File Nos. 33-50203
811-7085
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [__]
Post-Effective Amendment No. 6 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 6 [X]
(Check appropriate box or boxes.)
DREYFUS GLOBAL BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
on April 1, 1997 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
Registrant has registered an indefinite number of shares of its common
stock under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the
fiscal year ended November 30, 1996 was filed on January 27, 1997.
DREYFUS GLOBAL BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 4
4 General Description of Registrant 4
5 Management of the Fund 8
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 19
7 Purchase of Securities Being Offered 10
8 Redemption or Repurchase 15
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
_________
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-2 and B-31
13 Investment Objectives and Policies B-2
14 Management of the Fund B-14
15 Control Persons and Principal B-18
Holders of Securities
16 Investment Advisory and Other B-18
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS GLOBAL BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-29
18 Capital Stock and Other Securities B-31
19 Purchase, Redemption and Pricing B-20, B-21
of Securities Being Offered and B-26
20 Tax Status *
21 Underwriters B-1 and B-20
22 Calculations of Performance Data B-30
23 Financial Statements B-40
Items in
Part C of
Form N-1A
_________
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-4
Common Control with Registrant
26 Number of Holders of Securities C-4
27 Indemnification C-4
28 Business and Other Connections of C-5
Investment Adviser
29 Principal Underwriters C-9
30 Location of Accounts and Records C-12
31 Management Services C-12
32 Undertakings C-12
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
FOR USE BY BANKS ONLY
April 1, 1997
DREYFUS GLOBAL BOND FUND, INC.
Supplement to Prospectus
Dated April 1, 1997
All mutual fund shares involve certain investment risks, including
the possible loss of principal.
098s040197BNK
- - -------------------------------------------------------------------------------
PROSPECTUS APRIL 1, 1997
DREYFUS GLOBAL BOND FUND, INC.
- - -------------------------------------------------------------------------------
DREYFUS GLOBAL BOND FUND, INC. (THE "FUND") IS AN OPEN-END,
NON-DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. THE
FUND'S INVESTMENT OBJECTIVE 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 PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED APRIL 1, 1997, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP:// WWW. SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, 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 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE
FROM TIME TO TIME.
TABLE OF CONTENTS
Page
Annual Fund Operating Expenses.................... 3
Condensed Financial Information................... 4
Description of the Fund........................... 4
Management of the Fund............................ 8
How to Buy Shares................................. 10
Shareholder Services.............................. 12
How to Redeem Shares.............................. 15
Shareholder Services Plan......................... 17
Dividends, Distributions and Taxes................ 17
Performance Information........................... 19
General Information............................... 19
Appendix.......................................... 21
- - -------------------------------------------------------------------------------
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.
- - -------------------------------------------------------------------------------
This Page Intentionally Left Blank
Page 2
<TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C> <C> <C> <C>
Management Fees (after expense reimbursement)............................................ .05%
Other Expenses .......................................................................... 1.30%
Total Fund Operating Expenses (after expense reimbursement).............................. 1.35%
Example: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $14 $43 $74 $162
</TABLE>
- - -------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
- - -------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. The expenses noted above have been restated to
reflect an undertaking by The Dreyfus Corporation that if, in the fiscal year
ending November 30, 1997, Fund expenses, including the management fee, exceed
1.35% of the value of the Fund's average net assets for the fiscal year, The
Dreyfus Corporation may waive its management fee or bear certain expenses of
the Fund to the extent of such excess expense. The expenses noted above,
without reimbursement, would have been: Management Fees _ .70% and Total Fund
Operating Expenses _ 2.00%. 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. See "Management of the
Fund," "How to Buy Shares" and "Shareholder Services Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
YEAR ENDED NOVEMBER 30,
-----------------------------------
1994(1) 1995 1996
---------- --------- ----------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year...................................... $12.50 $12.04 $13.07
---------- --------- ----------
INVESTMENT OPERATIONS:
Investment income-net .................................................. .65 .85 .77(2)
Net realized and unrealized gain (loss) on investments.................. (.54) 1.06 .55(2)
---------- --------- ----------
TOTAL FROM INVESTMENT OPERATIONS........................................ .11 1.91 1.32(2)
---------- --------- ----------
DISTRIBUTIONS:
Dividends from investment income-net.................................... (.57) (.88) (1.21)
---------- --------- ----------
Net asset value, end of year............................................ $12.04 $13.07 $13.18
---------- --------- ----------
TOTAL INVESTMENT RETURN................................................... 1.29%(3) 16.47% 10.96%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ................................ .-- .81% 1.34%
Ratio of net investment income to average net assets.................... 7.83%(3) 6.76% 5.87%
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation................................. 2.49%(3) 1.12% .66%
Portfolio Turnover Rate................................................. 4.16%(4) 20.46% 81.34%
Net Assets, end of year (000's omitted)................................. $15,275 $16,480 $10,779
______________________
(1) From March 18, 1994 (commencement of operations)to November 30, 1994.
(2) Based on average shares outstanding.
(3) Annualized.
(4) Not annualized.
</TABLE>
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 investment objective 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, as amended
(the "1940 Act")) 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 enti-
Page 4
ties. 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 Ratings Group ("S&P"), Fitch Investors Service, L.P. ("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--Certain Portfolio Securities--
Ratings." 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
"Investment Considerations and Risks_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 Dreyfus Corporation 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 activities 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. 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). See
"Appendix--Certain Portfolio Securities-- Securities of Emerging Markets
Issuers."
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
Page 5
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.
While seeking desirable investments, the Fund may invest in money
market instruments consisting of U.S. Government securities, certificates of
deposit, time deposits, bankers' acceptances, short-term investment grade
corporate bonds and other short-term debt instruments, and repurchase
agreements, as set forth under "Appendix _ Certain Portfolio Securities _
Money Market Instruments." Under normal market conditions, the Fund does not
expect to have a substantial portion of its assets invested in money market
instruments. However, when The Dreyfus Corporation determines that adverse
market conditions exist, the Fund may adopt a temporary defensive posture and
invest all of its assets in money market instruments.
The Fund's annual portfolio turnover rate is not expected to exceed
100%. Higher portfolio turnover rates usually generate additional brokerage
commissions and expenses and the short-term gains realized from these
transactions are taxable to shareholders as ordinary income. In addition, the
Fund may engage in various investment techniques, such as foreign currency
transactions, options and futures transactions, leveraging, short-selling and
lending portfolio securities. For a discussion of the investment techniques
and their related risks, see "Investment Considerations and Risks" and
"Appendix -- Investment Techniques" below and "Investment Objective and
Management Policies -- Management Policies" in the Statement of Additional
Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objective and Management Policies" in the
Statement of Additional Information for a further discussion of certain
risks.
FIXED-INCOME SECURITIES -- Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities generally are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values
of fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuer. Certain securities purchased by
the Fund, such as those rated Baa or lower by Moody's and BBB or lower by
S&P, Fitch and Duff, may be subject to such risk with respect to the issuing
entity and to greater market fluctuations than certain lower yielding, higher
rated fixed-income securities. Once the rating of a portfolio security has
been changed, the Fund will consider all circumstances deemed relevant in
determining whether to continue to hold the security. See "Lower Rated
Securities"and "Appendix--Certain Portfolio Securities--Ratings" below and
"Appendix" in the Statement of Additional Information.
LOWER RATED SECURITIES -- The Fund may invest up to 35% of its net assets in
higher yielding (and, therefore, higher risk) debt securities such as those
rated Ba by Moody's or BB by S&P, Fitch or Duff or as low as the lowest
rating assigned by Moody's, S&P, Fitch or Duff (commonly known as junk
bonds). They may be subject to certain risks with respect to the issuing
entity and to greater market fluctuations than certain lower yielding, higher
rated fixed-income securities. The retail secondary market for these
securities may be less liquid than that of higher rated securities; adverse
conditions could make it difficult at times for the Fund to sell certain
securities or could result in lower prices than those used in calculating the
Fund's net asset value. See "Appendix _ Certain Portfolio Securities _
Ratings."
FOREIGN SECURITIES -- Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Page 6
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, seizure or
nationalization of foreign deposits or adoption of governmental restrictions
which might adversely affect or restrict the payment of principal and
interest on the foreign securities to investors located outside the country
of the issuer, whether from currency blockage or otherwise.
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.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have
adverse effects on the economies and securities markets of certain of these
countries.
INVESTING IN SOVEREIGN DEBT OBLIGATIONS -- 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.
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 arising from past
restructuring agreements may affect the economic performance and political
and social stability of those issuers.
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
objective. 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 applicable 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.
FOREIGN CURRENCY TRANSACTIONS -- 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
Page 7
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. See
"Appendix -- Investment Techniques -- Foreign Currency Transactions."
USE OF DERIVATIVES -- The Fund may invest in derivatives ("Derivatives").
These are financial instruments which derive their performance, at least in
part, from the performance of an underlying asset, index or interest rate.
The Derivatives the Fund may use include options and futures, and
mortgage-related securities. While Derivatives can be used effectively in
furtherance of the Fund's investment objective, under certain market
conditions, they can increase the volatility of the Fund's net asset value,
can decrease the liquidity of the Fund's portfolio and make more difficult
the accurate pricing of the Fund's portfolio. See "Appendix -- Investment
Techniques -- Use of Derivatives" below and "Investment Objective and
Management Policies -- Management Policies -- Derivatives"in the Statement of
Additional Information.
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."
NON-DIVERSIFIED STATUS -- The classification of the Fund as a
"non-diversified" investment company means that the proportion of the Fund's
assets that may be invested in the securities of a single issuer is not
limited by the 1940 Act. A "diversified" investment company is required by
the 1940 Act generally, with respect to 75% of its total assets, to invest
not more than 5% of such assets in the securities of a single issuer. Since a
relatively high percentage of the Fund's assets may be invested in the
securities of a limited number of issuers, some of which may be within the
same industry, the Fund's portfolio securities may be more sensitive to
changes in the market value of a single issuer. However, to meet Federal tax
requirements, at the close of each quarter the Fund may not have more than
25% of its total assets invested in any one issuer and, with respect to 50%
of total assets, not more than 5% of its total assets invested in any one
issuer. These limitations do not apply to U.S. Government securities.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest
in, or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment
company. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or
received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Page 8
Corporation ("Mellon"). As of February 28, 1997, The Dreyfus Corporation
managed or administered approximately $86 billion in assets for approximately
1.7 million investor accounts.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Maryland law.
The Fund's primary portfolio manager is Christine V. Downton. She has held
that position and has been employed by The Dreyfus Corporation as a portfolio
manager since September 1996. She also is a partner and Chief Investment
Officer of Pareto Partners ("Pareto"), an indirect subsidiary of Mellon and,
thus, an affiliate of The Dreyfus Corporation. Ms. Downton has been employed
by Pareto since April 1991. The Fund's other portfolio managers are
identified in the Statement of Additional Information. The Dreyfus
Corporation also provides research services for the Fund and for other funds
advised by The Dreyfus Corporation, through a professional staff of portfolio
managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$233 billion in assets as of December 31, 1996, including approximately $86
billion in proprietary mutual fund assets. As of December 31, 1996, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $1.046 trillion in
assets, including approximately $57 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .70 of 1% of
the value of the Fund's average daily net assets. For the fiscal year ended
November 30, 1996, the Fund paid The Dreyfus Corporation a monthly management
fee at the effective annual rate of .04 of 1% of the value of the Fund's
average daily net assets. From time to time, The Dreyfus Corporation may
waive receipt of its fee and/or voluntarily assume certain expenses of the
Fund, which would have the effect of lowering the expense ratio of the Fund
and increasing yield to investors. The Fund will not pay The Dreyfus
Corporation at a later time for any amounts it may waive, nor will the Fund
reimburse The Dreyfus Corporation for any amounts it may assume.
In allocating brokerage transactions, The Dreyfus Corporation seeks
to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among
other things, the receipt of research services and/or the sale of shares of
the Fund or other funds managed, advised or administered by The Dreyfus
Corporation as factors in the selection of broker-dealers to execute
portfolio transactions for the Fund. See "Portfolio Transactions" in the
Statement of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay Service Agents
in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671,
Page 9
is the Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent").
The Bank of New York, 90 Washington Street, New York, New York 10286, is the
Fund's Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a fee
if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution (collectively, "Service Agents"). Stock
certificates are issued only upon your written request. No certificates are
issued for fractional shares. The Fund reserves the right to reject any
purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which maintains an omnibus account in the Fund and
has made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. However, the minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant is $750, with no minimum for subsequent
purchases. Individuals who open an IRA also may open a non-working spousal
IRA with a minimum initial investment of $250. Subsequent investments in a
spousal IRA must be at least $250. The initial investment must be accompanied
by the Account Application. For full-time or part-time employees of The
Dreyfus Corporation or any of its affiliates or subsidiaries, directors of The
Dreyfus Corporation, Board members of a fund advised by The Dreyfus
Corporation, including members of the Fund's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. For
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment is $50. The
Fund reserves the right to offer Fund shares without regard to minimum
purchase requirements to employees participating in certain qualified or
non-qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time. Fund shares also are offered
without regard to the minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to the Dreyfus
Step Program described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian" and should specify that you are
investing in the Fund. Payments to open new accounts which are mailed should
be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode
Island 02940-9387, together with your Account Application. For subsequent
investments, your Fund account number should appear on the check and an invest
ment slip should be enclosed and sent to The Dreyfus Family of Funds, P.O.
Box 105, Newark, New Jersey 07101-0105. For Dreyfus retirement plan accounts,
both initial and subsequent investments should be sent to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427.
Neither initial nor subsequent investments should be made by third party
check. Purchase orders may be delivered in person only to a Dreyfus Financial
Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call one of the telephone numbers listed under "General
Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900118385/Dreyfus Global
Page 10
Bond Fund, Inc., for purchase of Fund shares in your name. The wire must
include your Fund account number (for new accounts, your Taxpayer
Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Account Application and promptly mail the Account Application
to the Fund, as no redemptions will be permitted until the Account Application
is received. You may obtain further information about remitting funds in this
manner from your bank. All payments should be made in U.S. dollars and, to
avoid fees and delays, should be drawn only on U.S. banks. A charge will be
imposed if any check used for investment in your account does not clear. The
Fund makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House 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."
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 Fund 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. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payments for the purchase of the Fund shares may be transmitted,
and must be received by the Transfer Agent, within three business days after
the order is placed. If such payment is not received within three business
days after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds $1,000,000 ("Eligible Benefit Plans").
Shares of funds in the Dreyfus Family of Funds then held by Eligible Benefit
Plans will be aggregated to determine the fee payable. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from the
Fund, including past profits or any other source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the 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 shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on
Page 11
the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank
account maintained in a domestic financial institution which is an Automated
Clearing House member may be so designated. The Fund may modify or terminate
this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES -- You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by The Dreyfus
Corporation, to the extent such shares are offered for sale in your state of
residence. These funds have different investment objectives which may be of
interest 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 applicable "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, by a separate signed Shareholder Services Form, available by calling
1-800-645-6561, or by oral request from any of the authorized signatories on
the account by calling 1-800-645-6561. If you have established the Telephone
Exchange Privilege, you may telephone exchange instructions (including over
The Dreyfus TouchRegistration Mark automated telephone system) by calling
1-800-645-6561. If you are calling from overseas, call 516-794-5452. See "How
to Redeem Shares _ Procedures." Upon an exchange into a new account, the
following shareholder services and privileges, as applicable and where
available, will be automatically carried over to the fund into which the
exchange is made: Telephone Exchange Privilege, Wire Redemption Privilege,
Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege and the
dividend/capital gain distribution option (except for Dreyfus Dividend Sweep)
selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or distributions paid with respect to the foregoing categories
of shares. To qualify, at the time of the exchange you must notify the
Transfer Agent or your Service Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the Statement of
Additional Information. No fees currently are charged shareholders directly
in connection with exchanges, although the Fund reserves the right, upon not
less than 60 days' written notice, to charge shareholders a nominal
administrative fee in accordance with rules promulgated by the Securities and
Exchange Commission. 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. See
"Dividends, Distributions and Taxes."
Page 12
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 certain other funds
in the Dreyfus Family of Funds of which you are a shareholder. The amount you
designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. See "Shareholder Services" in the Statement of
Additional Information. The right to exercise this Privilege may be modified
or canceled by 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. 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. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark -- Dreyfus-AUTOMATIC Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares
are purchased by transferring funds from the bank account designated by you.
At your option, the 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 notify
ing in writing the appropriate Federal agency. The Fund may terminate your
participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN -- Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon 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
Page 13
authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, The Dreyfus Corporation,
the Fund, the Transfer Agent or any other person, to arrange for transactions
under the Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS STEP PROGRAM -- Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a
Dreyfus Step Program account, you must supply the necessary information on
the Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). The Fund may
modify or terminate this Program at any time. Investors who wish to purchase
Fund shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts."
DREYFUS DIVIDEND OPTIONS -- Dreyfus Dividend Sweep enables you to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by 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 in a fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced sales
load. If you are investing in a fund that charges a contingent deferred sales
charge, the shares purchased will be subject on redemption to the contingent
deferred sales charge, if any, applicable to the purchased shares. See
"Shareholder Services" in the Statement of Additional Information. Dreyfus
Dividend ACH permits you to transfer electronically dividends or dividends
and capital gain distributions, if any, from the Fund to a designated bank
account. Only an account maintained at a 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, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
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. 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,"
Page 14
please call 1-800-645-6561; or for SEP-IRAs, 401(k) Salary Reduction Plans
and 403(b)(7) Plans, please call 1-800-322-7880.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. 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 their clients a fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted with
the redemption request. The value of the shares redeemed may be more or less
than their original cost, depending upon the Fund's then-current net asset
value.
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 BUILDERRegistration
Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-
AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR
MORE. IN ADDITION, THE 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, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Wire
Redemption Privilege, the Telephone Redemption Privilege, or the Dreyfus TELET
RANSFER Privilege. Other redemption procedures may be in effect for clients
of certain Service Agents. The Fund makes available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities. The Fund reserves the right to refuse any request made
by wire or telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
The Fund may modify or terminate any redemption Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans,
and shares for which certificates have been issued, are not eligible for the
Wire Redemption, Telephone Redemption or Dreyfus TELETRANSFER Privilege.
You may redeem shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you specifically refuse it), you authorize the Transfer Agent to act
on telephone instructions (including over The
Page 15
Dreyfus TouchRegistration Mark automated telephone system) 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, or, if for Dreyfus retirement
plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island 02940-6427. Redemption requests may be delivered in
person only to a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED
TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location
of the nearest Dreyfus Financial Center, please call one of the telephone
numbers listed under "General Information." Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion Program.
If you have any questions with respect to signature-guarantees, please call
one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also 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
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request,
Page 16
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.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
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 the
Fund shareholders a fee at the 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.
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. If you are an omnibus
accountholder and indicate in a partial redemption request that a portion of
any accrued dividends to which such account is entitled belongs to an
underlying accountholder who has redeemed all shares in his or her account,
such portion of the accrued dividends will be paid to you along with the
proceeds of the redemption. Distributions from net realized securities gains,
if any, generally are declared and paid once a year, but 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 1940 Act. 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 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.
Page 17
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.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require 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
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended November 30, 1996 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. 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.
Page 18
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.
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.
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 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members 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 Board member from office or for any other purpose. Fund
shareholders may remove a Board member by the affirmative vote of a majority
of the Fund's out-
Page 19
standing shares. In addition, the Board will call a meeting
of shareholders for the purpose of electing Board members if, at any time,
less than a majority of the Board members then holding office have been
elected by shareholders.
The 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; outside the U.S. and Canada, call 516-794-5452.
Page 20
APPENDIX
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS -- Foreign currency transactions may be entered
into for a variety of purposes, including: to fix in U.S. dollars, between
trade and settlement date, the value of a security the Fund has agreed to buy
or sell; to hedge the U.S. dollar value of securities the Fund already owns,
particularly if it expects a decrease in the value of the currency in which
the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the value of the
currency sold relative to the currency the Fund contracted to receive in the
exchange. The Fund's success in these transactions will depend principally on
The Dreyfus Corporation's ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar.
LEVERAGE -- Leveraging exaggerates 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 limited to 331/3% of the value of the Fund's
total assets. These borrowings will be subject to interest costs which may or
may not be recovered by appreciation of the securities purchased; in certain
cases, interest costs may exceed the return received on the securities
purchased.
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund
of an underlying debt instrument in return for cash proceeds based on a
percentage of the value of the security. The Fund retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Fund repurchases the security at principal plus accrued
interest. Except for these transactions, the Fund's borrowings generally will
be unsecured.
SHORT-SELLING -- In these transactions, the Fund sells a security it does not
own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement.
The price at such time may be more or less than the price at which the
security was sold by the Fund, which would result in a loss or gain,
respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not sell short
the securities of any single issuer listed on a national securities exchange
to the extent of more than 5% of the value of the Fund's net assets. The Fund
may not make a short sale which results in the Fund having sold short in the
aggregate more than 5% of the outstanding securities of any class of an
issuer.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will more than 15% of the value
of the Fund's net assets be in deposits on short sales against the box.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund--Investment Considerations and
Risks--Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management
Policies--Management Policies--Derivatives" in the Statement of Additional
Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed
Page 21
in much the same way as the Fund can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if its Derivatives
were poorly correlated with its other investments, or if the Fund were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, certain Derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission
which limit the extent to which the Fund can invest in such Derivatives. The
Fund may invest in futures contracts and options with respect thereto for
hedging purposes without limit. However, the Fund may not invest in such
contracts and options for other purposes if the sum of the amount of initial
margin deposits and premiums paid for unexpired options with respect to such
contracts, other than for bona fide hedging purposes, exceeds 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20% of
the value of its net assets at the time such option contracts are written.
When required by the Securities and Exchange Commission, the Fund will set
aside permissible liquid assets in a segregated account to cover its
obligations relating to its transactions in Derivatives. To maintain this requ
ired cover, the Fund may have to sell portfolio securities at disadvantageous
prices or times since it may not be possible to liquidate a Derivative
position at a reasonable price.
LENDING PORTFOLIO SECURITIES _ The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed 331/3%
of the value of the Fund's total assets, and the Fund will receive collateral
consisting of cash, U.S. Government securities or irrevocable letters of
credit which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. Such loans are
terminable by the Fund at any time upon specified notice. The Fund might
experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Fund.
FORWARD COMMITMENTS -- The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate receivable on a forward commitment
or when-issued security are fixed when the Fund enters into the commitment,
but the Fund does not make payment until it receives delivery from the
counterparty. The Fund will commit 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. A segregated
account of the Fund consisting of permissible liquid assets at least equal at
all times to the amount of the commitments will be established and maintained
at the Fund's custodian bank.
Page 22
CERTAIN PORTFOLIO SECURITIES
SECURITIES OF EMERGING MARKETS ISSUERS -- The securities of emerging markets,
issuers in which the Fund may invest 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.
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 1940 Act. As a result, the Fund's
investment in these Structured Securities may be limited by the restrictions
contained in the 1940 Act. 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,
Page 23
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 -- Convertible securities may be converted at either a
stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, enjoy seniority in right of
payment to all equity securities, and convertible preferred stock is senior
to common stock, of the same issuer. Because of the subordination feature,
however, convertible securities typically have lower ratings than similar
non-convertible securities.
MONEY MARKET INSTRUMENTS -- The Fund may invest in the following types of
money market instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the U.S. Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies 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.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund -- Investment Considerations and Risks
- - -- Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by 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,
Page 24
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 A3 by Moody's
or A- by S&P, Fitch or Duff, or (c) if unrated, determined by The Dreyfus
Corporation to be of comparable quality to those rated obligations which may
be purchased by the Fund.
WARRANTS -- A warrant is an instrument issued by a corporation which gives
the holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time. The Fund may
invest up to 5% of its net assets in warrants, except that this limitation
does not apply to warrants purchased by the Fund that are sold in units with,
or attached to, other securities. Included in such amount, but not to exceed
2% of the value of the Fund's net assets, may be warrants which are not
listed on the New York or American Stock Exchange.
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. Zero coupon securities also are issued by corporations and financial
institutions which constitute a proportionate ownership of the issuer's pool
of underlying U.S. Treasury securities. A zero coupon security pays no
interest to its holder during its life and is sold at a discount to its face
value at maturity. The 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 -- Mortgage-related securities are a form of
Derivative collateralized by pools of mortgages. The mortgage-related
securities which may be purchased 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. 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 secured. If a mortgage-related
security is purchased at a premium, all or part of the premium may be lost if
there is a decline in the market value of the security, whether resulting
from changes in interest rates or prepayments on the underlying mortgage
collateral. As with other interest-bearing securities, the prices of certain
mortgage-related securities are inversely affected by changes in interest
rates. However, although the value of a mortgage-related security may decline
when interest rates rise, the converse is not necessarily true, since in
periods of declining interest rates the mortgages underlying the security are
more likely to be prepaid. For this and other reasons, a mortgage-related
security's stated maturity may be shortened by unscheduled prepayments on the
underlying mortgages, and, therefore, it is not possible to predict
accurately the security's return to the Fund. Moreover, with respect to
stripped mortgage-backed securities, if the underlying mortgage securities
experience greater than anticipated prepayments of principal, the Fund may
fail to fully recoup its initial investment even if the securities are rated
in the highest rating category by a nationally recognized statistical rating
organization. During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity which generally would cause the value of such security to fluctuate
more widely in response to changes in interest rates. Were the prepayments on
the Fund's mortgage-related securities to decrease broadly, the Fund's
effective duration, and thus sensitivity to interest rate fluctuations, would
increase. For further discussion concerning the investment considera-
Page 25
tions involved, see "Description of the Fund -- Investment Considerations and
Risks -- Fixed-Income Securities" and "Illiquid Securities" below.
INVESTMENT COMPANY SECURITIES -- The Fund may invest in securities issued by
other investment companies. Under the 1940 Act, 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 total assets with respect to any one investment company and (iii) 10%
of the Fund's total 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. As to
these securities, the Fund is subject to a risk that should the Fund desire
to sell them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Fund's net assets could be
adversely affected.
RATINGS -- Securities rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate.
Securities rated BB by S&P, Fitch or Duff are regarded as having
predominately speculative characteristics and, while such obligations have
less near-term vulnerability to default than other speculative grade debt,
they face major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. Securities rated Caa by Moody's
are of poor standing and may be in default or there may be present elements
of danger with respect to principal or interest. S&P, Fitch and Duff
typically assign a CCC rating to debt which has a current identifiable
vulnerability to default and is dependent upon favorable business, financial
and economic conditions to meet timely payments of interest and repayment of
principal. 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 or Fitch or DD by Duff are in default, and 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 Statement of
Additional Information for a general description of securities ratings.
The ratings of Moody's, S&P, Fitch and Duff represent their opinions
as to the quality of the obligations which they undertake to rate. Ratings
are relative and subjective and, although ratings may be useful in evaluating
the safety of interest and principal payments, they do not evaluate the
market value risk of such obligations. Although these ratings may be an
initial criterion for selection of portfolio investments, The Dreyfus
Corporation also will evaluate these securities and the ability of the issuers
of such securities to pay interest and principal. The Fund's ability to
achieve its investment objective may be more dependent on The Dreyfus
Corporation's credit analysis than might be the case for a fund that invested
in higher rated securities.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 26
[This Page Intentionally Left Blank]
Page 27
Global Bond Fund, Inc.
Prospectus
Registration Mark
Copy Rights 1997 Dreyfus Service Corporation
098p040197
Page 28
DREYFUS GLOBAL BOND FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
APRIL 1, 1997
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 April 1, 1997, 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
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services. Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies......... B-2
Management of the Fund............................... B-14
Management Agreement................................. B-18
Purchase of Shares................................... B-20
Shareholder Services Plan............................ B-21
Redemption of Shares................................. B-22
Shareholder Services................................. B-23
Determination of Net Asset Value..................... B-26
Dividends, Distributions and Taxes................... B-27
Portfolio Transactions............................... B-29
Performance Information.............................. B-30
Information About the Fund........................... B-31
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors................... B-31
Appendix............................................. B-32
Financial Statements................................. B-40
Report of Independent Auditors....................... B-49
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
Portfolio 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 the repurchase agreement, the Fund will enter into repurchase
agreements only with domestic Banks with total assets in excess of $1
billion, or primary government securities dealers reporting to the Federal
Reserve Bank of New York, with respect to securities of the type in which
the Fund may invest, and will require that additional securities be
deposited with it if the value of the securities purchased should decrease
below the resale price.
Commercial Paper and Other Short-Term Corporate Obligations. These
instruments include variable amount master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. These noted permit daily changes in the amounts
borrowed. Because these obligations are direct lending arrangements
between the lender and borrower, it is not contemplated that such
instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they are
redeemable at face value, plus accrued interest, at any time.
Accordingly, where these obligations are not secured by letters of credit
or other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Such obligations frequently are not rated by credit rating
agencies, and 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.
Convertible Securities. Although to a lesser extent than with fixed-
income securities, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature,
the market value of convertible securities tends to vary with fluctuations
in the market value of the underlying common stock. A unique feature of
convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly
on a yield basis, and so may not experience market value declines to the
same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying
common stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investment in common stock of the same issuer.
Convertible securities are investments that provide for a stable
stream of income with generally higher yields than common stocks. There
can be no assurance of current income because the issuers of the
convertible securities may default on their obligations. A convertible
security, in addition to providing fixed income, offers the potential for
capital appreciation through the conversion feature, which enables the
holder to benefit from increases in the market price of the underlying
common stock. There can be no assurance of capital appreciation, however,
because securities prices fluctuate. Convertible securities, however,
generally offer lower interest or dividend yields than non-convertible
securities of similar quality because of the potential for capital
appreciation.
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") included FNMA Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are
solely the obligations of FNMA and are not backed by or entitled to the
full faith and credit of the United States. FNMA is a government-
sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment or principal and interest by
FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "PCs"). FHLMC is a corporate
instrumentality of the United States created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie
Macs are not guaranteed by the United States or by any Federal Home Loan
Bank and do not constitute a debt or obligation of the United States or of
any Federal Home Loan Bank. Freddie Macs entitle to holder to timely
payment of interest, which is guaranteed by FHLMC. FHLMC guarantees
either ultimate collection or timely payment of all principal payments on
the underlying mortgage loans. When FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
Private Entity Securities--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely
payment of principal and interest on mortgage- related securities backed
by pools created by non-governmental issuers often is supported partially
by various forms of insurance or guarantees, including individual loan,
title, pool and hazard insurance. The insurance and guarantees are issued
by government entities, private insurers and the mortgage poolers. There
can be no assurance that the private insurers or mortgage poolers can meet
their obligations under the policies, so that if the issuers default on
their obligations the holders of the security could sustain a loss. No
insurance or guarantee covers the Fund or the price of the Fund's shares.
Mortgage-related securities issued by non-governmental issuers generally
offer a higher rate of interest than government-agency and government-
related securities because there are no direct or indirect government
guarantees of payment.
Foreign Government Obligations; Securities of Supranational Entities.
The Fund may invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Manager to be of comparable
quality to the other obligations in which the Fund may invest. Such
securities also include debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.
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.
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 the extent practicable, 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, where a substantial market of qualified
institutional buyers develops for certain unregistered securities
purchased by the Fund pursuant to Rule 144A under the Securities Act of
1933, as amended, the Fund intends to treat certain unregistered
securities as liquid securities in accordance with procedures approved by
the Fund's Board. 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 has directed the Manager to monitor carefully
the Fund's investments in such securities with particular regard to
trading activity, availability of reliable price information and other
relevant information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to
Rule 144A, the Fund's investing in such securities may have the effect of
increasing the level of illiquidity in the Fund's portfolio during such
period.
Management Policies
The Fund may engage in the following investment practices in
furtherance of its objective.
Leverage. For borrowings for investment purposes, the Investment
Company Act of 1940, as amended (the "1940 Act"), requires the Fund to
maintain continues asset coverage (that it, total assets including
borrowings, less liabilities exclusive of borrowings) of 300% of the
amount borrowed. If the required coverage should decline as a result of
market fluctuations or other reasons, the Fund may be required to sell
some of its portfolio securities within three days to reduce the amount of
its borrowings and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that
time. The Fund also may be required to maintain minimum average balances
in connection with such borrowing or pay a commitment or other fee to
maintain a line of credit; either of these requirements would increase the
cost of borrowing over the stated interest rate. To the extent the Fund
enters into a reverse repurchase agreement, the Fund will maintain in a
segregated custodial account permissible liquid assets 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 transaction as collateralized
borrowings by the Fund.
Short-Selling. Until a Fund closes its short position or replaces
the borrowed securities, it will: (a) maintain a segregated account,
containing permissible liquid assets, at such a level that the amount
deposited in the account plus the amount deposited with the broker as
collateral always equals the current value of the security sold short; or
(b) otherwise cover its short position.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide
a cheaper, quicker or more specifically focused way for the Fund to invest
that "traditional" securities would.
Derivatives may be purchase on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated
with Derivatives purchased on an exchange. By contrast, no clearing
agency guarantees over-the-counter Derivatives. Therefore, each party to
an over-the-counter Derivative bears the risk that the counterparty will
default. Accordingly, the Manager will consider the creditworthiness of
counterparties to over-the-counter Derivatives in the same manner as it
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested
in bidding for it.
Futures Transactions--In General. The Fund may enter into futures
contracts in the U.S. domestic markets, such as the Chicago Board of Trade
and the International Monetary Market of the Chicago Mercantile Exchange,
or on exchanges located outside the United States, such as the London
International Financial Futures Exchange and the Sydney Futures Exchange
Limited. Foreign markets may offer advantages such as trading
opportunities or arbitrage possibilities not available in the United
States. Foreign markets, however, may have greater risk potential than
domestic markets. For example, some foreign exchanges are principal
markets so that no common clearing facility exists and an investor may
look only to the broker for performance of the contract. In addition, any
profits a Fund might realize in trading could be eliminated by adverse
changes in the exchange rate, or the Fund could incur losses as a result
of those changes. Transactions on foreign exchanges may include both
commodities which are traded on domestic exchanges and those which are
not. Unlike trading on domestic commodity exchanges, trading on foreign
commodity exchanges is not regulated by the Commodity Futures Trading
Commission.
Engaging in these transactions involves risk of loss to the Fund
which could adversely affect the value of the Fund's net assets. Although
the Fund intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time.
Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once
the daily limit has been reached in a particular contract, no trades may
be make that day at a price beyond that limit or trading may be suspended
for specified periods during the trading day. Futures contract prices
could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions
and potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the
Manager's ability to predict correctly movements in the direction of the
relevant market, and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract.
For example, if the Fund uses futures to hedge against the possibility of
a decline in the market value of securities held in its portfolio and the
prices of such securities instead increase, the Fund will lose part or all
of the benefit of the increased value of securities which it has hedged
because it will have offsetting losses in its futures positions.
Furthermore, if in such circumstances the Fund has insufficient cash, it
may have to sell securities to meet daily variation margin requirements.
The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Purchase to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate permissible
liquid assets in connection with its commodities transactions in an amount
generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting the Fund's ability
otherwise to invest those assets.
Specific Futures Transactions. The Fund may purchase and sell interest
rate futures contracts. An interest rate future obligates the Fund to
purchase or sell an amount of a specific debt security at a future date at
a specific price.
The Fund may purchase and sell currency futures. A currency future
obligates the Fund to purchase or sell an amount of a specific currency at
a future date at a specific price.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to
sell, the underlying security or securities at the exercise price at any
time during the option period, or at a specific date. Conversely, a put
option gives the purchaser of the option the right to sell, and obligates
the writer to buy, the underlying security or securities at the exercise
price at any time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with
respect to which the Fund owns the underlying security or otherwise covers
the transaction by segregating cash or other securities. A put option
written by the Fund is covered when, among other things, cash or liquid
securities having a value equal to or greater than the exercise price of
the option are placed in a segregated account with the Fund's custodian to
fulfill the obligation undertaken. The principal reason for writing
covered call and put options is to realize, through the receipt of
premiums, a greater return than would be realized on the underlying
securities alone. The Fund receives a premium from writing covered call
or put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen
events, at times have rendered certain of the clearing facilities
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading
halts or suspensions in one or more options. There can be no assurance
that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it
might not be possible to effect closing transactions in particular
options. If, as a covered call option writer, the Fund is unable to
effect a closing purchase transaction in a secondary market, it will not
be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise or it otherwise covers its
position.
Specific Options Transactions. The Fund may purchase and sell call and
put options on foreign currency. These options convey the right to buy or
sell the underlying currency at a price which is expected to be lower or
higher than the spot price of the currency at the time the option is
exercised or expires.
The Fund may purchase cash-settled options on interest rate swaps and
interest rate swaps denominated in foreign currency 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 or foreign currency. A cash-
settled option on a swap gives the purchaser the right, but not the
obligation, in return for the premium paid, to receive an amount of cash
equal to the value of the underlying swap as of the exercise date. These
options typically are purchased in privately negotiated transactions from
financial institutions, including securities brokerage firms.
Successful use by the Fund of options will be subject to the
Manager's ability to predict correctly movements in foreign currencies or
interest rates. To the extent the Manager's predictions are incorrect,
the Fund may incur losses.
Future Developments. The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts
and any other Derivatives which are not presently contemplated for use by
the Fund or which are not currently available but which may be developed,
to the extent such opportunities are both consistent with the Fund's
investment objective an legally permissible for the Fund. Before entering
into such transactions or making any such investment, the Fund will
provide appropriate disclosure in its Prospectus or Statement of
Additional Information.
Forward Commitments. Securities purchased on a forward commitment or
when-issued basis are subject to changes in value (generally changing in
the same way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's perception
of the creditworthiness of the issuer and changes, real or anticipated, in
the level of interest rates. Securities purchase on a forward commitment
or when-issued basis may expose the Fund to risks because they may
experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued basis can involve the additional risk that the
yield available in the market when the delivery takes place actually may
be higher than that obtained in the transaction itself. Purchasing
securities on a forward commitment or when-issued basis when 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.
Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower on a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," or part of the interest earned from the investment of collateral
reserved 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.
Investment Considerations and Risks
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 Ba by Moody's Investors Service, Inc. ("Moody's") or BB
by Standard & Poor's Ratings Group ("S&P"), Fitch Investors Service, L.P.
("Fitch") and Duff & Phelps Credit Rating Co. ("Duff, and, with the other
rating agencies, the "Rating Agencies") and as low as the lowest ratings
assigned by the Rating Agencies. Such securities, though higher yielding,
are characterized by risk. See "Description of the Fund--Investment
Considerations and Risks--Lower Rated Securities" in the Prospectus for a
discussion of certain risks and the "Appendix" for a general description
of the Rating Agencies' ratings. Although ratings may be useful in
evaluating the safety of interest and principal payments, they do not
evaluate the market value risk of these securities. The Fund will rely on
the Manager's judgment, analysis and experience in evaluating the
creditworthiness of an issuer.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are
higher rated securities. These securities are considered by the Rating
Agencies to be, on balance, predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms
of the obligation and generally will involve more credit risk than
securities in the higher rating categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities
of such issuers generally is greater than is the case with the higher
rated securities. For example, during an economic downturn or a sustained
period of rising interest rates, highly leveraged issuers of these
securities may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations also
may be affected adversely by specific corporate developments, forecasts,
or the unavailability of additional financing. The risk of loss because
of default by the issuer is significantly greater for the holders of these
securities because such securities generally are unsecured and often are
subordinated to other creditors of the issuer.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these securities does exist, it
generally is not as liquid as the secondary market for higher rated
securities. The lack of a liquid secondary market may have an adverse
impact on market price and yield and the Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the Fund's 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 Manager will review carefully the credit and
other characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon securities. 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, which cannot be changed without approval by the
holders of a majority (as defined in the 1940 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 Board members 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 1940 Act
(which currently limits borrowings to no more than 33-1/3% of the value of the
Fund's total assets). For purposes of this Investment Restriction, the entry
into options, 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.
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 1940 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 1940 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
Board members 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 Board member who is deemed to be an
"interested person" of the Fund, as defined in the 1940 Act, is indicated
by an asterisk.
Board Members of the Fund
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board for various funds in The Dreyfus Family of Funds. He is
also Chairman of the Board of Directors of Noel Group, Inc., a
venture capital company; and a director of The Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway
Company, Inc., a manufacturer and marketer of industrial threads and
buttons; Curtis Industries, Inc., a national distributor of security
products, chemicals and automotive and other hardware, and Staffing
Resources, Inc. For more than five years prior to January 1995, he
was President, a director and, until August 1994, Chief Operating
Officer of the Manager and Executive Vice President and a director of
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager
and, until August 24, 1994, the Fund's distributor. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
He is 53 years old and his address is 200 Park Avenue, New York, New
York 10166.
*DAVID P. FELDMAN, Board Member. Chairman and Chief Executive Officer of
AT&T Investment Management Corporations. He is also a trustee of
Corporate Property Investors, a real estate investment company. He
is 56 years old and his address is One Oak Way, Berkeley Heights, New
Jersey 07922.
JOHN M. FRASER, JR., Board Member. 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 73 years old and his
address is 133 East 64th Street, New York, New York 10021.
ROBERT R. GLAUBER, Board Member. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard
University since January 1992. 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 Mid
Ocean Reinsurance Co. Ltd. and Cooke & Bieler, Inc., investment
counselors, NASD Regulation, Inc. and the Federal Reserve Bank of
Boston. He is 56 years old and his address is 79 John F. Kennedy
Street, Cambridge, Massachusetts 02138.
JAMES F. HENRY, Board Member. President of the CPR Institute for Dispute
Resolution, a non-profit organization principally engaged in the
development of alternatives to business litigation. He was of
counsel to the law firm of Lovejoy, Wasson & Ashton from October 1975
to December 1976 and from October 1979 to June 1983, and was a
partner of that firm from January 1977 to September 1979. He was
President and a director of the Edna McConnell Clark Foundation, a
philanthropic organization from September 1971 to December 1996. He
is 65 years old and his address is c/o CPR Institute for Dispute
Resolution, 366 Madison Avenue, New York, New York 10017.
ROSALIND GERSTEN JACOBS, Board Member. 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 70 years old and her
address is c/o Corporate Property Investors, 305 East 47th Street,
New York, New York 10017.
IRVING KRISTOL, Board Member. John M. Olin Distinguished Fellow of the
American Enterprise Institute for Public Policy Research, co-editor
of the Public Interest magazine and an author or co-editor of several
books. From May 1981 to December 1994 he was consultant to the
Manager on economic matters; from 1969 to 1988, he was Professor of
Social Thought at the Graduate School of Business Administration, New
York University; and from September 1969 to August 1979, he was Henry
R. Luce Professor of Urban Values at New York University. He 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, Board Member. President and Chief Executive Officer of
Memorial Sloan-Kettering Cancer Center. He was Vice President for
Health Sciences and Director of the Cancer Center at Columbia
University from 1973 to September 1980, and Professor of Medicine and
of Human Genetics and Development at Columbia University from 1968 to
1982. He is also a director of Pfizer, Inc., a pharmaceutical
company, Life Technologies, Inc., a life science company providing
products for cell and molecular biology and microbiology, and
Tularik, Inc., a biotechnology company and a general partner of LIWC
Venture Lease Partners II, L.P., a limited partnership engaged in
leasing. Dr. Marks is 69 years old and his address is c/o Memorial
Sloan-Kettering Cancer Center, 1275 York Avenue, New York, New York
10021.
DR. MARTIN PERETZ, Board Member. 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, Board Member. Financial Consultant. From January 1990
to March 1995, he was Executive Vice President and Chief Financial
Officer, and from January 1990 to March 1993, a director 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
director of The New Germany Fund, Mountasia Entertainment
International, Inc., Lillian Vernon Corporation, Winstar
Communications, Inc. and IDT Corp. He is 62 years old and his
address is 126 East 56th Street, Suite 12 North, New York, New York
10022.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the
Fund who are not "interested persons" of the Fund, as defined in the 1940
Act, will be selected and nominated by the Board members who are not
"interested persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a
per meeting fee and reimburses them for their expenses. The Chairman of
the Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee
of one-half the amount paid to them as Board members. The aggregate
compensation paid to each Board member by the Fund for the fiscal year
ended November 30, 1996, and by all other funds in the Dreyfus Family of
Funds for which such person is a Board member (the number of which is set
forth in parenthesis next to each Board member's total compensation) for
the year ended December 31, 1996, were as follows:
Total
Compensation From
Aggregate Fund and Fund
Name of Board Compensation From Complex Paid to
Member Fund* Board Member
Joseph S. DiMartino $2,813 $517,075 (93)
David P. Feldman $2,250 $122,257 (37)
John M. Fraser, Jr. $2,250 $ 73,563 (14)
Robert R. Glauber $2,250 $103,549 (20)
James F. Henry $2,250 $ 59,973 (10)
Rosalind Gersten Jacobs $2,000 $ 93,900 (20)
Irving Kristol $2,250 $ 59,973 (10)
Dr. Paul A. Marks $2,000 $ 55,223 (10)
Dr. Martin Peretz $2,250 $ 59,973 (10)
Bert W. Wasserman $2,250 $ 59,973 (10)
____________________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $634 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. He is 31 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor of
Treasury Services and Administration of the Distributor and an officer
of other investment companies advised or administered by the Manager.
He is also Supervisor of Treasury Services and Administration of Funds
Distributor, Inc. From April 1993 to January 1995, he was a Senior
Fund Accountant for Investors Bank & Trust Company. From December
1991 to March 1993, he was employed as a Fund Accountant at The Boston
Company, Inc. He is 27 years old.
MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of
the Distributor and an officer of other investment companies advised
or administered by the Manager. Prior to August 1993, he was employed
as an Associate Examiner at the National Association of Securities
Dealers, Inc. He is 27 years old.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Assistant
Vice President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 27 years
old.
RICHARD INGRAM, Vice President and Assistant Treasurer. Senior Vice
President and Director of Client Services and Treasury Operations of
the Distributor and an officer of other investment companies advised
or administered by the Manager. He is also Senior Vice President and
Director of Client Services and Treasury Operations of Funds
Distributor, Inc. From March 1994 to November 1995, he was Vice
President and Division Manager for First Data Investor Services Group.
From 1989 to 1994, he was Vice President, Assistant Treasurer and Tax
Director - Mutual Funds of The Boston Company, Inc. He is 41 years
old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and an officer of other investment companies advised
or administered by the Manager. She is also Vice President and
Manager of Treasury Services and Administration of Funds Distributor,
Inc. From September 1989 to July 1994, she was an Assistant Vice
President and Client Manager for The Boston Company, Inc. She is 32
years old.
MICHAEL PETRUCELLI, Vice President and Assistant Treasurer. Director of
Strategic Client Initiatives for Funds Distributor, Inc. and an
officer of other investment companies advised or administered by the
Manager. From December 1989 through November 1986, he was employed
with GE Investments where he held various financial, business
development and compliance positions. He is 35 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor
and an officer of other investment companies advised or administered
by the Manager. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 33 years old.
The address of each officer of the Fund, is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares outstanding on March 17, 1997.
The following persons are known by the Fund to own of record 5% or
more of the Fund's outstanding voting securities as of March 17, 1997:
MBC Investments Corporation, Attn: Michael Botsford, 4500 New Linden Hill
Road, Wilmington, Delaware 19808 -59.41%. 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 1940 Act)
of the Fund.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a
majority (as defined in the 1940 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 Board members who are not "interested persons"
(as defined in the 1940 Act) of the Fund or the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval.
The Agreement was approved by shareholders on August 2, 1994 and was last
approved by the Fund's Board, including a majority of the Board members
who are not "interested persons" of any party to the Agreement, at a
meeting held on March 10, 1997. The Agreement is terminable without
penalty, on 60 days' notice, by the Fund's Board or by vote of the holders
of a majority of the Fund's shares, or, on not less than 90 days' notice,
by the Manager. The Agreement will terminate automatically in the event
of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
W. Keith Smith, Chairman of the Board; Christopher M. Condron, President,
Chief Executive Officer, Chief Operating Officer and a director; Stephen
E. Canter, Vice Chairman, Chief Investment Officer and a director;
Lawrence S. Kash, Vice Chairman-Distribution and a director; William T.
Sandalls, Jr., Senior Vice President and Chief Financial Officer; William
F. Glavin, Jr., Vice President-Corporate Development; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President--Corporate Communications; Mary Beth Leibig, Vice President-
Human Resources; Jeffrey N. Nachman, Vice President-Mutual Fund
Accounting; Andrew S. Wasser, Vice President-Information Services; Elvira
Oslapas, Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt and
Frank V. Cahouet, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the
Fund's Board. The Manager is responsible for investment decisions, and
provides the Fund with portfolio managers who are authorized by the Board
to execute purchases and sales of securities. The Fund's portfolio
managers are Christine V. Downton, Garitt Kono, Kevin M. McClintock and
Gerald Thunelius. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who
provide research services for the Fund and for other funds advised by the
Manager. All purchases and sales are reported for the Boards' review at
the meeting subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures using its own resources, as it from time to time
deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: organizational costs, taxes,
interest, loan commitment fees, interest and distributions paid on
securities sold short, brokerage fees and commissions, if any, fees of
Board members who are not officers, directors, employees or holders of 5%
or more of the outstanding voting securities of the Manager or any of its
affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of
maintaining the Fund's existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of shareholders' reports and
meetings, costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to
existing shareholders, and any extraordinary expenses. Fund shares are
subject to an annual service fee. See "Shareholder Services Plan."
As compensation for the Manager's services, the Fund has agreed to pay
the Manager 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, and for fiscal year ended November 30, 1995, no
management fee was paid by the Fund pursuant to undertakings by the
Manager. For the fiscal year ended November 30, 1996, the management fee
payable by the Fund was $101,805; however pursuant to an undertaking in
effect, the Manager reduced its fee by $96,116, resulting in a net fee of
$5,689 for fiscal 1996.
Pursuant to a sub-investment advisory agreement which was terminated
September 11, 1996, the Manager engaged M&G Investment Management Limited
("M&G") to provide sub-investment advisory services and day-to-day
management of the Fund's investments. As compensation for M&G's services,
the Manager had 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
from March 18, 1994 (commencement of operations) through November 30,
1994 and for fiscal year ended November 30, 1995 no sub-investment advisory
fee was paid by the Manager pursuant to an agreement in effect between the
Manager and M&G. For the period from December 1, 1995 through September
10, 1996 $3,684 was paid to M&G by the Manager.
The Manager has 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, the
Fund may deduct from the payment to be made to the Manager under the
Agreement, or the Manager will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be
estimated daily, and reconciled and effected or paid, as the case may be,
on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor on
a best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the
Dreyfus Family of Funds and for certain other investment companies. In
some states, certain financial institutions effecting transactions in Fund
shares may be required to register as dealers pursuant to state law.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business,
or orders made on Saturday, Sunday or any Fund holiday (e.g., when the New
York Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of 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 Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"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 the
Fund's shareholders. 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 the shareholder accounts. Under
the Shareholder Services Plan, the Distributor may make payments to
certain securities dealers, financial institutions and other financial
industry professionals (collectively, "Service Agents") in respect of
these services.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Board for its review. In addition, the Shareholder
Services Plan provides that material amendments must be approved by the
Board, and by the Board members who are not "interested persons" (as
defined in the 1940 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 Board members cast in person at a
meeting called for the purpose of voting on the Shareholder Services Plan.
The Shareholder Services Plan was last so approved on March 10, 1997. The
Shareholder Services Plan is terminable at any time by vote of a majority
of the Board members who are not "interested persons" and have no direct
or indirect financial interest in the operation of the Shareholder
Services Plan or in any agreements entered into in connection with the
Shareholder Services Plan.
For the fiscal year ended November 30, 1996, $36,359 was charged to
the Fund under the Shareholder Services Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem 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 ($1,000 minimum)
will be transferred by Federal Reserve wire only to the commercial bank
account specified by the investor on the Account Application or
Shareholder Services Form, or to a correspondent bank if the investor's
bank is not a member of the Federal Reserve Board. Fees ordinarily are
imposed by such bank and borne by the investor. Immediate notification by
the correspondent bank to the investor's bank is necessary to avoid a
delay in crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion
Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other
suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to signature-
guarantees, please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund is committed 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 Fund's Board reserves the right to make payments in whole or
in part in securities (which may include non-marketable 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 or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the Account
Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions (including
over The Dreyfus Touchr automated telephone system) 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. 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 automatically 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
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. Expenses and fees of
the Fund, including the management fee paid by the Fund and shareholder
services 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 members, are valued at fair value as
determined in good faith by the Fund's Board. The Board members will
review the method of valuation on a current basis. In making their good
faith valuation of restricted securities, the Board members generally will
take the following factors into consideration: restricted securities
which are, or are convertible into, securities of the same class of
securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Fund's Board if the Board
members believe that it no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at cost.
Any subsequent adjustment from cost will be based upon considerations
deemed relevant by the Fund's Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
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, 1996 as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (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) to its shareholders,
derive less than 30% of its annual gross income from gain on the sale of
securities held for less than three months, and meet certain asset
diversification and other requirements. The term "regulated investment
company" does not imply the supervision of management or investment
practices or policies by any government agency.
Depending on the composition of the Fund's income, all or a portion of
the dividends paid by the Fund from net investment income may qualify for
the dividends received deduction allowable to certain U.S. corporate
shareholders ("dividends received deduction"). In general, dividend
income of the Fund distributed to qualifying corporate shareholders will
be eligible for the dividends received deduction only to the extent that
the Fund's income consists of dividends paid by the U.S. corporations.
However, Section 246(c) of the Code provides that if a qualifying
corporate shareholder has disposed of Fund shares not held for 46 days or
more and has received a dividend from net investment income with respect
to such shares, the portion designated by the Fund as qualifying for the
dividends received deduction will not be eligible for such shareholder's
dividends received deduction.
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 in
the Prospectus. 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 of the Code. "Conversion transactions" are defined to
include certain forward, futures, option and "straddle" transactions,
transactions marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
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 of the Code, 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 of the Code.
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 of the Code. 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
The Manager 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 the
Manager's 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 Manager's research
facilities with statistical data, investment information, economic facts
and opinions. Information so received is in addition to and not in lieu
of services required to be performed by the Manager and the Manager's fees
are not reduced as a consequence of the receipt of such supplemental
information.
Such information may be useful to the Manager in serving both the Fund
and other funds which it advises and, conversely, supplemental information
obtained by the placement of business of other clients may be useful to
the Manager in carrying out its obligations to the Fund. Brokers also
will be selected because of their ability to handle special executions
such as are involved in large block trades or broad distributions,
provided the primary consideration is met. Large block trades may, in
certain cases, result from two or more funds advised or administered by
the Manager being engaged simultaneously in the purchase or sale of the
same security. Certain of the 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.
The Fund's portfolio turnover rate for the fiscal years ended November
30, 1995 and 1996 was 20.46% and 81.34%, respectively. Portfolio turnover
may vary from year to year, as well as within a year. High turnover rates
are likely to result in comparatively greater brokerage expenses. The
overall reasonableness of brokerage commissions paid is evaluated by the
Manager based upon its knowledge of available information as to the
general level of commissions paid by other institutional investors for
comparable services.
For the period from March 18, 1994 (commencement of operations)
through November 30, 1994 and for the fiscal years ended November 30, 1995
and 1996, 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, 1996
was 5.56%. The Fund's net yield for this same period was 4.73%. 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 total return for the 1 and 2.707 year
periods ended November 30, 1996 was 10.96% and 10.31%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value per share
with a hypothetical $1,000 payment made at the beginning of the period
(assuming the reinvestment of dividends and distributions), dividing by
the amount of the initial investment, taking the "n"th root of the
quotient (where "n" is the number of years in the period) and subtracting
1 from the result.
The Fund's total return for the period from March 18, 1994
(commencement of operations) through November 30, 1996 was 30.42%. 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.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Fund, the Transfer Agent arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications
between shareholders and the Fund and the payment of dividends and
distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee computed on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses. For the period December 1, 1995
(effective date of the transfer agency agreement) through November 30,
1996, the Fund paid the Transfer Agent $5,734. The Bank of New York, 90
Washington Street, New York, New York 10286, acts as custodian of the
Fund's investments. Neither the Transfer Agent nor The Bank of New York
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 LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance
of the shares 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 Ratings
Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, L.P. ("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
Bond Ratings
AAA
Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
BBB
Bonds rated BBB are considered to have below average protection
factors but still considered sufficient for prudent investment.
Considerable variability in risk during economic cycles.
BB
Bonds rated BB are below investment grade but are deemed by Duff as
likely to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the
category.
B
Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating
within this category or into a higher or lower quality rating grade.
CCC
Bonds rated CCC are well below investment grade securities. Such
bonds may be in default or have considerable uncertainty as to timely
payment of interest, preferred dividends and/or principal. Protection
factors are narrow and risk can be substantial with unfavorable economic
or industry conditions and/or with unfavorable company developments.
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, 1996
Principal
Bonds and Notes-89.9% Amount Value
______ ______
<S> <C> <C>
Banking-3.1% Bayerische Landesbank Girozentrale,
Sr. Bonds, 7 7/8%, 2006.............. $ 327,990 (a) $ 333,730
______
Chemicals-4.8% Imperial Chemical Industries,
Bonds, 9 3/4%, 2005.................. 462,550 (a) 513,141
______
Financial Services-5.9% Abbey National Treasury Services plc,
Bonds, 8%, 2003...................... 504,600 (a) 515,954
Baden-Wuerttembergische Landers-Finance NV,
Gtd. Bonds, 6 1/2%, 2008............. 114,434 (b) 118,497
______
634,451
______
Miscellaneous-3.8% Petroleos Mexicanos,
Gtd. Notes, 9%, 2003....................... 168,200 (a) 158,423
Treasury Corp. of Victoria,
Bonds (Gtd. by The Government of Victoria),
7 1/4%, 2003......................... 252,340 (c) 252,813
______
411,236
______
Pharamaceuticals-3.1% Glaxo Wellcome plc,
Sr. Notes, 8 3/4%, 2005.................. 319,580 (a) 338,156
______
Real Estate-4.6% Land Securities,
Deb., 9 1/2%, 2007............................... 454,140 (a) 497,283
______
Telecommunications-3.4% Telstra Ltd.,
Bonds, 6%, 2006.............................. 363,706 (d) 361,888
______
Transportation-3.6% Societe National des Chemins de fer Francais,
Deb., 7 1/2%, 2008................... 344,564 (d) 386,557
______
Foreign/
Governmental-52.8% Bundesrepublik Deutschland,
7 3/8%, 2005......................... 374,512 (b) 417,132
Commonwealth of Australia,
Bonds, 8 3/4%, 2008.................. 1,546,600 (c) 1,730,568
France O.A.T.,
Deb., 8 1/2%, 2008................... 665,773 (d) 819,034
Queensland Treasury,
Global Notes, 8%, 2003............... 171,754 (c) 179,590
Republic of Finland,
Deb., 8%, 2003....................... 504,600 (a) 518,477
Republic of Italy (Buoni del Tesoro Poliennali),
Bonds, 8 3/4%, 2006.................. 415,842 (e) 454,099
United Kingdom Gilt Edged Securities:
7 1/2%, 2006......................... 454,140 (a) 458,681
8 1/2%, 2007......................... 1,034,430 (a) 1,116,215
______
5,693,796
______
DREYFUS GLOBAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1996
Principal
Bonds and Notes (continued) Amount Value
______ ______
Supranational-4.8% European Investment Bank,
Notes, 8%, 2003...................... $ 504,600 (a) $ 521,630
______
TOTAL BONDS AND NOTES
(cost $8,957,317).................... $ 9,691,868
======
Short-Term Investments-1.5%
U.S. Treasury Bills; 5.09%, 12/19/1996
(cost $158,595)............................. $ 159,000 $ 158,569
======
TOTAL INVESTMENTS (cost $9,115,912)......................................... 91.4% $ 9,850,437
==== ======
CASH AND RECEIVABLES (NET).................................................. 8.6% $ 928,575
==== ======
NET ASSETS.................................................................. 100.0% $10,779,012
==== ======
Notes to Statement of Investments:
(a) Denominated in British Pounds.
(b) Denominated in German Deutsche Marks.
(c) Denominated in Australian Dollars.
(d) Denominated in French Francs.
(e) Denominated in Italian Lire.
See notes to financial statements.
DREYFUS GLOBAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1996
Cost Value
______ ______
ASSETS: Investments in securities-See Statement of Investments $ 9,115,912 $ 9,850,437
Cash....................................... 6,881
Cash denominated in foreign currencies..... 1,279,321 1,292,404
Interest receivable........................ 328,951
Receivable for forward currency exchange contracts 14,924
Prepaid expenses........................... 42,401
Due from The Dreyfus Corporation and affiliates 1,412
______
11,537,410
______
LIABILITIES: Due to Distributor......................... 2,177
Payable for investment securities purchased and
forward currency exchange contracts 603,225
Net unrealized (depreciation) on forward currency
exchange contracts-Note 3(a) 100,784
Accrued expenses........................... 52,212
______
758,398
______
NET ASSETS.................................................................. $10,779,012
======
REPRESENTED BY: Paid-in capital............................ $10,064,044
Accumulated undistributed investment income-net 68,157
Accumulated net realized gain (loss) on investments
and foreign currency transactions (9,698)
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions 656,509
______
NET ASSETS.................................................................. $10,779,012
======
SHARES OUTSTANDING
(300 million shares of $.001 par value Common Stock authorized)............. 817,857
NET ASSET VALUE, offering and redemption price per share.................... $13.18
======
See notes to financial statements.
DREYFUS GLOBAL BOND FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED NOVEMBER 30, 1996
INVESTMENT INCOME
INCOME Interest Income (net of $1,254 foreign taxes
withheld at source).................... $1,048,173
EXPENSES: Management fee-Note 2(a)................... $101,805
Shareholder servicing costs-Note 2(b)...... 44,679
Audit fees................................. 39,070
Directors' fees and expenses-Note 2(c)..... 24,247
Legal fees................................. 21,339
Registration fees.......................... 16,668
Prospectus and shareholders' reports....... 12,294
Custodian fees............................. 7,842
Miscellaneous.............................. 22,586
_____
Total Expenses....................... 290,530
Less-reduction in management fee due to
undertakings-Note 2(a)................. (96,116)
_____
Net Expenses......................... 194,414
______
INVESTMENT INCOME-NET....................................................... 853,759
______
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 3:
Net realized gain (loss) on investments and
foreign currency transactions.......... $647,416
Net realized gain (loss) on forward currency
exchange contracts..................... 165,101
_____
Net Realized Gain (Loss)............. 812,517
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions...... (391,286)
______
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 421,231
______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,274,990
======
See notes to financial statements.
DREYFUS GLOBAL BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
November 30, 1996 November 30, 1995
__________ __________
OPERATIONS:
Investment income-net......................................... $ 853,759 $ 1,079,380
Net realized gain (loss) on investments....................... 812,517 59,595
Net unrealized appreciation (depreciation) on investments..... (391,286) 1,277,458
______ ______
Net Increase (Decrease) in Net Assets Resulting from Operations 1,274,990 2,416,433
______ ______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net......................................... (1,458,377) (1,115,679)
______ ______
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold................................. 1,086,523 2,400,052
Dividends reinvested.......................................... 1,257,808 928,971
Cost of shares redeemed....................................... (7,861,858) (3,425,344)
______ ______
Increase (Decrease) in Net Assets from Capital Stock Transactions (5,517,527) (96,321)
______ ______
Total Increase (Decrease) in Net Assets................. (5,700,914) 1,204,433
NET ASSETS:
Beginning of Period........................................... 16,479,926 15,275,493
______ ______
End of Period................................................. $10,779,012 $16,479,926
====== ======
UNDISTRIBUTED INVESTMENT INCOME-NET............................... $ 68,157 $ 68,497
______ ______
Shares Shares
______ ______
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................... 86,181 195,310
Shares issued for dividends reinvested........................ 100,387 74,302
Shares redeemed............................................... (630,010) (277,215)
______ ______
Net Increase (Decrease) in Shares Outstanding............... (443,442) (7,603)
====== ======
See notes to financial statements.
</TABLE>
DREYFUS GLOBAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated April 1, 1997.
DREYFUS GLOBAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Global Bond Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company. The Fund's investment objective is to seek
total return. The Dreyfus Corporation ("Dreyfus") serves as the Fund's
investment adviser. Prior to September 12, 1996, M&G Investment Management
Limited ("M&G") served as the Fund's sub-investment adviser. Dreyfus is a
direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of
Mellon Bank Corporation. Premier Mutual Fund Services, Inc. (the
"Distributor") acts as the distributor of the Fund's shares, which are sold
to the public without a sales charge.
As of November 30, 1996, MBIC Investment Corp., an indirect subsidiary of
Mellon Bank Corporation, held 504,642 shares of the Fund.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(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. Forward currency exchange contracts are valued at the forward rate.
(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.
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 dividends, 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. Such gains and losses
are included with net realized and unrealized gain or loss on investments.
(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.
(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 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 29, 1996, the Board of Directors declared a cash dividend of
$.063 per share from undistributed investment income-net, payable on December
2, 1996 (ex-dividend date), to shareholders of record as of the close of
business on November 29, 1996.
(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
DREYFUS GLOBAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 $17,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1996. If not
applied, $10,000 of the carryover expires in fiscal 2003 and $7,000 of the
carryover expires in fiscal 2004.
As of November 30, 1996, the Fund reclassified certain components of net
assets. The reclassifications resulted in a net increase to distribution in
excess of investment income-net and a decrease in accumulated net realized
losses on investments and foreign currency transactions of $573,085. This
reclassification was the result of permanent book to tax differences,
primarily from foreign currency transactions. In addition, the Fund
reclassified $31,193 from paid-in capital to undistributed investment
income-net. Net assets were not affected by these reclassifications.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a Management Agreement ("Agreement") with Dreyfus, the
management fee is computed at the annual rate of .70 of 1% of the value of
the Fund's average daily net assets and is payable monthly. The Manager has
undertaken from December 1, 1995 through December 17, 1995 to reduce other
expenses paid by the Fund, to the extent that the Fund's aggregate expenses
(exclusive of taxes, brokerage, interest on borrowings and extraordinary
expenses) exceeded specified annual percentages of the Fund's average daily
net assets. The Manager has currently undertaken from December 18, 1995
through November 30, 1997 to reduce the management fee paid by the Fund, to
the extent that the Fund's aggregate annual expenses (exclusive of certain
expenses as described above) exceed an annual rate of 1.35% of the value of
the Fund's average daily net assets. The reduction in management fee,
pursuant to the undertakings, amounted to $96,116 during the period ended
November 30, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
Prior to September 12, 1996, pursuant to a Sub-Investment Advisory
Agreement between Dreyfus and M&G, the sub-advisory fee was computed at the
annual rate of .28 of 1% of the value of the Fund's average daily net assets
and was payable monthly by Dreyfus.
(B) 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 the provision of certain services. 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 (a securities
dealer, financial institution or other industry professional) in respect of
these services. The Distributor determines the amounts to be paid to Service
Agents. During the period ended November 30, 1996, the Fund was charged by
the Distributor an aggregate of $36,359 pursuant to the Shareholder Services
Plan.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Fund. Such compensation amounted to $5,734 during the period ended
November 30, 1996.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
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, 1996 amounted to $11,084,601 and
$17,533,555, respectively.
In addition, the following summarizes open forward currency exchange
contracts at November 30, 1996:
<TABLE>
<CAPTION>
Foreign Unrealized
Currency Appreciation
Forward Currency Contracts: Amount Proceeds Value (Depreciation)
______________ ________ _______ _______ _______
<S> <C> <C> <C> <C>
Sales:
___
Australian Dollars, expiring 1/16/97. 2,913,000 $2,301,271 $2,368,560 $ (67,289)
British Pounds, expiring 1/16/97..... 1,270,000 2,042,093 2,134,235 (92,142)
French Francs, expiring 1/16/97...... 8,250,000 1,616,491 1,583,250 33,241
German Deutsche Marks, expiring 1/16/97 3,200,580 2,125,559 2,086,563 38,996
Purchases: Cost
_____ _______
Dutch Guilders, expiring 1/16/97..... 1,000,000 591,980 581,801 (10,179)
Italian Lire, expiring 1/16/97....... 770,000,000 502,896 507,146 4,250
Japanese Yen, expiring 1/16/97....... 36,000,000 325,682 318,021 (7,661)
______
TOTAL.............................. $(100,784)
======
</TABLE>
The Fund enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency
exchange rates on its foreign portfolio holdings. 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, 1996, accumulated net unrealized appreciation on
investments and forward currency exchange contracts was $633,741, consisting
of $827,179 gross unrealized appreciation and $193,438 gross unrealized
depreciation.
At November 30, 1996, 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, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Global Bond Fund, Inc. at November 30, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[ERNST & YOUNG LLP signature logo]
New York, New York
January 10, 1997
DREYFUS GLOBAL BOND FUND, INC.
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement
Condensed Financial Information for the period from March
18, 1994 (commencement of operations) to November 30, 1994
and for each of the two years in the period ended November
30, 1996.
Included in Part B of the Registration Statement:
Statement of Investments-- November 30, 1996
Statement of Assets and Liabilities-- November 30, 1996
Statement of Operations--year ended November 30, 1996
Statement of Changes in Net Assets--for each of the two
years in the period ended November 30, 1996
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors,
dated January 10, 1997
All Schedules and other financial statement information, for which
provision is made in the applicable accounting regulations of the
Securities and Exchange Commission, are either omitted because they are not
required under the related instructions, they are inapplicable, or the
required information is presented in the financial statements or notes
thereto which are included in Part B of the Registration Statement.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1) Registrant's Articles of Incorporation and Articles of
Amendment are incorporated by reference to Exhibit (1) and
Exhibit (1)(b) of Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A, filed on February 25, 1994.
(2) Registrant's By-Laws, as amended, are incorporated by
reference to Exhibit (2) of Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A, filed on February 25, 1994.
(5) Management Agreement is incorporated by reference to Exhibit
(5) of Pre-Effective Amendment No. (5)(a) to the Registration
Statement on Form N-1A, filed on January 30, 1995.
(6)(a) Distribution Agreement is incorporated by reference to
Exhibit (6) of Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A, filed on January 30, 1995.
(8) Custody Agreement is incorporated by reference to Exhibit 8
of Pre-Effective Amendment No. 2 to the Registration Statement on
Form N-1A, filed on February 25, 1994.
(10) Opinion and consent of Registrant's counsel is incorporated
by reference to Exhibit (10) of Pre-Effective Amendment No. 2 to
the Registration Statement on Form N-1A, filed on February 25,
1994.
(11) Consent of Independent Auditors is incorporated by reference
to Exhibit (16) of Post-Effective Amendment No. 1 to the
Registration Statement on From N-1A filed on August 12, 1994.
(14) Model Retirement Plans are incorporated by Reference to
Exhibit (14) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on January 24, 1997.
(16) Schedules of Computation of Performance Data is incorporated
by reference to Exhibit (16) of Post-Effective Amendment No. 1 to
the Registration Statement on From N-1A filed on August 12, 1994.
(17) Financial Data Schedule.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
Other Exhibits
______________
(a) Powers of Attorney of the Directors and officers are
incorporated by reference to Other Exhibits (a) of
Post-Effective Amendment No. 5 to the Registration
Statement on Form N-1A, filed on January 24, 1997.
(b) Certificate of Secretary is incorporated by reference
to Other Exhibits (b) of Post-Effective Amendment No. 5
to the Registration Statement on Form N-1A, filed on
January 24, 1997.
*n*
Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities.
_______ ________________________________
(1) (2)
Number of Record
Title of Class Holders as of March 17, 1997
______________ _____________________________
Common Stock
(Par value $.001) 316
Item 27. Indemnification
_______ _______________
Reference is made to Articles SEVENTH of the Registrant's Articles
of Incorporation incorporated by reference to Exhibit (1)(b) of
Pre-Effective Amendment No. 2 to the Registration Statement on Form
N-1A, filed on February 25, 1994 and to Section 2-418 of the
Maryland General Corporation Law. The application of these
provisions is limited by Article VIII of the Registrant's By-Laws
incorporated by reference to Exhibit (2) of Pre-Effective Amendment
No. 2 to the Registration Statement on Form N-1A, filed on February
25, 1994 and by the following undertaking set forth in the rules
promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such
issue.
Reference is also made to the Distribution Agreement incorporated
by reference to Exhibit (6) of Post-Effective Amendment No. 2 to
the Registration Statement on Form N-1A, filed on January 30, 1995.
Item 28. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business
consists primarily of providing investment management services
as the investment adviser, and manager for sponsored investment
companies registered under the Investment Company Act of 1940
and as an investment adviser to institutional and individual
accounts. Dreyfus also serves as sub-investment adviser to
and/or administrator of other investment companies. Dreyfus
Service Corporation, a wholly-owned subsidiary of Dreyfus,
serves primarily as a registered broker-dealer of shares of
investment companies sponsored by Dreyfus and of other
investment companies for which Dreyfus acts as investment
adviser, sub-investment adviser or administrator. Dreyfus
Management, Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans,
institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive Officer and
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation***;
Mellon Bank, N.A.***
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company****;
Vice Chairman of the Board:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation***;
Executive Officer, The Boston Company****;
Chief Operating Deputy Director:
Officer and a Mellon Trust***;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.****;
President:
Boston Safe Deposit and Trust Company****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.**;
Director:
Dreyfus America Fund
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****;
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Dreyfus America Fund
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
MARK N. JACOBS Vice President, Secretary and Director:
Vice President, Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.**;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation***
Services
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 131 Second Street, Lewes,
Delaware 19958.
*** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
**** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) Dreyfus Investment Grade Bond Funds, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus LifeTime Portfolios, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus 100% U.S. Treasury Intermediate Term Fund
57) Dreyfus 100% U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus 100% U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus S&P 500 Index Fund
63) Dreyfus Short-Intermediate Government Fund
64) Dreyfus Short-Intermediate Municipal Bond Fund
65) The Dreyfus Socially Responsible Growth Fund, Inc.
66) Dreyfus Stock Index Fund, Inc.
67) Dreyfus Tax Exempt Cash Management
68) The Dreyfus Third Century Fund, Inc.
69) Dreyfus Treasury Cash Management
70) Dreyfus Treasury Prime Cash Management
71) Dreyfus Variable Investment Fund
72) Dreyfus Worldwide Dollar Money Market Fund, Inc.
73) General California Municipal Bond Fund, Inc.
74) General California Municipal Money Market Fund
75) General Government Securities Money Market Fund, Inc.
76) General Money Market Fund, Inc.
77) General Municipal Bond Fund, Inc.
78) General Municipal Money Market Fund, Inc.
79) General New York Municipal Bond Fund, Inc.
80) General New York Municipal Money Market Fund
81) Premier Insured Municipal Bond Fund
82) Premier California Municipal Bond Fund
83) Premier Equity Funds, Inc.
84) Premier Global Investing, Inc.
85) Premier GNMA Fund
86) Premier Growth Fund, Inc.
87) Premier Municipal Bond Fund
88) Premier New York Municipal Bond Fund
89) Premier State Municipal Bond Fund
90) Premier Strategic Growth Fund
91) Premier Value Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Vice President
and Chief Financial Officer and Assistant
Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Roy M. Moura+ First Vice President None
Dale F. Lampe+ Vice President None
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Elizabeth A. Keeley++ Assistant Vice President Vice President
and Assistant
Secretary
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
New York, and State of New York on the 20th day of March, 1997.
DREYFUS GLOBAL BOND FUND, INC.
BY: /s/Marie E. Connolly*
__________________________________________
MARIE E. CONNOLLY, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signatures Title Date
__________________________ _______________________________ ________
/s/Marie E. Connolly* President and Treasurer 3/20/97
Marie E. Connolly (Principal Executive, Financial
and Accounting Officer)
/s/Joseph S. DiMartino* Chairman of the Board of 3/20/97
Joseph S. DiMartino Directors
/s/David P. Feldman* Director 3/20/97
David P. Feldman
/s/John M. Fraser, Jr.* Director 3/20/97
John M. Fraser, Jr.
/s/Robert R. Glauber* Director 3/20/97
Robert R. Glauber
/s/James F. Henry* Director 3/20/97
James F. Henry
/s/Rosalind G. Jacobs* Director 3/20/97
Rosalind G. Jacobs
/s/Irving Kristol* Director 3/20/97
Irving Kristol
/s/Paul A. Marks* Director 3/20/97
Paul A. Marks
/s/Dr. Martin Peretz* Director 3/20/97
Dr. Martin Peretz
/s/Bert W. Wasserman* Director 3/20/97
Bert W. Wasserman
*BY: /s/Elizabeth Keeley
___________________
Elizabeth Keeley,
Attorney-in-Fact
INDEX OF EXHIBITS
(11) Consent of Independent Auditors
(17) Financial Data Schedule
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our report
dated January 10, 1997, in this Registration Statement (Form N-1A 33-50203)
of Dreyfus Global Bond Fund, Inc.
ERNST & YOUNG LLP
New York, New York
March 19, 1997
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