOTE 4(A):
Net realized gain on investments:
Long transactions (including option transactions)..................... $ 23,125,464
Short sale transactions............................................... (632,457)
Net realized (loss) on forward currency exchange contracts;
Short transactions.................................................... (3,663,025)
Net realized (loss) on financial futures_Note 4(a):
Long transactions .................................................... (1,331,861)
Short transactions.................................................... 581,625
-------------
NET REALIZED GAIN..................................................... 18,079,746
Net unrealized (depreciation) on investments and forward
currency exchange contracts for the year:
Unaffiliated issuers.............................................. $(58,799,443)
Affiliated issuers................................................ 482,080 (58,317,363)
------------- -------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (40,237,617)
-------------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $ (6,592,802)
============
See notes to financial statements.
</TABLE>
<TABLE>
DREYFUS GROWTH AND INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31,
-----------------------------------
1993 1994
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Investment income_net................................................... $ 15,628,381 $ 33,644,815
Net realized gain on investments........................................ 2,531,927 18,079,746
Net unrealized appreciation (depreciation) on investments for the year.. 103,044,415 (58,317,363)
---------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... 121,204,723 (6,592,802)
---------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (13,079,365) (31,151,196)
Net realized gain on investments........................................ ____ (2,937,836)
---------------- ---------------
TOTAL DIVIDENDS....................................................... (13,079,365) (34,089,032)
---------------- ---------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 1,177,630,870 1,009,565,228
Dividends reinvested.................................................... 12,383,305 32,199,203
Cost of shares redeemed................................................. (231,168,477) (448,852,062)
---------------- ---------------
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS................ 958,845,698 592,912,369
---------------- ---------------
TOTAL INCREASE IN NET ASSETS...................................... 1,066,971,056 552,230,535
NET ASSETS:
Beginning of year....................................................... 98,531,802 1,165,502,858
---------------- ---------------
End of year (including undistributed investment income_net: $2,675,131 in 1993
and $5,168,750 in 1994)............................................... $1,165,502,858 $1,717,733,393
================ ==============
SHARES SHARES
---------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 75,412,429 60,025,508
Shares issued for dividends reinvested.................................. 788,052 1,969,430
Shares redeemed......................................................... (14,163,247) (26,930,996)
---------------- ---------------
NET INCREASE IN SHARES OUTSTANDING.................................... 62,037,234 35,063,942
================ ==============
See notes to financial statements.
</TABLE>
DREYFUS GROWTH AND INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 3 of the Fund's Prospectus dated February
28, 1995.
See notes to financial statements.
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, until August 24, 1994, acted as the exclusive distributor of the
Fund's shares, which are sold to the public without a sales charge. Dreyfus
Service Corporation is a wholly-owned subsidiary of The Dreyfus Corporation
("Manager"). Effective August 24, 1994, the Manager became a direct
subsidiary of Mellon Bank N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109 is a wholly-owned
subsidiary of Institutional Administration Services, Inc., a provider of
mutual fund administration services, the parent company of which is Boston
Institutional Group, Inc.
(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 denominated in foreign currencies are translated to U.S.
dollars at the prevailing rates of exchange. Investments in forward currency
exchange contracts are valued at the offsetting rate.
(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 applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $3,409,000
available for Federal income tax purposers to be applied against future net
securities profits, if any, realized subsequent to October 31, 1994. If not
applied, the carryover expires in fiscal 2000.
DREYFUS GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BANK LINE OF CREDIT:
In accordance with an agreement with a bank, the Fund may borrow up to
$10 million under a short-term unsecured line of credit. Interest on
borrowings is charged at rates which are related to Federal Funds rates in
effect from time to time.
At October 31, 1994, there were no outstanding borrowings under the line
of credit.
NOTE 3--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
(which, in the view of Stroock, Stroock & Lavan, counsel to the Fund, also
contemplates interest and dividends on securities sold short), 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.
No expense reimbursement was required pursuant to the Agreement for the year
ended October 31, 1994.
(B) Pursuant to the Fund's Shareholder Services Plan, 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 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, 1994, the Fund was charged an aggregate of $2,636,592 pursuant to
the Shareholder Services Plan.
(C) Prior to August 24, 1994 certain officers and directors of the Fund
were "affiliated persons," as defined in the Act, of the Manager and/or
Dreyfus Service Corporation. Each director who is not an "affiliated person"
receives an annual fee of $4,500 and an attendance fee of $500 per meeting.
Prior to March 16, 1994, the annual fee was $1,000 and the attendance fee was
$250.
NOTE 4--SECURITIES TRANSACTIONS:
(A) The following summarizes the aggregate amount of purchases and sales
of investment securities and securities sold short, excluding short-term
securities, forward currency exchange contracts and options transactions,
during the year ended October 31, 1994:
<TABLE>
PURCHASES SALES
---------------- ----------------
<S> <C> <C>
Long transactions............................................ $1,439,016,709 $1,154,226,960
Short sale transactions...................................... 27,055,576 26,423,119
---------------- ----------------
Total...................................................... $1,466,072,285 $1,180,650,079
=============== =================
</TABLE>
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
DREYFUS GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 1994, there were no securities sold
short outstanding.
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 opened 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 opened 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 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, 1994, there were no financial
futures contracts outstanding.
(B) At October 31, 1994, accumulated net unrealized appreciation on
investments was $47,797,186, consisting of $93,707,275 gross unrealized
appreciation and $45,910,089 gross unrealized depreciation.
At October 31, 1994, 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).
DREYFUS GROWTH AND INCOME FUND, INC.
REPORT OF ERNST & YOUNG LLP, 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, 1994, 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, 1994 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our 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, 1994, 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.
(Ernst & Young LLP Signature)
New York, New York
December 5, 1994
