File Nos. 33-48926
811-6718
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 12 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 12 [X]
(Check appropriate box or boxes.)
DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
----
X on November 1, 1998 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis 4
3 Condensed Financial Information 5
4 General Description of Registrant 6
5 Management of the Fund 10
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 22
7 Purchase of Securities Being Offered 11
8 Redemption or Repurchase 17
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
- ---------
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-36
13 Investment Objectives and Policies B-2
14 Management of the Fund B-17
15 Control Persons and Principal B-20
Holders of Securities
16 Investment Advisory and Other B-22
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-35
18 Capital Stock and Other Securities B-36
19 Purchase, Redemption and Pricing B-24; B-25;
of Securities Being Offered and B-31
20 Tax Status *
21 Underwriters B-1 and B-24
22 Calculations of Performance Data B-35
23 Financial Statements B-37
Items in
Part C of
Form N-1A
_________
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-3
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
_______________________________________________________________________________
PROSPECTUS NOVEMBER 1, 1998
DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
DREYFUS SHORT TERM INCOME FUND
DREYFUS INTERMEDIATE TERM INCOME FUND
_______________________________________________________________________________
DREYFUS INVESTMENT GRADE BOND FUNDS, INC. IS AN OPEN-END, MANAGEMENT
INVESTMENT COMPANY (THE "COMPANY"), KNOWN AS A MUTUAL FUND. THE COMPANY
PERMITS YOU TO INVEST IN TWO SEPARATE SERIES WHICH ARE DESCRIBED IN THIS
PROSPECTUS (EACH, A "FUND" AND, COLLECTIVELY, THE "FUNDS")_DREYFUS SHORT
TERM INCOME FUND ("SHORT TERM INCOME FUND"), A NON-DIVERSIFIED SERIES, AND
DREYFUS INTERMEDIATE TERM INCOME FUND ("INTERMEDIATE TERM INCOME FUND"), A
DIVERSIFIED SERIES. EACH FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE YOU WITH
AS HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT WITH THE PRESERVATION OF
CAPITAL. THE FUNDS DIFFER IN EFFECTIVE PORTFOLIO DURATION AND AVERAGE
PORTFOLIO MATURITY, WHICH IN TURN AFFECTS THEIR LEVEL OF INCOME AND DEGREE OF
SHARE PRICE FLUCTUATION.
EACH FUND INVESTS PRINCIPALLY IN A BROAD RANGE OF INVESTMENT GRADE
DEBT SECURITIES OF DOMESTIC AND FOREIGN ISSUERS. UNDER NORMAL MARKET
CONDITIONS, THE SHORT TERM INCOME FUND WILL INVEST IN A PORTFOLIO OF
SECURITIES THAT HAS AN EFFECTIVE DURATION AND AN EFFECTIVE AVERAGE PORTFOLIO
MATURITY OF THREE YEARS OR LESS. UNDER NORMAL MARKET CONDITIONS, THE
INTERMEDIATE TERM INCOME FUND WILL INVEST IN A PORTFOLIO OF SECURITIES THAT
HAS AN EFFECTIVE DURATION RANGING BETWEEN THREE AND EIGHT YEARS AND AN
EFFECTIVE AVERAGE PORTFOLIO MATURITY RANGING BETWEEN FIVE AND TEN YEARS.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY.
EACH FUND PROVIDES FREE REDEMPTION CHECKS, WHICH YOU CAN USE IN
AMOUNTS OF $500 OR MORE FOR CASH OR TO PAY BILLS. YOU CONTINUE TO EARN INCOME
ON THE AMOUNT OF THE CHECK UNTIL IT CLEARS. YOU CAN PURCHASE OR REDEEM SHARES
BY TELEPHONE USING DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES EACH FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUNDS THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED NOVEMBER 1, 1998,
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. THE SECURITIES AND
EXCHANGE COMMISSION MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS
THE STATEMENT OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, A
ND OTHER INFORMATION REGARDING THE FUNDS. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, WRITE TO THE COMPANY AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
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.
_______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_______________________________________________________________________________
TABLE OF CONTENTS
PAGE
ANNUAL FUND OPERATING EXPENSES.................... 4
CONDENSED FINANCIAL INFORMATION................... 5
DESCRIPTION OF THE FUNDS.......................... 6
MANAGEMENT OF THE FUNDS........................... 10
HOW TO BUY SHARES................................. 11
SHAREHOLDER SERVICES.............................. 14
HOW TO REDEEM SHARES ............................. 17
SHAREHOLDER SERVICES PLAN......................... 20
DIVIDENDS, DISTRIBUTIONS AND TAXES................ 20
PERFORMANCE INFORMATION........................... 21
GENERAL INFORMATION............................... 22
APPENDIX.......................................... 24
[Page 2]
[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
DREYFUS DREYFUS
SHORT TERM INTERMEDIATE TERM
INCOME FUND INCOME FUND
__________ __________
<S> <C> <C>
Management Fees .......................................... .50% .55%
Other Expenses............................................ .39% 1.08%
Total Fund Operating Expenses ............................ .89% 1.63%
EXAMPLE:
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period:
DREYFUS DREYFUS
SHORT TERM INTERMEDIATE TERM
INCOME FUND INCOME FUND
__________ __________
1 YEAR $ 9 $ 17
3 YEARS $ 28 $ 51
5 YEARS $ 49 $ 89
10 YEARS $110 $193
</TABLE>
_______________________________________________________________________________
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST AND FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, A FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
_______________________________________________________________________________
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by each Fund, the payment of which will reduce
investors' annual return. The information in the foregoing table does not
reflect any fee waivers or expense reimbursement arrangements that may be in
effect. You can purchase Fund shares without charge directly from the Funds'
distributor; you may be charged a fee if you effect transactions in Fund
shares through a Service Agent (as defined below). See "Management of the
Funds," "How to Buy Shares" and "Shareholder Services Plan."
[Page 4]
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, each Fund's independent auditors. Further financial data, related
notes and the report of independent auditors accompany 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 period indicated. This
information has been derived from the Funds' financial statements.
<TABLE>
<CAPTION>
SHORT TERM INCOME FUND INTERMEDIATE TERM INCOME FUND
_________________________________________________________________ __________________________
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
_________________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $12.50 $12.47 $11.94 $11.89 $11.86 $12.03 $12.50 $12.22 $13.23
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment
income_net .... .89 .84 .85 .78 .86 .84 .46 .95 .91
Net realized and unrealized
gain (loss) on
investments..... (.01) (.54) (.05) (.04) .17 .08 (.28) 1.01 .47
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT
OPERATIONS...... .88 .30 .80 .74 1.03 .92 .18 1.96 1.38
______ ______ ______ ______ ______ ______ ______ ______ ______
Dividends from investment
income-net...... (.89) (.83) (.85) (.77) (.86) (.83) (.46) (.95) (.89)
Dividends from net realized
gain on investments.. (.02) _ _ _ _ _ _ _ (.34)
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS.... (.91) (.83) (.85) (.77) (.86) (.83) (.46) (.95) (1.23)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end
of year......... $12.47 $11.94 $11.89 $11.86 $12.03 $12.12 $12.22 $13.23 $13.38
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL INVESTMENT
RETURN.......... 7.68%(3) 2.47% 7.05% 6.42% 8.95% 7.92% 3.05%(3) 16.70% 10.93%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of operating expenses
to average net assets.... _ .24% .61% .80% .80% .87% _ .52% .80%
Ratio of interest expense to
average net assets. _ _ _ _ .02% .02% _ .06% .34%
Ratio of net investment
income to average
net assets...... 7.58%(3) 6.79% 7.26% 6.52% 7.28% 7.01% 7.70%(3) 7.45% 6.81%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation..... 1.12%(3) .71% .34% .14% .11% .00%* 2.50%(3) .98% .49%
Portfolio Turnover Rate.. 54.59%(4) 74.90% 511.62% 291.35% 292.99% 185.77% 139.38%(4)321.59% 170.52%
Net Assets, end of year
(000's omitted)... $205,736 $277,028 $210,524 $189,693 $279,142 $358,726 $9,756 $21,944 $22,977
(1) From August 18, 1992 (commencement of operations) through July 31, 1993.
(2) From February 2, 1996 (commencement of operations) through July 31, 1996.
(3) Annualized.
(4) Not annualized.
*Amount represents less than .01%.
</TABLE>
Further information about each Fund's performance is contained in such
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.
[Page 5]
<TABLE>
<CAPTION>
DEBT OUTSTANDING
INTERMEDIATE TERM
SHORT-TERM INCOME FUND INCOME FUND
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
______________________ ____________________________
PER SHARE DATA: 1997(1) 1998 1997(2) 1998
______________________ ____________________________
<S> <C> <C> <C> <C>
Amount of debt outstanding at
end of year (in thousands).......................... _ _ _ $1,832
Average amount of debt
outstanding throughout
year (in thousands)(3)................................ $591 $796 $173 $1,320
Average number of shares
outstanding throughout
year (in thousands)(4)................................ 19,092 25,596 1,300 1,766
Average amount of debt per share
throughout year..................................... $.03 $.03 $.13 $.75
(1) From August 18, 1992 (commencement of operations) to July 31, 1996,
the Fund had no outstanding debt.
(2) From February 2, 1996 (commencement of operations) to July 31, 1996,
the Fund had no outstanding debt.
(3) Based upon daily outstanding borrowings.
(4) Based upon month-end balances.
</TABLE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVE
Each Fund's investment objective is to provide you with as high a
level of current income as is consistent with the preservation of capital. It
cannot be changed, as to a Fund, without approval by the holders of a
majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of such Fund's outstanding voting shares. There can be no
assurance that a Fund's investment objective will be achieved. Each Fund
pursues this objective in the manner described below.
MANAGEMENT POLICIES
Under normal market conditions, each Fund invests at least 65% of its
net assets in investment grade debt securities and securities with debt-like
characteristics of domestic and foreign issuers. These securities include
bonds, debentures, notes, money market instruments, mortgage-related
securities, asset-backed securities, municipal obligations, warrants,
convertible debt obligations and convertible preferred stock (collectively,
"Fixed-Income Securities"). See "Appendix_Certain Portfolio Securities." The
issuers may include domestic and foreign corporations, partnerships or
trusts, and governments or their political subdivisions, agencies or
instrumentalities. Each Fund may invest up to 30% of the value of its total
assets in securities of foreign issuers, including securities of companies
whose principal activities are in, or governments of, emerging markets. See
"Investment Considerations and Risks_Foreign Securities." The
mortgage-related securities in which the Fund may invest include those with
fixed, floating or variable interest rates, those with interest rates that
change based on multiples of changes in a specified index of interest rates
and those with interest rates that change inversely to changes in interest
rates, as well as those that do not bear interest.
Under normal market conditions, the Short Term Income Fund will
invest in a portfolio of securities that has an effective duration of three
years or less and the Intermediate Term Income Fund will invest in a
portfolio of securities that has an effective duration ranging between three
and eight years. As a measure of a fixed-income security's cash flow,
duration is an alternative to the concept of "term to maturity" in assessing
the price volatility associated with changes in interest rates. Generally,
the longer the duration, the more volatility an investor should expect. For
example, the market price of a bond with a duration of two years would be
expected to decline 2% if interest rates rose 1%. Conversely, the market
price of the same bond would be expected to increase 2% if interest rates
fell 1%. The market
[Page 6]
price of a bond with a duration of four years would be expected to increase
or decline twice as much as the market price of a bond with a two-year
duration. Duration is a way of measuring a security's maturity in terms of
the average time required to receive the present value of all interest and
principal payments as opposed to its term to maturity. The maturity of a
security measures only the time until final payment is due; it does not take
account of the pattern of a security's cash flows over time, which would
include how cash flow is affected by prepayments and by changes in interest
rates. Incorporating a security's yield, coupon interest payments, final
maturity and option features into one measure, duration is computed by
determining the weighted average maturity of a bond's cash flows, where the
present values of the cash flows serve as weights. In computing the duration
of the Funds, The Dreyfus Corporation will estimate the duration of
obligations that are subject to features such as prepayment or redemption by
the issuer, put options retained by the investor or other imbedded options,
taking into account the influence of interest rates on prepayments and coupon
flows. This method of computing duration is known as option-adjusted
duration. See also "Appendix-Certain Portfolio Securities-Mortgage-Related
Securities."
Investment grade Fixed-Income Securities are those rated at least Baa
by Moody's Investors Service, Inc. ("Moody's") or at least BBB by Standard &
Poor's Ratings Group ("S&P"), Fitch IBCA, Inc. ("Fitch") or Duff & Phelps
Credit Rating Co. ("Duff"), or, if unrated, deemed to be of comparable
quality by The Dreyfus Corporation. Fixed-Income 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.
Each Fund may invest up to 35% of the value of its net assets in
Fixed-Income Securities rated lower than Baa by Moody's and BBB by S&P, Fitch
and Duff and as low as Caa by Moody's and CCC by S&P, Fitch and Duff, or, if
unrated, deemed to be of comparable quality by The Dreyfus Corporation.
Securities rated Caa by Moody's and CCC by S&P, Fitch and Duff are considered
to have predominantly speculative characteristics with respect to capacity to
pay interest and repay principal and to be of poor standing. Each Fund
currently intends to invest less than 35% of its net assets in Fixed-Income
Securities rated lower than investment grade or, if unrated, deemed to be of
comparable quality by The Dreyfus Corporation. See "Investment Considerations
and Risks-Lower Rated Securities" below for a discussion of certain risks,
and "Appendix" in the Statement of Additional Information.
Each Fund may invest in money market instruments consisting 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 set forth under
"Appendix-Certain Portfolio Securities-Money Market Instruments." Under
normal market conditions, neither Fund expects to have a substantial portion
of its assets invested in money market instruments. However, when The Dreyfus
Corporation determines that adverse market conditions exist, a Fund may adopt
a temporary defensive posture and invest all of its assets in money market
instruments. Each Fund also may invest in money market instruments in
anticipation of investing cash positions.
The annual portfolio turnover rate for the current fiscal year is not
expected to exceed 300% for the Short Term Income Fund and is not expected to
exceed 350% for the Intermediate Term Fund. A turnover rate of 100% is
equivalent to the Fund buying and selling all the securities in its portfolio
over the course of a year. Higher portfolio turnover rates usually generate
additional brokerage commissions and transaction costs and the short term
gains realized from these transactions are taxable to shareholders as
ordinary income. Each Fund may engage in various investment techniques, such
as foreign currency
[Page 7]
transactions, options and futures transactions, leveraging, and lending
portfolio securities. The Intermediate Term Income Fund also may engage in
short-selling and interest rate swaps. For a discussion of the investment
techniques and their related risks, see "Investment Considerations and Risks"
and "Appendix-Investment Techniques" below and "Investment Objective and
Management Policies-Management Policies" in the Statement of Additional
Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL-Each Fund's net asset value per share should be expected to
fluctuate. Investors should consider a Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objective and Management Policies" in the
Statement of Additional Information for a further discussion of certain
risks.
FIXED-INCOME SECURITIES-Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities generally are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values
of Fixed-Income Securities also may be affected by changes in the credit
rating or financial condition of the issuer. Certain securities purchased by
a Fund, such as those rated Baa or lower by Moody's and BBB or lower by S&P,
Fitch and Duff, may be subject to such risk with respect to the issuing
entity and to greater market fluctuations than certain lower yielding, higher
rated fixed-income 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. See "Lower Rated
Securities" and "Appendix-Certain Portfolio Securities-Ratings" below and
"Appendix" in the Statement of Additional Information.
MORTGAGE-RELATED SECURITIES - Mortgage-related securities are complex
derivative instruments, subject to both credit and prepayment risk, and may
be more volatile and less liquid than more traditional debt securities.
Mortgage-related securities are subject to credit risks associated with the
performance of the underlying mortgage properties. Adverse changes in
economic conditions and circumstances are more likely to have an adverse
impact on mortgage-related securities secured by loans on certain types of
commercial properties than on those secured by loans on residential
properties. In addition, these securities are subject to prepayment risk,
although commercial mortgages typically have shorter maturities than
residential mortgages and prepayment protection features.
Some mortgage-related securities have structures that make their reactions to
interest rate changes and other factors difficult to predict, making their
value highly volatile. See "Appendix - Certain Portfolio Securities -
Mortgage-Related Securities."
LOWER RATED SECURITIES-Each Fund may invest up to 35% of its net assets in
higher yielding (and, therefore, higher risk) debt securities such as those
rated Ba by Moody's or BB by S&P, Fitch or Duff or as low as Caa by Moody's
or CCC by S&P, Fitch or Duff (commonly known as junk bonds). They may be
subject to certain risks with respect to the issuing entity and to greater
market fluctuations than certain lower yielding, higher rated fixed-income
securities. The retail secondary market for these securities may be less
liquid than that of higher rated securities; adverse conditions could make it
difficult at times for a Fund to sell certain securities or could result in
lower prices than those used in calculating the Fund's net asset value. See
"Appendix-Certain Portfolio Securities-Ratings."
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.
[Page 8]
Because evidences of ownership of such securities usually are held
outside the United States, each Fund will be subject to additional risks which
include possible adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect or restrict the payment of principal and interest
on the foreign securities to investors located outside the country of the
issuer, whether from currency blockage or otherwise.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have
adverse effects on the economies and securities markets of certain of these
countries.
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. See "Appendix-Investment
Techniques-Foreign Currency Transactions."
USE OF DERIVATIVES-Each Fund may invest in, or enter into, derivatives
("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Derivatives each Fund may use include options and
futures, mortgage-related securities and asset-backed securities and, with
respect to the Intermediate Term Income Fund, interest rate swaps. While
Derivatives can be used effectively in furtherance of a Fund's investment
objective, under certain market conditions, they can increase the volatility
of the Fund's net asset value, decrease the liquidity of the Fund's portfolio
and make more difficult the accurate pricing of the Fund's portfolio. See
"Appendix-Investment Techniques-Use of Derivatives" below and "Investment
Objective and Management Policies-Management Policies-Derivatives" in the
Statement of Additional Information.
NON-DIVERSIFIED STATUS (SHORT TERM INCOME FUND ONLY)-The classification of
the Short-Term Income Fund 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 1940 Act. A "diversified"
investment company is required by the 1940 Act 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. Since a relatively high percentage of the
Short Term Income Fund's assets may be invested in the securities of a
limited number of issuers, some of which may be within the same industry, the
Fund's portfolio may be more sensitive to changes in the market value of a
single issuer. However, to meet Federal tax requirements, at the close of
each quarter the Fund may not have more than 25% of its total assets invested
in any one issuer and, with respect to 50% of total assets, not more than 5%
of its total assets invested in any one issuer. These limitations do not
apply to U.S. Government securities.
SIMULTANEOUS INVESTMENTS-Investment decisions for each Fund are made
independently from those of the other investment companies advised by The
Dreyfus Corporation. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as a 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 a Fund or the price paid
or received by a Fund.
[Page 9]
Year 2000 Risks - Like other mutual funds, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by The Dreyfus Corporation and the
Fund's other service providers do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Dreyfus Corporation is taking
steps to address the Year 2000 Problem with respect to the computer systems
that it uses and to obtain assurances that comparable steps are being taken
by the Fund's other major service providers. At this time, however, there can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the Funds.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER-The Dreyfus Corporation, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947 and serves as each 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 September 30, 1998, The Dreyfus Corporation managed or
administered approximately $109 billion in assets for approximately 1.7
million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of each Fund's affairs under a Management Agreement with the
Company, subject to the authority of the Company's Board in accordance with
Maryland law. The primary portfolio manager for each Fund is Kevin M.
McClintock. He has held that position since February 1, 1996, for the Short
Term Income Fund, and for the Intermediate Term Income Fund since its
inception, and has been employed by The Dreyfus Corporation since November
1995. From 1993 through October 1995, Mr. McClintock was Managing Director,
Fixed Income Investments, for Aeltus Investment Management, Inc., a
subsidiary of the Aetna Corporation. The Funds' other portfolio managers are
identified in the Statement of Additional Information. The Dreyfus
Corporation also provides research services for the Funds and 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
approximately $350 billion in assets as of June 30, 1998, including
approximately $125 billion in proprietary mutual fund assets. As of June 30,
1998, Mellon, through various subsidiaries, provided non-investment services,
such as custodial or administration services, for more than $1.791 trillion
in assets, including approximately $54 billion in mutual fund assets.
Under the terms of the Management Agreement, the Company has agreed
to pay The Dreyfus Corporation a monthly fee at the annual rate of .50 of 1%
of the value of the Short Term Income Fund's average daily net assets and .55
of 1% of the value of the Intermediate Term Income Fund's average daily net
assets. From time to time, The Dreyfus Corporation may waive receipt of its
fees and/or voluntarily assume certain expenses of a Fund, which would have
the effect of lowering the
[Page 10]
expense ratio of the Fund and increasing yield to investors. A Fund will not
pay The Dreyfus Corporation at a later time for any amounts it may waive, nor
will the Fund reimburse The Dreyfus Corporation for any amounts it may
assume. For the fiscal year ended July 31, 1998, the Short Term Income Fund
paid The Dreyfus Corporation a monthly management fee at the annual rate of
.50 of 1% of the value of the Fund's average daily net assets, and the
Intermediate Term Income Fund paid The Dreyfus Corporation a monthly
management fee at the effective annual rate of .16 of 1% of the value of the
Fund's average daily net assets pursuant to undertakings by The Dreyfus
Corporation.
In allocating brokerage transactions, The Dreyfus Corporation seeks
to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among
other things, the receipt of research services and/or the sale of shares of a
Fund or other funds managed, advised or administered by The Dreyfus
Corporation or its affiliates as factors in the selection of broker-dealers
to execute portfolio transactions for the Fund. See "Portfolio Transactions"
in the Statement of Additional Information.
The Dreyfus Corporation may pay the Funds' distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Funds. The
Funds' distributor may use part or all of such payments to pay Service Agents
in respect of these services.
DISTRIBUTOR-The Funds' distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN-Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Funds' Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). Mellon Bank, N.A., located at One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258, serves as the Funds'
Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a fee
if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution (collectively, "Service Agents"). Stock
certificates are issued only upon your written request. No certificates are
issued for fractional shares. Each Fund reserves the right to reject any
purchase order. See "Appendix - Additional Information About Purchases,
Exchanges and Redemptions."
The minimum initial investment for each Fund is $2,500, or $1,000 if
you are a client of a Service Agent which maintains an omnibus account in the
Fund and has made an aggregate minimum initial purchase for its customers of
$2,500. Subsequent investments must be at least $100. However, the minimum
initial investment is $750 for Dreyfus-sponsored Keogh Plans, IRAs (including
regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and
rollover IRAs) and 403(b)(7) Plans with only one participant and $500 for
Dreyfus-sponsored Education IRAs, with no minimum for subsequent purchases.
The initial investment must be accompanied by the Account Application. For
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries, directors of The Dreyfus Corporation, Board
members of a fund advised by The Dreyfus Corporation, including members of
the Company's Board, or the spouse or minor child of any of the foregoing,
the minimum initial investment is $1,000. For full-time or part-time
employees of The Dreyfus Corporation or any of its affiliates or subsidiaries
who elect to have a portion of their pay directly deposited into their Fund
accounts, the minimum initial investment is $50. Each Fund reserves the right
to offer Fund shares
[Page 11]
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. Each Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time. Fund
shares also are offered without regard to the minimum initial investment
requirements through Dreyfus-AUTOMATIC Asset Builder Registration Mark,
Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan
pursuant to the Dreyfus Step Program described under "Shareholder Services."
These services enable you to make regularly scheduled investments and may
provide you with a convenient way to invest for long-term financial goals.
You should be aware, however, that periodic investment plans do not guarantee
a profit and will not protect an investor against loss in a declining market.
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" and should specify the Fund in which
you are investing. 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 invest
ment 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, together with the applicable
Fund's DDA# as shown below, for purchase of Fund shares in your name: DDA#
8900117028/Dreyfus Investment Grade Bond Funds, Inc./Dreyfus Short Term
Income Fund; or DDA#8900275944/Dreyfus Investment Grade Bond Funds,
Inc./Dreyfus Intermediate Term Income Fund. The wire must include your Fund
account number (for new accounts, your Taxpayer Identification Number ("TIN")
should be included instead), account registration and dealer number, if
applicable. If your initial purchase of Fund shares is by wire, please call
1-800-645-6561 after completing your wire payment to obtain your Fund account
number. Please include your Fund account number on the 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. Each Fund makes available to
certain large institutions the ability to issue purchase instructions through
compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
Fund account number PRECEDED BY THE DIGITS "1111."
[Page 12]
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 entity authorized to receive orders on behalf of the
Fund. 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 a
Fund's net assets (i.e., the value of its assets less liabilities) by the
total number of Fund shares outstanding. Each Fund's investments are valued
generally by using available market quotations or at fair value which may be
determined by one or more pricing services approved by the Company's Board.
Each pricing services' procedures are reviewed under the general supervision
of the Board. For further information regarding the methods employed in
valuing the Funds' investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds $1,000,000 ("Eligible Benefit Plans").
Shares of funds in the Dreyfus Family of Funds then held by Eligible Benefit
Plans will be aggregated to determine the fee payable. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from a
Fund, including past profits or any other source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to a Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE-You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
A Fund may modify or terminate this Privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
[Page 13]
SHAREHOLDER SERVICES
FUND EXCHANGES
You may purchase, in exchange for shares of a Fund, shares of certain
other funds managed or administered by The Dreyfus Corporation, to the extent
such shares are offered for sale in your state of residence. These funds have
different investment objectives which may be of interest to you. If you
desire to use this service, you should consult your Service Agent or call
1-800-645-6561 to determine if it is available and whether any conditions are
imposed on its use. If you are calling from overseas, call 516-794-5452.
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 applicable "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, by a separate signed Shareholder Services Form,
or by oral request from any of the authorized signatories on the account. If
you have established the Telephone Exchange Privilege, you may telephone
exchange instructions (including over The Dreyfus Touch Registration Mark
automated telephone system) by calling one of the telephone numbers set forth
above. See "How to Redeem 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, Check Redemption
Privilege, Wire Redemption Privilege, Telephone Redemption Privilege, Dreyfus
TELETRANSFER Privilege and the dividend/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 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 the exchange you must notify the
Transfer Agent or your Service Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the Statement of
Additional Information. No fees currently are charged shareholders directly
in connection with exchanges, although each Fund reserves the right, upon not
less than 60 days' written notice, to charge shareholders a nominal
administrative fee in accordance with rules promulgated by the Securities and
Exchange Commission. Each Fund reserves the right to reject any exchange
request in whole or in part. See "Appendix - Additional Information About
Purchases, Exchanges and Redemptions." The availability of Fund Exchanges may
be modified or terminated at any time upon notice to shareholders. See
"Dividends, Distributions and Taxes."
[Page 14]
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
a Fund, in shares of certain other funds in the Dreyfus Family of Funds of
which you are a shareholder. The amount you designate, which can be expressed
either in terms of a specific dollar or share amount ($100 minimum), will be
exchanged automatically on the first and/or fifteenth day of the month
according to the schedule you have selected. Shares will be exchanged at the
then-current net asset value; however, a sales load may be charged with
respect to exchanges 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 canceled by a Fund or the Transfer Agent.
You may modify or cancel your exercise of this Privilege at any time by
mailing written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. A Fund may charge a service fee for the
use of this Privilege. No such fee currently is contemplated. See "Dividends,
Distributions and Taxes." 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 Registration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. Only an account maintained at a
domestic financial institution which is an 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. A 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 this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. A Fund
may terminate your participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum 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
[Page 15]
through the Automated Clearing House system at each pay period. To establish
a Dreyfus Payroll Savings Plan account, you must file an authorization form
with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not the
Distributor, The Dreyfus Corporation, a Fund, the Transfer Agent or any other
person, to arrange for transactions under the Dreyfus Payroll Savings Plan. A
Fund may modify or terminate this Privilege at any time or charge a service
fee. No such fee currently is contemplated.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Fund shares without
regard to the Fund's minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit Privilege
or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program account,
you must supply the necessary information on the Account Application and file
the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary
authorization form(s), please call toll free 1-800-782-6620. You may
terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be,
as provided under the terms of such Privilege(s). A Fund may modify or
terminate this Program at any time. Investors who wish to purchase Fund
shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts."
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by a Fund in
shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. 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 a Fund to a designated bank account. Only an
account maintained at a domestic 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. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three business
days following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. A Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
[Page 16]
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 Automatic Withdrawal Plan may
be established by filing an Automatic Withdrawal Plan application with the
Transfer Agent or by oral request from any of the authorized signatories on
the account by calling 1-800-645-6561. The Automatic Withdrawal Plan may be
ended at any time by you, a Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
RETIREMENT PLANS
Each Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs, Rollover IRAs and Education IRAs),
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs (except SEP-IRAs) please call 1-800-645-6561; or for SEP-IRAs, 401(k)
Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. See
"Appendix - Additional Information About Purchases, Exchanges and
Redemptions." When a request is received in proper form by the Transfer Agent
or other entity authorized to receive orders on behalf of the Fund, the Fund
will redeem the shares at the next determined net asset value.
Neither Fund imposes any charges when shares are redeemed. Service
Agents may charge their clients a fee for effecting redemptions of Fund
shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may
be more or less than their original cost, depending upon the Fund's
then-current net asset value.
Each 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 Registration
Mark 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 FUNDS WILL NOT HONOR REDEMPTION CHECKS UNDER
THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES BY
WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE, FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC
ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF
YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE
REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS
ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO
EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
[Page 17]
Each 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, or through the Check Redemption Privilege or the
Telephone Redemption Privilege, which are granted automatically unless you
specifically refuse them by checking the applicable "No" box on the Account
Application. The Check Redemption Privilege and the Telephone Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories on the
account by calling 1-800-645-6561. You also may redeem shares through the
Wire Redemption Privilege or the Dreyfus TELETRANSFER Privilege, if you have
checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholder Services Form with the
Transfer Agent. Other redemption procedures may be in effect for clients of
certain Service Agents. The Fund makes available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities. The Fund reserves the right to refuse any request made
by wire or telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
The Fund may modify or terminate any redemption Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans,
and shares for which certificates have been issued, are not eligible for the
Check Redemption, Wire Redemption, Telephone Redemption or Dreyfus
TELETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus Touch Registration Mark automated telephone system) from any
person representing himself or herself to be you and reasonably believed by
the Transfer Agent to be genuine. Each Fund will require the Transfer Agent
to employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Funds nor
the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a 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
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
[Page 18]
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program. If you
have any questions with respect to signature-guarantees, please call one of
the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE-You may write Redemption Checks drawn on your
Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $500 or more. Potential fluctuations in the net asset
value of the Fund's shares should be considered in determining the amount of
the check. Redemption Checks should not be used to close your account.
Redemption Checks are free, but the Transfer Agent will impose a fee for
stopping payment of a Redemption Check upon your request or if the Transfer
Agent cannot honor a Redemption Check due to insufficient funds or other
valid reason. You should date your Redemption Checks with the current date
when you write them. Please do not postdate your Redemption Checks. If you
do, the Transfer Agent will honor upon presentment, even if presented before
the date of the check, all postdated Redemption Checks which are dated within
six months of presentment for payment, if they are otherwise in good order.
If you hold shares in a Dreyfus sponsored IRA account, you may be permitted
to make withdrawals from your IRA account using checks furnished to you by
The Dreyfus Trust Company. This Privilege will be terminated immediately,
without notice, with respect to any account which is, or becomes, subject to
backup withholding on redemptions (see "Dividends, Distributions and Taxes").
Any Redemption Check written on an account which has become subject to backup
withholding on redemptions will not be honored by the Transfer Agent. The
Check Redemption Privilege is granted automatically unless you refuse it.
WIRE REDEMPTION PRIVILEGE-You may request by wire, telephone or letter 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. 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 1-800-645-6561 or,
if you are calling from overseas, call 516-794-5452. The Statement of
Additional Information sets forth instructions for transmitting redemption
requests by wire.
TELEPHONE REDEMPTION PRIVILEGE-You may request by telephone that redemption
proceeds (maximum $150,000 per day) be paid by check and mailed to your
address. You may telephone redemption instructions by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452. The Telephone
Redemption Privilege is granted automatically unless you refuse it.
DREYFUS TELETRANSFER PRIVILEGE-You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be 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. 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.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
[Page 19]
SHAREHOLDER SERVICES PLAN
The Company has adopted a Shareholder Services Plan with respect to
each Fund, pursuant to which it pays the Distributor for the provision of
certain services to Fund shareholders a fee at the annual rate of .20 of 1%
of the value of the Short Term Income Fund's average daily net assets and .25
of 1% of the value of the Intermediate Term Income Fund's average daily net
assets. 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. The Distributor may make payments to
Service Agents in respect of these services. The Distributor determines the
amounts to be paid to Service Agents.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Internal Revenue Code of 1986, as amended (the "Code"),
each Fund is treated as a separate corporation for purposes of qualification
and taxation as a regulated investment company. Each Fund ordinarily declares
dividends from its net investment income on each day the New York Stock
Exchange is open for business. Each Fund's earnings for Saturdays, Sundays
and holidays are declared as dividends on the next business day. Dividends
usually are paid on the last business day of each month. If you redeem all
shares in your account at any time during the month, all dividends to which
you are entitled will be paid to you along with the proceeds of the
redemption. If you are an omnibus accountholder and indicate in a partial
redemption request that a portion of any accrued dividends to which such
account is entitled belongs to an underlying accountholder who has redeemed
all shares in his or her account, such portion of the accrued dividends will
be paid to you along with the proceeds of the redemption. Distributions from
net realized securities gains, if any, generally are declared and paid once a
year, but a Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. Neither Fund will 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 shares at net asset value. If you elect to receive dividends and
distributions in cash, and your dividend or distribution check is returned to
the Fund as undeliverable or remains uncashed for six months, the Fund
reserves the right to reinvest such dividend or distribution and all future
dividends and distributions payable to you in additional Fund shares at net
asset value. No interest will accrue on amounts represented by uncashed
distribution or redemption checks. All expenses are accrued daily and
deducted before 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 a Fund will be taxable to U.S. shareholders as
ordinary income whether received in cash or reinvested in additional shares.
No dividend paid by a Fund will qualify for the dividends received deduction
allowable to certain U.S. corporations. Distributions from net realized
long-term securities gains of a 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 additional Fund shares. The Code
provides that an individual generally will be taxed on his or her net capital
gain at a maximum rate of 20% with respect to capital gains from securities
held for more than 12 months. Dividends and distributions may be subject to
state and local taxes.
[Page 20]
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 a 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 a 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.
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.
Federal regulations generally require a 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 if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify a 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, IRS individual taxpayer
identification number, or employer identification number of the record owner
of the account. Any tax withheld as a result of backup withholding does not
constitute an additional tax 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 Company believes that each Fund has qualified for
the fiscal year ended July 31, 1998 as a "regulated investment company" under
the Code. Each 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 of any liability for Federal income tax
to the extent its earnings are distributed in accordance with applicable
provisions of the Code. Each 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.
Current yield refers to a 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
[Page 21]
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
Funds."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
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 a 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 the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Under normal market conditions, the Intermediate Term Income Fund
will seek to provide performance results that equal or exceed the Lehman
Brothers Aggregate Bond Index, which is a broad investment grade bond index
that measures the total investment return (capital change plus income)
provided by a universe of over 6,000 fixed-income securities, weighted by the
market value outstanding of each security.
Comparative performance information may be used from time to time in
advertising or marketing Fund shares, including data from Lipper Analytical
Services, Inc., Lehman Brothers Aggregate Bond Index, Moody's Bond Survey
Bond Index, Bond Buyer's 20-Bond Index, Morningstar, Inc. and other industry
publications. Each Fund's yield should generally be higher than money market
funds (neither Fund, however, seeks to maintain a stabilized price per share
nor may it be able to return an investor's principal), and its price per
share should fluctuate less than long term bond funds (which generally have
somewhat higher yields).
GENERAL INFORMATION
The Company was incorporated under Maryland law on June 26, 1992, and
commenced operations on August 18, 1992. Before November 8, 1995, the
Company's name was Dreyfus Short-Term Income Fund, Inc. The Company is
authorized to issue one billion shares of Common Stock (with 500 million
shares allocated to each Fund), par value $.001 per share. Each share has one
vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for a Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Company's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Company to hold
[Page 22]
a special meeting of shareholders for purposes of removing a Board member
from office or for any other purpose. Shareholders may remove a Board member
by the affirmative vote of a majority of the Company's outstanding voting
shares. In addition, the Board will call a meeting of shareholders for the
purpose of electing Board members if, at any time, less than a majority of
the Board members then holding office have been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio. By this Prospectus, shares of each Fund are being
offered. Other portfolios may be sold pursuant to other offering documents.
To date, the Board has authorized the creation of two series of
shares. All consideration received by the Company for shares of one of the
series and all assets in which such consideration is invested will belong to
that series (subject only to the rights of creditors of the Company) and will
be subject to the liabilities related thereto. The income attributable to,
and the expenses of, one series are treated separately from those of the
other series. The Company has the ability to create, from time to time, new
series without shareholder approval.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Company at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll
free 1-800-645-6561. In New York City, call
1-718-895-1206; outside the U.S., call 516-794-5452.
[Page 23]
APPENDIX
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS-Foreign currency transactions may be entered
into for a variety of purposes, including: to fix in U.S. dollars, between
trade and settlement date, the value of a security the Fund has agreed to buy
or sell; to hedge the U.S. dollar value of securities a Fund already owns,
particularly if it expects a decrease in the value of the currency in which
the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, a Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the value of the
currency sold relative to the currency the Fund contracted to receive in the
exchange. A Fund's success in these transactions will depend principally on
The Dreyfus Corporation's ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar.
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.
LEVERAGE-Leveraging exaggerates the effect on net asset value of any
increase or decrease in the market value of a Fund's portfolio. Money
borrowed for leveraging will be limited to 331\3% of the value of the Fund's
total assets. These borrowings will be subject to interest costs which 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.
Each Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves 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. Except for these transactions, each Fund's borrowings generally
will be unsecured.
SHORT-SELLING-(INTERMEDIATE TERM INCOME FUND ONLY) In these transactions,
the Fund sells a security it does not own in anticipation of a decline in the
market value of the security. To complete the transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund is obligated to
replace the security borrowed by purchasing it subsequently 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, which would result
in a loss or gain, respectively.
Securities will not 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 make a
short sale which results in the Fund having sold short in the aggregate more
than 5% of the outstanding securities of any class of an issuer.
The Intermediate Term Income Fund also may make short sales "against
the box," in which the Fund enters into a short sale of a security it owns.
At no time will more than 15% of the value of the Fund's net assets be in
deposits on short sales against the box.
[Page 24]
USE OF DERIVATIVES-Each Fund may invest in, or enter into, the types of
Derivatives enumerated under "Description of the Funds-Investment
Considerations and Risks-Use of Derivatives." These instruments and certain
related risks are described more specifically under "Investment Objective and
Management Policies-Management Policies-Derivatives" in the Statement of
Additional Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit a Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as a Fund can increase or decrease the level of
the risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on a Fund's performance.
If a Fund invests in Derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. A Fund also could experience losses if it were unable to
liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although neither Fund will be a commodity pool, certain Derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission
which limit the extent to which the Fund can invest in such Derivatives. Each
Fund may invest in futures contracts and options with respect thereto for
hedging purposes without limit. The Intermediate Term Income Fund may invest
in futures contracts and options thereon for other than hedging purposes.
However, the Intermediate Term Income Fund may not invest in such contracts
and options for other than hedging purposes if the sum of the amount of
initial margin deposits and premiums paid for unexpired options with respect
to such contracts, other than for bona fide hedging purposes, exceeds 5% of
the liquidation value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on such contracts and options;
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% limitation.
The Intermediate Term Income Fund also may invest up to 5% of its
assets, represented by the premium paid, in the purchase of call and put
options. The Intermediate Term Income Fund may write (i.e., sell) 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. When required by the
Securities and Exchange Commission, the Fund will set aside permissible
liquid assets in a segregated account to cover its obligations relating to
its transactions in Derivatives. To maintain this required cover, the Fund
may have to sell portfolio securities at disadvantageous prices or times
since it may not be possible to liquidate a Derivative position at a
reasonable price.
LENDING PORTFOLIO SECURITIES-Each Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and on the loaned securities'
collateral. Loans of portfolio securities may not exceed 331\3% of the value
of the Fund's total assets, and the Fund will receive collateral consisting
of cash, U.S. Government securities or irrevocable letters of credit which
will be maintained at all times in an amount equal to at
[Page 25]
least 100% of the current market value of the loaned securities. Such loans
are terminable by the Fund 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-Each Fund may purchase or sell securities on a forward
commitment, when-issued or delayed delivery basis, which means that delivery
and payment take place a number of days after the date of the commitment to
purchase or sell the securities at a predetermined price and/or yield.
Typically, no interest accrues to the purchaser until the security is
delivered. When purchasing a security on a forward commitment basis, the Fund
assumes the rights and risks of ownership of the security, including the risk
of price and yield fluctuations, and takes such fluctuations into account
when determining its net asset value. Because the Fund is not required to pay
for these securities until the delivery date, these risks are in addition to
the risks associated with the Fund's other investments. If the Fund is fully
or almost fully invested when forward commitment purchases are outstanding,
such purchases may result in a form of leverage. The Fund intends to engage
in forward commitments to increase its portfolio's financial exposure to the
types of securities in which it invests. Leveraging the portfolio in this
manner will increase the Fund's exposure to changes in interest rates and
will increase the volatility of its returns. The Fund will set aside in a
segregated account permissible liquid assets at least equal at all times to
the amount of the Fund's purchase commitments. At no time will the Fund have
more than 33-1/3% of its assets committed to purchase securities on a forward
commitment basis.
FORWARD ROLL TRANSACTIONS-To enhance current income, each Fund may enter
into forward roll transactions with respect to mortgage-related securities.
In a forward roll transaction, the Fund sells a mortgage-related security to
a financial institution, such as a bank or broker-dealer, and simultaneously
agrees to repurchase a similar security from the institution at a later date
at an agreed upon price. The securities that are repurchased will bear the
same interest rate as those sold, but generally will be collateralized by
different pools of mortgages with different pre-payment histories than those
sold. During the period between the sale and repurchase, the Fund will not be
entitled to receive interest and principal payments on the securities sold.
Proceeds of the sale will be invested in short-term instruments, particularly
repurchase agreements, and the income from these investments, together with
any additional fee income received on the sale will generate income for the
Fund exceeding the yield on the securities sold. Forward roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the purchase price of those securities. The Fund will set aside
in a segregated account permissible liquid assets at least equal to the amount
of the repurchase price (including accrued interest).
CERTAIN PORTFOLIO SECURITIES
MORTGAGE-RELATED SECURITIES-Mortgage-related securities are a form of
Derivative collateralized by pools of commercial or residential mortgages.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. These
securities may include complex instruments such as collateralized mortgage
obligations, stripped mortgage-backed securities, mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs"),
adjustable rate mortgages, real estate investment trusts ("REITs"), including
debt and preferred stock issued by REITs, as well as other real
estate-related securities.
In certain instances, the credit risk associated with
mortgage-related securities can be reduced by third party guarantees or other
forms of credit support. Improved credit risk does not reduce prepayment risk
which is unrelated to the rating assigned to the mortgage-related security.
Prepayment risk
[Page 26]
can lead to fluctuations in value of the mortgage-related security which may
be pronounced. If a mortgage-related security is purchased 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 on the underlying mortgage collateral. Certain mortgage-related
securities that may be purchased by the Fund, such as inverse floating rate
collateralized mortgage obligations, have coupons that move inversely to a
multiple of a specific index which may result in a form of leverage. As with
other interest-bearing securities, the prices of certain mortgage-related
securities are inversely affected by changes in interest rates. However,
although 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 be prepaid. 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
certain 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 even if the securities
are rated in the highest rating category by a nationally recognized
statistical rating organization. During periods of rapidly rising interest
rates, prepayments of mortgage-related securities may occur at slower than
expected rates. Slower prepayments effectively may lengthen a
mortgage-related security's expected maturity which generally would cause the
value of such security to fluctuate more widely in response to changes in
interest rates. Were the prepayments on the Fund's mortgage-related
securities to decrease broadly, the Fund's effective duration, and thus
sensitivity to interest rate fluctuations, would increase.
RESIDENTIAL MORTGAGE-RELATED SECURITIES. The Fund may invest in
mortgage-related securities representing participation interests in pools of
one- to four-family residential mortgage loans issued or guaranteed by
governmental agencies or instrumentalities, such as the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC"), or issued
by private entities. Similar to commercial mortgage-related securities,
residential mortgage-related securities have been issued using a variety of
structures, including multi-class structures featuring senior and
subordinated classes.
COMMERCIAL MORTGAGE-RELATED SECURITIES. The Fund may invest in
commercial mortgage-related securities, which generally are multi-class debt
or pass-through certificates secured by mortgage loans on commercial
properties. These mortgage-related securities generally are structured to
provide protection to the senior classes' investors against potential losses
on the underlying mortgage loans. This protection is generally provided by
having the holders of subordinated classes of securities ("Subordinated
Securities") take the first loss if there are defaults on the underlying
commercial mortgage loans. Other protection, which may benefit all of the
classes or particular classes, may include issuer guarantees, reserve funds,
additional Subordinated Securities, cross-collateralization and
over-collateralization.
SUBORDINATED SECURITIES. The Fund may invest in Subordinated
Securities issued or sponsored by commercial banks, savings and loan
institutions, mortgage bankers, private mortgage insurance companies and
other non-governmental issuers. Subordinated Securities have no governmental
guarantee, and are subordinated in some manner as to the payment of principal
and/or interest to the holders of more senior mortgage-related securities
arising out of the same pool of mortgages. The holders of Subordinated
Securities typically are compensated with a higher stated yield than are the
holders of more senior mortgage-related securities. On the other hand,
Subordinated Securities typically
[Page 27]
subject the holder to greater risk than senior mortgage-related
securities and tend to be rated in a lower rating category, and frequently a
substantially lower rating category, than the senior mortgage-related
securities issued in respect of the same pool of mortgage. Subordinated
Securities generally are likely to be more sensitive to changes in prepayment
and interest rates and the market for such securities may be less liquid than
is the case for traditional fixed-income securities and senior
mortgage-related securities.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS PASS-THROUGH
SECURITIES. Collateralized mortgage obligations or "CMOs" are multiclass
bonds backed by pools of mortgage pass-through certificates or mortgage
loans. CMOs may be collateralized by (a) pass-through certificates issued or
guaranteed by GNMA, FNMA or FHLMC, (b) unsecuritized mortgage loans insured
by the Federal Housing Administration or guaranteed by the Department of
Veterans' Affairs, (c) unsecuritized conventional mortgages, (d) other
mortgage-related securities or (e) any combination thereof.
Each class of CMOs, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause it to be
retired substantially earlier than the stated maturities or final
distribution dates. The principal and interest on the underlying mortgages
may be allocated among the several classes of a series of a CMO in many ways.
One or more tranches of a CMO may have coupon rates which reset periodically
at a specified increment over an index, such as the London Interbank Offered
Rate ("LIBOR") (or sometimes more than one index). These floating rate CMOs
typically are issued with lifetime caps on the coupon rate thereon. The Fund
also may invest in inverse floating rate CMOs. Inverse floating rate CMOs
constitute a tranche of a CMO with a coupon rate that moves in the reverse
direction to an applicable index such as the LIBOR. Accordingly, the coupon
rate thereon will increase as interest rates decrease. Inverse floating rate
CMOs are typically more volatile than fixed or floating rate tranches of
CMOs.
STRIPPED MORTGAGE-BACKED SECURITIES. The Fund also may invest in
stripped mortgage-backed securities which are created by segregating the cash
flows from underlying mortgage loans or mortgage securities to create two or
more new securities, each with a specified percentage of the underlying
security's principal or interest payments. Mortgage securities may be
partially stripped so that each investor class receives some interest and
some principal. When securities are completely stripped, however, all of the
interest is distributed to holders of one type of security, known as an
interest-only security, or IO, and all of the principal is distributed to
holders of another type of security known as a principal-only security, or
PO. Strips can be created in a pass-through structure or as tranches of a
CMO. The yields to maturity on IOs and POs are very sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Fund may not fully recoup its initial
investment in IOs. Conversely, if the underlying mortgage assets experience
less than anticipated prepayments of principal, the yield on POs could be
materially and adversely affected.
REAL ESTATE INVESTMENT TRUSTS. A REIT is a corporation, or a business
trust that would otherwise be taxed as a corporation, which meets the
definitional requirements of the Code. The Code permits a qualifying REIT to
deduct dividends paid, thereby effectively eliminating corporate level
Federal income tax and making the REIT a pass-through vehicle for Federal
income tax purposes. To meet the definitional requirements of the Code, a
REIT must, among other things, invest substantially all of its assets in
interests in real estate (including mortgages and other REITs) or cash and
government securities, derive most of its income from rents from real
property or interest on loans secured by mortgages
[Page 28]
on real property, and distribute to shareholders annually a substantial
portion of its otherwise taxable income. REITs are subject to heavy cash flow
dependency, defaults by borrowers or tenants, self-liquidation and the
possibility of failing to qualify for tax-free status under the Code or to
maintain exemption from the 1940 Act.
PRIVATE ENTITY SECURITIES. These mortgage-related securities are
issued by commercial banks, savings and loan institutions, mortgage bankers,
private mortgage insurance companies and other non-governmental issuers.
Timely payment of principal and interest on mortgage-related securities
backed by pools created by non-governmental issuers often is supported
partially by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance.
ASSET-BACKED SECURITIES-Asset-backed securities are a form of Derivative.
The securitization techniques used for asset-backed securities are similar to
those used for mortgage-related securities. The collateral for these
securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. Each Fund may
invest in these and other types of asset-backed securities that may be
developed in the future.
Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may provide a Fund
with a less effective security interest in the related collateral than do
mortgage-backed securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available
to support payments on these securities.
CONVERTIBLE SECURITIES-Convertible securities may be converted at either a
stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. 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. Each Fund may invest in convertible preferred
stocks that offer enhanced yield features and higher dividend income than is
available on a company's common stock. The Short Term Income Fund intends to
purchase only those convertible securities trading below the stated
conversion price.
WARRANTS-A warrant is an instrument issued by a corporation which gives the
holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time. Each Fund may
invest up to 5% of its net assets in warrants, except that this limitation
does not apply to warrants purchased by the Fund that are sold in units with,
or attached to, other securities.
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. Municipal obligations bear fixed,
floating or variable rates of interest. 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
obligations and purchased and sold separately. Each Fund also may acquire
call options on specific municipal obligations. A Fund generally would
purchase these call options to protect the Fund from the issuer of the
related municipal obligation redeeming, or other holder of the call option
from calling away, the municipal obligation before maturity.
While, in general, municipal obligations are tax exempt securities
having relatively low yields as compared to taxable, non-municipal
obligations of similar quality, certain municipal obligations are taxable
[Page 29]
obligations, offering yields comparable to, 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 be
subject to Federal income tax. Each Fund may invest in municipal obligations,
the ratings of which correspond with the ratings of other permissible Fund
investments. Each Fund currently intends 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.
ZERO COUPON SECURITIES-Each Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and Bonds that have been stripped of
their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Zero coupon securities also are 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.
MONEY MARKET INSTRUMENTS-Each Fund may invest in the following types of
money market instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon a Fund's ability to dispose of the underlying
securities. Each Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
BANK OBLIGATIONS. Each Fund may purchase certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations issued
by domestic banks, foreign subsidiaries or foreign branches of domestic
banks, domestic and foreign branches of foreign banks, domestic savings and
loan associations and other banking institutions. With respect to such
securities issued by foreign subsidiaries or foreign branches of domestic
banks, and domestic and foreign branches of foreign banks, a 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. See "Description of the Funds-Investment Considerations and
Risks-Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
[Page 30]
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
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 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.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by a Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 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 at least A3 by Moody's or A-
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.
ILLIQUID SECURITIES-Each 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 mortgage-related
securities, and certain privately negotiated, non-exchange traded options and
securities used to cover such options. As to these securities, the Fund is
subject to a risk that should the Fund desire to sell them when a ready buyer
is not available at a price the Fund deems representative of their value, the
value of the Fund's net assets could be adversely affected.
RATINGS-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 payments. Securities rated Caa by Moody's
are of poor standing and may be in default or there may be present elements
of danger with respect to principal or interest. S&P, Fitch and Duff
typically assign a CCC rating to debt which has a current identifiable
vulnerability to default and is dependent upon favorable business, financial
and economic conditions to meet timely payments of interest and repayment of
principal. Such securities, though high yielding, are characterized by great
risk. See "Appendix" in the Statement of Additional Information for a general
description of securities 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. 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 such obligations. 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. A 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.
The average distribution of investments of the Short Term Income Fund
in corporate bonds (excluding convertible bonds) by ratings for the fiscal
year ended July 31, 1998, calculated monthly on a dollar weighted basis, was
as follows:
[Page 31]
MOODY'S OR S&P, FITCH OR DUFF PERCENTAGE
________ _________________ ___________
Aaa AAA 31.6%
Aa AA .8%
A A 16.3%
Baa BBB 26.9%
Ba BB 12.7%
B B 5.8%
Caa CCC 2.8%
NR NR 8.1%*
_______
105.0%**
=======
The actual distribution of the Short Term Income Fund's corporate
bond investments by ratings on any given date will vary, and 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.
* Included in the Not Rated category are securities comprising 8.7% of the
Fund's market value which, while not rated, have been determined by The
Dreyfus Corporation to be of comparable quality to securities in the
following rating categories: A 1.4%, Ba/BB 1.0%, B/B 2.1%, Caa/CCC .7%,
convertible bonds-BB 1.0%, convertible bonds-B .9%, convertible preferred
stocks-AA .3%, convertible preferred stocks-A .2% and convertible preferred
stocks-BBB .5%.
** The Fund also owns preferred stocks-A .1%, preferred stocks-CCC .1%,
convertible bonds-A .6%, convertible bonds-BBB 1.0%, convertible bonds-B
.5%, convertible preferred stocks-AAA .4%, convertible preferred stocks-BBB
.4% and convertible preferred stocks-BB .2%. Approximately (8.3%) of the
Fund's assets were invested in cash or cash equivalents.
The average distribution of investments of the Intermediate Term
Income Fund in corporate bonds (excluding preferred stock, convertible
preferred stock and convertible bonds) by ratings for the fiscal year ended
July 31, 1998, calculated monthly on a dollar weighted basis, was as follows:
MOODY'S OR S&P, FITCH OR DUFF PERCENTAGE
_______ __________________ __________
Aaa AAA 21.0%
Aa AA 1.4%
A A 12.9%
Baa BBB 37.3%
Ba BB 7.8%
B B 10.0%
Caa CCC .2%
NR NR 5.8%*
______
96.4%**
======
The actual distribution of the Intermediate Term Income Fund's
corporate bond investments by ratings on any given date will vary, and the
distribution of the Intermediate Term Income Fund's investments by ratings as
set forth above should not be considered as representative of the
Intermediate Term Income Fund's future portfolio composition.
* Included in the Not Rated category are securities comprising 5.8% of the
Fund's market value which, while not rated, have been determined by The
Dreyfus Corporation to be of comparable quality to securities in the
following rating categories: Baa/BBB 1.2%, Ba/BB .3%, B/B 1.5%, convertible
bonds-B/B 1.7% and preferred stocks-Baa/BBB 1.1%.
** The Fund also owns preferred stock 5.8%, common stock and warrants .7%,
convertible bonds-A .5%, convertible bonds-BBB 2.1% and convertible bonds-B
1.3%, convertible preferred stock-AAA 1.6% and convertible preferred
stock-BBB 1.7%. Approximately (10.1%) of the Fund's assets were invested in
cash or cash equivalents.
Additional Information About Purchases, Exchanges and Redemptions. Each Fund
is intended to be a long-term investment vehicle and is not designed to
provide investors with a means of speculation
[Page 32]
on short-term market movements. A pattern of frequent purchases and
exchanges can be disruptive to efficient portfolio management and,
consequently, can be detrimental to the Fund's performance and its
shareholders. Accordingly, if the Company's management determines that an
investor is engaged in excessive trading, the Fund, with or without prior
notice, may temporarily or permanently terminate the availability of Fund
Exchanges, or reject in whole or part any purchase or exchange request, with
respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of a Fund during any calendar year
(for calendar year 1998, beginning on January 15th) or who makes exchanges
that appear to coincide with an active market-timing strategy may be deemed
to be engaged in excessive trading. Accounts under common ownership or
control will be considered as one account for purposes of determining a
pattern of excessive trading. In addition, each Fund may refuse or restrict
purchase or exchange requests by any person or group if, in the judgment of
the Company's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates
receiving simultaneous orders that may significantly affect the Fund (e.g.,
amounts equal to 1% or more of the Fund's total assets). If an exchange
request is refused, the Fund will take no other action with respect to the
shares until it receives further instructions from the investor. Each Fund
may delay forwarding redemption proceeds for up to seven days if the investor
redeeming shares is engaged in excessive trading or if the amount of the
redemption request otherwise would be disruptive to efficient portfolio
management or would adversely affect the Fund. The Company's policy on
excessive trading applies to investors who invest in a Fund directly or
through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, a Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but
the purchase order would be effective only at the net asset value next
determined after the fund being purchased receives the proceeds of the
redemption, which may result in the purchase being delayed.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS'
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. 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 33]
[This Page Intentionally Left Blank]
[Page 34]
[This Page Intentionally Left Blank]
[Page 35]
Investment Grade Bond Funds, Inc.
* Dreyfus Short Term
Income Fund
* Dreyfus Intermediate
Term Income Fund
Prospectus
Copy Rights 1998, Dreyfus Service Corporation
B082/083p1198
DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
DREYFUS SHORT TERM INCOME FUND
DREYFUS INTERMEDIATE TERM INCOME FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the series named above (each, a "Fund" and, collectively, the "Funds") of
Dreyfus Investment Grade Bond Funds, Inc. (the "Company"), dated November 1,
1998, as it may be revised from time to time. To obtain a copy of the
Funds' Prospectus, please write to the Company 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
Outside the U.S. -- Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as each Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of each Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies B-2
Management of the Fund B-17
Management Agreement B-22
Purchase of Shares B-24
Shareholder Services Plan B-25
Redemption of Shares B-25
Shareholder Services B-28
Determination of Net Asset Value B-31
Dividends, Distributions and Taxes B-32
Portfolio Transactions B-34
Performance Information B-35
Information About the Funds B-36
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-36
Financial Statements and Report of Independent Auditors B-37
Appendix B-38
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Funds' Prospectus entitled "Description of the
Funds" and "Appendix."
Portfolio 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 of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal obligations include municipal lease/purchase agreements
which are similar to installment purchase contracts for property or
equipment issued by municipalities.
Mortgage Related Securities. Mortgage-related securities are a form of
Derivative collateralized by pools of commercial or residential mortgages.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. These
securities may include complex instruments such as collateralized mortgage
obligations and stripped mortgage-backed securities, mortgage pass-through
securities, interests in REMICs or other kinds of mortgage-backed
securities, including those with fixed, floating and variable interest
rates, those with interest rates that change based on multiples of changes
in a specified index of interest rates and those with interest rates that
change inversely to changes in interests rates.
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 United 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.
Private Entity Securities--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely
payment of principal and interest on mortgage-related securities backed by
pools created by non-governmental issuers often is supported partially by
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance. The insurance and guarantees are issued by
government entities, private insurers and the mortgage poolers. There can
be no assurance that the private insurers or mortgage poolers can meet their
obligations under the policies, so that if the issuers default on their
obligations the holders of the security could sustain a loss. No insurance
or guarantee covers the Funds or the price of the Funds' shares. Mortgage-
related securities issued by non-governmental issuers generally offer a
higher rate of interest than government-agency and government-related
securities because there are no direct or indirect government guarantees of
payment. Neither Fund will invest more than 5% of its assets in such
private entity securities issued by any one issuer, including any one bank
or savings and loan institution.
Commercial Mortgage-Related Securities--Commercial mortgage-related
securities generally are multi-class debt or pass-through certificates
secured by mortgage loans on commercial properties. These mortgage-related
securities generally are structured to provide protection to the senior
classes investors against potential losses on the underlying mortgage loans.
This protection generally is provided by having the holders of subordinated
classes of securities ("Subordinated Securities") take the first loss if
there are defaults on the underlying commercial mortgage loans. Other
protection, which may benefit all of the classes or particular classes, may
include issuer guarantees, reserve funds, additional Subordinated
Securities, cross-collateralization and over-collateralizaton.
The Fund may invest in Subordinated Securities issued or sponsored by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers.
Subordinated Securities have no governmental guarantee, and are subordinated
in some manner as to the payment of principal and/or interest to the holders
of more senior mortgage-related securities arising out of the same pool of
mortgages. The holders of Subordinated Securities typically are compensated
with a higher stated yield than are the holders of more senior mortgage-
related securities. On the other hand, Subordinated Securities typically
subject the holder to greater risk than senior mortgage-related securities
and tend to be rated in a lower rating category, and frequently a
substantially lower rating category, than the senior mortgage-related
securities issued in respect of the same pool of mortgage. Subordinated
Securities generally are likely to be more sensitive to change in prepayment
and interest rates and the market for such securities may be less liquid
than is the case for traditional fixed-income securities and senior mortgage-
related securities.
The market for commercial mortgage-related securities developed more
recently and in terms of total outstanding principal amount of issues is
relatively small compared to the market for residential single-family
mortgage-related securities. In addition, commercial lending generally is
viewed as exposing the lender to a greater risk of loss than one- to four-
family residential lending. Commercial lending, for example, typically
involves larger loans to single borrowers or groups of related borrowers
than residential one-to four-family mortgage loans. In addition, the
repayment of loans secured by income producing properties typically is
dependent upon the successful operation of the related real estate project
and the cash flow generated therefrom. Consequently, adverse changes in
economic conditions and circumstances are more likely to have an adverse
impact on mortgage-related securities secured by loans on commercial
properties than on those secured by loans on residential properties.
Collateralized Mortgage Obligations ("CMO")--A CMO is a multiclass bond
backed by a pool of mortgage pass-through certificates or mortgage loans.
CMOs may be collateralized by (a) Ginnie Mae, Fannie Mae, or Freddie Mac
pass-through certificates, (b) unsecuritized mortgage loans insured by the
Federal Housing Administration or guaranteed by the Department of Veterans'
Affairs, (c) unsecuritized conventional mortgages, (d) other mortgage-
related securities, or (e) any combination thereof. Each class of CMOs,
often referred to as a "tranche," is issued at a specific coupon rate and
has a stated maturity or final distribution date. Principal prepayments on
collateral underlying a CMO may cause it to be retired substantially earlier
than the stated maturities or final distribution dates. The principal and
interest on the underlying mortgages may be allocated among the several
classes of a series of a CMO in many ways. One or more tranches of a CMO
may have coupon rates which reset periodically at a specified increment over
an index, such as the London Interbank Offered Rate ("LIBOR") (or sometimes
more than one index). These floating rate CMOs typically are issued with
lifetime caps on the coupon rate thereon. The Fund also may invest in
inverse floating rate CMOs. Inverse floating rate CMOs constitute a tranche
of a CMO with a coupon rate that moves in the reverse direction to an
applicable index such a LIBOR. Accordingly, the coupon rate thereon will
increase as interest rates decrease. Inverse floating rate CMOs are
typically more volatile than fixed or floating rate tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying
inversely to a multiple of an applicable index creates a leverage factor.
Inverse floaters based on multiples of a stated index are designed to be
highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and loss of principal. The markets
for inverse floating rate CMOs with highly leveraged characteristics at
times may be very thin. The Fund's ability to dispose of its positions in
such securities will depend on the degree of liquidity in the markets for
such securities. It is impossible to predict the amount of trading interest
that may exist in such securities, and therefore the future degree of
liquidity.
Stripped Mortgage-Backed Securities--The Fund also may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are created
by segregating the cash flows from underlying mortgage loans or mortgages
securities to create two or more new securities, each with a specified
percentage of the underlying security's principal or interest payments.
Mortgage securities may be partially stripped so that each investor class
receives some interest and some principal. When securities are completely
stripped, however, all of the interest is distributed to holders of one type
of security, known as an interest-only security, or IO, and all of the
principal is distributed to holders of another type of security known as a
principal -only security, or PO. Strips can be created in a pass-through
structure or as tranches of a CMO. The yields to maturity on IOs and POs
are very sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage assets. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, the
Fund may not fully recoup its initial investment in IOs. Conversely, if the
underlying mortgage assets experience less than anticipated prepayments of
principal, the yield on POs could be materially and adversely affected.
Real Estate Investment Trusts--A REIT is a corporation, or a business trust
that would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
The Code permits a qualifying REIT to deduct dividends paid, thereby
effectively eliminating corporate level Federal income tax and making the
REIT a pass-through vehicle for Federal income tax purposes. To meet the
definitional requirements of the Code, a REIT must, among other things,
invest substantially all of its assets in interests in real estate
(including mortgages and other REITs) or cash and government securities,
derive most of its income from rents from real property or interest on loans
secured by mortgages on real property, and distribute to shareholders
annually a substantial portion of its otherwise taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITS. Equity REITs, which may include operating or finance companies, own
real estate directly and the value of, and income earned by, the REITs
depends upon the income of the underlying properties and the rental income
they earn. Equity REITs also can realize capital gains (or losses) by
selling properties that have appreciated (or depreciated) in value.
Mortgage REITs can make construction, development or long-term mortgage
loans and are sensitive to the credit quality of the borrower. Mortgage
REITs derive their income from interest payments on such loans. Hybrid
REITs combine the characteristics of both equity and mortgage REITs,
generally by holding both ownership interests and mortgage interests in real
estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also
are subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation and the possibility of failing to qualify for tax-free
status under the Code or to maintain exemption from the Investment Company
Act of 1940, as amended (the "1940 Act").
Adjustable-Rate Mortgage Loans ("ARMs")--ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest
rate for a specified period of time, generally for either the first three,
six, twelve, thirteen, thirty-six, or sixty scheduled monthly payments.
Thereafter, the interest rates are subject to periodic adjustment based on
changes in an index. ARMs typically have minimum and maximum rates beyond
which the mortgage interest rate may not vary over the lifetime of the
loans. Certain ARMs provide for additional limitations on the maximum
amount by which the mortgage interest rate may adjust for any single
adjustment period. Negatively amortizing ARMs may provide limitations on
changes in the required monthly payment. Limitations on monthly payments
can result in monthly payments that are greater or less than the amount
necessary to amortize a negatively amortizing ARM by its maturity at the
interest rate in effect during any particular month.
Other Mortgage-Related Securities--Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage
loans on real property, including CMO residuals. Other mortgage-related
securities may be equity or debt securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.
Foreign Government Obligations; Securities of Supranational Entities.
A Fund may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Manager to be of comparable
quality to the other obligations in which the Fund may invest. Such
securities also include debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.
Repurchase Agreements. The Funds' custodian or sub-custodian will have
custody of, and will hold in a segregated account, securities acquired by a
Fund under a repurchase agreement. Repurchase agreements are considered by
the staff of the Securities and Exchange Commission to be loans by the Fund
that enters into them. In an attempt to reduce the risk of incurring a loss
on a repurchase agreement, each Fund will enter into repurchase agreements
only with domestic banks with total assets in excess of $1 billion, 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.
Commercial Paper and Other Short-Term Corporate Obligations. These
instruments include variable amount master demand notes, which are
obligations that permit a Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily changes in the amounts
borrowed. 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. Such obligations frequently are not
rated by credit rating agencies, and a Fund may invest in them only if at
the time of an investment the borrower meets the criteria set forth in the
Funds' Prospectus for other commercial paper issuers.
Convertible Securities. Although to a lesser extent than with fixed-
income securities, 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. 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.
Convertible securities are investments that provide for a stable stream
of income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible
securities may default on their obligations. 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, however, generally
offer lower interest or dividend yields than non-convertible securities of
similar quality because of the potential for capital appreciation.
Each Fund may invest in convertible preferred stocks that offer
enhanced yield features, such as PERCS (Preferred Equity Redemption
Cumulative Stock). PERCS are preferred stock which generally feature a
mandatory conversion date, as well as a capital appreciation limit that is
usually expressed in terms of a stated price. Each Fund also may invest in
other classes of enhanced convertible securities, such as ACES
(Automatically Convertible Equity Securities), PEPS (Participating Equity
Preferred Stock), PRIDES (Preferred Redeemable Increased Dividend Equity
Securities), SAILS (Stock Appreciation Income Linked Securities), TECONS
(Term Convertible Notes), QICS (Quarterly Income Cumulative Securities) and
DECS (Dividend Enhanced Convertible Securities). These securities are
company-issued convertible preferred stock. Unlike PERCS, they do not have
a capital appreciation limit. They are designed to provide the investor
with high current income with some prospect of future capital appreciation,
issued with three-or four-year maturities, and typically have some built-in
call protection. Investors have the right to convert them into shares of
common stock at a preset conversion ratio or hold them until maturity. Upon
maturity they will convert mandatorily into either cash or a specified
number of shares of common stock.
Zero Coupon Securities. Zero coupon U.S. Treasury securities are
Treasury Notes and Bonds that have been stripped of their unmatured interest
coupons, the coupons themselves and receipts or certificates representing
interests in such stripped debt obligations and coupons. Receipts include
Treasury Receipts ("TRs"), Treasury Investment Growth Receipts ("TIGRs"),
Liquid Yield Option Notes ("LYONs"), and Certificates of Accrual on Treasury
Securities ("CATS"). TIGRs, LYONs and CATS are interests in private
proprietary accounts, while TRs are interests in accounts sponsored by the
U.S. Treasury.
Illiquid Securities. Where a substantial market of qualified
institutional buyers develops for certain unregistered securities purchased
by a Fund pursuant to Rule 144A under the Securities Act of 1933, as amended
(the "1933 Act"), the Fund intends to treat such securities as liquid
securities in accordance with procedures approved by the Company's Board.
Because it is not possible to predict with assurance how the market for
specific restricted securities sold pursuant to Rule 144A will develop, the
Company's Board has directed the Manager to monitor carefully the relevant
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, a Fund's investing in such securities may have the effect of
increasing the level of illiquidity in its investment portfolio during such
period.
Management Policies
Portfolio Maturity. Under normal market conditions, the average
effective portfolio maturity is expected to be three years or less for the
Short Term Income Fund and to range between five and ten years for the
Intermediate Term Income Fund. For purposes of calculating average
effective portfolio maturity, a security that is subject to redemption at
the option of the issuer on a particular date (the "call date") which is
prior to the security's stated maturity may be deemed to mature on the call
date rather than on its stated maturity date. The call date of a security
will be used to calculate average effective portfolio maturity when the
Manager reasonably anticipates, based upon information available to it, that
the issuer will exercise its right to redeem the security. The Manager may
base its conclusion on such factors as the interest rate paid on the
security compared to prevailing market rates, the amount of cash available
to the issuer of the security, events affecting the issuer of the security,
and other factors that may compel or make it advantageous for the issuer to
redeem a security prior to its stated maturity.
Leverage. For borrowings for investment purposes, the 1940 Act
requires a 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 required coverage should decline as a result of
market fluctuations or other reasons, the Fund may be required to sell some
of its portfolio securities within three days to reduce the amount of its
borrowings and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that
time. The Fund also may be required to maintain minimum average balances in
connection with such borrowing or 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 liquid
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.
Short-Selling. (Intermediate Term Income Fund only) Until the Fund
closes its short position or replaces the borrowed security, it will: (a)
maintain a segregated account, containing permissible liquid assets, at such
a level that the amount deposited in the account plus the amount deposited
with the broker as collateral always equals the current value of the
security sold short; or (b) otherwise cover its short position.
Lending Portfolio Securities. In connection with its securities
lending transactions, each 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 interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in connection
with the loan.
Derivatives. A Fund may invest in, or enter into, Derivatives (as
defined in the Funds' Prospectus) for a variety of reasons, including to
hedge certain market risks, to manage the interest rate sensitivity
(sometimes called duration) of fixed-income securities, to provide a
substitute for purchasing or selling particular securities or to increase
potential income gain. Derivatives may provide a cheaper, quicker or more
specifically focused way for the Fund to invest than "traditional"
securities would.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated
with Derivatives purchased on an exchange. By contrast, no clearing agency
guarantees over-the-counter Derivatives. Therefore, each party to an over-
the-counter Derivative bears the risk that the counterparty will default.
Accordingly, the Manager will consider the creditworthiness of
counterparties to over-the-counter Derivatives in the same manner as it
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested in
bidding for it.
Futures Transactions--In General. A Fund may enter into futures contracts
in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or, with
respect to the Intermediate Term Income Fund only, 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 opportunities or arbitrage
possibilities not available in the United States. Foreign markets, however,
may have greater risk potential than domestic markets. For example, some
foreign exchanges are principal markets so that no common clearing facility
exists and an investor may look only to the broker for performance of the
contract. In addition, any profits 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. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. 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.
Successful use of futures by a Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant
market and, to the extent the transaction is entered into for hedging
purposes, to ascertain the appropriate correlation between the transaction
being hedged and the price movements of the futures contract. For example,
if the Fund uses futures to hedge against the possibility of a decline in
the market value of securities held in its portfolio and the prices of such
securities instead increase, 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.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, each Fund may be required to segregate permissible
liquid assets in connection with its commodities transactions in an amount
generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting the Fund's ability otherwise
to invest those assets.
Specific Futures Transactions. Each Fund may purchase and sell interest
rate futures contracts. An interest rate future obligates the Fund to
purchase or sell an amount of a specific debt security at a future date at a
specific price.
The Intermediate Term Income Fund may purchase and sell currency
futures. A currency future obligates the Fund to purchase or sell an amount
of a specific currency at a future date at a specific price.
Interest Rate Swaps. (Intermediate Term Income Fund only) Interest rate
swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest (for example, an exchange
of floating rate payments for fixed-rate payments). The exchange
commitments can involve payments to be made in the same currency or in
different currencies. The use of interest rate swaps is a highly
specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio security
transactions. If the Manager is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment
performance of the Fund would diminish compared with what it would have been
if these investment techniques were not used. Moreover, even if the Manager
is correct in its forecasts, there is a risk that the swap position may
correlate imperfectly with the price of the asset or liability being hedged.
There is no limit on the amount of interest rate swap transactions that may
be entered into by the Fund. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the
risk of loss with respect to interest rate swaps is limited to the net
amount of interest payments that the Fund is contractually obligated to
make. If the other party to an interest rate swap defaults, the Fund's risk
of loss consists of the net amount of interest payments that the Fund
contractually is entitled to receive.
Options--In General. (Intermediate Term Income Fund only) The Intermediate
Term Income Fund may purchase and write (i.e., sell) call or put options
with respect to specific securities. A call option gives the purchaser of
the option the right to buy, and obligates the writer to sell, the
underlying security or securities at the exercise price at any time during
the option period, or at a specific date. Conversely, a put option gives
the purchaser of the option the right to sell, and obligates the writer to
buy, the underlying security or securities at the exercise price at any time
during the option period, or at a specific date.
A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written
by the Fund is covered when, among other things, cash or liquid securities
having a value equal to or greater than the exercise price of the option are
placed in a segregated account with the Fund's custodian to fulfill the
obligation undertaken. The principal reason for writing covered call and
put options is to realize, through the receipt of premiums, a greater return
than would be realized on the underlying securities alone. The Fund
receives a premium from writing covered call or put options which it retains
whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen events,
at times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, 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.
Specific Options Transactions. (Intermediate Term Income Fund only) The
Intermediate Term Income Fund may purchase and sell call and put options on
foreign currency. These options convey the right to buy or sell the
underlying currency at a price which is expected to be lower or higher than
the spot price of the currency at the time the option is exercised or
expires.
The Intermediate Term Income Fund may purchase cash-settled options on
interest rate swaps and interest rate swaps denominated in foreign currency
in pursuit of its investment objective. A cash-settled option on a swap
gives the purchaser the right, but not the obligation, in return for the
premium paid, to receive an amount of cash equal to the value of the
underlying swap as of the exercise date. These options typically are
purchased in privately negotiated transactions from financial institutions,
including securities brokerage firms.
Successful use by a Fund of options will be subject to the Manager's
ability to predict correctly movements in foreign currencies or interest
rates. To the extent the Manager's predictions are incorrect, the Fund may
incur losses.
Future Developments. A Fund may take advantage of opportunities in the
area of options and futures contracts and options on futures contracts and
any other Derivatives 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 or Statement of Additional
Information.
Forward Commitments. Securities purchased on a forward commitment or
when-issued basis are subject to changes in value (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 forward commitment or
when-issued basis may expose a Fund to risks because they may experience
such fluctuations prior to their actual delivery. Purchasing securities on
a when-issued 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. Purchasing securities on a forward
commitment or when-issued basis when a 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.
Investment Considerations and Risks
Lower Rated Securities. Each Fund is permitted to invest in debt
securities rated Ba by Moody's Investors Service, Inc. ("Moody's") or BB by
Standard & Poor's Ratings Group ("S&P"), Fitch IBCA, Inc. ("Fitch") or Duff
& Phelps Credit Ratings Co. ("Duff," and with Moody's, S&P and Fitch, the
"Rating Agencies") 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 "Description of the Funds--Investment Considerations and Risks--Lower
Rated Securities" in the Funds' Prospectus for a discussion of certain risks
and the "Appendix" for a general description of the Rating Agencies'
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. Each 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 the Rating
Agencies to be, on balance, 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.
A 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 any persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon securities and pay-in-kind bonds, in which the
Fund may invest up to 5% of its total assets. Pay-in-kind bonds pay
interest through the issuance of additional securities. Zero coupon
securities and pay-in-kind bonds carry an additional risk in that, unlike
bonds which pay interest throughout the period to maturity, the Fund will
realize no cash until the cash payment date unless a portion of such
securities are sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment.
Investment Restrictions
Each Fund has adopted investment restrictions numbered 1 through 7 as
fundamental policies. In addition, Dreyfus Intermediate Term Income Fund
has adopted investment restrictions numbered 14 and 15 as fundamental
policies. These restrictions cannot be changed, as to a Fund, without
approval by the holders of a majority (as defined in the 1940 Act) of such
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 Company's Board members at any time. Neither Fund may:
1. Invest in commodities, except that the Fund may purchase and
sell futures contracts, including those relating to indices, and options on
futures contracts or indices.
2. Purchase, hold or deal in real estate, 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 or 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 1940
Act (which currently limits borrowing to no more than 33-1/3% of the value
of the Fund's total assets). For purposes of this Investment Restriction,
the entry into options, 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 and 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 Company's Board.
5. Act as an underwriter of securities of other issuers, except
to the extent the Fund may be deemed an underwriter under the 1933 Act by
virtue of disposing of portfolio securities.
6. Invest more than 25% of the value of its total assets in the
securities of issuers in any single 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 1940 Act), except to the extent the activities permitted in
Investment Restriction Nos. 1, 3, and 9 may be deemed to give rise to a
senior security.
8. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
9. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to
the purchase of securities on a when-issued or forward commitment basis and
the deposit of assets in escrow in connection with writing covered put and
call options and collateral and initial or variation margin arrangements
with respect to options, futures contracts, including those relating to
indices, and options on futures contracts or indices.
10. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Prospectus and Statement of Additional
Information.
11. 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.
12. Purchase securities of other investment companies, except to
the extent permitted under the 1940 Act or as they may be acquired as part
of a merger, consolidation or acquisition of assets.
13. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in futures, including those
relating to indices, and options on futures or indices.
The following investment restrictions numbered 14 and 15 apply only to
Dreyfus Intermediate Term Income Fund. Dreyfus Intermediate Term Income
Fund may not:
14. Invest more than 5% of its assets in the obligations of any
single issuer, except that up to 25% of the value of the Fund's total assets
may be invested, and securities issued or guaranteed by the U.S. Government,
or its agencies or instrumentalities may be purchased, without regard to any
such limitation.
15. Hold more than 10% of the outstanding voting securities of
any single issuer. This Investment Restriction applies only with respect to
75% of the Fund's total assets.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will
not constitute a violation of
such restriction.
The Company may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Company determine that a commitment is no longer in the best
interest of the Fund and its shareholders, the Company reserves the right to
revoke the commitment by terminating the sale of such Fund's shares in the
state involved.
MANAGEMENT OF THE FUND
Board members and officers of the Company, together with information as
to their principal business occupations during at least the last five years,
are shown below.
Board Members of the Company
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is a
director of Noel Group, Inc., a venture capital company (for which,
from February 1995 until November 1997, he was Chairman of the Board),
The Muscular Dystrophy Association, HealthPlan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs, Carlyle Industries, Inc. (formerly,
Belding Heminway Company, Inc.), a button packager and distributor,
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies, and Career Blazers Inc. (formerly, Staffing
Resources, Inc.), a temporary placement agency. For more than five
years prior to January 1995, he was President, a director and, until
August 1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 24, 1994, the Company's
distributor. From August 1994 until December 31, 1994, he was a
director of Mellon Bank Corporation. He is 55 years old and his address
is 200 Park Avenue, New York, New York 10166.
LUCY WILSON BENSON, Board Member. President of Benson and Associates,
consultants to business and government. Mrs. Benson is a director of
Communications Satellite Corporation, General RE Corporation and
Logistics Management Institute. She is also a Trustee of the Alfred P.
Sloan Foundation, Vice Chairman of the Board of Trustees of Lafayette
College, Vice Chairman of the Citizens Network for Foreign Affairs and
of the Atlantic Council of the U.S. and a member of the Council on
Foreign Relations. From 1980 to 1994, Mrs. Benson was a director of
The Grumman Corporation. Mrs. Benson served as a consultant to the
U.S. Department of State and to SRI International from 1980 to 1981.
From 1977 to 1980, she was Under Secretary of State for Security
Assistance, Science and Technology. She is 71 years old and her
address is 46 Sunset Avenue, Amherst, Massachusetts 01002.
DAVID W. BURKE, Board Member. Chairman of the Broadcasting Board of
Governors, an independent board within the United States Information
Agency, since August 1995. From August 1994 to December 1994, Mr.
Burke was a Consultant to the Manager and, from October 1990 to August
1994, he was Vice President and Chief Administrative Officer of the
Manager. From 1977 to 1990, Mr. Burke was involved in the management
of national television news, as Vice President and Executive Vice
President of ABC News, and subsequently as President of CBS News. He
is 62 years old and his address is 197 Eighth Street, Charleston,
Massachusetts 02109.
MARTIN D. FIFE, Board Member. Chairman of the Board of Magar, Inc., a
company specializing in financial products and developing early stage
companies. In addition, Mr. Fife is Chairman of the Board and Chief
Executive Officer of Skysat Communications Network Corporation, a
company developing telecommunications systems. Mr. Fife also serves on
the boards of various other companies. He is 71 years old and his
address is 405 Lexington Avenue, New York, New York 10174.
WHITNEY I. GERARD, Board Member. Partner of the New York City law firm of
Chadbourne & Parke. He is 63 years old and his address is 30
Rockefeller Plaza, New York, New York 10112.
ROBERT R. GLAUBER, Board Member. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard
University since January 1992. Mr. Glauber 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 Mid Ocean Reinsurance Co.
Ltd. and Cooke & Bieler, Inc., investment counselors, NASD Regulation,
Inc. and the Federal Reserve Bank of Boston. He is 59 years old and
his address is 79 John F. Kennedy Street, Cambridge, Massachusetts
02138.
ARTHUR A. HARTMAN, Board Member. Senior consultant with APCO Associates
Inc. From 1981 to 1987, he was United States Ambassador to the former
Soviet Union. He sits on the Boards of Ford Meter Box Corporation and
Lawter International and is a member of the advisory councils of
several other companies, research institutes and foundations.
Ambassador Hartman is Chairman of First NIS Regional Funds (ING/Barings
Management) and former President of the Harvard Board of Overseers. He
is 72 years old and his address is 2738 McKinley Street, N.W.,
Washington, D.C. 20015.
GEORGE L. PERRY, Board Member. An economist and Senior Fellow at the
Brookings Institution since 1969. He is co-director of the Brookings
Panel on Economic Activity and editor of its journal, The Brookings
Papers. He is also a director of the State Farm Mutual Automobile
Association and State Farm Life Insurance Company and a Trustee of
Federal Realty Investment Trust. He is 64 years old and his address is
1775 Massachusetts Avenue, N.W., Washington, D.C. 20036.
PAUL D. WOLFOWITZ, Board Member. Dean of The Paul H. Nitze School of
Advanced International Studies at Johns Hopkins University. From 1989
to 1993, he was Under Secretary of Defense for Policy. From 1986 to
1989, he was the U.S. Ambassador to the Republic of Indonesia. From
1982 to 1986, he was Assistant Secretary of State for East Asian and
Pacific Affairs of the Department of State. He is also a director of
Hasbro, Inc. He is 52 years old and his address is 1740 Massachusetts
Avenue, N.W., Washington, D.C. 20036.
For so long as the Company's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members who are not
"interested persons" of the Company, as defined in the 1940 Act, will be
selected and nominated by the Board members who are not "interested persons"
of the Company.
The Company typically pays its Board members an annual retainer and a
per meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by the Company for the fiscal year
ended July 31, 1998, and by all other funds in the Dreyfus Family of Funds
for which such person is a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation) for the year
ended December 31, 1997, were as follows:
Total Compensation
From Company and
Aggregate Fund Complex
Name of Board Compensation Paid to Board
Member From Company* Member
Joseph S. DiMartino $7,813 $597,128 (99)
Lucy Wilson Benson $6,250 $ 74,055 (17)
David W. Burke $6,250 $239,000 (51)
Martin D. Fife $6,250 $ 60,500 (12)
Whitney I. Gerard $6,250 $ 60,500 (12)
Robert R. Glauber $5,625 $102,500 (20)
Arthur A. Hartman $5,625 $ 55,750 (12)
George L. Perry $5,625 $ 60,500 (12)
Paul D. Wolfowitz $5,625 $ 52,750 (11)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $4,164 for Dreyfus Short Term Income Fund
and $1,657 for Dreyfus Intermediate Term Income Fund for all Board
members as a group.
Officers of the Company
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer, Chief Compliance Officer and a director of the Distributor and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment companies
advised or administered by the Manager. She is 40 years old.
MARGARET W. CHAMBERS, Vice President and Secretary. Senior Vice President
and General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. She is
38 years old.
MICHAEL S. PETRUCELLI, Vice President, Assistant Secretary and Assistant
Treasurer. Senior Vice President of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From December 1989 through November 1996, he was employed by
GE Investments where he held various financial, business development
and compliance positions. He also served as Treasurer of the GE Funds
and as a Director of GE Investment Services. He is 37 years old.
STEPHANIE D. PIERCE, Vice President, Assistant Secretary and Assistant
Treasurer. Vice President and Client Development Manager of Funds
Distributor, Inc., and an officer of other investment companies advised
or administered by the Manager. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, N.A. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was Second
Vice President with Chase Manhattan Bank. She is 30 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for The Boston Company, Inc. She is 34 years old.
GEORGE A. RIO, Vice President and Assistant Treasurer. Executive Vice
President and Client Service Director of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by the
Manager. From June 1995 to March 1998, he was Senior Vice President
and Senior Key Account Manager for Putnam Mutual Funds. From May 1994
to June 1995, he was Director of Business Development for First Data
Corporation. From September 1983 to May 1994, he was Senior Vice
President and Manager of Client Services and Director of Internal Audit
at The Boston Company, Inc. He is 43 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, and Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., 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. He is 36 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company. From December 1991 to March 1993, he
was employed as a Fund Accountant at The Boston Company, Inc. He is 29
years old.
CHRISTOPHER J. KELLEY, Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of the Distributor and
Funds Distributor, Inc., and an officer of other investment companies
advised or administered by the Manager. From April 1994 to July 1996,
he was Assistant Counsel at Forum Financial Group. From October 1992
to March 1994, he was employed by Putnam Investments in legal and
compliance capacities. He is 33 years old.
KATHLEEN K. MORRISEY, Vice President and Assistant Secretary. Manager of
Treasury Services Administration. Vice President of Funds Distributor,
Inc. and an officer of other investment companies advised or
administered by the Manager. From July 1994 to November 1995, she was
a Fund Accountant for Investors Bank & Trust Company. She is 26 years
old.
ELBA VASQUEZ, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
March 1990 to May 1996, she was employed by the U.S. Trust Company of
New York, where she held various sales and marketing positions. She is
36 years old.
The address of each officer of the Company is 200 Park Avenue, New
York, New York 10166.
The Company's Board members and officers, as a group, owned less than
1% of each Fund's shares outstanding on October 9, 1998.
The following person is known by the Company to own of record 5% or
more of Dreyfus Short Term Income Fund's outstanding voting securities as of
October 9, 1998: Charles Schwab & Co., Inc., Reinvest Account ATTN: Mutual
Funds Department, 101 Montgomery Street, San Francisco, California 94104-
4122 - 9.1787%.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectus entitled "Management of the
Funds."
Management Agreement. The Manager provides management services
pursuant to the Management Agreement (the "Agreement") dated August 24,
1994, as amended August 24, 1995, with the Company. As to each Fund, the
Agreement is subject to annual approval by (i) the Company's Board or (ii)
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Fund, provided that in either event the continuance also
is approved by a majority of the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Company 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 on August 5, 1994 in
respect of Dreyfus Short Term Income Fund, and was last approved by the
Company's Board, including a majority of the Board members who are not
"interested persons" of any party to the Agreement, at a meeting held on May
7, 1998. As to each Fund, the Agreement is terminable without penalty, on
60 days' notice, by the Company's Board or by vote of the holders of a
majority of such Fund's shares, or, on not less than 90 days' notice, by the
Manager. The Agreement will terminate automatically, as to the relevant
Fund, in the event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman--Distribution and a director; Ronald P. O'Hanley III,
Vice Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Patrice M. Kozlowski, Vice President--
Corporate Communications; Mary Beth Leibig, Vice President--Human Resources;
Andrew S. Wasser, Vice President--Information Systems; Wendy Strutt, Vice
President; Richard Terres, Vice President; William H. Maresca, Controller;
James Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary;
and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and Richard F.
Syron, directors.
The Manager manages each Fund's investments in accordance with the
stated policies of such Fund, subject to the approval of the Company's
Board. The Manager is responsible for investment decisions, and provides
the Funds with portfolio managers who are authorized by the Board to execute
purchases and sales of securities. Dreyfus Short Term Income Fund's
portfolio managers are Kevin McClintock, Michael Hoeh, Roger E. King, Mathew
Olson and Gerald E. Thunelius. Dreyfus Intermediate Term Income Fund's
portfolio manager is Kevin McClintock. The Manager also maintains a
research department with a professional staff of portfolio managers and
securities analysts who provide research services for the Fund and for other
funds advised by the Manager.
The Manager maintains office facilities on behalf of the Funds, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Funds. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
Expenses. All expenses incurred in the operation of the Company are
borne by the Company, except to the extent specifically assumed by the
Manager. The expenses borne by the Company include: organizational costs,
taxes, interest, loan commitment fees, interest and distributions paid on
securities sold short, brokerage fees and commissions, if any, fees of Board
members 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 Company's existence, costs of independent
pricing services, costs attributable to investor services (including,
without limitation, telephone and personnel expenses), costs of preparing
and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders, costs of
shareholders' reports and meetings, and any extraordinary expenses. In
addition, Fund shares are subject to an annual service fee. See
"Shareholder Services Plan." Expenses attributable to a particular Fund are
charged against the assets of that Fund; other expenses of the Company are
allocated between the Funds on the basis determined by the Board, including,
but not limited to, proportionately in relation to the net assets of each
Fund.
As compensation for the Manager's services to the Company, the Company
has agreed to pay the Manager a monthly management fee at the annual rate of
.50 of 1% of the value of Dreyfus Short Term Income Fund's average daily net
assets and .55 of 1% of the value of Dreyfus Intermediate Term Income Fund's
average daily net assets. For the fiscal years ended July 31, 1996, 1997
and 1998, the management fees payable with respect to Dreyfus Short Term
Income Fund amounted to $980,165, $1,141,534 and $1,550,660, respectively;
however, such amounts were reduced by $278,382, $247,639 and $3,975,
respectively, pursuant to an undertaking by the Manager, which resulted in
$701,783 being paid in fiscal 1996, $893,895 being paid in fiscal 1997 and
$1,546,685 being paid in fiscal 1998 with respect to Dreyfus Short Term
Income Fund. For the period February 2, 1996 (commencement of operations)
through July 31, 1996 and the fiscal years ended July 31, 1997 and 1998, the
management fee payable with respect to Dreyfus Intermediate Term Income Fund
amounted to $25,206, $123,707 and $152,467, respectively; however, such
amounts were reduced by $25,206, $123,707 and $114,598, respectively,
pursuant to an undertaking by the Manager, which resulted in no management
fees being paid in fiscal 1996 and 1997 and $37,869 being paid in fiscal
1998 with respect to Dreyfus Intermediate Term Income Fund.
As to each Fund, 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 a Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as each Fund's distributor on
a best efforts basis 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 at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Funds' transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares--Dreyfus TeleTransfer Privilege."
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.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectus entitled "Shareholder Services
Plan."
The Company has adopted a Shareholder Services Plan, pursuant to which
the Company pays the Distributor for the provision of certain services to
each Fund's shareholders. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Company and providing reports and other information,
and services related to the maintenance of such shareholder accounts. Under
the Shareholder Services Plan, the Distributor may make payments to certain
securities dealers, financial institutions and other financial industry
professionals (collectively, "Service Agents") in respect of these services.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Board for its review. In addition, the Shareholder
Services Plan provides that material amendments must be approved by the
Company's Board, and by the Board members who are not "interested persons"
(as defined in the 1940 Act) of the Company and have no direct or indirect
financial interest in the operation of the Shareholder Services Plan or in
any agreements entered into in connection with the Shareholder Services
Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. As to each Fund, the Shareholder Services Plan
is subject to annual approval by such vote of the Board members cast in
person at a meeting called for the purpose of voting on the Shareholder
Services Plan. The Shareholder Services Plan was last approved by the Board
at a meeting held on June 18, 1997. The Shareholder Services Plan is
terminable with respect to each Fund at any time by vote of a majority of
the Board members who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Shareholder Services
Plan or in any agreements entered into in connection with the Shareholder
Services Plan.
For the fiscal year ended July 31, 1998, the Fund was charged $620,264
with respect to Dreyfus Short Term Income Fund and $58,430 with respect to
Dreyfus Intermediate Term Income Fund under the Plan. This amount was
reimbursed by the Manager pursuant to an undertaking resulting in no fee
being paid by the Portfolio.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectus entitled "How to Redeem Shares."
Check Redemption Privilege. The Company provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Check Redemption Privilege by checking the
applicable "No" box on the Account Application. Checks will be sent only
to the registered owner(s) of the account and only to the address of record.
The Check Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form. The Account Application or
Shareholder Services Form must be manually signed by the registered
owner(s). Checks are drawn on the investors Fund account and may be made
payable to the order of any person in an amount of $500 or more. When a
Check is presented to the Transfer Agent for payment, the Transfer Agent, as
the investor's agent, will cause the Fund to redeem a sufficient number of
shares in the investor's account to cover the amount of the Check.
Dividends are earned until the Check clears. After clearance, a copy of the
Check will be returned to the investor. Investors generally will be subject
to the same rules and regulations that apply to checking accounts, although
election of this Privilege creates only a shareholder-transfer agent
relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor and reasonably believed by the Transfer Agent to be genuine.
Ordinarily, the Company will initiate payment for shares redeemed pursuant
to this Privilege on the next business day after receipt by the Transfer
Agent of a redemption request in proper form. Redemption proceeds ($1,000
minimum) will be transferred by Federal Reserve wire only to the commercial
bank account specified by the investor on the Account Application or
Shareholder Services Form, or to a correspondent bank if the investor's bank
is not a member of the Federal Reserve System. Fees ordinarily are imposed
by such bank and borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. 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 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 Company has committed to pay in cash all
redemption requests by any shareholder of record of a Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of such 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 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 securities are valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the relevant 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 Funds' Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of 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 applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions (including
over The Dreyfus Touch Registration Mark automated telephone system) 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.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of a 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 the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next Auto-Exchange transaction. Shares held
under 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 the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Company reserves the right to
reject any exchange request in whole or in part. The Fund Exchanges service
or the 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. Automatic Withdrawal may be terminated at any time by the
investor, the Company or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from a 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 Retirement Plans. The Company
makes available to corporations a variety of prototype pension and profit-
sharing plans including a 401(k) Salary Reduction Plan. In addition, the
Company makes available Keogh Plans, IRAs (including regular IRAs, spousal
IRAs for a non-working spouse, Roth IRAs, IRAs set up under a Simplified
Employee Pension Plan (SEP-IRAs), Education 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 a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
A fee may be charged by the entity acting as custodian for Keogh Plans,
403(b)(7) Plans or IRAs, 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 for subsequent purchases. The minimum initial
investment is $750 for Dreyfus-sponsored Keogh Plans, IRAs (including
regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and
Rollover IRAs) and 403(b)(7) Plans with only one participant and $500 for
Dreyfus-sponsored Education IRAs with no minimum for subsequent purchases.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectus entitled "How to Buy Shares."
Valuation of Portfolio Securities. Substantially all of each Fund's
investments (excluding short-term investments) are valued each business day
by one or more independent pricing services (the "Service") approved by the
Board. Securities valued by the Service for which quoted bid prices in the
judgment of the Service are readily available and are representative of the
bid side of the market are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked
prices (as calculated by the Service based upon its evaluation of the market
for such securities). Other investments valued by the Service are carried
at fair value as determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and
general market conditions. Short-term investments are not valued by the
Service and are valued at the mean price or yield equivalent for such
securities or for securities of comparable maturity, quality and type as
obtained from market makers. Other investments that are not valued by the
Service are valued at the average of the most recent bid and asked prices in
the market in which such investments are primarily traded, or at the last
sales price for securities traded primarily on an exchange or the national
securities market. In the absence of reported sales of investments traded
primarily on an exchange or the national securities market, the average of
the most recent bid and asked prices is used. 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 U.S. 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.
Expenses and fees, including the management fee (reduced by the expense
limitation, if any), are accrued daily and taken into account for the
purpose of determining the net asset value of a Fund's shares.
Restricted securities, as well as securities or other assets for which
recent market quotations are not readily available or which are not valued
by the Service, are valued at fair value as determined in good faith by the
Board. The Board will review the method of valuation on a current basis.
In making their good faith valuation of restricted securities, the Board
members generally will take the following factors into consideration:
restricted securities which are, or are convertible into, securities of the
same class of securities for which a public market exists usually will be
valued at market value less the same percentage discount at which purchased.
This discount will be revised periodically by the Board if the Board members
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.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectus entitled "Dividends, Distributions
and Taxes."
Management of the Company believes that each Fund has qualified for the
fiscal year ended July 31, 1998 as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund
intends to continue to so qualify if such qualification is in the best
interests of its shareholders. As a regulated investment company, each Fund
will pay no Federal income tax on net investment income and net realized
securities gains to the extent that such income and gains are distributed to
shareholders in accordance with applicable provisions of the Code. To
qualify as a regulated investment company, the Fund must distribute at least
90% of its net income (consisting of net investment income and net
short-term capital gains) to its shareholders and meet certain asset
diversification and other requirements. The term "regulated investment
company" does not imply the supervision of management or investment
practices or policies by any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the aggregate net asset value of the shares
below the cost of his investment. Such a dividend or distribution would be
a return of investment in an economic sense, although taxable as stated
above. In addition, the Code provides that if a shareholder has not held
his shares more than for six months (or shorter period as the Internal
Revenue Service may prescribe by regulation) 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 long-term capital loss to the extent of the
capital gain distribution.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, a portion of the gain or loss
realized from the disposition of foreign currencies (including foreign
currency denominated bank deposits) and non-U.S. dollar denominated
securities (including debt instruments and certain forward contracts and
options) may be treated as ordinary income or loss under Section 988 of the
Code. In addition, all or a portion of any gains realized from the sale or
other disposition of certain market discount bonds will be treated as
ordinary income under Section 1276 of the Code. Finally, all or a portion
of the gain realized from engaging in "conversion transactions" may be
treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold to produce capital
gains, or transactions described in Treasury regulations to be issued in the
future.
Under Section 1256 of the Code, any gain or loss realized by a Fund
from certain forward contracts and options transactions will be treated as
60% long-term capital gain or loss and 40% short-term capital gain or loss.
Gain or loss will arise upon exercise or lapse of such contracts and options
as well as from closing transactions. In addition, any such contracts or
options remaining unexercised at the end of the Fund's taxable year will be
treated as sold for their then fair market value, resulting in additional
gain or loss to such Fund characterized in the manner described above.
Offsetting positions held by a Fund involving certain foreign currency
forward contracts or 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, override or modify the
provisions of Sections 1256 and 988 of the Code.
If a Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles" were
governed by Section 1256 of the Code. A Fund may make one or more elections
with respect to "mixed straddles." Depending on which election is made, if
any, the results to the Fund may differ. If no election is made, to the
extent the "straddle" and conversion transaction rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result
of the "straddle" and conversion transaction rules, short-term capital loss
on "straddle" positions may be recharacterized as long-term capital loss,
and long-term capital gain on "straddle" positions may be recharacterized as
short-term capital gains or ordinary income.
The Taxable Relief Act of 1997 included constructive sale provisions
that generally apply if a Fund either (1) holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests, ("appreciated financial position") and then enters into a short
sale, futures, forward, or offsetting notional principal contract
(collectively, a "Contract") respecting the same or substantially identical
property or (2) holds an appreciated financial position that is a Contract
and then acquires property that is the same as, or substantially identical
to, the underlying property. In each instance, with certain exceptions, the
Fund generally will be taxed as if the appreciated financial position were
sold at its fair market value on the date the Fund enters into the financial
position or acquires the property, respectively. Transactions that are
identified hedging or straddle transactions under other provisions of the
Code can be subject to the constructive sale provisions.
Investment by a 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.
PORTFOLIO TRANSACTIONS
The Manager assumes general supervision over placing orders on behalf
of the Company 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 will 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 fees are
not reduced as a consequence of the receipt of such supplemental
information. Such information may be useful to the Manager in serving both
the Company and other funds 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 obligations to the Company.
Sales of Fund shares by a broker may be taken into consideration, and
brokers also will be 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 may, in certain cases, result from two or more funds advised or
administered by the Manager being engaged simultaneously in the purchase or
sale of the same security. Certain of the Funds' transactions in securities
of foreign issuers may not benefit from the negotiated commission rates
available to the Funds for transactions in securities of domestic issuers.
When transactions are executed in the over-the-counter market, each Fund
will deal with the primary market makers unless a more favorable price or
execution otherwise is obtainable. 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.
Portfolio turnover may vary from year to year as well as within a year.
High turnover rates are likely to result in 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. The portfolio turnover rate (exclusive of U.S. Government
securities and short-term investments) for the fiscal year ended July 31,
1998 was 185.77% with respect to Dreyfus Short Term Income Fund and 170.52%
with respect to Dreyfus Intermediate Term Income Fund.
For the fiscal year ended July 31, 1996, no brokerage commissions were
paid by the Funds. For the fiscal years ended July 31, 1997 and 1998, total
brokerage commissions paid amounted to $18,178 and $177,655, respectively,
with respect to Dreyfus Short Term Income Fund and $1,912 and $41,035,
respectively, with respect to Dreyfus Intermediate Term Income Fund, none of
which was paid to the Distributor. Gross spreads and concessions on
principal transactions, where determinable, amounted to $466,250, $70,000
and $154,000 for fiscal years ended July 31, 1996, 1997 and 1998,
respectively, with respect to Dreyfus Short Term Income Fund, and $4,500 for
the period February 2, 1996 (commencement of operations) through July 31,
1996, and $0 for each of the fiscal years ended July 31, 1997 and 1998, with
respect to Dreyfus Intermediate Term Income Fund, none of which was paid to
the Distributor.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectus entitled "Performance
Information."
The current yield for the 30-day period ended July 31, 1998 for Dreyfus
Short Term Income Fund and Dreyfus Intermediate Term Income Fund was 6.13%
and 7.47%, respectively, which reflects the absorption of certain expenses
pursuant to expense limitations in effect. See "Management of the Funds" in
the Prospectus. Had certain expenses not been absorbed, current yield for
the same period would have been 7.00% for Dreyfus Intermediate Term Income
Fund. Current yield is computed pursuant to a formula which operates as
follows: the amount of the Fund's expenses accrued for the 30-day period
(net of reimbursements) is subtracted from the amount of the dividends and
interest earned (computed in accordance with regulatory requirements) by the
Fund during the period. That result is then divided by the product of: (a)
the average daily number of shares outstanding during the period that were
entitled to receive dividends, and (b) the net asset value per share on the
last day of the period less any undistributed earned income per share
reasonably expected to be declared as a dividend shortly thereafter. The
quotient is then added to 1, and that sum is raised to the 6th power, after
which 1 is subtracted. The current yield is then arrived at by multiplying
the result by 2.
Dreyfus Short Term Income Fund's average annual return for the 1 and 5
year periods ended July 31, 1998, and for the period from August 18, 1992
(commencement of operations) through July 31, 1998, was 7.92%, 6.54% and
6.73%, respectively. Dreyfus Intermediate Term Income Fund's average annual
return for the 1 year period ended July 31, 1998 and for the period from
February 1996 through July 31, 1998, was 10.93% and 11.59%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and 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.
Dreyfus Short Term Income Fund's total return for the period August 18,
1992 (commencement of operations) through July 31, 1998 was 47.30%. Dreyfus
Intermediate Term Income Fund's total return for the period February 2, 1996
(commencement of operations) through July 31, 1998 was 31.41%. 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.
From time to time, the Company may compare a Fund's performance with
the performance of other instruments, such as certificates of deposit and
FDIC-insured bank money market accounts.
INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in conjunction
with the section in the Funds' 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.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
The Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
Each Fund will send annual and semi-annual financial statements to all
its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, the Transfer Agent arranges for the maintenance of shareholder
account records for each Fund, the handling of certain communications
between shareholders and the Company and the payment of dividends and
distributions payable by a Fund. For these services, the Transfer Agent
receives a monthly fee computed on the basis of the number of shareholder
accounts it maintains for the Company during the month, and is reimbursed
for certain out-of-pocket expenses. For the fiscal year ended July 31,
1998, the Company paid the Transfer Agent $213,504 with respect to Dreyfus
Short Term Income Fund and $13,765 with respect to Dreyfus Intermediate Term
Income Fund.
Mellon Bank, N.A. (the "Custodian"), the Manager's parent, One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258, serves as the Company's
custodian. Under a custody agreement with the Company, the Custodian holds
each Fund's securities and keeps all necessary accounts and records. For
its custody services, the Custodian receives a monthly fee based on the
market value of each Fund's assets held in custody and receives certain
securities transactions charges. For the fiscal year ended July 31, 1998,
the Company paid the Custodian $40,165 with respect to the Dreyfus Short
Term Income Fund and $6,370 with respect to Dreyfus Intermediate Term Income
Fund.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Company, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance of
the shares being sold pursuant to the Funds' Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Company.
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
The Funds' Annual Reports to Shareholders for the fiscal year ended
July 31, 1998 are separate documents supplied with this Statement of
Additional Information, and the financial statements, accompanying notes,
and reports of independent auditors appearing therein are incorporated by
reference into this Statement of Additional Information.
APPENDIX
Description of certain ratings assigned by Standard & Poor's Ratings
Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch IBCA, 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
Bonds rated BB have less near-term vulnerability to default than other
speculative grade debt. However, 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 payments.
B
Bonds rated B have a greater vulnerability to default but presently
have 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
Bonds rated CCC have a current identifiable vulnerability to default,
and are dependent upon favorable business, financial and economic conditions
to meet timely payments of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, they are 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 and
in the categories below B. The modifier 1 indicates a ranking for the
security in the higher end of a rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end
of a rating category.
Commercial Paper 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 exists 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.
DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement
Condensed Financial Information for the period from August
18, 1992 (commencement of operations) to July 31, 1993 and
for each of the five years in the period ended July 31, 1998
for Dreyfus Short Term Income Fund and Condensed Financial
Information for the period from February 2, 1996,
(commencement of operations) to July 31, 1996, and for the
two years ended July 31, 1998, for Dreyfus Intermediate Term
Income Fund.
Included in Part B (by reference) of the Registration
Statement:
Statement of Investments-- July 31, 1998.*
Statement of Financial Futures -- July 31, 1998.*
Statement of Assets and Liabilities--July 31, 1998.*
Statement of Operations--year ended July 31, 1998.*
Statement of Changes in Net Assets--for each of the two
years ended July 31, 1998.*
Notes to Financial Statements.*
Report of Ernst & Young LLP, Independent Auditors, dated
September 8, 1998.*
_________________
* Items are incorporated by reference to the Registrant's
Annual Report on Form N-30D, filed on October 2, 1998.
All Schedules and other financial statement information, for which provision
is made in the applicable accounting regulations of the Securities and
Exchange Commission, are either omitted because they are not required under
the related instructions, they are inapplicable, or the required information
is presented in the financial statements or notes thereto which are included
in Part B of the Registration Statement.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1) Registrant's Articles of Incorporation and Articles of Amendment
are incorporated by reference to Exhibit (1) and Exhibit (1)(b) of
Post-Effective Amendment No. 7 to the Registration Statement on
Form N-1A, filed on December 1, 1995.
(2) Registrant's By-Laws, as amended, are incorporated by reference to
Exhibit (2) of Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A, filed on December 1, 1995.
(4) Specimen certificate for the Registrant's securities is
incorporated by reference to Exhibit (4) of the Registration
Statement on Form N-1A, filed on June 29, 1992.
(5) Management Agreement is incorporated by reference to Exhibit (5)
of Post-Effective Amendment No. 7 to the Registration Statement on
Form N-1A, filed on December 1, 1995.
(6)(a) Distribution Agreement is incorporated by reference to Exhibit
(6)(a) of Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A, filed on December 1, 1995.
(6)(b) Forms of Service Agreement are incorporated by reference to
Exhibit 6(b) and (6)(c) of Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A, filed on September 28, 1994.
(8)(a) Amended and Restated Custody Agreement is incorporated by
reference to Exhibit 8(a) of Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A, filed on December 1, 1995.
(8)(b) Sub-Custodian Agreements are incorporated by reference to Exhibit
8(b) of Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A, filed on January 9, 1993.
(10) Opinion and consent of Registrant's counsel is incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A, filed on December 1, 1995.
(11) Consent of Independent Auditors.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _________________________________________________________________
(16) Schedules of Computation of Performance Data are incorporated by
reference to Exhibit (16) of Post-Effective Amendment No. 10 to
the Registration Statement on Form N-1A, filed on September 27,
1996.
(17) Financial Data Schedule.
Other Exhibits
______________
(a) Powers of Attorney.
(b) Certificate of Secretary.
Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities.
_______ ________________________________
(1) (2)
Number of Record
Title of Class Holders as of October 9, 1998
______________ ______________________________
Common Stock
(Par value $.001) Dreyfus Short Term Income Fund
12,697
Dreyfus Short Term Income Fund
Dreyfus Intermediate Term Dreyfus Intermediate Term
Income Fund Income Fund
1,058
Item 27. Indemnification
_______ _________________
The Statement as to the general effect of any contract, arrangements
or statute under which a director, officer, underwriter or
affiliated person of the Registrant is insured or indemnified in any
manner against any liability which may be incurred in such capacity,
other than insurance provided by any director, officer, affiliated
person or underwriter for their own protection, is incorporated by
reference to Item 4 of Part II of Pre-Effective Amendment No. 7 to
the Registration Statement on Form N-1A, filed on December 1, 1995.
Item 27. Indemnification (Continued)
_______ _________________
Reference is also made to the Distribution Agreement previously
filed as Exhibit (6) of Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A, filed on December 1, 1995.
Item 28. Business and Other Connections of Investment Adviser.
_______ ______________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the
investment adviser, manager and distributor for sponsored
investment companies registered under the Investment Company Act
of 1940 and as an investment adviser to institutional and
individual accounts. Dreyfus also serves as sub-investment
adviser to and/or administrator of other investment companies.
Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, serves primarily as a registered broker-dealer of shares
of investment companies sponsored by Dreyfus and of other
investment companies for which Dreyfus acts as investment
adviser, sub-investment adviser or administrator. Dreyfus
Management, Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans,
institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
W. KEITH SMITH Senior Vice Chairman:
Chairman of the Mellon Bank, N.A.*;
Board President and Director:
The Bridgewater Land Co., Inc.**;
Mellon Preferred Capital Corporation**;
TBC Securities Co., Inc.**;
Wellington-Medford II Properties, Inc.**;
Chairman, President and Chief Executive Officer:
Shearson Summit Euromanagement, Inc.*;
Shearson Summit EuroPartners, Inc.*;
Shearson Summit Management, Inc.*;
Shearson Summit Partners, Inc.*;
Shearson Venture Capital, Inc.*;
Chairman and Chief Executive Officer:
The Boston Company, Inc.**;
Boston Safe Deposit and Trust Company**;
Boston Group Holdings, Inc.**;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
The Boston Company Asset Management, Inc.**;
Mellon Europe Limited
London, England;
Mellon Global Investing Corp.*;
Mellon Accounting Services, Inc.*;
MGIC-UK Ltd.;
Mellon Capital Management Corporation***;
Chairman:
Mellon Financial Company*;
Buck Consultants, Inc.
1 Pennsylvania Plaza, 29th Floor
New York, New York 10019;
Director and Vice Chairman:
Mellon Financial Services Corporation*;
Mellon Bank Corporation*;
Trustee:
Laurel Capital Advisors, LLP*;
Mellon Equity Associates, LLP*;
Mellon Bond Associates, LLP*;
Past Director:
Access Capital Strategies Corp.
124 Mount Auburn Street
Suite 200 North
Cambridge, MA 02138
W. KEITH SMITH Past Trustee:
Chairman of the Board Franklin Portfolio Associates Trust
(continued) 2 International Place, 22nd Floor
Boston, MA 02110
MANDELL L. BERMAN Real estate consultant and private investor:
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034
BURTON C. BORGELT Director:
Director Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880;
Mellon Bank Corporation*;
Mellon Bank, N.A.*
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation*;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Alleghany Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067;
Past Chairman, President and Chief Executive Officer:
Mellon Bank, N.A.*
STEPHEN E. CANTER Chairman and President:
Vice Chairman, Dreyfus Investment Advisors, Inc.****;
Chief Investment Director:
Officer, and a The Dreyfus Trust Company+;
Director Acting Chief Executive Officer:
Founders Asset Management, Inc.
2930 E. 3rd Avenue
Denver, CO 80206
CHRISTOPHER M. CONDRON President and Chief Operating Officer:
President, Chief Mellon Bank, N.A.*;
Executive Officer, President and Director:
Chief Operating Boston Safe Advisors, Inc.**;
Officer and a Vice-Chairman and Director:
Director Mellon Bank Corporation*;
The Boston Company, Inc.**;
Director:
Certus Asset Advisors Corporation++;
Mellon Capital Management Corporation***;
Boston Safe Deposit and Trust Company**;
CHRISTOPHER M. CONDRON Past President and Director:
President, Chief The Boston Company Financial Services, Inc.**;
Executive Officer, Boston Safe Deposit and Trust Company**;
Chief Operating Past President:
Officer and a Director The Boston Company Financial Strategies,
(continued) Inc.**;
Acting Chief Executive Officer:
Founders Asset Management, Inc.
Denver, CO
Past Director:
Mellon Preferred Capital Corporation**;
Access Capital Strategies Corp.
124 Mount Auburn Street
Suite 200 North
Cambridge, MA 02138;
Past Chairman, President, and Chief Executive Officer:
The Boston Company Asset Management, Inc.**;
Past Partner Representative:
Pareto Partners
271 Regent Street
London, England W1R 8PP;
Past Trustee:
Franklin Portfolio Associates Trust
2 International Place, 22nd Floor
Boston, MA. 02710;
Mellon Bond Associates, LLP*;
Mellon Equity Associates, LLP*;
LAWRENCE S. KASH Executive Vice President:
Vice Chairman- Mellon Bank, N.A.*;
Distribution and a Chairman, President and Director:
Director The Dreyfus Consumer Credit Corporation****;
Trustee, President and Chief Executive Officer:
Laurel Capital Advisors, LLP*;
Director:
Dreyfus Investment Advisors, Inc.****;
Seven Six Seven Agency, Inc.****;
President and Director:
Dreyfus Service Corporation+;
Dreyfus Precious Metals, Inc.+;
Dreyfus Service Organization, Inc.****;
The Boston Company, Inc.**;
Boston Group Holdings, Inc.**;
Chairman and Chief Executive Officer:
Dreyfus Brokerage Services, Inc.
401 North Maple Avenue
Beverly Hills, CA 90210;
Chairman, President and Chief Executive Officer:
The Dreyfus Trust Company+;
The Boston Company Advisors, Inc.
Wilmington, DE.
J. DAVID OFFICER Director:
Vice Chairman Dreyfus Financial Services Corporation*****;
and a Director Dreyfus Investment Services Corporation*****;
J. DAVID OFFICER Mellon Trust of Florida
Vice Chairman 2875 Northeast 191st Street
and a Director North Miami Beach, Florida 33180;
(continued) Mellon Preferred Capital Corporation**;
Boston Group Holdings, Inc.**;
Mellon Trust of New York
1301 Avenue of the Americas - 41st Floor
New York, New York 10019;
Mellon Trust of California
400 South Hope Street
Los Angeles, California 90071-2806;
Dreyfus Insurance Agency of Massachusetts, Inc.
53 State Street
Boston, Massachusetts 02109;
Executive Vice President:
Dreyfus Service Corporation****;
Mellon Bank, N.A.*;
Vice Chairman and Director:
The Boston Company, Inc.**;
President and Director:
RECO, Inc.**;
The Boston Company Financial Services, Inc.**;
Boston Safe Deposit and Trust Company**;
RICHARD F. SYRON Chairman of the Board and Chief Executive Officer:
Director American Stock Exchange
86 Trinity Place
New York, New York 10006;
Director:
John Hancock Mutual Life Insurance Company
John Hancock Place, Box 111
Boston, Massachusetts 02117;
Thermo Electron Corporation
81 Wyman Street, Box 9046
Waltham, Massachusetts 02254-9046;
American Business Conference
1730 K Street, NW, Suite 120
Washington, D.C. 20006;
Trustee:
Boston College - Board of Trustees
140 Commonwealth Ave.
Chestnut Hill, Massachusetts 02167-3934
RONALD P. O'HANLEY III Director:
Vice Chairman The Boston Company Asset Management, LLC**;
TBCAM Holding, Inc.**;
Franklin Portfolio Holdings, Inc.
Two International Place - 22nd Floor
Boston, Massachusetts 02110;
Mellon Capital Management Corporation***;
Certus Asset Advisors Corporation++;
Mellon-France Corporation***;
Chairman and Director:
Boston Safe Advisors, Inc.**;
RONALD P. O'HANLEY III Partner Representative:
Vice Chairman Pareto Partners
(continued) 271 Regent Street
London, England W1R 8PP;
Chairman and Trustee:
Mellon Bond Associates, LLP*;
Mellon Equity Associates, LLP*;
Trustee:
Laurel Capital Advisors, LLP*;
Chairman, President and Chief Executive Officer:
Mellon Global Investing Corp.*;
Partner:
McKinsey & Company, Inc.
Boston, Massachusetts
WILLIAM T. SANDALLS, JR. Chairman and Director:
Executive Vice President Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903;
President and Director:
Dreyfus-Lincoln, Inc.
4500 New Linden Hill Rd.
Wilmington, DE 19808;
Executive Vice President and Chief Financial Officer:
Dreyfus Service Corporation****;
Executive Vice President, Treasurer and Director:
Dreyfus Service Organization, Inc.****;
Director and Treasurer:
Dreyfus Investment Advisors, Inc.****;
Seven Six Seven Agency, Inc.****;
Dreyfus Precious Metals, Inc.+;
Director, Vice President and Treasurer:
The Dreyfus Consumer Credit Corporation****;
The TruePenny Corporation****
Director, Treasurer and Chief Financial Officer:
The Dreyfus Trust Company+;
Past Director and President:
Lion Management, Inc.****;
Dreyfus Partnership Management, Inc.****;
Past Director and Executive Vice President:
Dreyfus Service Organization, Inc.****;
Past Director and Treasurer:
Dreyfus Personal Management, Inc.****
MARK N. JACOBS Director:
Vice President, Dreyfus Service Organization, Inc.****;
General Counsel The Dreyfus Trust Company+;
and Secretary Dreyfus Investment Advisors, Inc.****;
Director and President:
The TruePenny Corporation****;
Past Director, Vice President and Secretary:
Lion Management, Inc.****
Past Secretary:
The TruePenny Corporation****;
Dreyfus Investment Advisers****
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
ANDREW S. WASSER Vice President:
Vice President- Mellon Bank Corporation*
Information Services
JAMES BITETTO Secretary:
Assistant Secretary The TruePenny Corporation****;
Assistant Secretary:
Dreyfus Service Corporation****;
Dreyfus Investment Advisers, Inc.****;
Dreyfus Service Organization, Inc.****
STEVEN F. NEWMAN Vice President, Secretary and Director:
Assistant Secretary Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903;
Secretary:
Dreyfus Service Organization, Inc.****
Wendy Strutt None
Vice President
Richard Terres None
Vice President
William H. Maresca Director:
Controller The Dreyfus Trust Company+;
Chief Financial Officer:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903;
Assistant Treasurer:
Dreyfus Service Organization, Inc.****
______________________________________
* The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
** The address of the business so indicated is One Mellon Bank Place,
Boston, Massachusetts, 02108.
*** The address of the business so indicated is 595 Market Street, Suite
3000, San Francisco CA 94105.
**** The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
***** The address of the business so indicated is Union Trust Building,
501 Grant Street, Pittsburgh, PA 15259.
+ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York, 11556-0144.
++ The address of the business so indicated is One Bush Street, Suite
450, San Francisco, CA. 94104.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management Funds
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Index Funds, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Preferred Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Funds, Inc.
35) Dreyfus Investment Grade Bond Funds, Inc.
36) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds, Inc.
38) The Dreyfus/Laurel Funds Trust
39) The Dreyfus/Laurel Tax-Free Municipal Funds
40) Dreyfus LifeTime Portfolios, Inc.
41) Dreyfus Liquid Assets, Inc.
42) Dreyfus Massachusetts Intermediate Municipal Bond Fund
43) Dreyfus Massachusetts Municipal Money Market Fund
44) Dreyfus Massachusetts Tax Exempt Bond Fund
45) Dreyfus MidCap Index Fund
46) Dreyfus Money Market Instruments, Inc.
47) Dreyfus Municipal Bond Fund, Inc.
48) Dreyfus Municipal Cash Management Plus
49) Dreyfus Municipal Money Market Fund, Inc.
50) Dreyfus New Jersey Intermediate Municipal Bond Fund
51) Dreyfus New Jersey Municipal Bond Fund, Inc.
52) Dreyfus New Jersey Municipal Money Market Fund, Inc.
53) Dreyfus New Leaders Fund, Inc.
54) Dreyfus New York Insured Tax Exempt Bond Fund
55) Dreyfus New York Municipal Cash Management
56) Dreyfus New York Tax Exempt Bond Fund, Inc.
57) Dreyfus New York Tax Exempt Intermediate Bond Fund
58) Dreyfus New York Tax Exempt Money Market Fund
59) Dreyfus 100% U.S. Treasury Intermediate Term Fund
60) Dreyfus 100% U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus 100% U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Premier California Municipal Bond Fund
66) Dreyfus Premier Equity Funds, Inc.
67) Dreyfus Premier International Funds, Inc.
68) Dreyfus Premier GNMA Fund
69) Dreyfus Premier Worldwide Growth Fund, Inc.
70) Dreyfus Premier Insured Municipal Bond Fund
71) Dreyfus Premier Municipal Bond Fund
72) Dreyfus Premier New York Municipal Bond Fund
73) Dreyfus Premier State Municipal Bond Fund
74) Dreyfus Premier Value Fund
75) Dreyfus Short-Intermediate Government Fund
76) Dreyfus Short-Intermediate Municipal Bond Fund
77) The Dreyfus Socially Responsible Growth Fund, Inc.
78) Dreyfus Stock Index Fund, Inc.
79) Dreyfus Tax Exempt Cash Management
80) The Dreyfus Third Century Fund, Inc.
81) Dreyfus Treasury Cash Management
82) Dreyfus Treasury Prime Cash Management
83) Dreyfus Variable Investment Fund
84) Dreyfus Worldwide Dollar Money Market Fund, Inc.
85) General California Municipal Bond Fund, Inc.
86) General California Municipal Money Market Fund
87) General Government Securities Money Market Fund, Inc.
88) General Money Market Fund, Inc.
89) General Municipal Bond Fund, Inc.
90) General Municipal Money Market Funds, Inc.
91) General New York Municipal Bond Fund, Inc.
92) General New York Municipal Money Market Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York
10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York on the 29th day of October, 1998.
DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
BY: /s/MARIE E. CONNOLLY*
__________________________________________
Marie E. Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signatures Title Date
__________________________ _______________________________ _________
/s/Marie E. Connolly* President and Treasurer (Principal 10/29/98
______________________________ Executive, Financial and
Marie E. Connolly Accounting Officer)
/s/Joseph S. DiMartino* Chairman of the Board of Directors 10/29/98
_____________________________
Joseph S. DiMartino
/s/Lucy Wilson Benson* Director 10/29/98
______________________________
Lucy Wilson Benson
/s/David W. Burke* Director 10/29/98
_____________________________
David W. Burke
/s/Martin D. Fife* Director 10/29/98
_____________________________
Martin D. Fife
/s/Robert R. Glauber* Director 10/29/98
_____________________________
Robert R. Glauber
/s/Whitney I. Gerard* Director 10/29/98
_____________________________
Whitney I. Gerard
/s/Arthur A. Hartman* Director 10/29/98
_____________________________
Arthur A. Hartman
/s/George L. Perry* Director 10/29/98
_____________________________
George L. Perry
/s/Paul D. Wolfowitz* Director 10/29/98
_____________________________
Paul D. Wolfowitz
/s/Elba Vasquez
*BY: __________________________
Elba Vasquez
Attorney-in-Fact
DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
INDEX OF EXHIBITS
(11) Consent of Independent Auditors
(17) Financial Data Schedule
Other Exhibits
(a) Powers of Attorney
(b) Certificate of Secretary
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our reports
dated September 8, 1998, which are incorporated by reference, in this
Registration Statement (Form N-1A 33-48926) of Dreyfus Investment Grade Bond
Funds, Inc.
ERNST & YOUNG LLP
New York, New York
October 26, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000889169
<NAME> DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
<SERIES>
<NUMBER> 02
<NAME> DREYFUS INTERMEDIATE TERM INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 26627
<INVESTMENTS-AT-VALUE> 27115
<RECEIVABLES> 288
<ASSETS-OTHER> 184
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27587
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4610
<TOTAL-LIABILITIES> 4610
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21382
<SHARES-COMMON-STOCK> 1717
<SHARES-COMMON-PRIOR> 1659
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1077
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 491
<NET-ASSETS> 22977
<DIVIDEND-INCOME> 167
<INTEREST-INCOME> 1691
<OTHER-INCOME> 0
<EXPENSES-NET> 266
<NET-INVESTMENT-INCOME> 1592
<REALIZED-GAINS-CURRENT> 1445
<APPREC-INCREASE-CURRENT> (634)
<NET-CHANGE-FROM-OPS> 2403
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1565)
<DISTRIBUTIONS-OF-GAINS> (559)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 879
<NUMBER-OF-SHARES-REDEEMED> (927)
<SHARES-REINVESTED> 106
<NET-CHANGE-IN-ASSETS> 1033
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 192
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 153
<INTEREST-EXPENSE> 78
<GROSS-EXPENSE> 381
<AVERAGE-NET-ASSETS> 23372
<PER-SHARE-NAV-BEGIN> 13.23
<PER-SHARE-NII> .91
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> (.89)
<PER-SHARE-DISTRIBUTIONS> (.34)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.38
<EXPENSE-RATIO> .011
<AVG-DEBT-OUTSTANDING> 1320
<AVG-DEBT-PER-SHARE> .747
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000889169
<NAME> DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
<SERIES>
<NUMBER> 001
<NAME> DREYFUS SHORT TERM INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 379192
<INVESTMENTS-AT-VALUE> 378503
<RECEIVABLES> 3812
<ASSETS-OTHER> 1523
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 383838
<PAYABLE-FOR-SECURITIES> 24234
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 878
<TOTAL-LIABILITIES> 25112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 368658
<SHARES-COMMON-STOCK> 29604
<SHARES-COMMON-PRIOR> 23210
<ACCUMULATED-NII-CURRENT> 789
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9884)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (837)
<NET-ASSETS> 358726
<DIVIDEND-INCOME> 188
<INTEREST-INCOME> 24280
<OTHER-INCOME> 0
<EXPENSES-NET> 2767
<NET-INVESTMENT-INCOME> 21701
<REALIZED-GAINS-CURRENT> 5314
<APPREC-INCREASE-CURRENT> (3580)
<NET-CHANGE-FROM-OPS> 23435
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21330)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17595
<NUMBER-OF-SHARES-REDEEMED> (12739)
<SHARES-REINVESTED> 1538
<NET-CHANGE-IN-ASSETS> 79585
<ACCUMULATED-NII-PRIOR> 419
<ACCUMULATED-GAINS-PRIOR> (15198)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1551
<INTEREST-EXPENSE> 48
<GROSS-EXPENSE> 2771
<AVERAGE-NET-ASSETS> 310132
<PER-SHARE-NAV-BEGIN> 12.03
<PER-SHARE-NII> .84
<PER-SHARE-GAIN-APPREC> .08
<PER-SHARE-DIVIDEND> (.83)
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.12
<EXPENSE-RATIO> .009
<AVG-DEBT-OUTSTANDING> 796
<AVG-DEBT-PER-SHARE> .031
</TABLE>
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Margaret W. Chambers,
Marie E. Connolly, Christopher J. Kelley, Kathleen K. Morrisey, Michael S.
Petrucelli, Stephanie Pierce and Elba Vasquez, and each of them, with full
power to act without the other, his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or
her, and in his or her name, place and stead, in any and all capacities
(until revoked in writing) to sign any and all amendments to the
Registration Statement of Dreyfus Investment Grade Bond Funds, Inc.
(including post-effective amendments and amendments thereto), and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his or
her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/ Joseph S. DiMartino June 15, 1998
Joseph S. DiMartino
/s/ Lucy Wilson Benson June 15, 1998
Lucy Wilson Benson
/s/ David W. Burke June 15, 1998
David W. Burke
/s/ Martin D. Fife June 15, 1998
Martin D. Fife
/s/ Whitney I. Gerard June 15, 1998
Whitney I. Gerard
/s/ Robert R. Glauber June 15, 1998
Robert R. Glauber
/s/ Arthur A. Hartman June 15, 1998
Arthur A. Hartman
/s/ George L. Perry June 15, 1998
George L. Perry
/s/ Paul D. Wolfowitz June 15, 1998
Paul D. Wolfowitz
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Margaret W. Chambers,
Christopher J. Kelley, Kathleen K. Morrisey, Michael S. Petrucelli,
Stephanie Pierce and Elba Vasquez, and each of them, with full power to act
without the other, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him or her, and in
his or her name, place and stead, in any and all capacities (until revoked
in writing) to sign any and all amendments to the Registration Statement of
Dreyfus Investment Grade Bond Funds, Inc. (including post-effective
amendments and amendments thereto), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every
act and thing ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Marie E. Connolly June 15, 1998
Marie E. Connolly
ASSISTANT SECRETARY'S CERTIFICATE
I, Elba Vasquez, Assistant Secretary of Dreyfus Investment Grade Bond
Funds, Inc., (the "Fund"), hereby certify the following resolution was
adopted by written consent dated June 15, 1998 and remains in full force and
effect:
RESOLVED, that the Registration Statement and any and
all amendments and supplements thereto may be signed by
any one of Margaret W. Chambers, Marie E. Connolly,
Christopher J. Kelley, Kathleen K. Morrisey, Michael S.
Petrucelli, Stephanie Pierce and Elba Vasquez as the
attorney-in-fact for the proper officers of the Fund,
with full power of substitution and resubstitution; and
that the appointment of each of such persons as such
attorney-in-fact hereby is authorized and approved; and
that such attorneys-in-fact, and each of them, shall
have full power and authority to do and perform each and
every act and thing requisite and necessary to be done
in connection with such Registration Statement and any
and all amendments and supplements thereto, as whom he
or she is acting as attorney-in-fact, might or could do
in person.
IN WITNESS WHEREOF, I have hereunto set my hand as Assistant Secretary
of the Funds and affixed the seal this 29th day of October, 1998.
/s/ Elba Vasquez
ELBA VASQUEZ
(Seal)
DREYFUS INVESTMENT GRADE BOND FUNDS, INC.
