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PROSPECTUS MARCH 31, 1995
DREYFUS GLOBAL BOND FUND, INC.
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DREYFUS GLOBAL BOND FUND, INC. (THE "FUND") IS AN OPEN-END,
NON-DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. ITS
GOAL IS TO SEEK TOTAL RETURN. THE FUND WILL INVEST PRINCIPALLY IN DEBT
SECURITIES OF FOREIGN AND DOMESTIC ISSUERS. UP TO 35% OF THE FUND'S TOTAL
ASSETS MAY BE INVESTED IN THE SECURITIES OF COMPANIES IN, OR GOVERNMENTS OF,
EMERGING MARKET COUNTRIES.
YOU CAN INVEST, REINVEST OR REDEEM FUND SHARES AT ANY TIME WITHOUT
CHARGE OR PENALTY IMPOSED BY THE FUND. YOU CAN PURCHASE OR REDEEM SHARES BY
TELEPHONE USING DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION ("DREYFUS") SERVES AS THE FUND'S INVESTMENT
ADVISER. DREYFUS HAS ENGAGED M&G INVESTMENT MANAGEMENT LIMITED ("M&G") TO
SERVE AS THE FUND'S SUB-INVESTMENT ADVISER AND PROVIDE DAY-TO-DAY MANAGEMENT
OF THE FUND'S INVESTMENTS. DREYFUS AND M&G ARE REFERRED TO COLLECTIVELY AS
THE "ADVISERS."
THE FUND BEARS CERTAIN COSTS PURSUANT TO A DISTRIBUTION PLAN ADOPTED
IN ACCORDANCE WITH RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940 AND A
SHAREHOLDER SERVICES PLAN.
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THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MARCH 31, 1995, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO THE FUND AT
144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR CALL
1-800-554-4611. WHEN TELEPHONING, ASK FOR OPERATOR 666.
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MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
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TABLE OF CONTENTS
PAGE
ANNUAL FUND OPERATING EXPENSES.................... 3
CONDENSED FINANCIAL INFORMATION................... 3
DESCRIPTION OF THE FUND........................... 4
MANAGEMENT OF THE FUND............................ 19
HOW TO BUY FUND SHARES............................ 21
SHAREHOLDER SERVICES.............................. 23
HOW TO REDEEM FUND SHARES......................... 25
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN... 28
DIVIDENDS, DISTRIBUTIONS AND TAXES................ 28
PERFORMANCE INFORMATION........................... 30
GENERAL INFORMATION............................... 31
APPENDIX.......................................... 31
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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[This Page Intentionally Left Blank]
Page 2
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................................. .70%
12b-1 Fees ..................................... .27%
Other Expenses ................................. 1.52%
Total Fund Operating Expenses................... 2.49%
EXAMPLE: 1 YEAR 3 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $25 $78
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES, AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE
EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY
AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the various costs and expenses borne by the Fund, and therefore indirectly by
investors, the payment of which will reduce investors' return on an annual
basis. The information in the foregoing table does not reflect any fee
waivers or expense reimbursement arrangements that may be in effect.
Long-term investors could pay more in
12b-1 fees than the economic equivalent of paying a front-end sales charge.
Certain Service Agents (as defined below) may charge their clients direct
fees for effecting transactions in Fund shares; such fees are not reflected
in the foregoing table. For a further description of the various costs and
expenses incurred in the operation of the Fund, as well as expense
reimbursement or waiver arrangements, see "Management of the Fund," "How to
Buy Fund Shares" and "Distribution Plan and Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for the period March 18, 1994
(commencement of operations) to November 30, 1994. This information has been
derived from information in the Fund's financial statements.
PER SHARE DATA:
<TABLE>
<CAPTION>
<S> <C> <C>
Net asset value, beginning of period........................................................ $12.50
-------
INVESTMENT OPERATIONS:
Investment income--net ..................................................................... .65
Net realized and unrealized (loss) on investments........................................... (.54)
-------
TOTAL FROM INVESTMENT OPERATIONS............................................................ .11
-------
DISTRIBUTIONS:
Dividends from investment income-net........................................................ (.57)
-------
Net asset value, end of period.............................................................. $12.04
=======
TOTAL INVESTMENT RETURN....................................................................... 1.29%(1)
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .................................................... ---
Ratio of net investment income to average net assets........................................ 7.83%(1)
Decrease reflected in above expense ratio due to
undertakings by the Dreyfus Corporation...................................................... 2.49%(1)
Portfolio Turnover Rate.....................................................................
4.16%(2)
Net Assets, end of period (000's Omitted)................................................... $15,277
</TABLE>
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(1) Annualized.
(2) Not annualized.
Page 3
Further information about the Fund's performance is contained in its
annual report which may be obtained without charge
by writing to the address or calling the number set forth on the cover page
of this Prospectus.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's goal is to seek total return. Total return consists of
realized and unrealized capital appreciation and income. The Fund's
investment objective cannot be changed without approval by the holders of a
majority (as defined in the Investment Company Act of 1940) of the Fund's
outstanding voting shares. There can be no assurance that the Fund's
investment objective will be achieved.
MANAGEMENT POLICIES
The Fund invests in a portfolio of debt obligations of issuers
located throughout the world. These debt obligations include bonds,
debentures, notes, money market instruments (including domestic and foreign
bank obligations, such as time deposits, certificates of deposit and bankers'
acceptances, commercial paper and repurchase agreements), mortgage-related
securities, municipal obligations and convertible debt obligations. The
issuers of these obligations may include corporations, partnerships, trusts or
similar entities, governments or their political subdivisions, agencies or
instrumentalities, and supranational entities. At least 65% of the value of
the Fund's net assets (except when maintaining a temporary defensive
position) will be invested in bonds, debentures and other debt instruments.
While there are no prescribed limits on geographic asset distribution, the
Fund ordinarily will seek to invest its assets in at least three countries.
The percentage of the Fund's assets invested in securities issued by foreign
issuers will vary depending on the relative yields of such securities, the
economic and financial markets of the countries in which the investments are
made and the interest rate climate of such countries. The Fund may hold
foreign currency of any country and may purchase debt securities or hold
currencies in combination with forward currency exchange contracts. The Fund
will be alert to opportunities to profit from fluctuations in currency
exchange rates. The Fund's portfolio will be invested without regard to
maturity.
It is a fundamental policy of the Fund that at least 65% of the
Fund's net assets will consist of debt securities rated at least Baa by
Moody's Investors Service, Inc. ("Moody's") or at least BBB by Standard &
Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff &
Phelps Credit Rating Co. ("Duff"). The Fund intends to invest less than 35%
of its net assets in debt securities rated lower than investment grade by
Moody's, S&P, Fitch and Duff. See "Appendix." Investments rated Ba or lower
by Moody's and BB or lower by S&P, Fitch and Duff ordinarily provide higher
yields but involve greater risk because of their speculative characteristics.
The Fund may invest in obligations rated C by Moody's or D by S&P, Fitch or
Duff, which is such rating organizations' lowest rating and indicates that
the obligation is in default and interest and/or repayment of principal is in
arrears. See "Risk Factors_Lower Rated Securities" below for a further
discussion of certain risks, and "Appendix" in the Statement of Additional
Information. The Fund also may invest in securities which, while not rated,
are determined by the Advisers to be of comparable quality to the rated
securities in which the Fund may invest; for purposes of the 65% requirement
described above, such unrated securities shall be deemed to have the rating
so determined.
The Fund may invest up to 35% of its total assets in companies whose
principal activities are in, or governments of, emerging markets. Emerging
markets will include any countries (i) having an "emerging stock market" as
defined by the International Finance Corporation; (ii) with low- to
middle-income economies according to the World Bank; or (iii) listed in World
Bank publications as developing. Currently, the countries not included in
these categories are Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway,
Spain, Sweden, Switzerland, the United Kingdom and the United States. Issuers
whose principal activi-
Page 4
ties are in countries with emerging markets include
issuers: (1) organized under the laws of, (2) whose securities have their
primary trading market in, (3) deriving at least 50% of their revenues or
profits from goods sold, investments made, or services performed in, or (4)
having at least 50% of their assets located in a country with, an emerging
market.
The Fund may invest up to 25% of its total assets in the securities
of issuers having their principal business activities in the same industry,
regardless of country. The Fund will not invest more than 25% of its total
assets in the securities of any foreign government or supranational entity.
The Fund may invest up to 5% of its assets in securities of companies that
have been in continuous operation for less than three years (including
operations of any predecessors).
In connection with its purchases of convertible securities, the Fund,
from time to time, may hold common stock received upon the conversion of the
security. The Fund does not intend to retain the common stock in its
portfolio and will sell it as promptly as practicable and in a manner which
it believes will reduce the risk to the Fund of loss in connection with the
sale.
When the Advisers determine that market conditions warrant, the Fund
may adopt a temporary defensive posture and invest without limitation in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and in other U.S. dollar-denominated money market
instruments consisting of certificates of deposit, time deposits, bankers'
acceptances, short-term investment grade corporate bonds and other short-term
debt instruments, and repurchase agreements, as described under "Certain
Portfolio Securities" below.
In an effort to increase total return, the Fund may engage in various
investment techniques such as leveraging, short selling, options and futures
transactions, currency transactions and lending portfolio securities, each of
which involves risk. See "Risk Factors--Other Investment Considerations"
below. Options and futures transactions involve so-called "derivative
securities."
CERTAIN PORTFOLIO SECURITIES
SECURITIES OF EMERGING MARKETS ISSUERS -- In emerging markets, the Fund may
purchase debt securities issued or guaranteed by foreign governments,
including participations in loans between foreign governments and financial
institutions, and interests in entities organized and operated for the purpose
of restructuring the investment characteristics of instruments issued or
guaranteed by foreign governments ("Sovereign Debt Obligations"). These
include Brady Bonds, Structured Securities and Loan Participations and
Assignments (as defined below).
BRADY BONDS. Brady Bonds are debt obligations created through the
exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructurings under a plan introduced by
former U.S. Secretary of the Treasury, Nicholas F. Brady.
Brady Bonds have been issued only relatively recently, and,
accordingly, do not have a long payment history. They may be collateralized
or uncollateralized and issued in various currencies (although most are U.S.
dollar-denominated). They are actively traded in the over-the-counter
secondary market.
STRUCTURED SECURITIES. Structured Securities are interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of Sovereign Debt Obligations. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as commercial bank loans
or Brady Bonds) and the issuance by that entity of one or more classes of
securities ("Structured Securities") backed by, or representing interests in,
the underlying instruments. The cash flow on the underlying instruments may
be apportioned among the newly-issued Structured Securities to create
securities with different investment characteristics such as varying
maturities, payment priorities and interest rate provisions, and the extent
of the payments made with respect to Structured Securities is dependent on
the extent of the cash flow on the underlying instruments. Because Structured
Securities of the type in which the Fund anticipates it will invest typically
involve no credit enhancement, their credit risk generally will be equivalent
to that of the underlying instruments.
Page 5
The Fund is permitted to invest in a class of Structured Securities
that is either subordinated or unsubordinated to the right of payment of
another class. Subordinated Structured Securities typically have higher
yields and present greater risks than unsubordinated Structured Securities.
Certain issuers of Structured Securities may be deemed to be
"investment companies" as defined in the Investment Company Act of 1940. As a
result, the Fund's investment in these Structured Securities may be limited
by the restrictions contained in the Investment Company Act of 1940. See
"Investment Company Securities" below.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may invest in fixed and
floating rate loans ("Loans") arranged through private negotiations between
an issuer of Sovereign Debt Obligations and one or more financial
institutions ("Lenders"). The Fund's investments in Loans are expected in
most instances to be in the form of participations in Loans
("Participations") and assignments of all or a portion of Loans
("Assignments") from third parties. The government that is the borrower on
the Loan will be considered by the Fund to be the issuer of a Participation
or Assignment. The Fund's investment in Participations typically will result
in the Fund having a contractual relationship only with the Lender and not
with the borrower. The Fund will have the right to receive payments of
principal, interest and any fees to which it is entitled only from the Lender
selling the Participation and only upon receipt by the Lender of the payments
from the borrower. In connection with purchasing Participations, the Fund
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the Loan, nor any rights of set-off
against the borrower, and the Fund may not directly benefit from any
collateral supporting the Loan in which it has purchased the Participation.
As a result, the Fund may be subject to the credit risk of both the borrower
and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Fund may be treated as
a general creditor of the Lender and may not benefit from any set-off between
the Lender and the borrower. Certain Participations may be structured in a
manner designed to avoid purchasers of Participations being subject to the
credit risk of the Lender with respect to the Participation, but even under
such a structure, in the event of the Lender's insolvency, the Lender's
servicing of the Participation may be delayed and the assignability of the
Participation impaired. The Fund will acquire Participations only if the
Lender interpositioned between the Fund and the borrower is a Lender having
total assets of more than $25 billion and whose senior unsecured debt is
rated investment grade or higher (i.e., Baa/BBB or higher).
CONVERTIBLE SECURITIES -- The Fund may purchase convertible securities, which
are fixed-income securities, such as bonds or preferred stock, that may be
converted at either a stated price or stated rate into underlying shares of
common stock. Convertible securities have general characteristics similar to
both fixed-income and equity securities. Although to a lesser extent than
with fixed-income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends
to increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stock, and
therefore, also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
As fixed-income securities, convertible securities are investments
that provide for a stable stream of income with generally higher yields than
common stocks. Of course, like all fixed-income securities, there can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. Convertible securities, however, generally
offer lower interest or dividend yields than non-convertible
Page 6
securities of
similar quality because of the potential for capital appreciation. A
convertible security, in addition to providing fixed income, offers the
potential for capital appreciation through the conversion feature, which
enables the holder to benefit from increases in the market price of the
underlying common stock. There can be no assurance of capital appreciation,
however, because securities prices fluctuate.
Convertible securities generally are subordinated to other similar
but non-convertible securities of the same issuer, although convertible
bonds, as corporate debt obligations, enjoy seniority in right of payment to
all equity securities, and convertible preferred stock is senior to common
stock, of the same issuer. Because of the subordination feature, however,
convertible securities typically have lower ratings than similar
non-convertible securities.
MONEY MARKET INSTRUMENTS -- The Fund may invest, in circumstances described
under "Management Policies" above, in the following types of money market
instruments.
U.S. GOVERNMENT SECURITIES. The Fund may purchase securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities,
which include U.S. Treasury securities. Some obligations issued or guaranteed
by U.S. Government agencies and instrumentalities, for example, Government
National Mortgage Association pass-through certificates, are supported by the
full faith and credit of the U.S. Treasury; others, such as those of the
Federal Home Loan Banks, by the right of the issuer to borrow from the U.S.
Treasury; others, such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, such as
those issued by the Student Loan Marketing Association, only by the credit of
the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. Principal and interest may fluctuate based on
generally recognized reference rates or the relationship of rates. While the
U.S. Government provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will always
do so, because the U.S. Government is not obligated to do so by law.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations of domestic
banks, foreign subsidiaries of domestic banks, foreign branches of domestic
banks, and domestic and foreign branches of foreign banks, domestic savings
and loan associations and other banking institutions. With respect to such
securities issued by foreign branches of domestic banks, foreign subsidiaries
of domestic banks, and domestic and foreign branches of foreign banks, the Fun
d may be subject to additional investment risks that are different in some
respects from those incurred by a fund which invests only in debt obligations
of U.S. domestic issuers. Such risks include possible future political and
economic developments, the possible imposition of foreign withholding taxes
on interest income payable on the securities, the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on these
securities and the possible seizure or nationalization of foreign deposits.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by the Fund will not benefit from insurance from
the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation. The Fund will not
invest more than 15% of the value of its net assets in time deposits that are
illiquid and in other illiquid securities.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and of the drawer to pay the face amount of
the instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
Page 7
REPURCHASE AGREEMENTS. Repurchase agreements involve the acquisition
by the Fund of an underlying debt instrument, subject to an obligation of the
seller to repurchase, and the Fund to resell, the instrument at a fixed price
usually not more than one week after its purchase. Certain costs may be
incurred by the Fund in connection with the sale of the securities if the
seller does not repurchase them in accordance with the repurchase agreement.
In addition, if bankruptcy proceedings are commenced with respect to the
seller of the securities, realization on the securities by the Fund may be
delayed or limited.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS.
Commercial paper consists of short-term, unsecured promissory notes issued to
finance short-term credit needs. The commercial paper purchased by the Fund
will consist only of direct obligations which, at the time of their purchase,
are (a) rated not lower than Prime-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 not lower than Aa3 by Moody's or AA- by S&P, Fitch or
Duff, or (c) if unrated, determined by the Advisers to be of comparable
quality to those rated obligations which may be purchased by the Fund. The
Fund may purchase floating and variable rate demand notes and bonds, which
are obligations ordinarily having stated maturities in excess of one year, but
which permit the holder to demand payment of principal at any time or at
specified intervals.
WARRANTS -- The Fund may invest up to 5% of its net assets in warrants,
except that this limitation does not apply to warrants acquired in units or
attached to securities. A warrant is an instrument issued by a corporation
which gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time.
The Fund does not intend to retain in its portfolio any common stock received
upon the exercise of a warrant and will sell the common stock as promptly as
practicable and in a manner that it believes will reduce its risk of a loss
in connection with the sale. The Fund does not intend to retain in its
portfolio any warrant for equity securities acquired as a unit with a debt
instrument if the warrant begins to trade separately from the related debt
instrument.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and Bonds that have been stripped of
their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. The Fund also may invest in zero coupon securities issued by
corporations and financial institutions which constitute a proportionate
ownership of the issuer's pool of underlying U.S. Treasury securities. A zero
coupon security pays no interest to its holder during its life and is sold at
a discount to its face value at maturity. The amount of the discount
fluctuates with the market price of the security. The market prices of zero
coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are likely to respond to a
greater degree to changes in interest rates than non-zero coupon securities
having similar maturities and credit qualities.
MORTGAGE-RELATED SECURITIES -- The Fund may invest in mortgage-related
securities which are collateralized by pools of mortgage loans assembled for
sale to investors by various governmental agencies, such as Government
National Mortgage Association and government-related organizations such as
Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation, as well as by private issuers such as commercial banks, savings
and loan institutions, mortgage banks and private mortgage insurance
companies, and similar foreign entities. Mortgage-related securities are a
form of derivative security. The mortgage-related securities which may be
purchased by the Fund include those with fixed, floating and variable
interest rates, those with interest rates that change based on multiples of
changes in interest rates, and those with interest rates that change
inversely to changes in interest rates, as well as stripped mortgage-backed
securities. Stripped mortgage-backed securities usually are structured with
two classes that receive different proportions of interest and principal
distributions on a pool of mortgage-backed securities or whole loans. A
common type of stripped mortgage-backed security will have one class
receiving some of the interest and most of the principal from the mortgage
collateral, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme
Page 8
case, one class will receive
all of the interest (the interest-only or "IO" class), while the other class
will receive all of the principal (the principal-only or "PO" class).
Although certain mortgage-related securities are guaranteed by a third party
or otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If the Fund purchases a mortgage-related
security at a premium, all or part of the premium may be lost if there is a
decline in the market value of the security, whether resulting from changes
in interest rates or prepayments in the underlying mortgage collateral. As
with other interest-bearing securities, the prices of certain mortgage-backed
securities are inversely affected by changes in interest rates, while others,
which the Fund may purchase, may be structured so that their interest rates
will fluctuate inversely (and thus their price will increase as interest
rates rise and decrease as interest rates fall) in response to changes in
interest rates. Though the value of a mortgage-related security may decline
when interest rates rise, the converse is not necessarily true, since in
periods of declining interest rates the mortgages underlying the security are
more likely to prepay. For this and other reasons, a mortgage-related
security's stated maturity may be shortened by unscheduled prepayments on the
underlying mortgages, and, therefore, it is not possible to predict
accurately the security's return to the Fund. Moreover, with respect to
stripped mortgage-backed securities, if the underlying mortgage securities
experience greater than anticipated prepayments of principal, the Fund may
fail to fully recoup its initial investment in these securities even if the
securities are rated in the highest rating category by a nationally
recognized statistical rating organization. In addition, regular payments
received in respect of mortgage-related securities include both interest and
principal. No assurance can be given as to the return the Fund will receive
when these amounts are reinvested. The Fund also may invest in collateralized
mortgage obligations structured on pools of mortgage pass-through
certificates or mortgage loans. Collateralized mortgage obligations will be
purchased only if rated in one of the two highest rating categories by a
nationally recognized statistical rating organization such as Moody's, S&P,
Fitch or Duff, or, if unrated, deemed to be of comparable quality by the
Advisers. For a further discussion concerning the investment considerations
involved, see "Risk Factors _ Other Investment Considerations" below and
"Investment Objective and Management Polices _ Portfolio Securities _
Mortgaged-Related Securities" in the Fund's Statement of Additional
Information.
INVESTMENT COMPANY SECURITIES -- The Fund may invest in securities issued by
other investment companies which principally invest in securities of the type
in which the Fund invests. Under the Investment Company Act of 1940, the
Fund's investments in such securities, subject to certain exceptions,
currently are limited to (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Fund's net assets with respect to any one
investment company and (iii) 10% of the Fund's net assets in the aggregate.
Investments in the securities of other investment companies may involve
duplication of advisory fees and certain other expenses.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, certain Sovereign Debt Obligations,
repurchase agreements providing for settlement in more than seven days after
notice, certain options traded in the over-the-counter market and securities
used to cover such options, and certain mortgage-backed securities, such as
certain collateralized mortgage obligations and stripped mortgage-backed
securities. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS -- The Fund may engage in currency exchange
transactions to the extent consistent with its investment objective or to
hedge its portfolio. The Fund will conduct its currency
Page 9
exchange transactions
either on a spot (i.e., cash) basis at the rate prevailing in the currency
exchange market, or through entering into forward contracts to purchase or
sell currencies. A forward currency exchange contract involves an obligation
to purchase or sell a specific currency at a future date, which must be more
than two days from the date of the contract, at a price set at the time of
the contract. Forward currency exchange contracts are entered into in the
interbank market conducted directly between currency traders (typically
commercial banks or other financial institutions) and their customers. The
Fund also may combine forward currency exchange contracts with investments in
securities denominated in other currencies.
The Fund also may maintain short positions in forward currency
exchange transactions, 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. The
Fund will maintain in a segregated custodial account cash or U.S. Government
securities or other high quality liquid debt securities at least equal to the
aggregate amount of its short positions, plus accrued interest, in certain
cases, in accordance with releases promulgated by the Securities and Exchange
Commission.
OPTIONS ON FOREIGN CURRENCY -- The Fund may purchase and sell call and put
options on foreign currency for the purpose of hedging against changes in
future currency exchange rates. Call options convey the right to buy the
underlying currency at a price which is expected to be lower than the spot
price of the currency at the time the option expires. Put options convey the
right to sell the underlying currency at a price which is anticipated to be
higher than the spot prices of the currency at the time the option expires.
The Fund may use foreign currency options for the same purposes as forward
currency exchange and futures transactions, as described herein. See also
"Call and Put Options on Specific Securities" and "Currency Futures and
Options on Currency Futures" below.
LEVERAGE THROUGH BORROWING -- The Fund may borrow for investment purposes up
to 331/3% of the value of its total assets. This borrowing, which is known as
leveraging, generally will be unsecured, except to the extent the Fund enters
into reverse repurchase agreements described below. Leveraging will
exaggerate the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed for leveraging will be
subject to interest costs that may or may not be recovered by appreciation of
the securities purchased; in certain cases, interest costs may exceed the
return received on the securities purchased.
Among the forms of borrowing in which the Fund may engage is the
entry into reverse repurchase agreements with banks, brokers or dealers.
These transactions involve the transfer by the Fund of an underlying debt
instrument in return for cash proceeds based on a percentage of the value of
the security. The Fund retains the right to receive interest and principal
payments on the security. At an agreed upon future date, the Fund repurchases
the security at principal, plus accrued interest.
SHORT-SELLING -- The Fund may make short sales, which are transactions in
which the Fund sells a security it does not own in anticipation of a decline
in the market value of that security. To complete such a transaction, the
Fund must borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it at the market
price at the time of replacement. The price at such time may be more or less
than the price at which the security was sold by the Fund. The Fund will
incur a loss as a result of the short sale if the price of the security
increases between the date of the short sale and the date on which the Fund
replaces the borrowed security. The Fund will realize a gain if the security
declines in price between those dates.
No securities will be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not sell short
the securities of any single issuer listed on a United States national
securities exchange to the extent of more than 5% of the value of the Fund's
net assets. The Fund may not sell short the securities
Page 10
of any class of an
issuer to the extent, at the time of the transaction, of more than 5% of the
outstanding securities of that class.
In addition to the short sales discussed above, the Fund may make
short sales "against the box," a transaction in which the Fund enters into a
short sale of a security which the Fund owns. The Fund at no time will have
more than 15% of the value of its net assets in deposits on short sales
against the box. It currently is anticipated that the Fund will make short
sales against the box for purposes of protecting the value of the Fund's net
assets.
CALL AND PUT OPTIONS ON SPECIFIC SECURITIES -- The Fund may invest up to 5%
of its assets, represented by the premium paid, in the purchase of call and
put options in respect of specific securities (or groups or "baskets" of
specific securities) in which the Fund may invest. The Fund may write covered
call and put option contracts to the extent of 20% of the value of its net
assets at the time such option contracts are written. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell,
the underlying security at the exercise price at any time during the option
period. Conversely, a put option gives the purchaser of the option the right
to sell, and obligates the writer to buy, the underlying security at the
exercise price at any time during the option period. A covered call option
sold by the Fund, which is a call option with respect to which the Fund owns
the underlying security, exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of
the underlying security or to possible continued holding of a security which
might otherwise have been sold to protect against depreciation in its market
price. The principal reason for writing covered call options is to realize,
through the receipt of premiums, a greater return than would be realized on
the Fund's portfolio securities alone. A covered put option sold by the Fund
exposes the Fund during the term of the option to a decline in price of the
underlying security. Similarly, the principal reason for writing covered put
options is to realize income in the form of premiums. A put option sold by
the Fund is covered when, among other things, cash or liquid securities are
placed in a segregated account with the Fund's custodian to fulfill the obliga
tion undertaken.
To close out a position when writing covered options, the Fund may
make a "closing purchase transaction" by purchasing an option on the same
security with the same exercise price and expiration date as the option it
has previously written. To close out a position as a purchaser of an option,
the Fund may make a "closing sale transaction," which involves liquidating
the Fund's position by selling the option previously purchased. The Fund will
realize a profit or loss from a closing purchase or sale transaction
depending upon the difference between the amount paid to purchase an option
and the amount received from the sale thereof.
The Fund intends to treat options in respect of specific securities
that are not traded on a national securities exchange and the securities
underlying covered call options written by the Fund as illiquid securities.
See "Certain Portfolio Securities _ Illiquid Securities" above.
The Fund will purchase options only to the extent permitted by the
policies of state securities authorities in states where shares of the Fund
are qualified for offer and sale.
OPTIONS ON INTEREST RATE SWAPS -- The Fund may purchase cash-settled options
on interest rate swaps in pursuit of its investment objective. 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) denominated in U.S. dollars.
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.
FUTURES TRANSACTIONS -- IN GENERAL -- The Fund is not a commodity pool.
However, as a substitute for a comparable market position in the underlying
securities or for hedging purposes, the Fund may engage in futures and
options on futures transactions as described below.
Page 11
The Fund may trade futures contracts and options on futures contracts
in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or, to the
extent permitted under applicable law, on exchanges located outside the
United States, such as the London International Financial Futures Exchange
and the Sydney Futures Exchange Limited. Foreign markets may offer advantages
such as trading in commodities that are not currently traded in the United
States or arbitrage possibilities not available in the United States. Foreign
markets, however, may have greater risk potential than domestic markets. See
"Risk Factors _ Foreign Commodity Transactions" below.
The Fund's commodities transactions must constitute bona fide hedging
or other permissible transactions pursuant to regulations promulgated by the
Commodity Futures Trading Commission (the "CFTC"). In addition, the Fund may
not engage in such transactions if the sum of the amount of initial margin
deposits and premiums paid for unexpired commodity options, other than for
bona fide hedging transactions, would exceed 5% of the liquidation value of
the Fund's assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided, however,
that in the case of an option that is in-the-money at the time of purchase,
the in-the-money amount may be excluded in calculating the 5%. Pursuant to
regulations and/or published positions of the Securities and Exchange
Commission, the Fund may be required to segregate cash or high quality money
market instruments in connection with its commodities transactions in an
amount generally equal to the value of the underlying commodity. To the
extent the Fund engages in the use of futures and options on futures for
other than bona fide hedging purposes, the Fund may be subject to additional
risk.
Initially, when purchasing or selling futures contracts the Fund will
be required to deposit with its custodian in the broker's name an amount of
cash or cash equivalents up to approximately 10% of the contract amount. This
amount is subject to change by the exchange or board of trade on which the
contract is traded and members of such exchange or board of trade may impose
their own higher requirements. This amount is known as "initial margin" and
is in the nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures position,
assuming all contractual obligations have been satisfied. Subsequent
payments, known as "variation margin," to and from the broker will be made
daily as the price of the index or securities underlying the futures contract
fluctuates, making the long and short positions in the futures contract more
or less valuable, a process known as "marking-to-market." At any time prior
to the expiration of a futures contract, the Fund may elect to close the
position by taking an opposite position, at the then prevailing price, which
will operate to terminate the Fund's existing position in the contract.
Although the Fund intends to purchase or sell futures contracts only
if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may
be made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move
to the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the Fund to substantial losses. If it is not possible, or the Fund
determines not, to close a futures position in anticipation of adverse price
movements, the Fund will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may offset partially or completely losses on
the futures contract. However, no assurance can be given that the price of
the securities being hedged will correlate with the price movements in a
futures contract and thus provide an offset to losses on the futures
contract.
To the extent the Fund is engaging in a futures transaction as a
hedging device, because of the risk of an imperfect correlation between
securities in the Fund's portfolio that are the subject of a hedging
transaction and the futures contract used as a hedging device, it is possible
that the hedge will not be fully effective if, for
Page 12
example, losses on the
portfolio securities exceed gains on the futures contract or losses on the
futures contract exceed gains on the portfolio securities. For futures contrac
ts based on indices, the risk of imperfect correlation increases as the
composition of the Fund's portfolio varies from the composition of the index.
In an effort to compensate for the imperfect correlation of movements in the
price of the securities being hedged and movements in the price of futures
contracts, the Fund may buy or sell futures contracts in a greater or lesser
dollar amount than the dollar amount of the securities being hedged if the
historical volatility of the futures contract has been less or greater than
that of the securities. Such "over hedging" or "under hedging" may adversely
affect the Fund's net investment results if the market does not move as
anticipated when the hedge is established.
Successful use of futures by the Fund also is subject to the
Advisers' ability to predict correctly movements in the direction of the
market or interest rates. For example, if the Fund has hedged against the
possibility of a decline in the market adversely affecting the value of
securities held in its portfolio and prices increase instead, the Fund will
lose part or all of the benefit of the increased value of securities which it
has hedged because it will have offsetting losses in its futures positions.
Furthermore, if in such circumstances the Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. The Fund
may have to sell such securities at a time when it may be disadvantageous to
do so.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the option exercise
period. The writer of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a
long position if the option is a put). Upon exercise of the option, the
assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account which represents the amount by which the
market price of the futures contract, at exercise, exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
on the futures contract.
Call options sold by the Fund with respect to futures contracts will
be covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the prices of which
are expected to move relatively consistently with the instruments underlying,
the futures contract. Put options sold by the Fund with respect to futures
contracts will be covered in the same manner as put options on specific
securities as described above.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE FUTURES
CONTRACTS -- The Fund may invest in interest rate futures contracts and
options on interest rate futures contracts as a substitute for a comparable
market position or to hedge against adverse movements in interest rates.
To the extent the Fund has invested in interest rate futures
contracts or options on interest rate futures contracts as a substitute for a
comparable market position, the Fund will be subject to the investment risks
of having purchased the securities underlying the contract.
The Fund may purchase call options on interest rate futures contracts
to hedge against a decline in interest rates and may purchase put options on
interest rate futures contracts to hedge its portfolio securities against the
risk of rising interest rates.
The Fund may sell call options on interest rate futures contracts to
partially hedge against declining prices of its portfolio securities. If the
futures price at expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the Fund's
portfolio holdings. The Fund may sell put options on interest rate futures
contracts to hedge against increasing prices of the securities which are
deliverable upon exercise of the futures contracts. If the futures price at
expiration of the option is higher than the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against
Page 13
any increase in the price of securities which the Fund intends to
purchase. If a put or call option sold by the Fund is exercised, the Fund
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures
positions, the Fund's losses from existing options on futures may to some
extent be reduced or increased by changes in the value of its portfolio
securities.
The Fund also may sell options on interest rate futures contracts as
part of closing purchase transactions to terminate its options positions. No
assurance can be given that such closing transactions can be effected or that
there will be a correlation between price movements in the options on
interest rate futures and price movements in the Fund's portfolio securities
which are the subject of the hedge. In addition, the Fund's purchase of such
options will be based upon predictions as to anticipated interest rate
trends, which could prove to be inaccurate.
CURRENCY FUTURES AND OPTIONS ON CURRENCY FUTURES -- The Fund may purchase and
sell currency futures contracts and options thereon. See "Call and Put
Options on Specific Securities" above. By selling foreign currency futures,
the Fund can establish the number of U.S. dollars it will receive in the
delivery month for a certain amount of a foreign currency. In this way, if
the Fund anticipates a decline of a foreign currency against the U.S. dollar,
the Fund can attempt to fix the U.S. dollar value of some or all of its
securities that are denominated in that currency. By purchasing foreign
currency futures, the Fund can establish the number of U.S. dollars it will
be required to pay for a specified amount of a foreign currency in the
delivery month. Thus, if the Fund intends to buy securities in the future and
expects the U.S. dollar to decline against the relevant foreign currency
during the period before the purchase is effected, the Fund, for the price of
the currency future, can attempt to fix the price in U.S. dollars of the
securities it intends to acquire.
The purchase of options on currency futures will allow the Fund, for
the price of the premium it must pay for the option, to decide whether or not
to buy (in the case of a call option) or to sell (in the case of a put
option) a futures contract at a specified price at any time during the period
before the option expires. If the Fund, in purchasing an option, has been
correct in its judgment concerning the direction in which the price of a
foreign currency would move as against the U.S. dollar, it may exercise the
option and thereby take a futures position to hedge against the risk it had
correctly anticipated or close out the option position at a gain that will
offset, to some extent, currency exchange losses otherwise suffered by the
Fund. If exchange rates move in a way the Fund did not anticipate, the Fund
will have incurred the expense of the option without obtaining the expected
benefit. As a result, the Fund's profits on the underlying securities
transactions may be reduced or overall losses incurred.
FUTURE DEVELOPMENTS -- The Fund may take advantage of opportunities in the
area of options and futures contracts and options on futures contracts and
any other derivative investments which are not presently contemplated for use
by the Fund or which are not currently available but which may be developed,
to the extent such opportunities are both consistent with the Fund's
investment objective and legally permissible for the Fund. Before entering
into such transactions or making any such investment, the Fund will provide
appropriate disclosure in its prospectus.
LENDING PORTFOLIO SECURITIES -- From time to time, the Fund may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions.
Such loans may not exceed 331/3% of the value of the Fund's total assets. In
connection with such loans, the Fund will receive collateral consisting of
cash, U.S. Government securities or irrevocable letters of credit which will
be maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The Fund can increase its income
through the investment of such collateral. The Fund continues to be entitled
to payments in amounts equal to the interest or other distributions payable
on the loaned security and receives interest on the amount of the loan. Such
loans
Page 14
will be terminable at any time upon specified notice. The Fund might
experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Fund.
FORWARD COMMITMENTS -- The Fund may purchase securities on a when-issued or
forward commitment basis, which means that the price is fixed at the time of
commitment, but delivery and payment ordinarily take place a number of days
after the date of the commitment to purchase. The Fund will make commitments
to purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities before the settlement date
if it is deemed advisable. The Fund will not accrue income in respect of a
security purchased on a when-issued or forward commitment basis prior to its
stated delivery date.
Securities purchased on a when-issued or forward commitment basis and
certain other debt securities held by the Fund are subject to changes in
value (both generally changing in the same way, i.e., appreciating when
interest rates decline and depreciating when interest rates rise) based upon
the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on
a when-issued or forward commitment basis may expose the Fund to risk because
they may experience such fluctuations prior to their actual delivery.
Purchasing debt securities on a when-issued or forward commitment basis can
involve the additional risk that the yield available in the market when the
delivery takes place actually may be higher than that obtained in the
transaction itself. A segregated account of the Fund consisting of cash, cash
equivalents or U.S. Government securities or other high quality liquid debt
securities at least equal at all times to the amount of the when-issued or
forward commitments will be established and maintained at the Fund's
custodian bank. Purchasing debt securities on a when-issued or forward
commitment basis when the Fund is fully or almost fully invested may result
in greater potential fluctuation in the value of the Fund's net assets and
its net asset value per share.
CERTAIN FUNDAMENTAL POLICIES
The Fund may (i) borrow money to the extent permitted under the
Investment Company Act of 1940; and (ii) invest up to 25% of its total assets
in the securities of issuers in a single industry, provided that there is no
such limitation on investments in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. This paragraph describes
fundamental policies of the Fund that cannot be changed without approval by
the holders of a majority (as defined in the Investment Company Act of 1940)
of the Fund's outstanding voting shares. See "Investment Objective and
Management Policies _ Investment Restrictions" in the Fund's Statement of
Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
The Fund may (i) pledge, hypothecate, mortgage or otherwise encumber
its assets, but only to secure permitted borrowings; (ii) invest up to 15% of
the value of its net assets in repurchase agreements providing for settlement
in more than seven days after notice and in other illiquid securities; and
(iii) purchase securities of other investment companies to the extent
permitted under the Investment Company Act of 1940. See "Investment Objective
and Management Policies _ Investment Restrictions" in the Fund's Statement of
Additional Information.
RISK FACTORS
INVESTING IN SOVEREIGN DEBT OBLIGATIONS AND EMERGING MARKET COUNTRIES -- No
established secondary markets may exist for many of the Sovereign Debt
Obligations in which the Fund will invest. Reduced secondary market liquidity
may have an adverse effect on the market price and the Fund's ability to
dispose of particular instruments when necessary to meet its liquidity
requirements or in response to specific economic events such as a
deterioration in the creditworthiness of the issuer. Reduced secondary market
liquidity for certain Sovereign Debt Obligations also may make it more
difficult for the Fund to obtain accurate market quotations for purposes of
valuing its portfolio. Market quotations are generally available on many
Sovereign Debt Obligations only from a limited number of dealers and may not
necessarily represent firm bids of those dealers or prices for actual sales.
Page 15
By investing in Sovereign Debt Obligations, the Fund will be exposed
to the direct or indirect consequences of political, social and economic
changes in various countries. Political changes in a country may affect the
willingness of a foreign government to make or provide for timely payments of
its obligations. The country's economic status, as reflected, among other
things, in its inflation rate, the amount of its external debt and its gross
domestic product, will also affect the government's ability to honor its
obligations.
Many 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. In an attempt to control
inflation, wage and price controls have been imposed in certain countries.
Investing in Sovereign Debt Obligations involves economic and
political risks. The Sovereign Debt Obligations in which the Fund will invest
in most cases pertain to countries that are among the world's largest debtors
to commercial banks, foreign governments, international financial
organizations and other financial institutions. In recent years, the
governments of some of these countries have encountered difficulties in
servicing their external debt obligations, which led to defaults on certain
obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit
agreements or converting outstanding principal and unpaid interest to Brady
Bonds, and obtaining new credit to finance interest payments. Certain
governments have not been able to make payments of interest on or principal
of Sovereign Debt Obligations as those payments have come due. Obligations ari
sing from past restructuring agreements may affect the economic performance
and political and social stability of those issuers.
Central banks and other governmental authorities which control the
servicing of Sovereign Debt Obligations may not be willing or able to permit
the payment of the principal or interest when due in accordance with the
terms of the obligations. As a result, the issuers of Sovereign Debt
Obligations may default on their obligations. Defaults on certain Sovereign
Debt Obligations have occurred in the past. Holders of certain Sovereign Debt
Obligations may be requested to participate in the restructuring and
rescheduling of these obligations and to extend further loans to the issuers.
The interests of holders of Sovereign Debt Obligations could be adversely
affected in the course of restructuring arrangements or by certain other
factors referred to below. Furthermore, some of the participants in the
secondary market for Sovereign Debt Obligations also may be directly involved
in negotiating the terms of these arrangements and, therefore, may have
access to information not available to other market participants.
The Fund is permitted to invest in Sovereign Debt Obligations that
are not current in the payment of interest or principal or are in default, so
long as the Advisers believe it to be consistent with the Fund's investment
objectives. The Fund may have limited legal recourse in the event of a
default with respect to certain Sovereign Debt Obligations it holds.
Bankruptcy, moratorium and other similar laws applicable to issuers of
Sovereign Debt Obligations may be substantially different from those applicabl
e to issuers of private debt obligations. The political context, expressed as
the willingness of an issuer of Sovereign Debt Obligations to meet the terms
of the debt obligation, for example, is of considerable importance. In
addition, no assurance can be given that the holders of commercial bank debt
will not contest payments to the holders of securities issued by foreign
governments in the event of default under commercial bank loan agreements.
INVESTING IN OTHER FOREIGN SECURITIES -- Foreign securities markets generally
are not as developed or efficient as those in the United States. Securities
of some foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States. The issuers of
some of these securities, such as foreign bank obligations, may be subject to
less stringent or different regulations than are U.S. issuers. In addition,
there may be less publicly available information
Page 16
about a non-U.S. issuer, and
non-U.S. issuers generally are not subject to uniform accounting and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers.
Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible adverse political and economic developments, possible
seizure or nationalization of foreign deposits and possible adoption of
governmental restrictions that might adversely affect the payment of
principal and interest on the foreign securities or might restrict the
payment of principal and interest to investors located outside the country of
the issuer, whether from currency blockage or otherwise. Custodial expenses
for a portfolio of non-U.S. securities generally are higher than for a
portfolio of U.S. securities.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. Some currency exchange costs may be
incurred when the Fund changes investments from one country to another.
Furthermore, some of these securities may be subject to brokerage
taxes levied by foreign governments, which have the effect of increasing the
cost of such investment and reducing the realized gain or increasing the
realized loss on such securities at the time of sale. Income received by the
Fund from sources within foreign countries may be reduced by withholding and
other taxes imposed by such countries. Tax conventions between certain
countries and the United States, however, may reduce or eliminate such taxes.
All such taxes paid by the Fund will reduce its net income available for
distribution to investors.
FOREIGN CURRENCY EXCHANGE -- Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by
the forces of supply and demand in the foreign exchange markets and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
The foreign currency market offers less protection against defaults
in the forward trading of currencies than is available when trading in
currencies occurs on an exchange. Since a forward currency contract is not
guaranteed by an exchange or clearinghouse, a default on the contract would
deprive the Fund of unrealized profits or force the Fund to cover its
commitments for purchase or resale, if any, at the current market price.
FOREIGN COMMODITY TRANSACTIONS -- Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
CFTC and may be subject to greater risks than trading on domestic exchanges.
For example, some foreign exchanges are principal markets so that no common
clearing facility exists and a trader may look only to the broker for
performance of the contract. In addition, unless the Fund hedges against
fluctuations in the exchange rate between the U.S. dollar and the currencies
in which trading is done on foreign exchanges, any profits that the Fund
might realize in trading could be eliminated by adverse changes in the
exchange rate, or the Fund could incur losses as a result of those changes.
Transactions on foreign exchanges may include both commodities which are
traded on domestic exchanges and those which are not.
LOWER RATED SECURITIES -- You should carefully consider the relative risks of
investing in the higher yielding (and, therefore, higher risk) debt
securities in which the Fund may invest. These are securities such as those
rated Ba by Moody's or BB by S&P, Fitch or Duff or as low as the lowest
rating assigned by Moody's, S&P, Fitch or Duff. They generally are not meant
for short-term investing and may be subject to certain risks with respect to
the issuing entity and to greater market fluctuations than certain lower
yielding, higher rated fixed-income securities. Securities rated Ba by
Moody's are judged to have speculative elements; their future cannot be
considered as well assured and often the protection of interest and principal
payments may be very moderate. Securities rated BB by S&P, Fitch or Duff are
regarded as having predominantly speculative characteristics and, while such
obligations have less near-
Page 17
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 C by Moody's are regarded as having extremely poor prospects
of ever attaining any real investment standing. Securities rated D by S&P,
Fitch and Duff are in default and the payment of interest and/or repayment of
principal is in arrears. Such securities, though high yielding, are
characterized by great risk. See "Appendix" in the Fund's Statement of
Additional Information for a general description of Moody's, S&P, Fitch and
Duff securities ratings. The ratings of the various rating agencies represent
their opinions as to the quality of the obligations which they undertake to
rate. It should be emphasized, however, that ratings are relative and
subjective and, although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk
of such obligations. Therefore, although these ratings may be an initial
criterion for selection of portfolio investments, the Advisers also will
evaluate such obligations and the ability of their issuers to pay interest
and principal. The Fund's ability to achieve its investment objective may be
more dependent on the Advisers' credit analysis than might be the case for a
fund that invested in higher rated securities. Once the rating of a security
in the Fund's portfolio has been changed, the Advisers will consider all
circumstances deemed relevant in determining whether the Fund should continue
to hold the security.
The market price and yield of securities rated Ba or lower by Moody's
and BB or lower by S&P, Fitch or Duff are more volatile than those of higher
rated securities. Factors adversely affecting the market price and yield of
these securities will adversely affect the Fund's net asset value. In
addition, the retail secondary market for these securities may be less liquid
than that of higher rated securities; adverse conditions could make it
difficult at times for the Fund to sell certain securities or could result in
lower prices than those used in calculating the Fund's net asset value.
The market values of certain lower rated debt securities tend to
reflect specific developments with respect to the issuer to a greater extent
than do higher rated securities, which react primarily to fluctuations in the
general level of interest rates, and tend to be more sensitive to economic
conditions than are higher rated securities. Issuers of such debt securities
often are highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated with
acquiring the securities of such issuers generally is greater than is the
case with higher rated securities.
See "Investment Objective and Management Policies _ Risk Factors _
Lower Rated Securities" in the Fund's Statement of Additional Information.
DISCOUNT OBLIGATIONS -- A substantial portion of the Fund's investments
(including most Brady Bonds) may be in (i) securities which were initially
issued at a discount from their face value (collectively, "Discount
Obligations") and (ii) securities purchased by the Fund at a price less than
their stated face amount or, in the case of Discount Obligations, at a price
less than their issue price plus the portion of "original issue discount"
previously accrued thereon, i.e., purchased at a "market discount." The
amount of original issue discount and/or market discount on obligations
purchased by the Fund may be significant, and accretion of market discount
together with original issue discount, will cause the Fund to realize income
prior to the receipt of cash payments with respect to these securities. To
maintain its qualification as a regulated investment company and avoid
liability for Federal income taxes, the Fund may be required to distribute
such income accrued with respect to these securities and may have to dispose o
f portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements. See "Dividends,
Distributions and Taxes."
OTHER INVESTMENT CONSIDERATIONS -- The Fund's net asset value is not fixed
and should be expected to fluctuate. You should purchase Fund shares only as
a supplement to an overall investment program and only if you are willing to
undertake the risks involved.
Page 18
The use of investment techniques such as leveraging, short-selling,
engaging in financial futures and options transactions and lending portfolio
securities and the purchase of Sovereign Debt Obligations and certain
stripped mortgage-backed securities involves greater risk than that incurred
by many other funds with similar objectives. The risks are described above
under "Investment Techniques" and "Certain Portfolio Securities." In
addition, using these techniques may produce higher than normal portfolio
turnover and may affect the degree to which the Fund's net asset value
fluctuates. Portfolio turnover may vary from year to year, as well as within
a year. Under normal market conditions, the Fund's portfolio turnover rate
generally will not exceed 150%. Higher portfolio turnover rates are likely to
result in comparatively greater brokerage commissions or transaction costs.
Short-term gains realized from portfolio transactions are taxable to
shareholders as ordinary income. See "Portfolio Transactions" in the
Statement of Additional Information.
The Fund's ability to engage in certain short-term transactions may
be limited by the requirement that, to qualify as a regulated investment
company, it must earn less than 30% of its gross income from the disposition
of securities held for less than three months. This 30% test limits the
extent to which the Fund may sell securities held for less than three months,
effect short sales of securities held for less than three months, write
options expiring in less than three months and invest in certain futures
contracts, among other strategies. However, portfolio turnover will not
otherwise be a limiting factor in making investment decisions.
Investors should be aware that even though interest-bearing
securities are investments which promise a stable stream of income, the
prices of such securities are inversely affected by changes in interest rates
and, therefore, are subject to the risk of market price fluctuations. The
values of fixed-income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities.
The Fund's classification as a "non-diversified" investment company
means that the proportion of the Fund's assets that may be invested in the
securities of a single issuer is not limited by the Investment Company Act of
1940. A "diversified" investment company is required by the Investment
Company Act of 1940 generally to invest, with respect to 75% of its total
assets, not more than 5% of such assets in the securities of a single issuer.
However, the Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which requires that, at the end of each
quarter of its taxable year, (i) at least 50% of the market value of the
Fund's total assets be invested in cash, U.S. Government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
assets, and 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its total assets be invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies). Since a relatively high
percentage of the Fund's assets may be invested in the securities of a
limited number of issuers, some of which may be within the same industry or
economic sector, the Fund's portfolio securities may be more susceptible to
any single economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.
Investment decisions for the Fund are made independently from those
of other investment companies or accounts advised by Dreyfus or M&G. However,
if such other investment companies or accounts are prepared to invest in, or
desire to dispose of, securities of the type in which the Fund invests at the
same time as the Fund, available investments or opportunities for sales will
be allocated equitably to each. In some cases, this procedure may adversely
affect the size of the position obtained for or disposed of by the Fund or
the price paid or received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISERS -- Dreyfus, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947 and serves as the Fund's investment adviser.
The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank, N.A.,
which is a wholly-owned subsidiary of Mellon Bank
Page 19
Corporation ("Mellon"). As of February 28, 1995, Dreyfus managed or
administered approximately $72 billion in assets for more than 1.9
million investor accounts.
Dreyfus supervises and assists in the overall management of the
Fund's affairs under a Management Agreement with the Fund, subject to the
overall authority of the Fund's Board of Directors in accordance with
Maryland law.
Dreyfus has engaged M&G, located at Three Quays Tower Hill, London
EC3R 6BQ, England, to serve as the Fund's sub-investment adviser. M&G, a
registered investment adviser formed in 1961, is a wholly-owned subsidiary of
M&GGroup P.L.C. As of February 28, 1995, M&G managed or advised approximately
$21.4 billion in assets and serves as the investment adviser of two other
investment companies in the Dreyfus Family of Funds.
M&G, subject to the supervision and approval of Dreyfus, provides
investment advisory assistance and the day-to-day management of the Fund's
investments, as well as investment research and statistical information,
under a Sub-Investment Advisory Agreement with Dreyfus, subject to the
overall authority of the Fund's Board of Directors in accordance with
Maryland law. The Fund's primary portfolio manager is Theodora Zemek. Ms.
Zemek has been employed by M&G as Head of Fixed Income since 1992. Prior
thereto, she was employed by James Capel Fund Managers as a Multicurrency
Fixed Income Manager. The Fund's other portfolio managers are identified
under "Management of the Fund" in the Fund's Statement of Additional
Information. The Advisers also provide research services for the Fund, as
well as for other funds advised by Dreyfus or M&G, 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 Dreyfus, Mellon managed more than $201 billion in
assets as of September 30, 1994, including approximately $76 billion in
mutual fund assets. As of September 30, 1994, various subsidiaries of Mellon
provided non-investment services, such as custodial or administration
services, for approximately $659 billion in assets, including $108 billion in
mutual fund assets.
Under the Management Agreement, the Fund has agreed to pay Dreyfus a
monthly fee at the annual rate of .70 of 1% of the value of the Fund's
average daily net assets. From time to time, Dreyfus may waive receipt of its
fee and/or voluntarily assume certain expenses of the Fund, which would have
the effect of lowering the overall expense ratio of the Fund and increasing
yield to investors at the time such amounts are waived or assumed, as the
case may be. The Fund will not pay Dreyfus at a later time for any amounts it
may waive, nor will the Fund reimburse Dreyfus for any amounts it may assume.
For the period March 18, 1994 (commencement of operations) through November
30, 1994, no management fee was paid by the Fund pursuant to an undertaking
by Dreyfus.
Under the Sub-Investment Advisory Agreement, Dreyfus has agreed to
pay M&G a monthly fee at the annual rate of .28 of 1% of the value of the
Fund's average daily net assets. For the period March 18, 1994 (commencement
of operations) through November 30, 1994, no sub-investment advisory fee was
paid by Dreyfus pursuant to an agreement in effect between Dreyfus and M&G.
Dreyfus may pay the Fund's distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Fund. The Fund's distributor may use part or all of such
payments to pay Service Agents in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, Boston, Massachusetts
02109. The Distributor is a wholly-owned sub-
Page 20
sidiary of Institutional
Administration Services, Inc., a provider of mutual fund administration
services, the parent company of which is Boston Institutional Group, Inc.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT -- The Bank of New York,
110 Washington Street, New York, New York 10286, is the Fund's Custodian. The
Shareholder Services Group, Inc., a subsidiary of First Data Corporation,
P.O. Box 9671, Providence, Rhode Island 02940-9671, is the Fund's Transfer
and Dividend Disbursing Agent (the "Transfer Agent").
HOW TO BUY FUND SHARES
You can purchase Fund shares through the Distributor or certain
financial institutions, securities dealers and other industry professionals
(collectively, "Service Agents") that have entered into agreements with the
Distributor. Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order.
Management understands that some Service Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus, and, to the extent permitted by applicable regulatory authority,
may charge their clients direct fees which would be in addition to any
amounts which might be received under the Shareholder Services Plan. Each
Service Agent has agreed to transmit to its clients a schedule of such fees.
You should consult your Service Agent in this regard. See "Distribution Plan
and Shareholder Services Plan."
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which has made an aggregate minimum initial
purchase for its customers of $2,500. Subsequent investments must be at least
$100. The initial investment must be accompanied by the Fund's Account
Application. For full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Fund's Board, or the spouse or
minor child of any of the foregoing, the minimum initial investment is
$1,000. For full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment is $50. The
Fund reserves the right to offer Fund shares without regard to minimum
purchase requirements to employees participating in certain qualified or
non-qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian." Payments to open new accounts which
are mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application.
For subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to The Dreyfus
Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. For Dreyfus
retirement plan accounts, both initial and subsequent investments should be
sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Neither initial nor subsequent investments should be
made by third party check. Purchase orders may be delivered in person only to
a Dreyfus Financial Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND
WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the nearest
Dreyfus Financial Center, please call one of the telephone numbers listed
under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900118385/Dreyfus Global
Bond Fund, Inc., for purchase of Fund shares in your name. The wire must
include your Fund account
Page 21
number (for new accounts, your Taxpayer
Identification Number ("TIN") should be included instead), account registratio
n and dealer number, if applicable. If your initial purchase of Fund shares
is by wire, please call 1-800-645-6561 after completing your wire payment to
obtain your Fund account number. Please include your Fund account number on
the Fund's Account Application and promptly mail the Account Application to
the Fund, as no redemptions will be permitted until the Account Application
is received. You may obtain further information about remitting funds in this
manner from your bank. All payments should be made in U.S. dollars and, to
avoid fees and delays, should be drawn only on U.S. banks. A charge will be
imposed if any check used for investment in your account does not clear. The
Fund makes available to certain large institutions the ability to issue purcha
se 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
your Fund account number PRECEDED BY THE DIGITS "1111."
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds one million dollars. All present holdings
of shares of funds in the Dreyfus Family of Funds by such employee benefit
plans or programs will be aggregated to determine the fee payable with
respect to each purchase of Fund shares. The Distributor reserves the right
to cease paying these fees at any time. The Distributor will pay such fees
from its own funds, other than amounts received from the Fund, including past
profits or any other source available to it.
Fund shares are sold on a continuous basis at net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. For purposes of determining net asset value, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value per share is computed
by dividing the value of the Fund's net assets (i.e., the value of its assets
less liabilities) by the total number of shares outstanding. The Fund's
investments are valued based on market value or, where market quotations are
not readily available, based on fair value as determined in good faith by the
Fund's Board of Directors. For further information regarding the methods
employed in valuing the Fund's investments, see "Determination of Net Asset
Value" in the Fund's Statement of Additional Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject you
to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE
You may purchase Fund shares (minimum $500, maximum $150,000 per day)
by telephone if you have checked the appropriate box and supplied the
necessary information on the Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
Page 22
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those in
this Prospectus. You should consult your Service Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, shares of
certain other funds managed or administered by Dreyfus, to the extent such
shares are offered for sale in your state of residence. These funds have
different investment objectives which may be of interest to you. If you
desire to use this Service, 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.
To request an exchange, you or your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing or by
telephone. Before any exchange, you must obtain and should review a copy of
the current prospectus of the fund into which the exchange is being made.
Prospectuses may be obtained by calling 1-800-645-6561. Except in the case of
Personal Retirement Plans, the shares being exchanged must have a current
value of at least $500; furthermore, when establishing a new account by
exchange, the shares being exchanged must have a value of at least the
minimum initial investment required for the fund into which the exchange is
being made. The ability to issue exchange instructions by telephone is given
to all Fund shareholders automatically, unless you check the appropriate "NO"
box on the Account Application, indicating that you specifically refuse the
Privilege. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, or by a separate signed Shareholder Services Form, also available by
calling 1-800-645-6561. If you have established the Telephone Exchange
Privilege, you may telephone exchange instructions by calling 1-800-221-4060
or, if you are calling from overseas, call 1-401-455-3306. See "How to Redeem
Fund Shares _ Procedures." Upon an exchange into a new account, the following
shareholder services and privileges, as applicable and where available, will
be automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Wire Redemption Privilege, Telephone Redemption
Privilege, Dreyfus TELETRANSFER Privilege and the dividend/capital gain
distribution option (except for Dreyfus Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares of the fund from
which you are exchanging were: (a) purchased with a sales load, (b) acquired
by a previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestment of dividends or distributions paid with respect
to the foregoing categories of shares. To qualify, at the time of your
exchange you must notify the Transfer Agent 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 the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with rules promulgated by the
Securities and Exchange Commission. The Fund reserves the right to reject any
exchange request in whole or in part. The availability of Fund Exchanges may
be modified or terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Page 23
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of other funds in the Dreyfus Family of Funds of which
you are currently an investor. The amount you designate, which can be
expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth 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 the Fund or the
Transfer Agent. You may modify or cancel your exercise of this Privilege at
any time by mailing written notification to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge a service
fee for the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for Federal
income tax purposes as a sale of the shares given in exchange by the sharehold
er and, therefore, an exchanging shareholder may realize a taxable gain or
loss. For more information concerning this Privilege and the funds in the
Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. To establish a Dreyfus-AUTOMATIC-Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the
necessary authorization by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in the Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. The
Fund may terminate your participation upon 30 days' notice to you.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of another fund in the Dreyfus Family of Funds of which you are 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
Page 24
in a fund that charges a sales load, you may qualify for share prices which do
not include the sales load or which reflect a reduced sales load. See
"Shareholder Services" in the Statement of Additional Information. Dreyfus
Dividend ACH permits you to transfer electronically dividends or dividends
and capital gain distributions, if any, from the Fund to a designated bank
account. Only an account maintained at a 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. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans or IRAs are not
eligible for Dreyfus Dividend Sweep.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon your employer's direct deposit program, you may have part or all of your
paycheck transferred to your existing Dreyfus account electronically through
the Automated Clearing House system at each pay period. To establish a
Dreyfus Payroll Savings Plan account, you must file an authorization form
with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not the
Distributor, Dreyfus, the Fund, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Fund may
modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. There is a service
charge of 50cents for each withdrawal check. The Automatic Withdrawal Plan
may be ended at any time by you, the Fund or the Transfer Agent. Shares for
which certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free:for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
The Fund imposes no charges when shares are redeemed. Service Agents
may charge a nominal fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be sub-
Page 25
mitted with
the redemption request. The value of the shares redeemed may be more or less
than their original cost, depending upon the Fund's then-current net asset
value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE
REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE
OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC
ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN
ADDITION, THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE
OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT
BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE
DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER
AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY
IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A
SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST.
PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL
ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS
OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, the Wire Redemption Privilege, the Telephone
Redemption Privilege, or the Dreyfus TELETRANSFER Privilege. Other redemption
procedures may be in effect for investors who effect transactions in Fund
shares through Service Agents. The Fund makes available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed an
Shareholder Services Form with the Transfer Agent. If you select a telephone
redemption privilege or telephone exchange privilege (which is granted
automatically unless you specifically refuse it), you authorize the Transfer
Agent to act on telephone instructions from any person representing himself
or herself to be you or a representative of your Service Agent, and reasonably
believed by the Transfer Agent to be genuine. The Fund will require the
Transfer Agent to employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine and, if it
does not follow such procedures, the Fund or the Transfer Agent may be liable
for any losses due to unauthorized or fraudulent instructions. Neither the
Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or 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
Fund shares by written request mailed to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. 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
Page 26
of a joint account,
and each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion
Program. If you have any questions with respect to signature-guarantees,
please call one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $1,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of not more than $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-221-4060 or, if you
are calling from overseas, call 1-401-455-3306. The Fund reserves the right
to refuse any redemption request, including requests made shortly after a chan
ge of address, and may limit the amount involved or the number of such
requests. This Privilege may be modified or terminated at any time by the
Transfer Agent or the Fund. The Fund's Statement of Additional Information
sets forth instructions for transmitting redemption requests by wire. Shares
held under Keogh Plans, IRAs or other retirement plans, and shares for which
certificates have been issued, are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE -- You may redeem Fund shares (maximum
$150,000 per day) by telephone if you have checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306. The
Fund reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of telephone redemption requests. This Privilege may
be modified or terminated at any time by the Transfer Agent or the Fund.
Shares held under Keogh Plans, IRAs or other retirement plans, and shares for
which certificates have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE -- You may redeem Fund shares (minimum $500
per day) by telephone if you have checked the appropriate box and supplied
the necessary information on the Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between your Fund account and the bank account designated in one
of these documents. Only such an account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
Redemption proceeds will be on deposit in your account at an Automated
Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period. The
Fund reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. The Fund may modify or terminate
this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
Page 27
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. Shares held under Keogh Plans, IRAs or other retirement
plans, and shares issued in certificate form, are not eligible for this
Privilege.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Fund shares are subject to a Distribution Plan and a Shareholder
Services Plan.
DISTRIBUTION PLAN -- Under the Distribution Plan, adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, the Fund (a) reimburses the
Distributor for payments to certain Service Agents for distributing the
Fund's shares and (b) pays Dreyfus, Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus, and any affiliate of either of them for
advertising and marketing relating to the Fund, at an aggregate annual rate
of .25 of 1% of the value of the Fund's average daily net assets. The
Distributor may pay one or more Service Agents in respect of distribution
services. The Distributor determines the amounts, if any, to be paid to
Service Agents under the Distribution Plan and the basis on which such
payments are made. The fees payable under the Distribution Plan are payable
without regard to actual expenses incurred.
The Fund bears the costs of preparing and printing prospectuses and
statements of additional information used for regulatory purposes and for
distribution to existing Fund shareholders. Under the Distribution Plan, the
Fund bears (a) the costs of preparing, printing and distributing prospectuses
and statements of additional information used for other purposes and (b) the
costs associated with implementing and operating the Distribution Plan, the
aggregate of such amounts not to exceed in any fiscal year of the Fund the
greater of $100,000 or .005 of 1% of the value of the Fund's average daily
net assets for such fiscal year.
SHAREHOLDER SERVICES PLAN -- Under the Shareholder Services Plan, the Fund
pays the Distributor for the provision of certain services to Fund
shareholders a fee at the annual rate of .25 of 1% of the value of the 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. Each Service Agent is
required to disclose to its clients any compensation payable to it by the
Fund pursuant to the Shareholder Services Plan and any other compensation
payable by their clients in connection with the investment of their assets in
Fund shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from its net
investment income monthly. Fund shares begin earning income dividends on the
day following the date of purchase. 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. Distributions from net
realized securities gains, if any, generally are declared and paid once a
year, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), in all events in a manner consistent with the
provisions of the Investment Company Act of 1940. The Fund will not make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose
whether to receive dividends and distributions in cash or to reinvest in
additional Fund shares at net asset value. All expenses are accrued daily and
deducted before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains of the Fund and
all or a portion of any gains realized from the sale or other disposition of
certain market discount bonds, paid by the Fund will be taxable to U.S.
shareholders as ordinary
Page 28
income whether received in cash or reinvested in
Fund shares. Distributions from net realized long-term securities gains of
the Fund will be taxable to U.S. shareholders as long-term capital gains for
Federal income tax purposes, regardless of how long shareholders have held
their Fund shares and whether such distributions are received in cash or
reinvested in Fund shares. The Code provides that the net capital gain of an
individual generally will not be subject to Federal income tax at a rate in
excess of 28%. Dividends and distributions may be subject to state and local
taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains of the Fund and
all or a portion of any gains realized from the sale or other disposition of
certain market discount bonds, paid by the Fund to a foreign investor
generally are subject to U.S. nonresident withholding taxes at the rate of
30%, unless the foreign investor claims the benefit of a lower rate specified
in a tax treaty. Distributions from net realized long-term securities gains
paid by the Fund to a foreign investor as well as the proceeds of any
redemptions from a foreign investor's account, regardless of the extent to
which gain or loss may be realized, generally will not be subject to U.S.
nonresident withholding tax. However, such distributions may be subject to
backup withholding, as described below, unless the foreign investor certifies
his non-U.S. residency status.
The Fund may invest a substantial portion of its assets in Sovereign
Debt Obligations with original issue discount and/or market discount.
Original issue discount generally is the excess (if any) of the stated
redemption price of an obligation over its original issue price. Market
discount generally is the excess (if any) of the stated redemption price of
an obligation (or in the case of an obligation issued with original issue
discount, its original issue price plus accreted original issue discount) over
the price at which it is purchased subsequent to original issuance. Original
issue discount is generally required to be included in income on a periodic
basis by a holder as ordinary income. Income attributable to market discount
generally is ordinary income (as opposed to capital gain). A taxpayer may
elect to include market discount in income on a periodic basis as opposed to
including market discount in income upon payment or sale of the obligation.
It is expected that the Fund will elect to include market discount in income
currently, for both book and tax purposes. Accordingly, accretion of market
discount together with original issue discount will cause the Fund to realize
income prior to the receipt of cash payments with respect to these securities.
To distribute this income and maintain its qualification as a regulated
investment company and avoid becoming subject to Federal income or excise
tax, the Fund may be required to liquidate portfolio securities that it might
otherwise have continued to hold, use its cash assets or borrow funds on a
temporary basis necessary to declare and pay a distribution to shareholders.
The Fund may realize capital gains or losses from those sales, which would
increase or decrease the Fund's investment company taxable income or net
capital gain. If the Fund realizes net capital gains from such sales, its
shareholders may receive a larger capital gain distribution, if any, than
they would have in the absence of such sales.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder 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 wi
thholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
Page 29
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended November 30, 1994 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interests of its shareholders. Such qualification relieves the
Fund of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. In
addition, the Fund is subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable investment income
and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance will be calculated on
several bases, including current yield, average annual total return and/or
total return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of the Fund's
current yield may reflect absorbed expenses pursuant to expense limitations
in effect. See "Management of the Fund."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter periods depending upon the
length of time during which the Fund has operated. Computations of average
annual total return for periods of less than one year represent an
annualization of the Fund's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Morgan Stanley Capital International World Index,
Standard & Poor's 500 Composite Stock Price Index, Standard & Poor's MidCap
400 Index, the Dow Jones Industrial Average, Morningstar, Inc. and other
industry publications.
Page 30
GENERAL INFORMATION
The Fund was incorporated under Maryland law on September 8, 1993,
and commenced operations on March 18, 1994. The Fund is authorized to issue
300 million shares of Common Stock, par value $.001 per share. Each share has
one vote.
Unless otherwise required by the Investment Company Act of 1940,
ordinarily it will not be necessary for the Fund to hold annual meetings of
shareholders. As a result, Fund shareholders may not consider each year the
election of Directors or the appointment of auditors. However, pursuant to
the Fund's By-Laws, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Fund to hold a special meeting of
shareholders for purposes of removing a Director from office or for any other
purpose. Fund shareholders may remove a Director by the affirmative vote of a
majority of the Fund's outstanding shares. In addition, the Board of
Directors will call a meeting of shareholders for the purpose of electing
Directors if, at any time, less than a majority of the Directors then holding
office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call
1-718-895-1206; on Long Island, call 794-5452.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
APPENDIX
The average distribution of investments in corporate bonds by ratings
for the period ended November 30, 1994, calculated monthly on a dollar
weighted basis, was as follows:
<TABLE>
<CAPTION>
MOODY'S INVESTORS STANDARD & POOR'S
SERVICE, INC. OR CORPORATION PERCENTAGE
--------------------- ---------------------- -----------------
<S> <C> <C>
Aaa AAA 30.09%
Aa AA 14.46
A A 20.27
Ba BB 4.02
Unrated Unrated 31.16*
----------
100.00%
========
</TABLE>
The actual distribution of the Fund's corporate bond investments by
ratings on any given date will vary. In addition, the distribution of the
Fund's investments by ratings as set forth above should not be considered as
representative of the Fund's future portfolio composition.
* Included under the Unrated category are securities comprising 31.16%,
of the Fund's market value, which, while unrated, have been determined by the
Advisers to be of comparable quality to securities in the following rating
categories: Aaa/AAA(13.92%); Aa/AA (9.15%); A/A (4.40%) and Ba/BB (3.69%).
Page 31
GLOBAL BOND FUND, INC.
PROSPECTUS
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
098P3033195
DREYFUS GLOBAL BOND FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 31, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Global Bond Fund, Inc. (the "Fund"), dated March 31, 1995, as
it may be revised from time to time. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call the following numbers:
Call Toll Free -- 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
adviser. Dreyfus has engaged M&G Investment Management Limited ("M&G") to
serve as the Fund's sub-investment adviser and provide day-to-day
management of the Fund's investments, subject to the supervision of
Dreyfus. Dreyfus and M&G are referred to collectively as the "Advisers."
Premier Mutual Fund Services. Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
----
Investment Objective and Management Policies. . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . B-13
Management Arrangements . . . . . . . . . . . . . . . . . . . . B-18
Distribution Plan and Shareholder Services Plan . . . . . . . . B-20
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . B-22
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . B-22
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . B-24
Determination of Net Asset Value. . . . . . . . . . . . . . . . B-27
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . B-28
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . B-30
Performance Information . . . . . . . . . . . . . . . . . . . . B-31
Information About the Fund. . . . . . . . . . . . . . . . . . . B-31
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . . . . B-32
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
Financial Statements. . . . . . . . . . . . . . . . . . . . . . B-41
Report of Independent Auditors. . . . . . . . . . . . . . . . . B-52
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
Portfolio Securities
- --------------------
Bank Obligations. Domestic commercial banks organized under Federal
law are supervised and examined by the Comptroller of the Currency and are
required to be members of the Federal Reserve System and to have their
deposits insured by the Federal Deposit Insurance Corporation (the
"FDIC"). Domestic banks organized under state law are supervised and
examined by state banking authorities but are members of the Federal
Reserve System only if they elect to join. In addition, state banks whose
certificates of deposit ("CDs") may be purchased by the Fund are insured
by the FDIC (although such insurance may not be of material benefit to the
Fund, depending on the principal amount of the CDs of each bank held by
the Fund) and are subject to Federal examination and to a substantial body
of Federal law and regulation. As a result of Federal or state laws and
regulations, domestic branches of domestic banks whose CDs may be
purchased by the Fund generally are required, among other things, to
maintain specified levels of reserves, are limited in the amounts which
they can loan to a single borrower and are subject to other regulations
designed to promote financial soundness. However, not all of such laws
and regulations apply to the foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches of
foreign banks, such as CDs and time deposits ("TDs"), may be general
obligations of the parent banks in addition to the issuing branch, or may
be limited by the terms of a specific obligation and governmental
regulation. Such obligations are subject to different risks than are
those of domestic banks. These risks include foreign economic and
political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding and other taxes on
interest income. These foreign branches and subsidiaries are not
necessarily subject to the same or similar regulatory requirements as
apply to domestic banks, such as mandatory reserve requirements, loan
limitations, and accounting, auditing and financial record keeping
requirements. In addition, less information may be publicly available
about a foreign branch of a domestic bank or about a foreign bank than
about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation or by Federal or state
regulation as well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a foreign bank
with assets in excess of $1 billion may be subject to reserve requirements
imposed by the Federal Reserve System or by the state in which the branch
is located if the branch is licensed in that state.
In addition, Federal branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may be
required to: (1) pledge to the regulator, by depositing assets with a
designated bank within the state, a certain percentage of their assets as
fixed from time to time by the appropriate regulatory authority; and (2)
maintain assets within the state in an amount equal to a specified
percentage of the aggregate amount of liabilities of the foreign bank
payable at or through all of its agencies or branches within the state.
The deposits of Federal and State Branches generally must be insured by
the FDIC if such branches take deposits of less than $100,000.
Securities of Supranational Entities. Supranational entities in
which the Fund may invest 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.
Mortgage-Related Securities
- ---------------------------
Government Agency Securities. Mortgage-related securities issued by
the Government National Mortgage Association ("GNMA") include GNMA
Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are
guaranteed as to the timely payment of principal and interest by GNMA and
such guarantee is backed by the full faith and credit of the United
States. GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury
to make payments under its guarantee.
Government Related Securities. Mortgage-related securities issued by
the Federal National Mortgage Association ("FNMA") include FNMA Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are
solely the obligations of the FNMA and are not backed by or entitled to
the full faith and credit of the United States. The 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"). The 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 the FHLMC. The FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When the 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.
Brady Bonds. Collateralized Brady Bonds may be fixed rate par bonds
or floating rate discount bonds, which are generally collateralized in
full as to principal due at maturity by U.S. Treasury zero coupon
obligations which have the same maturity as the Brady Bonds. Interest
payments on these Brady Bonds generally are collateralized by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to
at least one year of rolling interest payments or, in the case of floating
rate bonds, initially is equal to at least one year's rolling interest
payments based on the applicable interest rate at that time and is
adjusted at regular intervals thereafter. Certain Brady Bonds are
entitled to "value recovery payments" in certain circumstances, which in
effect constitute supplemental interest payments but generally are not
collateralized. Brady Bonds are often viewed as having three or four
valuation components: (i) the collateralized repayment of principal at
final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts
constitute the "residual risk"). In the event of a default with respect
to Collateralized Brady Bonds as a result of which the payment obligations
of the issuer are accelerated, the U.S. Treasury zero coupon obligations
held as collateral for the payment of principal will not be distributed to
investors, nor will such obligations be sold and the proceeds distributed.
The collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal
the principal payments which would have then been due on the Brady Bonds
in the normal course. In addition, in light of the residual risk of Brady
Bonds and, among other factors, the history of defaults with respect to
commercial bank loans by public and private entities of countries issuing
Brady Bonds, investments in Brady Bonds are to be viewed as speculative.
Debt restructurings have been implemented under the Brady Plan in
Argentina, Brazil, Bolivia, Costa Rica, Mexico, Nigeria, the Philippines,
Uruguay and Venezuela, with the largest proportion of Brady Bonds having
been issued to date by Argentina, Mexico and Venezuela. Most Argentine
and Mexican Brady Bonds and a significant portion of the Venezuelan Brady
Bonds issued to date are Collateralized Brady Bonds with interest coupon
payments collateralized on a rolling-forward basis by funds or securities
held in escrow by an agent for the bondholders.
Loan Participation and Assignments. When the Fund purchases
Assignments from Lenders it will acquire direct rights against the
borrower on the Loan (as such terms, and other capitalized terms used in
this paragraph, are defined in the Prospectus). Because Assignments are
arranged through private negotiations between potential assignees and
potential assignors, however, the rights and obligations acquired by the
Fund as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender. The assignability of
certain Sovereign Debt Obligations is restricted by the governing
documentation as to the nature of the assignee such that the only way in
which the Fund may acquire an interest in a Loan is through a
Participation and not an Assignment. The Fund may have difficulty
disposing of Assignments and Participations because to do so it will have
to assign such securities to a third party. Because there is no
established secondary market for such securities, the Fund anticipates
that such securities could be sold only to a limited number of
institutional investors. The lack of an established secondary market may
have an adverse impact on the value of such securities and the Fund's
ability to dispose of particular Assignments or Participations 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
borrower. The lack of an established secondary market for Assignments and
Participations also may make it more difficult for the Fund to assign a
value to these securities for purposes of valuing the Fund's portfolio and
calculating its net asset value. The Fund will not invest more than 15%
of the value of its net assets in Loan Participations and Assignments that
are illiquid, and in other illiquid securities.
Repurchase Agreements. The Fund's custodian or sub-custodian will
have custody of, and will hold in a segregated account, securities
acquired by the Fund under a repurchase agreement. Repurchase agreements
are considered by the staff of the Securities and Exchange Commission to
be loans by the Fund. In an attempt to reduce the risk of incurring a
loss on a repurchase agreement, the Fund will enter into repurchase
agreements only with domestic banks with total assets in excess of one
billion dollars, or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities of the type
in which the Fund may invest, and will require that additional securities
be deposited with it if the value of the securities purchased should
decrease below the resale price. The Advisers will monitor on an ongoing
basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. The Fund will consider on an ongoing basis
the creditworthiness of the institutions with which it enters into
repurchase agreements.
Commercial Paper and Other Short-Term Corporate Obligations.
Variable rate demand notes include variable amount master demand notes,
which are obligations that permit the Fund to invest fluctuating amounts
at varying rates of interest pursuant to direct arrangements between the
Fund, as lender, and the borrower. These notes permit daily changes in
the amounts borrowed. As mutually agreed between the parties, the Fund
may increase the amount under the notes at any time up to the full amount
provided by the note agreement, or decrease the amount, and the borrower
may repay up to the full amount of the note without penalty. Because
these obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value, plus accrued
interest, at any time. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements, the
Fund's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. In connection with floating and
variable rate demand obligations, the Advisers will consider, on an
ongoing basis, earning power, cash flow and other liquidity ratios of the
borrower, and the borrower's ability to pay principal and interest on
demand. Such obligations frequently are not rated by credit rating
agencies, and the Fund may invest in them only if at the time of an
investment the borrower meets the criteria set forth in the Fund's
Prospectus for other commercial paper issuers.
Illiquid Securities. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not
readily marketable, the Fund will endeavor to obtain the right to
registration at the expense of the issuer. Generally, there will be a
lapse of time between the Fund's decision to sell any such security and
the registration of the security permitting sale. During any such period,
the price of the securities will be subject to market fluctuations.
However, if a substantial market of qualified institutional buyers
develops pursuant to Rule 144A under the Securities Act of 1933, as
amended, for certain unregistered securities held by the Fund, the Fund
intends to treat certain unregistered securities as liquid securities in
accordance with procedures approved by the Fund's Board of Directors.
Because it is not possible to predict with assurance how the market for
restricted securities pursuant to Rule 144A will develop, the Fund's Board
of Directors has directed the Advisers to monitor carefully the Fund's
investments in such securities with particular regard to trading activity,
availability of reliable price information and other relevant information.
To the extent that, for a period of time, qualified institutional buyers
cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level
of illiquidity in the Fund's portfolio during such period.
Management Policies
- ------------------
The Fund may engage in the following practices in furtherance of its
objective.
Leverage Through Borrowing. The Fund may borrow for investment
purposes. The Investment Company Act of 1940, as amended (the "Act"),
requires the Fund to maintain continuous asset coverage (that is, total
assets including borrowings, less liabilities exclusive of borrowings) of
300% of the amount borrowed. If the 300% asset coverage should decline as
a result of market fluctuations or other reasons, the Fund may be
required to sell some of its portfolio holdings within three days to
reduce the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that
time. The Fund also may be required to maintain minimum average balances
in connection with such borrowing or to pay a commitment or other fee to
maintain a line of credit; either of these requirements would increase the
cost of borrowings over the stated interest rate. To the extent the Fund
enters into a reverse repurchase agreement, the Fund will maintain in a
segregated custodial account cash or U.S. Government securities or other
high quality liquid debt securities at least equal to the aggregate amount
of its reverse repurchase obligations, plus accrued interest, in certain
cases, in accordance with releases promulgated by the Securities and
Exchange Commission. The Securities and Exchange Commission views reverse
repurchase transactions as collateralized borrowings by the Fund. These
agreements, which are treated as if reestablished each day, are expected
to provide the Fund with a flexible borrowing tool.
Short Selling. The Fund may make short sales of securities. Until
the Fund replaces a borrowed security in connection with a short sale, the
Fund will: (a) maintain daily a segregated account, containing cash or
U.S. Government Securities, at such a level that (i) the amount deposited
in the account plus the amount deposited with the broker as collateral
will equal the current value of the security sold short and (ii) the
amount deposited in the segregated account plus the amount deposited with
the broker as collateral will not be less than the market value of the
security at the time it was sold short; or (b) otherwise cover its short
position.
Options Transactions. The Fund may engage in options transactions,
such as purchasing or writing covered call or put options. In return for
a premium, the writer of a covered call option forfeits the right to any
appreciation in the value of the underlying security above the strike
price for the life of the option (or until a closing purchase transaction
can be effected). Nevertheless, the call writer retains the risk of a
decline in the price of the underlying security. The writer of a covered
put option accepts the risk of a decline in the price of the underlying
security. The size of the premiums that the Fund may receive may be
adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing
activities.
Options written ordinarily will have expiration dates between one and
nine months from the date written. The exercise price of the options may
be below, equal to or above the market values of the underlying securities
at the time the options are written. In the case of call options, these
exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Fund may write (a) in-the-money
call options when the Advisers expect that the price of the underlying
security will remain stable or decline moderately during the option
period, (b) at-the-money call options when the Advisers expect that the
price of the underlying security will remain stable or advance moderately
during the option period and (c) out-of-the-money call options when the
Advisers expect that the premiums received from writing the call option
plus the appreciation in market price of the underlying security up to the
exercise price will be greater than the appreciation in the price of the
underlying security alone. In these circumstances, if the market price of
the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by
the premium received. Out-of-the-money, at-the-money and in-the-money put
options (the reverse of call options as to the relation of exercise price
to market price) may be utilized in the same market environments that such
call options are used in equivalent transactions.
So long as the Fund's obligation as the writer of an option
continues, the Fund may be assigned an exercise notice by the broker-
dealer through which the option was sold, requiring the Fund to deliver,
in the case of a call, or take delivery of, in the case of a put, the
underlying security against payment of the exercise price. This
obligation terminates when the option expires or the Fund effects a
closing purchase transaction. The Fund can no longer effect a closing
purchase transaction with respect to an option once it has been assigned
an exercise notice.
While it may choose to do otherwise, the Fund generally will purchase
or write only those options for which the Advisers believe there is an
active secondary market so as to facilitate closing transactions. There
is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary
market may exist. A liquid secondary market in an option may cease to
exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other unforeseen events, at
times have rendered certain clearing facilities inadequate and resulted in
the institution of special procedures, such as trading rotations,
restrictions on certain types of orders or trading halts or suspensions in
one or more options. There can be no assurance that similar events, or
events that otherwise may interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be
possible to effect closing transactions in particular options. If as a
covered call option writer the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise or it otherwise covers its position.
Futures Contracts and Options on Futures Contracts. Upon exercise of
an option, the writer of the option will deliver to the holder of the
option the futures position and the accumulated balance in the writer's
futures margin account, which represents the amount by which the market
price of the futures contract exceeds, in the case of a call, or is less
than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of options
on futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time
of sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change
daily and that change would be reflected in the net asset value of the
Fund.
Foreign Currency Transactions. If the Fund enters into a currency
transaction, it will deposit, if so required by applicable regulations,
with its custodian cash or readily marketable securities in a segregated
account of the Fund in an amount at least equal to the value of the Fund's
total assets committed to the consummation of the forward contract. If
the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account so that the
value of the account will equal the amount of the Fund's commitment with
respect to the contract.
At or before the maturity of a forward contract, the Fund either may
sell a security and make delivery of the currency, or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency which it is
obligated to deliver. If the Fund retains the portfolio security and
engages in an offsetting transaction, the Fund, at the time of execution
of the offsetting transaction, will incur a gain or loss to the extent
movement has occurred in forward contract prices. Should forward prices
decline during the period between the Fund's entering into a forward
contract for the sale of a currency and the date it enters into an
offsetting contract for the purchase of the currency, the Fund will
realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
The cost to the Fund of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because transactions in
currency exchange usually are conducted on a principal basis, no fees or
commissions are involved. The use of forward currency exchange contracts
does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved
in the future. If a devaluation generally is anticipated, the Fund may
not be able to contract to sell the currency at a price above the
devaluation level it anticipates. The requirements for qualification as a
regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), may cause the Fund to restrict the degree to which
it engages in currency transactions. See "Dividends, Distributions and
Taxes."
Lending Portfolio Securities. To a limited extent, the Fund may lend
its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value
of the securities loaned. By lending its portfolio securities, the Fund
can increase its income through the investment of the cash collateral.
For purposes of this policy, the Fund considers collateral consisting of
U.S. Government securities or irrevocable letters of credit issued by
banks whose securities meet the standards for investment by the Fund to be
the equivalent of cash. From time to time, the Fund may return to the
borrower or a third party which is unaffiliated with the Fund, and which
is acting as a "placing broker," a part of the interest earned from the
investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value
of the securities rises above the level of such collateral; (3) the Fund
must be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any interest or other
distributions 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.
Risk Factors
- ------------
Investing in Sovereign Debt Obligations of Emerging Market Countries.
The ability of governments to make timely payments on their obligations is
likely to be influenced strongly by the issuer's balance of payments,
including export performance, and its access to international credits and
investments. A country whose exports are concentrated in a few
commodities could be vulnerable to a decline in the international prices
of one or more of those commodities. Increased protectionism on the part
of a country's trading partners also could adversely affect the country's
exports and diminish its trade account surplus, if any. To the extent
that a country receives payment for its exports in currencies other than
dollars, its ability to make debt payments denominated in dollars could be
adversely affected.
To the extent that a country develops a trade deficit, it will need
to depend on continuing loans from foreign governments, multilateral
organizations or private commercial banks, aid payments from foreign
governments and on inflows of foreign investment. The access of a country
to these forms of external funding may not be certain, and a withdrawal of
external funding could adversely affect the capacity of a government to
make payments on its obligations. In addition, the cost of servicing debt
obligations can be affected by a change in international interest rates
since the majority of these obligations carry interest rates that are
adjusted periodically based upon international rates.
Another factor bearing on the ability of a country to repay Sovereign
Debt Obligations is the level of the country's international reserves.
Fluctuations in the level of these reserves can affect the amount of
foreign exchange readily available for external debt payments and, thus,
could have a bearing on the capacity of the country to make payments on
its Sovereign Debt Obligations.
Expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other similar developments, such as
military coups, have occurred in the past in countries in which the Fund
will invest and could adversely affect the Fund's assets should these
conditions or events recur.
Foreign investment in certain Sovereign Debt Obligations is
restricted or controlled to varying degrees. These restrictions or
controls at times may limit or preclude foreign investment in certain
Sovereign Debt Obligations and increase the costs and expenses of the
Fund. Certain countries in which the Fund will invest require
governmental approval prior to investments by foreign persons, limit the
amount of investment by foreign persons in a particular issuer, limit the
investment by foreign persons only to a specific class of securities of an
issuer that may have less advantageous rights than the classes available
for purchase by domiciliaries of the countries and/or impose additional
taxes on foreign investors.
Certain countries other than those on which the Fund initially will
focus its investments may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs
in a country's balance of payments, the country could impose temporary
restrictions on foreign capital remittances. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental
approval for repatriation of capital, as well as by the application to the
Fund of any restrictions on investments. Investing in local markets may
require the Fund to adopt special procedures, seek local government
approvals or take other actions, each of which may involve additional
costs to the Fund.
Lower Rated Securities. The Fund is permitted to invest in
securities rated below Baa by Moody's Investors Service, Inc. ("Moody's")
and below BBB by Standard & Poor's Corporation ("S&P"), Fitch Investors
Service, Inc. ("Fitch") and Duff & Phelps Credit Rating Co. ("Duff") and
as low as the lowest rating assigned by Moody's, S&P, Fitch or Duff. Such
securities, though higher yielding, are characterized by risk. See in the
Prospectus "Description of the Fund--Risk Factors--Lower Rated Securities"
for a discussion of certain risks and the "Appendix" for a general
description of Moody's, S&P, Fitch and Duff ratings. Although ratings may
be useful in evaluating the safety of interest and principal payments,
they do not evaluate the market value risk of these securities. The Fund
will rely on the Advisers' 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 and will fluctuate over time. These securities
are considered by S&P, Moody's, Fitch and Duff, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation and
generally will involve more credit risk than securities in the higher
rating categories.
Issues of 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 securities
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 any economic recession could disrupt
severely the market for such securities and may have an adverse impact on
the value of such securities. In addition, it is likely that any such
economic downturn could adversely affect the ability of the issuers of
such securities to repay principal and pay interest thereon and increase
the incidence of default for such securities.
The Fund may acquire these securities during an initial offering.
Such securities may involve special risks because they are new issues.
The Fund has no arrangement with any persons concerning the acquisition of
such securities, and the Advisers will review carefully the credit and
other characteristics pertinent to such new issues.
Lower rated zero coupon securities involve special considerations.
The credit risk factors pertaining to lower rated securities also apply to
lower rated zero coupon securities. Such zero coupon securities carry an
additional risk in that, unlike securities 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.
See "Dividends, Distributions and Taxes."
Investment Restrictions
- -----------------------
The Fund has adopted investment restrictions numbered 1 through 8 as
fundamental policies. These restrictions cannot be changed without
approval by the holders of a majority (as defined in the Act) of the
Fund's outstanding voting shares. Investment restrictions numbered 9
through 14 are not fundamental policies and may be changed by vote of a
majority of the Fund's Directors at any time. The Fund may not:
1. 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.
2. Invest in commodities, except that the Fund may purchase and sell
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
3. 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 or real estate investment
trusts.
4. Borrow money, except to the extent permitted under the Act. For
purposes of this Investment Restriction, the entry into options, forward
contracts, futures contracts, including those relating to indices, and
options on futures contracts or indices shall not constitute borrowing.
5. 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 Fund's Board of Directors.
6. Act as an underwriter of securities of other issuers, except to
the extent the Fund may be deemed an underwriter under the Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.
7. Issue any senior security (as such term is defined in Section
18(f) of the Act), except to the extent the activities permitted in
Investment Restriction Nos. 2, 4, 11 and 12 may be deemed to give rise to
a senior security.
8. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indices, and options on
futures contracts or indices.
9. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessor) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.
10. 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.
11. 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, forward contracts, futures contracts, including
those relating to indices, and options on futures contracts or indices.
12. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and Statement of Additional
Information.
13. Enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which are
illiquid, if, in the aggregate, more than 15% of the value of the Fund's
net assets would be so invested.
14. Purchase securities of other investment companies, except to the
extent permitted under the Act.
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 Fund may invest, notwithstanding any other investment restriction
(whether or not fundamental), all of the Fund's assets in the securities
of a single open-end management investment company with substantially the
same fundamental investment objective, policies and restrictions as the
Fund.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interest of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below. Each Director who is deemed to be an "interested person"
of the Fund, as defined in the Act, is indicated by an asterisk.
Directors of the Fund
- --------------------
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in
The Dreyfus Family of Funds. For more than five years prior thereto,
he was President, 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 1994, the Fund's distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. Mr.
DiMartino is a director and former Treasurer of The National Muscular
Dystrophy Association; a trustee of Bucknell University; a director
of Health Plan Services Corporation; and a director and Chairman of
the Board of Directors of the Noel Group, Inc. Mr. DiMartino is also
a Board member of 69 other funds in the Dreyfus Family of Funds. He
is 51 years old and his address is 200 Park Avenue, New York, New
York 10166.
*DAVID P. FELDMAN, Director. Corporate Vice President-Investment
Management of AT&T. He is also a trustee of Corporate Property
Investors, a real estate investment company. He is also a Board
member of 37 other funds in the Dreyfus Family of Funds. Mr. Feldman
is 55 years old and his address is One Oak Way, Berkeley Heights, New
Jersey 07922.
JOHN M. FRASER, JR., Director. President of Fraser Associates, a service
company for planning and arranging corporate meetings and other
events. From September 1975 to June 1978, he was Executive Vice
President of Flagship Cruises, Ltd. Prior thereto, he was Senior
Vice President and Resident Director of the Swedish-American Line for
the United States and Canada. He is also a Board member of 14 other
funds in the Dreyfus Family of Funds. Mr. Fraser is 73 years old and
his address is 133 East 64th Street, New York, New York 10021.
ROBERT R. GLAUBER, Director. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard
University since January 1992. He was Under Secretary of the
Treasury for Finance at the U.S. Treasury Department from May 1989 to
January 1992. For more than five years prior thereto, he was a
Professor of Finance at the Graduate School of Business
Administration of Harvard University and, from 1985 to 1989, Chairman
of its Advanced Management Program. He is also a director of
MidOcean Reinsurance Co. Ltd. and Cooke & Bieler, Inc., investment
counselors. He is also a Board member of 20 other funds in the
Dreyfus Family of Funds. Mr. Glauber is 56 years old and his address
is 79 John F. Kennedy Street, Cambridge, Massachusetts 02138.
JAMES F. HENRY, Director. President of the Center for Public Resources, a
non-profit organization principally engaged in the development of
alternatives to business litigation. He was of counsel to the law
firm of Lovejoy, Wasson & Ashton from October 1975 to December 1976
and from October 1979 to June 1983, and was a partner of that firm
from January 1977 to September 1979. From September 1971 to December
1976, he was President and a director of the Edna McConnell Clark
Foundation, a philanthropic organization. He is also a Board member
of 10 other funds in the Dreyfus Family of Funds. Mr. Henry is 64
years old and his address is c/o Center for Public Resources, 366
Madison Avenue, New York, New York 10017.
ROSALIND GERSTEN JACOBS, Director. Director of Merchandise and Marketing
for Corporate Property Investors, a real estate investment company.
From 1974 to 1976, she was owner and manager of a merchandise and
marketing consulting firm. Prior to 1974, she was Vice President of
Macy's, New York. She is also a Board member of 20 other funds in
the Dreyfus Family of Funds. Mrs. Jacobs is 69 years old and her
address is c/o Corporate Property Investors, 305 East 47th Street,
New York, New York 10017.
IRVING KRISTOL, Director. John M. Olin Distinguished Fellow of the
American Enterprise Institute for Public Policy Research. From May
1981 to December 1994 he was a consultant to Dreyfus on economic
matters. From 1969 to 1988, he was Professor of Social Thought at
the Graduate School of Business Administration, New York University.
From September 1969 to August 1979, he was Henry R. Luce Professor of
Urban Values at New York University. He is also co-editor of The
Public Interest magazine and an author or co-editor of several
books. He also has been a director of Lincoln National Corporation,
an insurance company from 1975 to 1990, and of Warner-Lambert
Company, a pharmaceutical and consumer products company from 1977 to
1990. He is also a Board member of 10 other funds in the Dreyfus
Family of Funds. Mr. Kristol is 75 years old and his address is c/o
The Public Interest, 1112 16th Street, N.W., Suite 530, Washington,
D.C. 20036.
DR. PAUL A. MARKS, Director. President and Chief Executive Officer of
Memorial Sloan-Kettering Cancer Center. He was Vice President for
Health Sciences and Director of the Cancer Center at Columbia
University from 1973 to September 1980, and Professor of Medicine and
of Human Genetics and Development at Columbia University from 1968 to
1982. From 1976 to 1991, he was a director of Charles H. Revson
Foundation. From 1992 to 1993, he was a director of Biotechnology
General, Inc., a biotechnology development company. He is also a
director of Pfizer, Inc., a pharmaceutical company, Life
Technologies, Inc., a life science company providing products for
cell and molecular biology and microbiology, National Health
Laboratories, a national chemical diagnostic laboratory and Tularik,
Inc., a biotechnology company. He is also a Board member of 10 other
funds in the Dreyfus Family of Funds. Mr. Marks is 68 years old and
his address is c/o Memorial Sloan-Kettering Cancer Center, 1275 York
Avenue, New York, New York 10021.
DR. MARTIN PERETZ, Director. Editor-in-Chief of The New Republic magazine
and a lecturer in social studies at Harvard University, where he has
been a member of the faculty since 1965. He is a trustee of the
Center of Blood Research at the Harvard Medical School, and a
director of Leukosite Inc., a biopharmaceutical company. He is also
a Board member of 10 other funds in the Dreyfus Family of Funds. Dr.
Peretz is 55 years old and his address is c/o The New Republic,
1220 19th Street, N.W., Washington, D.C. 20036.
BERT W. WASSERMAN, Director. Executive Vice President and Chief Financial
Officer since January 1990 and a director from January 1990 to March
1993 of Time Warner Inc. From 1981 to 1990, he was a member of the
office of the President and a director of Warner Communications Inc.
He is also a member of the Chemical Bank National Advisory Board, a
trustee of the Baruch School of the College of the City of New York
and a director of The New Germany Fund. He is also a Board member of
10 other funds in the Dreyfus Family of Funds. Mr. Wasserman is 62
years old and his address is c/o Time Warner Inc., 75 Rockefeller
Plaza, New York, New York 10019.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the
Directors of the Fund who are not "interested persons" of the Fund, as
defined in the Act, will be selected and nominated by the Directors who
are not "interested persons" of the Fund.
The Fund typically pays its Directors an annual retainer and a per
meeting fee and reimburses them for their expenses. The aggregate
compensation to be paid to each Director from the Fund, based on estimated
amounts for the current fiscal year, and the total compensation for
calendar year 1994 from the Fund and all other funds in the Dreyfus Family
of Funds for which such person is a Board member is as follows:
<TABLE>
<CAPTION>
(5) Total
Compensation from
Fund and Fund
(3) Pension or Complex Paid to
(2) Aggregate Retirement Benefits (4) Estimated Annual Board Member For
(1) Name of Board Compensation from Accrued as Part of Benefits Upon the 1994 Calendar
Member Fund Fund's Expenses Retirement Year
- ----------------- ----------------- -------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Joseph S. DiMartino $2,000 none none $445,000*
David P. Feldman $2,000 none none $ 85,631
John M. Fraser, Jr. $2,000 none none $ 46,766
Robert R. Glauber $2,000 none none $ 79,696
James F. Henry $2,000 none none $ 44,946
Rosalind Gersten Jacobs $2,000 none none $ 57,638
Irving Kristol $2,000 none none $ 44,946
Dr. Paul A. Marks $2,000 none none $ 44,946
Dr. Martin Peretz $2,000 none none $ 44,946
Bert W. Wasserman $2,000 none none $ 40,720
</TABLE>
________________________________
* Mr. DiMartino was elected Director on March 13, 1995. This amount
reflects estimated compensation for calendar
year 1995.
Officers of the Fund
- --------------------
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From December 1991 to
July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., a wholly-owned subsidiary of The Boston Company,
Inc. Prior to December 1991, she served as Vice President and
Controller, and later as Senior Vice President, of The Boston Company
Advisors, Inc.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President
and General Counsel of the Distributor and an officer of other
investment companies advised or administered by Dreyfus. From
February 1992 to July 1994, he served as Counsel for The Boston
Company Advisors, Inc. From August 1990 to February 1992, he was
employed as an Associate at Ropes & Gray, and prior to August 1990,
he was employed as an Associate at Sidley & Austin.
JOSEPH S. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by
Dreyfus. 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.
FREDERICK C. DEY, Vice President and Assistant Treasury. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From 1988 to August
1994, he was Manager of the High Performance Fabric Division of
Springs Industries Inc.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From September 1992 to
August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System.
JOHN J. PYBURN, Assistant Treasurer. Vice President of the Distributor
and an officer of other investment companies advised or administered
by Dreyfus. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of Dreyfus.
PAUL FURCINITO, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by Dreyfus. From January 1992 to July 1994, he was a
Senior Legal Product Manager, and from January 1990 to January 1992,
he was a mutual fund accountant, for The Boston Company Advisors,
Inc.
RUTH D. LEIBERT, Vice President. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by Dreyfus. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts and, prior thereto, was
employed as a Research Assistant for the Bureau of National Affairs.
The address of each officer of the Fund, is 200 Park Avenue, New
York, New York 10166.
Directors and officers of the Fund, as a group, owned less than 1% of
the Fund's shares of common stock outstanding on January 23, 1995.
The following persons are known by the Fund to own of record or
beneficially 5% or more of the Fund's outstanding voting securities as of
January 23, 1995: Major Trading Corporation, Attn.: Maurice Bendrihem,
200 Park Avenue, New York, New York 10166 - 32.9%. M&G, Attn.: David
Witzer, 3 Quays Towerhill, London EC3R6B2 England - 32.6%. A shareholder
who beneficially owns, directly or indirectly, more than 25% of the Fund's
voting securities may be deemed a "control person" (as defined in the Act)
of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Management Agreement. Dreyfus supervises investment management of
the Fund pursuant to the Management Agreement (the "Management Agreement")
dated August 24, 1994 between Dreyfus and the Fund. The Management
Agreement is subject to annual approval by (i) the Fund's Board of
Directors or (ii) vote of a majority (as defined in the Act) of the Fund's
outstanding voting securities, provided that in either event its
continuance also is approved by a majority of the Fund's Directors who are
not "interested persons" (as defined in the Act) of the Fund or Dreyfus,
by vote cast in person at a meeting called for the purpose of voting on
such approval. The Management Agreement is terminable without penalty, on
60 days' notice, by the Fund's Directors or by vote of the holders of a
majority of the Fund's shares, or, on not less than 90 days' notice, by
Dreyfus. The Management Agreement will terminate automatically in the
event of its assignment (as defined in the Act).
The following persons are officers and/or directors of Dreyfus:
Howard Stein, Chairman of the Board and Chief Executive Officer; Robert E.
Riley, President and Chief Operating Officer; W. Keith Smith, Vice
Chairman of the Board; Lawrence S. Kash, Vice Chairman-Distribution;
Philip L. Toia, Vice Chairman-Operations and Administration; Paul H.
Snyder, Vice President and Chief Financial Officer; Daniel C. Maclean,
Vice President and General Counsel; Elie M. Genadry, Vice
President-Wholesale; Henry D. Gottmann, Vice President-Retail; Jeffrey N.
Nachman, Vice President-Mutual Fund Administration; Diane M. Coffey, Vice
President-Corporate Communications; Barbara E. Casey, Vice President-
Retirement Services; Katherine C. Wickham, Vice President-Human Resources;
Mark N. Jacobs, Secretary and Vice President-Fund Legal and Compliance;
Maurice Bendrihem, Controller; and Mandell L. Berman, Frank V. Cahouet,
Alvin E. Friedman, Lawrence M. Greene and David B. Truman, directors.
Dreyfus maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. Dreyfus also may make such advertising and
promotional expenditures using its own resources, as it from time to time
deems appropriate.
Sub-Investment Advisory Agreement. M&G provides investment advisory
assistance and day-to-day management of the Fund's investments pursuant to
the Sub-Investment Advisory Agreement (the "Sub-Advisory Agreement") dated
August 24, 1994 between M&G and Dreyfus. The Sub-Advisory Agreement is
subject to annual approval by (i) the Fund's Board of Directors or (ii)
vote of a majority (as defined in the Act) of the Fund's outstanding
voting securities, provided that in either event the continuance also is
approved by a majority of the Fund's Directors who are not "interested
persons" (as defined in the Act) of the Fund or M&G, by vote cast in
person at a meeting called for the purpose of voting on such approval.
The Sub-Advisory Agreement is terminable without penalty, (i) by Dreyfus
on 60 days' notice, (ii) by the Fund's Board of Directors or by vote of
the holders of a majority of the Fund's shares on 60 days' notice, or
(iii) by M&G on not less than 90 days' notice. The Sub-Advisory Agreement
will terminate automatically in the event of its assignment (as defined in
the Act) or upon the termination of the Management Agreement for any
reason.
The following persons are officers and/or directors of M&G: David L.
Morgan, Chairman of the Board of Directors; John P. Allard, John W.
Boeckmann, Gordon P. Craig, James H.S. Denham, Charles C.M. Glasse,
Patrick A. Harrington, Martin E. Harrison, Robert A. R. Hayes, Richard S.
Hughes, David J. Hutchins, Peter D. Jones, James R.D. Korner, Paul R.
Marsh, Michael G. McLintock, Nigel D. Morrison, Roger D. Nightingale,
William J. Nott, Neil A. Pegrum, Duncan N. Robertson, J. Christopher
Whitaker, directors; and Anthony J. Ashplant, Secretary.
M&G provides day-to-day management of the Fund's investments in
accordance with the stated policies of the Fund, subject to the
supervision of Dreyfus and approval of the Fund's Board of Directors.
Dreyfus and M&G provide the Fund with portfolio managers who are
authorized by the Board of Directors to execute purchases and sales of
securities. The Fund's portfolio managers are William Vincent and
Theodora Zemek. Dreyfus also maintains a research department with a
professional staff of portfolio managers and securities analysts who
provide research services for the Fund as well as other funds advised by
Dreyfus. All purchases and sales are reported for the Board of Directors'
review at the meeting subsequent to such transactions.
Expenses. All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically assumed by Dreyfus
and/or M&G. The expenses borne by the Fund 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, Securities and Exchange Commission fees, state Blue
Sky qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of
maintaining the Fund's existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of shareholders' reports and
meetings, and any extraordinary expenses. The Fund is subject to an
annual distribution fee for advertising, marketing and distributing its
shares and an annual service fee for ongoing personal services relating to
shareholder accounts and services related to the maintenance of
shareholder accounts. See "Distribution Plan and Shareholder Services
Plan."
As compensation for Dreyfus' services, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of .70 of 1% of the value of the
Fund's average daily net assets. All fees and expenses are accrued daily
and deducted before declaration of dividends to shareholders. For the
period from March 18, 1994 (commencement of operations) through November
30, 1994, no management fee was paid by the Fund pursuant to undertakings
by Dreyfus.
As compensation for M&G's services, Dreyfus has agreed by pay M&G a
monthly fee at the annual rate of .28 of 1% of the value of the Fund's
average daily net assets. For the period from March 18, 1994
(commencement of operations) through November 30, 1994, no sub-investment
advisory fee was paid by Dreyfus pursuant to an agreement in effect
between Dreyfus and M&G.
Dreyfus and M&G have agreed that if in any fiscal year the aggregate
expenses of the Fund, exclusive of interest, taxes, brokerage 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, Dreyfus
and M&G will bear the excess expense in proportion to their management fee
and sub-advisory fee to the extent required by state law. Such payment,
if any, will be estimated daily, and reconciled and paid on a monthly
basis.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan and Shareholder Services Plan."
Fund shares are subject to a Distribution Plan and a Shareholder
Services Plan.
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the Securities
and Exchange Commission under the Act provides, among other things, that
an investment company may bear expenses of distributing its shares only
pursuant to a plan adopted in accordance with the Rule. The Fund's Board
of Directors has adopted such a plan (the "Distribution Plan") with
respect to the Fund's shares, pursuant to which the Fund reimburses the
Distributor for distributing Fund shares and pays Dreyfus, Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus, and any affiliate of
either of them for advertising and marketing relating to the Fund. Under
the Distribution Plan, the Distributor may make payments to certain
financial institutions, securities dealers and other financial industry
professionals (collectively, "Service Agents") in respect to distribution
services. The Fund's Board of Directors believes that there is a
reasonable likelihood that the Distribution Plan will benefit the Fund and
its shareholders. In some states, certain financial institutions
effecting transactions in Fund shares may be required to register as
dealers pursuant to state law.
A quarterly report of the amounts expended under the Distribution
Plan, and the purposes for which such expenditures were incurred, must be
made to the Directors for their review. In addition, the Distribution
Plan provides that it may not be amended to increase materially the costs
which Fund shareholders may bear for distribution pursuant to the
Distribution Plan without shareholder approval and that other material
amendments of the Distribution Plan must be approved by the Board of
Directors, and by the Directors who are not "interested persons" (as
defined in the Act) of the Fund and have no direct or indirect financial
interest in the operation of the Distribution Plan or in any agreements
entered into in connection with the Distribution Plan, by vote cast in
person at a meeting called for the purpose of considering such amendments.
The Distribution Plan is subject to annual approval by such vote of the
Directors cast in person at a meeting called for the purpose of voting on
the Distribution Plan. The Distribution Plan was so approved by the
Directors at a meeting held on February 17, 1994. The Distribution Plan
may be terminated at any time by vote of a majority of the Directors who
are not "interested persons" and have no direct or indirect financial
interest in the operation of the Distribution Plan or in any agreements
entered into in connection with the Distribution Plan or by vote of the
holders of a majority of the Fund's shares.
For the period from August 24, 1994 through November 30, 1994, the
amounts payable by the Fund under the Distribution Plan was $10,695, of
which $9,456 was charged for advertising, marketing and servicing the
Fund's shares and $1,239 was charged for preparing, printing and
distributing prospectuses and statements of additional information.
Pursuant to undertakings in effect, the amount chargeable to the Fund
pursuant to the Distribution Plan was waived, resulting in no fee being
paid by the Fund.
Shareholder Services Plan. The Fund has adopted a Shareholder
Services Plan, pursuant to which the Fund pays the Distributor for the
provision of certain services to Fund shareholders.
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 Directors for their review. In addition, the
Shareholder Services Plan provides that it may not be amended without
approval of the Directors, and by the Directors who are not "interested
persons" (as defined in the Act) of the Fund 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. The Shareholder Services Plan is subject
to annual approval by such vote of the Directors cast in person at a
meeting called for the purpose of voting on the Shareholder Services Plan.
The Shareholder Services Plan was so approved on February 17, 1994. The
Shareholder Services Plan is terminable at any time by vote of a majority
of the Directors who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Shareholder Services
Plan or in any agreements entered into in connection with the Shareholder
Services Plan.
For the period from August 24, 1994 through November 30, 1994, $9,456
was charged to the Fund under the Shareholder Services Plan. Pursuant to
undertakings in effect, the amount chargeable to the Fund was waived,
resulting in no fee being paid by the Fund.
Prior Distribution Plan and Shareholder Services Plan. As of August
24, 1994 the Fund terminated its then existing Distribution Plan, which
provided for payments to be made to Dreyfus Service Corporation for
advertising, marketing and distributing Fund shares at the annual rate of
.25%. For the period March 18, 1994 (commencement of operations) through
August 23, 1994, the amounts payable by the Fund under the Distribution
Plan was $13,225 of which $12,364 was charged for advertising, marketing
and servicing the Fund's shares and $861 was charged for preparing,
printing and distributing prospectuses and statements of additional
information. Pursuant to undertakings in effect, the amount chargeable to
the Fund pursuant to the Plan was waived, resulting in no fee being paid
by the Fund.
As of August 24, 1994, the Fund also terminated its then existing
Shareholder Services Plan, which provided for payments to be made to
Dreyfus Service Corporation for expenses related to providing shareholder
services. For the period March 18, 1994 (commencement of operations)
through August 23, 1994, the amounts charged to the Fund under the
Shareholder Services Plan was $12,364. Pursuant to undertakings in
effect, the amount chargeable to the Fund pursuant to the Plan was waived,
resulting in no fee being paid by the Fund.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor
also acts as distributor for the other funds in the Dreyfus Family of
Funds and for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made between the hours of 8:00 a.m. and 4:00 p.m., New York time,
on any business day that The Shareholder Services Group, Inc., the Fund's
transfer and dividend disbursing agent (the "Transfer Agent"), and the New
York Stock Exchange are open. Such purchases will be credited to the
shareholder's Fund account on the next bank business day. To qualify to
use the Dreyfus TeleTransfer Privilege, the initial payment for purchase
of Fund shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request
must be in writing and signature-guaranteed. See "Redemption of Fund
Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege
on the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds will be
transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder
Services Form. Redemption proceeds, if wired, must be in the amount of
$1,000 or more and will be wired to the investor's account at the bank of
record designated in the investor's file at the Transfer Agent, if the
investor's bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-
654-7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Fund Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion
Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other
suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to signature-
guarantees, please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of
the Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Board of Directors reserves the right to make payments in
whole or in part in securities or other assets in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities
and Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment
of dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales load
that could have been imposed in connection with the Purchased
Shares (at the time the Purchased Shares were acquired), without
giving effect to any reduced loads, the difference will be
deducted.
To accomplish an exchange under item D above, shareholders must
notify the Transfer Agent of their prior ownership of fund shares and
their account number.
To request an exchange, an investor or the investor's Service Agent
acting on the investor's behalf must give exchange instructions to the
Transfer Agent in writing, by wire 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 from any
person representing himself or herself to be the investor or a
representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for
telephone exchange.
To establish a Personal Retirement Plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in Corporate Plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
Personal Retirement Plans, the shares exchanged must have a current value
of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund,
shares of another fund in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the
basis of relative net asset value as set forth under "Fund Exchanges"
above. Enrollment in or modification or cancellation of this Privilege is
effective three business days following notification by the investor. An
investor will be notified if his account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next Auto-Exchange transaction. Shares
held under IRA and other retirement plans are eligible for this Privilege.
Exchanges of IRA shares may be made between IRA accounts and from regular
accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only
among those accounts.
Fund Exchanges and 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 1-800-654-6561. The Fund 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. There is a service charge of $.50 for each
withdrawal check. Automatic Withdrawal may be terminated at any time by
the investor, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
other funds purchased pursuant to this privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge
a sales load may be invested in shares of other funds sold with
a sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge and the applicable contingent deferred sales charge, if
any, will be imposed upon redemption of such shares.
Corporate Pension/Profit-Sharing and Personal Retirement Plans. The
Fund makes available to corporations a variety of prototype pension and
profit-sharing plans including a 401(k) Salary Reduction Plan. In
addition, the Fund makes available Keogh Plans, IRAs, including SEP-IRAs
and IRA "Rollover Accounts," and 403(b)(7) Plans. Plan support services
also are available.
Investors who wish to purchase Fund shares in conjunction with a
Keogh Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request
from the Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or
IRAs may charge a fee, payment of which could require the liquidation of
shares. All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans
may not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum or subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a non-
working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on
eligibility, service fees and tax implications, and should consult a tax
adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
Valuation of Portfolio Securities. The Fund's securities, including
covered call options written by the Fund, are valued at the last sale
price on the securities exchange or national securities market on which
such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were
no transactions, are valued at the average of the most recent bid and
asked prices, except in the case of open short positions where the asked
price is used for valuation purposes. Bid price is used when no asked
price is available. Any assets or liabilities initially expressed in
terms of foreign currency will be translated into dollars at the midpoint
of the New York interbank market spot exchange rate as quoted on the day
of such translation by the Federal Reserve Bank of New York or if no such
rate is quoted on such date, at the exchange rate previously quoted by the
Federal Reserve Bank of New York or at such other quoted market exchange
rate as may be determined to be appropriate by the Advisers. Forward
currency contracts will be valued at the current cost of offsetting the
contract. Because of the need to obtain prices as of the close of trading
on various exchanges throughout the world, the calculation of net asset
value does not take place contemporaneously with the determination of
prices of a majority of the Fund's securities. Short-term investments are
carried at amortized cost, which approximates value. Any securities or
other assets for which recent market quotations are not readily available
are valued at fair value as determined in good faith by the Fund's Board
of Directors. Expenses and fees of the Fund, including the management fee
paid by the Fund and distribution and service fees, are accrued daily and
taken into account for the purpose of determining the net asset value of
Fund shares.
Restricted securities, as well as securities or other assets for
which market quotations are not readily available, or are not valued by a
pricing service approved by the Board of Directors, are valued at fair
value as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In
making their good faith valuation of restricted securities, the Directors
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same
class of securities for which a public market exists usually will be
valued at market value less the same percentage discount at which
purchased. This discount will be revised periodically by the Board of
Directors if the Directors believe that it no longer reflects the value of
the restricted securities. Restricted securities not of the same class as
securities for which a public market exists usually will be valued
initially at cost. Any subsequent adjustment from cost will be based upon
considerations deemed relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on
which the New York Stock Exchange is closed currently are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Management of the Fund believes that the Fund has qualified for the
fiscal year ended November 30, 1994 as a "regulated investment company"
under the Code. The Fund intends to continue to so qualify if such
qualification is in the best interests of its shareholders. As a
regulated investment company, the 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 pay out to its shareholders at least 90% of its net
income (consisting of net investment income and net short-term capital
gain), must derive less than 30% of its annual gross income from gain on
the sale of securities held for less than three months, and must meet
certain asset diversification and other requirements. Accordingly, the
Fund may be restricted in the selling of securities held for less than
three months. The Code, however, allows the Fund to net certain
offsetting positions, making it easier for the Fund to satisfy the 30%
test. 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 net asset value of the shares
below the cost of the 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 holds shares
of the Fund for six months or less and has received a capital gain
distribution with respect to such shares, any loss incurred on the sale of
such shares will be treated as long-term capital loss to the extent of the
capital gain distribution received.
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gains and losses. However, a portion of the
gain or loss realized from the disposition of non-U.S. dollar denominated
securities (including debt instruments, certain financial futures and
options, and certain preferred stock) may be treated as ordinary income or
loss under Section 988 of the Code. In addition, all or a portion of any
gains realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income under Section 1276 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. "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.
The Fund may qualify for and may make an election permitted under
Section 853 of the Code so that shareholders may be eligible to claim a
credit or deduction on their Federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro
rata portion of qualified taxes paid or incurred by the Fund to foreign
countries (which taxes relate primarily to investment income). The Fund
may make an election under Section 853, provided that more than 50% of the
value of the Fund's total assets at the close of the taxable year consists
of securities in foreign corporations, and the Fund satisfies the
applicable distribution provisions of the Code. The foreign tax credit
available to shareholders is subject to certain limitations imposed by the
Code.
Under Section 1256 of the Code, any gain or loss the Fund realizes
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 the Fund characterized in the
manner described above.
Offsetting positions held by the 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
Section 1092 of the Code, which, in certain circumstances, overrides or
modifies the provisions of Sections 1256 and 988. If the 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. The 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" 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" rules,
short-term capital loss on "straddle" positions may be recharacterized as
long-term capital loss, and long-term capital gains may be treated as
short-term capital gains or ordinary income.
Investment by the Fund in securities issued 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 as income each year a portion of the
discount (or deemed discount) at which such securities were issued and to
distribute such income. 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
Dreyfus assumes general supervision over placing orders on behalf of
the Fund for the purchase or sale of investment securities. Allocation of
brokerage transactions, including their frequency, is made in Dreyfus'
best judgment 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 Advisers' 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 Advisers and the Advisers' fees are not
reduced as a consequence of the receipt of such supplemental information.
Such information may be useful to Dreyfus in serving both the Fund
and other funds which it advises and to M&G in serving both the Fund and
the other funds or accounts it advises, and, conversely, supplemental
information obtained by the placement of business of other clients may be
useful to the Advisers in carrying out their obligations to the Fund.
Brokers also will be selected because of their ability to handle special
executions such as are involved in large block trades or broad distribu-
tions, provided the primary consideration is met. Large block trades may,
in certain cases, result from two or more funds advised or administered by
Dreyfus being engaged simultaneously in the purchase or sale of the same
security. Certain of the Fund's transactions in securities of foreign
issuers may not benefit from the negotiated commission rates available to
the Fund for transactions in securities of domestic issuers. When
transactions are executed in the over-the-counter market, the Fund will
deal with the primary market makers unless a more favorable price or
execution otherwise is obtainable. 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 comparatively greater
brokerage expenses. The overall reasonableness of brokerage commissions
paid is evaluated by the Advisers based upon their knowledge of available
information as to the general level of commissions paid by other
institutional investors for comparable services.
For the period from March 18, 1994 (commencement of operations)
through November 30, 1994, there were no commissions, gross spreads or
concessions on principal transactions.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Performance Information."
The Fund's current yield for the 30-day period ended November 30,
1994 was 7.75%. The Fund's net yield for this same period was 5.39%.
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.
The Fund's average annual return for the period March 18, 1994
(commencement of operations) through November 30, 1994 was 1.29%. Average
annual total return is calculated by determining the ending redeemable
value of an investment purchased at net asset value per share with a
hypothetical $1,000 payment made at the beginning of the period (assuming
the reinvestment of dividends and distributions), dividing by the amount
of the initial investment, taking the "n"th root of the quotient (where
"n" is the number of years in the period) and subtracting 1 from the
result.
The Fund's total return for the period from March 18, 1994
(commencement of operations) through November 30, 1994 was 0.91%. 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.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. Fund shares are of one class and have equal rights as to
dividends and in liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
The Bank of New York, 110 Washington Street, New York, New York
10286, is the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's transfer and dividend disbursing agent.
Neither The Bank of New York nor The Shareholder Services Group, Inc. has
any part in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance
of the shares of Common Stock being sold pursuant to the Fund's
Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX
Description of certain ratings assigned by Standard & Poor's
Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, Inc. ("Fitch") and Duff & Phelps Credit Rating Co.
("Duff"):
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small
degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of
speculation and C the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
BB
Debt rated BB has less near-term vulnerability to default than
other speculative grade debt. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments.
B
Debt rated B has a greater vulnerability to default but
presently has the capacity to meet interest payments and principal
repayments. Adverse business, financial or economic conditions would
likely impair capacity or willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payments of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC-debt rating.
D
Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be
modified by the addition of a plus or minus sign to show relative standing
within the major ratings categories.
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.
Ca
Bonds which are rated Ca present obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show
relative standing within the major ratings categories, except in the Aaa
category and in 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.
Issuers (or related supporting institutions) rated Prime-2 (P-2)
have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above
but to a lesser degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Fitch Bond Ratings
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.
CC
Bonds rated CC are minimally protected. Default payment of
interest and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of
interest and/or principal payments. Such bonds are extremely speculative
and should be valued on the basis of their ultimate recovery value in
liquidation or reorganization of the obligor. DDD represents the highest
potential for recovery on these bonds and D represents the lowest
potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to
indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in the AAA category covering
12-36 months or the DDD, DD or D categories.
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+.
F-2
Good Credit Quality. Issues carrying this rating have a
satisfactory degree of assurance for timely payments, but the margin of
safety is not as great as the F-1+ and F-1 categories.
Duff
AAA
Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A
Bonds rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods
of economic stress.
BBB
Bonds rated BBB are considered to have below average protection
factors but still considered sufficient for prudent investment.
Considerable variability in risk during economic cycles.
BB
Bonds rated BB are below investment grade but are deemed by Duff
as likely to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the
category.
B
Bonds rated B are below investment grade and possess the risk
that obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry conditions
and/or company fortunes. Potential exists for frequent changes in quality
rating within this category or into a higher or lower quality rating
grade.
CCC
Bonds rated CCC are well below investment grade securities.
Such bonds may be in default or have considerable uncertainty as to timely
payment of interest, preferred dividends and/or principal. Protection
factors are narrow and risk can be substantial with unfavorable economic
or industry conditions and/or with unfavorable company developments.
DD
Defaulted debt obligations. Issuer has failed to meet scheduled
principal and/or interest payments.
Plus (+) and minus (-) signs are used with a rating symbol
(except AAA) to indicate the relative position of a credit within the
rating category.
Commercial Paper Rating
The rating Duff-1 is the highest commercial paper rating
assigned by Duff. Paper rated Duff-1 is regarded as having very high
certainty of timely payment with excellent liquidity factors which are
supported by ample asset protection. Risk factors are minor.
<TABLE>
<CAPTION>
DREYFUS GLOBAL BOND FUND, INC.
STATEMENT OF INVESTMENTS NOVEMBER 30, 1994
PRINCIPAL
BONDS AND NOTES_92.1% AMOUNT VALUE
--------- -----------
<S> <C> <C>
BANKING_9.7% Bayerische Landesbank Girozentrale,
Bonds, 6%, 2004...................... $ 553,787 (a) $ 495,086
Societe Generale,
Floating Rate Notes, 5 3/4%, 2008.... 500,000 (b) 500,075
Sudwestdeutsche Landesbank Capital Markets,
Bonds (Gtd. by Sudwestdeutsche Landesbank
Girozentrale), 6 1/4%, 2003.......... 541,057 (a) 490,739
--------
1,485,900
---------
CHEMICALS_8.7% Eastman Kodak,
Notes, 7 7/8%, 1997.................. 450,000 446,963
Hoechst,
Bearer Bonds, 6%, 2000............... 500,000 447,200
Imperial Chemical Industries,
Bonds, 9 3/4%, 2005.................. 430,513 (c) 440,199
--------
1,334,362
--------
FINANCIAL SERVICES_7.0% Credit Local De France,
Bonds, 6%, 2001...................... 757,959 (d) 813,480
Ford Motor Credit,
Floating Rate Notes, 6 3/16%, 1998... 250,000 (b) 249,975
--------
1,063,455
--------
MACHINERY AND
ENGINEERING_3.0% Fuji Heavy Industries,
Bonds (Gtd. by The Industrial Bank of Japan),
8 3/4%, 1999......................... 450,000 449,438
--------
MISCELLANEOUS_11.7% B.A.T. Capital,
Gtd. Bonds (Gtd. by B.A.T. Industries p.l.c.),
6 1/2%, 2003......................... 500,000 427,825
Petroleos Mexicanos,
Gtd. Notes, 9%, 2003................. 508,788 (c) 459,207
Treasury Corp. of Victoria,
Bonds (Gtd. by The Government of Victoria),
7 1/4%, 2003......................... 545,706 (e) 435,200
Ville de Montreal,
Notes, 6 3/8%, 2001.................. 545,137 (f) 462,004
--------
1,784,236
--------
TELECOMMUNICATIONS_2.8%. Cable and Wireless,
Bonds, 6 1/2%, 2003.................. 500,000 429,700
--------
UTILITIES-ELECTRIC_5.1% Chubu Electric Power,
Bonds, 6 1/8%, 2001.................. 505,306 (d) 543,835
Tokyo Electric Power,
Notes, 10 1/2%, 2001................. 218,055 (f) 228,063
--------
771,898
--------
DREYFUS GLOBAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
-------- -----------
FOREIGN/
GOVERNMENTAL_44.1% Asfinag,
Bonds (Gtd. by the Republic of Austria),
6%, 2000............................. $ 808,489 (d) $ 865,083
France O.A.T.:
Coupon Strips:
Zero Coupon, 2018................ 1,857,010 (g) 251,253
Zero Coupon, 2022................ 1,822,500 (h) 177,511
Deb., 6 3/4%, 2004................... 371,402 (g) 339,536
Ireland Treasury Securities,
6 1/4%, 2004......................... 437,190 (i) 371,830
Italy Treasury Bonds,
8 1/2%, 1999......................... 784,920 (j) 711,137
Kingdom of Denmark Bullet,
7%, 2004............................. 544,715 (k) 486,567
Kingdom of Spain Government Bonds,
4 5/8%, 2004......................... 505,306 (d) 500,910
Netherlands Government Bonds,
5 3/4%, 2004......................... 1,081,020 (l) 963,188
Republic of Italy,
Notes, 5 1/8%, 2003.................. 454,775 (d) 463,302
Spain Government Bonds,
8%, 2004............................. 572,082 (m) 469,536
United Kingdom Treasury Securities,
8%, 2003............................. 665,338 (c) 642,882
United Mexican States (Aztec),
Collateralized Floating Rate Bonds,
7 5/16%, 2008........................ 500,000 (b) 499,375
--------
6,742,110
--------
TOTAL BONDS AND NOTES
(cost $14,419,771)................... $14,061,099
===========
SHORT-TERM INVESTMENTS_2.9%
U.S. TREASURY BILLS:........ 4.51%, 12/8/1994 $ 162,000 $ 161,859
4.65%, 12/15/1994...................... 39,000 38,927
5.06%, 12/22/1994...................... 249,000 248,208
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $449,053)...................... $ 448,994
===========
TOTAL INVESTMENTS (cost $14,868,824)........................................ 95.0% $14,510,093
===== ===========
CASH AND RECEIVABLES (NET).................................................. 5.0% $ 765,400
===== ===========
NET ASSETS.................................................................. 100.0% $15,275,493
===== ===========
</TABLE>
DREYFUS GLOBAL BOND FUND, INC.
NOTES TO STATEMENT OF INVESTMENTS:
(a) Denominated in German Deutsche Marks.
(b) Variable rate security-interest rate subject to periodic change.
(c) Denominated in British Pounds.
(d) Denominated in Japanese Yen.
(e) Denominated in Australian Dollars.
(f) Denominated in Canadian Dollars.
(g) Denominated in French Francs.
(h) Denominated in European Currency Units.
(i) Denominated in Irish Pounds.
(j) Denominated in Italian Lire.
(k) Denominated in Danish Krone.
(l) Denominated in Dutch Guilders.
(m) Denominated in Spanish Pesetas.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS GLOBAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1994
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $14,868,824)_see statement..................................... $14,510,093
Cash.................................................................... 147,483
Interest receivable..................................................... 408,388
Net unrealized appreciation on forward currency exchange
contracts_Note 3(a)................................................... 129,068
Prepaid expenses_Note 1(e).............................................. 70,091
Due from The Dreyfus Corporation........................................ 135,687
-----------
15,400,810
LIABILITIES:
Due to Distributor...................................................... $ 6,054
Payable for shares of Common Stock redeemed............................. 56,853
Accrued expenses and other liabilities.................................. 62,410 125,317
----------- -----------
NET ASSETS.................................................................. $15,275,493
=============
REPRESENTED BY:
Paid-in capital......................................................... $15,709,085
Accumulated undistributed investment income_net......................... 104,796
Accumulated net realized (loss) on investments and foreign currency transactions (308,725)
Accumulated net unrealized (depreciation) on investments
and foreign currency transactions_Note 3(b)........................... (229,663)
-----------
NET ASSETS at value applicable to 1,268,902 shares outstanding
(300 million shares of $.001 par value Common Stock authorized)......... $15,275,493
=============
NET ASSET VALUE, offering and redemption price per share
($15,275,493 / 1,268,902 shares)........................................ $12.04
======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GLOBAL BOND FUND, INC.
STATEMENT OF OPERATIONS
FROM MARCH 18, 1994 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1994
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME (net of $4,066 foreign taxes withheld at source)........ $ 683,264
EXPENSES:
Management fee_Note 2(a)............................................. $ 61,095
Shareholder servicing costs_Note 2(b,c)............................... 60,907
Organization expenses_Note 1(f)....................................... 23,652
Legal fees............................................................ 22,134
Auditing fees......................................................... 18,036
Directors' fees and expenses_Note 2(d)................................ 11,790
Prospectus and shareholders' reports_Note 2(b)........................ 6,329
Registration fees..................................................... 6,153
Custodian fees........................................................ 6,114
Miscellaneous......................................................... 1,213
----------
217,423
Less_expense reimbursement from Manager due to
undertakings_Note 2(a)............................................ 217,423
----------
TOTAL EXPENSES.................................................. --
----------
INVESTMENT INCOME_NET.......................................... 683,264
----------
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments_Note 3(a)............................. $ 1,839
Net realized (loss) on forward currency exchange contracts_Note 3(a).... (310,564)
----------
Net Realized (Loss)................................................... (308,725)
Net unrealized (depreciation) on investments and forward currency
exchange contracts.................................................... (229,663)
----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (538,388)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 144,876
=========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GLOBAL BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FROM MARCH 18, 1994 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1994
<S> <C>
OPERATIONS:
Investment income_net................................................................... $ 683,264
Net realized (loss) on investments....................................................... (308,725)
Net unrealized (depreciation) on investments for the period.............................. (229,663)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 144,876
----------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income_net................................................................... (578,468)
----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold............................................................ 16,832,717
Dividends reinvested..................................................................... 514,095
Cost of shares redeemed.................................................................. (1,737,727)
----------
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS................................. 15,609,085
----------
TOTAL INCREASE IN NET ASSETS....................................................... 15,175,493
NET ASSETS:
Beginning of period_Note 1.............................................................. 100,000
----------
End of period (including undistributed investment income_net of $104,796)................ $15,275,493
=========
SHARES
----------
CAPITAL SHARE TRANSACTIONS:
Shares sold.............................................................................. 1,361,664
Shares issued for dividends reinvested................................................... 42,403
Shares redeemed.......................................................................... (143,165)
----------
NET INCREASE IN SHARES OUTSTANDING..................................................... 1,260,902
=========
See notes to financial statements.
</TABLE>
DREYFUS GLOBAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 3 of the Fund's Prospectus dated March 31, 1995.
See notes to financial statements.
DREYFUS GLOBAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1_SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Global Bond Fund, Inc. (the "Fund") was incorporated on September
8, 1993 and had no operations until March 18, 1994 (commencement of
operations) other than matters relating to its organization and registration
as a non-diversified open-end management investment company under the
Investment Company Act of 1940 ("Act") and the Securities Act of 1933 and the
sale and issuance of 8,000 shares of Common Stock ("Initial Shares") to The
Dreyfus Corporation ("Dreyfus"), the Fund's investment adviser. M&G
Investment Management Limited ("M&G") serves as the Fund's sub-investment
adviser. Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus,
until August 24, 1994, acted as the distributor of the Fund's shares, which
are sold to the public without a sales load. Effective August 24, 1994, the
Manager became a direct subsidiary of Mellon Bank, N.A.
As of November 30, 1994, Major Trading Corporation, a subsidiary of
Mellon Bank Investments Corporation, held 427,458 of the Fund's outstanding
shares. Mellon Bank Investments Corporation is a subsidiary of Mellon Bank.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of Institutional Administration Services, Inc., a provider of
mutual fund administration services, the parent company of which is Boston
Institutional Group, Inc.
(A) PORTFOLIO VALUATION: Investments in securities are valued each
business day at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of
exchange.
(B) FOREIGN CURRENCY TRANSACTIONS: The Fund does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
and maturities of short-term securities, sales of foreign currencies,
currency gains or losses realized on securities transactions, the difference
between the amounts of interest and foreign withholding taxes recorded on the
Fund's books, and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities,
resulting from changes in exchange rates.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, including, where applicable, amortization of discount on investments,
is recognized on the accrual basis.
DREYFUS GLOBAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid monthly.
Dividends from net realized capital gain, if any, are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
On November 30, 1994, the Board of Directors declared a cash dividend of
$.080 per share from undistributed investment income-net, payable on December
1, 1994 (ex-dividend date), to shareholders of record as of the close of
business on November 30, 1994.
(E) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $241,000
available for Federal income tax purposes to be applied against future net
securities profits, if any realized subsequent to November 30, 1994. If not
applied, the carryover expires in fiscal 2002.
(F) OTHER: Organization expenses paid by the Fund are included in prepaid
expenses and are being amortized to operations from March 18, 1994, the date
operations commenced, over the period during which it is expected that a
benefit will be realized, not to exceed five years. At November 30, 1994, the
unamortized balance of such expenses amounted to $67,196. In the event that
any of the Initial Shares are redeemed during the amortization period, the
redemption proceeds will be reduced by any unamortized organization expenses
in the same proportion as the number of such shares being redeemed bears to
the number of such shares outstanding at the time of such redemption.
NOTE 2_INVESTMENT ADVISORY FEE, SUB-INVESTMENT ADVISORY FEE AND OTHER
TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a Management Agreement with Dreyfus, the management fee
is computed at the annual rate of .70 of 1% of the average daily value of
the Fund's net assets and is payable monthly. Dreyfus and M&G have agreed
that if in any full fiscal year the Fund's aggregate expenses, exclusive of
interest, taxes, brokerage and extraordinary expenses, exceed the expense
limitation of any state having jurisdiction over the Fund, Dreyfus and M&G
will bear the excess expense in proportion to their management fee and
sub-advisory fee to the extent required by state law. The most stringent
state expense limitation applicable to the Fund presently requires
reimbursement of expenses in any full fiscal year that such expenses
(exclusive of distribution expenses and certain expenses as described above)
exceed 2 1/2% of the first $30 million, 2% of the next $70 million and 1 1/2%
of the excess over $100 million of the average value of the Fund's net assets
in accordance with California "blue sky" regulations.
However, Dreyfus has undertaken from March 18, 1994 through December 31,
1994, or until such time as the net assets of the Fund exceed $50 million,
regardless of whether they remain at that level, to assume all expenses of
the Fund. The expense reimbursement, pursuant to the undertaking, amounted to
$217,423 for the period ended November 30, 1994.
DREYFUS GLOBAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and M&G,
the sub-advisory fee is computed at the annual rate of .28 of 1% of the
average daily value of the Fund's net assets and is payable monthly by
Dreyfus.
(B) On August 2, 1994, the shareholders approved a revised Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Pursuant to the Plan,
effective August 24, 1994, the Fund (a) reimburses the Distributor for
payments to certain Service Agents for distributing the Fund's shares and (b)
pays the Manager, Dreyfus Service Corporation and any affiliate of either of
them for advertising and marketing relating to the Fund, at an aggregate
annual rate of .25 of 1% of the value of the Fund's average daily net assets.
The distributor may pay one or more Service Agents in respect of distribution
services. The Distributor determines the amounts, if any, to be paid to
Service Agents under the Plan and the basis on which such payments are made.
The fees payable under the Plan are payable without regard to actual expenses
incurred. The Plan also separately provides for the Fund to bear the costs of
preparing, printing and distributing certain of the Fund's prospectuses and
statements of additional information and costs associated with implementing
and operating the Plan, not to exceed the greater of $100,000 or .005 of 1%
of the Fund's average daily net assets for any full fiscal year.
Prior to August 24, 1994, the Fund's Distribution Plan ("prior
Distribution Plan") provided that the Fund pay Dreyfus Service Corporation at
an annual rate of .25 of 1% of the value of the Fund's average daily net
assets, for costs and expenses in connection with advertising, marketing and
distributing the Fund's shares and for servicing shareholder accounts.
Dreyfus Service Corporation made payments to one or more Service Agents based
on the value of the Fund's shares owned by clients of the Service Agents. The
prior Distribution Plan also separately provided for the Fund to bear the
costs of preparing, printing and distributing certain of the Fund's
prospectuses and statements of additional information and costs associated
with implementing and operating the prior Distribution Plan, not to exceed
the greater of $100,000 or .005 of 1% of the Fund's average daily net assets
for any full fiscal year.
During the period ended November 30, 1994, $10,695 was charged to the
Fund pursuant to the Plan and $13,225 was charged to the Fund pursuant to the
prior Distribution Plan.
(C) Pursuant to the Fund's Shareholder Services Plan, the Fund pays the
Distributor an annual rate of .25 of 1% of the value of the Fund's average
daily net assets for servicing shareholder accounts. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and services related to the maintenance of shareholder
accounts. From March 18, 1994 (commencement of operations) through August 23,
1994, $12,364 was charged to the Fund, by Dreyfus Service Corporation. From
August 24, 1994 through November 30, 1994, $9,456 was charged to the Fund by
the Distributor pursuant to the Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and directors of the Fund
were "affiliated persons," as defined in the Act, of Dreyfus and/or Dreyfus
Service Corporation. Each director who is not an "affiliated person" receives
an annual fee of $1,000 and an attendance fee of $250 per meeting.
DREYFUS GLOBAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3_SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities and forward currency exchange contracts,
during the period ended November 30, 1994 amounted to $14,746,109 and
$443,597, respectively.
In addition, the following summarizes open forward currency exchange
contracts at November 30, 1994:
<TABLE>
<CAPTION>
U.S. DOLLAR UNREALIZED
FORWARD CURRENCY SALE CONTRACT PROCEEDS VALUE APPRECIATION
----------- ----------- -------------
<S> <C> <C> <C>
Danish Krone, expiring 4/28/95........................... $ 255,493 $ 244,300 $ 11,193
Dutch Guilders, expiring 4/28/95......................... 867,017 829,045 37,972
German Deutsche Marks, expiring 4/28/95.................. 564,062 538,611 25,451
Japanese Yen, expiring 4/28/95........................... 2,341,294 2,297,621 43,673
Spanish Pesetas, expiring 4/28/95........................ 238,190 227,411 10,779
---------
$129,068
========
</TABLE>
When executing forward currency exchange contracts, the Fund is obligated
to buy or sell a foreign currency at a specified rate on a certain date in
the future. With respect to sales of forward currency exchange contracts, the
Fund would incur a loss if the value of the contract increases between the
date the forward contract is opened and the date the forward contract is
closed. The Fund realizes a gain if the value of the contract decreases
between those dates. With respect to purchase of forward currency exchange
contracts, the Fund would incur a loss if the value of the contract decreases
between the date the forward contract is opened and the date the forward
contract is closed. The Fund realizes a gain if the value of the contract
increases between those dates. The Fund is also exposed to credit risk
associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gains on such
contracts that are recognized in the statement of assets and liabilities.
(B) At November 30, 1994, accumulated net unrealized depreciation on
investments was $229,663, consisting of $254,595 gross unrealized
appreciation and $484,258 gross unrealized depreciation.
At November 30, 1994, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS GLOBAL BOND FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS GLOBAL BOND FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus Global Bond Fund, Inc., including the statement of investments, as of
November 30, 1994, and the related statements of operations and changes in
net assets and financial highlights for the period from March 18, 1994
(commencement of operations) to November 30, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1994 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Global Bond Fund, Inc. at November 30, 1994, and the
results of its operations, the changes in its net assets and the financial
highlights for the period from March 18, 1994 to November 30, 1994, in
conformity with generally accepted accounting principles.
(logo signature)
New York, New York
January 9, 1995
*N*
