June 22, 1994
DREYFUS INTERNATIONAL RECOVERY FUND, INC.
SUPPLEMENT TO PROSPECTUS
DATED JUNE 22, 1994
The following information supplements and should be read in conjunction
with the section of the Fund's Prospectus entitled "Management of the
Fund."
The Fund's investment adviser, The Dreyfus Corporation ("Dreyfus"), has
entered into an Agreement and Plan of Merger (the "Merger Agreement")
providing for the merger of Dreyfus with a subsidiary of Mellon Bank
Corporation ("Mellon").
Following the merger, it is planned that Dreyfus will be a direct
subsidiary of Mellon Bank, N.A. Closing of this merger is subject to a
number of contingencies, including receipt of certain regulatory approvals
and approvals of the stockholders of Dreyfus and of Mellon. The merger is
expected to occur in August 1994, but could occur significantly later.
096/stkr062294
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PROSPECTUS JUNE 22, 1994
DREYFUS INTERNATIONAL RECOVERY FUND, INC.
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DREYFUS INTERNATIONAL RECOVERY FUND, INC. (THE "FUND") IS AN
OPEN-END, NON-DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN
AS A MUTUAL FUND. ITS GOAL IS TO PROVIDE YOU WITH CAPITAL GROWTH.
THE FUND WILL INVEST PRIMARILY IN THE EQUITY SECURITIES OF FOREIGN
COMPANIES THAT ARE GOING THROUGH A DIFFICULT PERIOD BUT WHERE, IN
THE JUDGMENT OF THE FUND'S SUB-INVESTMENT ADVISER, THE
MARKETPLACE IS UNDERPRICING THE PROSPECTS OF RECOVERY. SEE
"DESCRIPTION OF THE FUND __ INVESTMENT APPROACH."
YOU CAN INVEST, REINVEST OR REDEEM FUND SHARES AT ANY TIME
WITHOUT CHARGE OR PENALTY IMPOSED BY THE FUND. YOU CAN PURCHASE
OR REDEEM SHARES BY TELEPHONE USING DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION ("DREYFUS") WILL SERVE AS THE FUND'S
INVESTMENT ADVISER. DREYFUS HAS ENGAGED M&G INVESTMENT
MANAGEMENT LIMITED ("M&G") TO SERVE AS THE FUND'S SUB-INVESTMENT
ADVISER AND PROVIDE DAY-TO-DAY MANAGEMENT OF THE FUND'S
INVESTMENTS. DREYFUS AND M&G ARE REFERRED TO COLLECTIVELY AS THE
"ADVISERS."
THE FUND BEARS CERTAIN COSTS PURSUANT TO A DISTRIBUTION PLAN
ADOPTED IN ACCORDANCE WITH RULE 12B-1 UNDER THE INVESTMENT
COMPANY ACT OF 1940 AND A SHAREHOLDER SERVICES PLAN.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE
FUND THAT YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
PART B (ALSO KNOWN AS THE STATEMENT OF ADDITIONAL INFORMATION),
DATED JUNE 22, 1994, WHICH MAY BE REVISED FROM TIME TO TIME,
PROVIDES A FURTHER DISCUSSION OF CERTAIN AREAS IN THIS PROSPECTUS
AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME INVESTORS. IT
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS
INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO THE
FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-
0144, OR CALL 1-800-554-4611. WHEN TELEPHONING, ASK FOR OPERATOR
666.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. THE NET ASSET VALUE OF FUNDS OF
THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
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TABLE OF CONTENTS
PAGE
ANNUAL FUND OPERATING EXPENSES....................... 2
DESCRIPTION OF THE FUND.............................. 2
MANAGEMENT OF THE FUND............................... 12
HOW TO BUY FUND SHARES............................... 13
SHAREHOLDER SERVICES................................. 15
HOW TO REDEEM FUND SHARES............................ 18
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN...... 20
DIVIDENDS, DISTRIBUTIONS AND TAXES.................... 21
PERFORMANCE INFORMATION............................... 22
GENERAL INFORMATION.................................... 22
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................................. .75%
12b-1 Fees...................................... .50%
Other Expenses.................................. .85%
Total Fund Operating Expenses................... 2.10%
EXAMPLE: 1 YEAR 3 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $21 $66
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE
EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER
OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding the
various costs and expenses borne by the Fund, and therefore indirectly by
investors, the payment of which will reduce investors' return on an annual
basis. Other Expenses and Total Fund Operating Expenses are based on
estimated amounts for the current fiscal year. The information in the
foregoing table does not reflect any fee waivers or expense
reimbursement arrangements that may be in effect. 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. Long-term investors could pay more in 12b-1 fees than
the economic equivalent of paying a front-end sales charge. For a further
description of the various costs and expenses incurred in the operation of
the Fund, as well as expense reimbursement or waiver arrangements, see
"Management of the Fund," "How to Buy Fund Shares" and "Distribution
Plan and Shareholder Services Plan."
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's goal is to provide you with capital growth. The Fund's
investment objective cannot be changed without approval by the holders of
a majority (as defined in the Investment Company Act of 1940) of the
Fund's outstanding voting shares. There can be no assurance that the
Fund's investment objective will be achieved.
INVESTMENT APPROACH
M&G, the Fund's sub-investment adviser, intends to employ a style of
investing it calls "recovery investing." This style involves identifying
companies that are going through a difficult period, but where, in M&G's
judgement, the market place is undervaluing the prospects of recovery.
These companies may be identified from characteristics such as reduced
dividends, low cash flow, high leverage, slowdown in earnings momentum,
product failures and management problems. See "Risk Factors __ Other
Investment Considerations." Companies, the stock of which is suitable for
purchase by the Fund, should have, in M&G's opinion, adequate financial
strength to achieve the anticipated recovery and to provide the desired
measure of capital growth over a two to three year period. M&G expects
that a significant proportion of the Fund's investments will be selected
among medium (companies with market capitalizations of between $750
million and $2.5 billion) and smaller (companies with market
capitalizations of less than $750 million) capitalized companies;
however, the Fund will not limit the market capitalizations of companies
in which it invests. M&G continually will seek new holdings to replace
those where the prospects of recovery appear to have been fulfilled or
where they seem to have been unfounded. Capital growth is the Fund's sole
objective and income is not a consideration when investments are
selected. M&G has been applying this particular investment discipline for
more than 24 years and currently manages over $2 billion in U.K. managed
accounts, which are similar to mutual funds, using this style of
investment.
Page 2
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that at least 65% of the value of
its total assets (except when maintaining a temporary defensive position)
will be invested in equity securities of foreign (non-U.S.) issuers located
throughout the world. Equity securities consist of common stocks,
convertible securities and preferred stocks. Under normal market
conditions, it is expected that substantially all of the Fund's assets will
be invested in securities of foreign issuers. While there are no prescribed
limits on geographic asset distribution outside the United States, the Fund
ordinarily will seek to invest its assets in at least three foreign
countries. The Fund may invest up to 35% of its total assets in companies
whose principal activities are in emerging markets. The Fund may invest
up to 5% of its assets in securities of companies that have been in
continuous operation for fewer than three years. The Fund also may invest
up to 5% of its assets in debt securities, without limitation as to rating,
of foreign issuers that show "recovery" characteristics similar to those
shown by the Fund's equity investments. The Fund's policy is to purchase
marketable securities traded in markets throughout the world; however
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. See "Certain Portfolio
Securities-Illiquid Securities" below.
The Fund may invest, in anticipation of investing cash positions, 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 "Certain Portfolio
Securities" below. The Fund also may hold U.S. Government securities to
meet certain asset segregation requirements. Under normal market
conditions, the Fund expects to have less than 20% of its assets invested
in money market instruments. However, when the Advisers determine that
adverse market conditions exist, the Fund may adopt a temporary
defensive posture and invest all of its assets in money market
instruments.
INVESTMENT TECHNIQUES
The Fund may engage in various investment techniques, such as foreign
exchange transactions, options and futures transactions and lending
portfolio securities, each of which involves risk. See "Risk Factors"
below. Options and futures transactions involve so-called "derivative
securities."
FOREIGN CURRENCY TRANSACTIONS-The Fund may engage in currency
exchange transactions to the extent consistent with its investment
objective or to hedge its portfolio. The Fund will conduct its currency
exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, or through entering into
forward contracts to purchase or sell currencies. A forward currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which must be more than two days from the
date of the contract, at a price set at the time of the contract. Forward
currency exchange contracts are entered into in the interbank market
conducted directly between currency traders (typically commercial banks
or other financial institutions) and their customers. The Fund also may
combine forward currency exchange contracts with investments in
securities denominated in other currencies.
The Fund also may maintain short positions in forward currency
exchange transactions, which would involve the Fund agreeing to exchange
an amount of a currency it did not currently own for another currency at a
future date in anticipation of a decline in the value of the currency sold
relative to the currency the Fund contracted to receive in the exchange.
The Fund will maintain in a segregated custodial account cash or U.S.
Government securities or other high quality liquid debt securities at least
equal to the aggregate amount of its short positions, plus accrued
interest, in certain cases, in accordance with releases promulgated by the
Securities and Exchange Commission.
OPTIONS ON FOREIGN CURRENCY-The Fund may purchase and sell call and
put options on foreign currency for the purpose of hedging against changes
in future currency exchange rates. Call options convey the right to buy the
underlying currency at a price which is expected to be lower than the spot
price of the currency at the time the option expires. Put options convey
the right to sell the underlying currency at a price which is antici-
Page 3
pated to
be higher than the spot prices of the currency at the time the option
expires. The Fund may use foreign currency options for the same purposes
as forward currency exchange and futures transactions, as described
herein. See also "Call and Put Options on Specific Securities" and
"Currency Futures and Options on Currency Futures" below.
CALL AND PUT OPTIONS ON SPECIFIC SECURITIES-The Fund may invest up
to 5% of its assets, represented by the premium paid, in the purchase of
call and put options in respect of specific securities (or groups or
"baskets" of specific securities) in which the Fund may invest. The Fund
may write covered call and put option contracts to the extent of 20% of
the value of its net assets at the time such option contracts are written.
A call option gives the purchaser of the option the right to buy, and
obligates the writer to sell, the underlying security at the exercise price
at any time during the option period. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy,
the underlying security at the exercise price at any time during the option
period. A covered call option sold by the Fund, which is a call option with
respect to which the Fund owns the underlying security or securities,
exposes the Fund during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
security or securities or to possible continued holding of a security or
securities which might otherwise have been sold to protect against
depreciation in the market price thereof. A covered put option sold by the
Fund exposes the Fund during the term of the option to a decline in price of
the underlying security or securities. A put option sold by the Fund is
covered when, among other things, cash or liquid securities are placed in a
segregated account with the Fund's custodian to fulfill the obligation
undertaken.
To close out a position when writing covered options, the Fund may
make a "closing purchase transaction," which involves purchasing an
option on the same security or securities with the same exercise price
and expiration date as the option which it has previously written. To close
out a position as a purchaser of an option, the Fund may make a "closing
sale transaction," which involves liquidating the Fund's position by
selling the option previously purchased. The Fund will realize a profit or
loss from a closing purchase or sale transaction depending upon the
difference between the amount paid to purchase an option and the amount
received from the sale thereof.
The Fund intends to treat options in respect of specific securities that
are not traded on a U.S. or foreign national securities exchange and the
securities underlying covered call options written by the Fund as illiquid
securities. See "Certain Portfolio Securities-Illiquid Securities" below.
The Fund will purchase options only to the extent permitted by the
policies of state securities authorities in states where shares of the Fund
are qualified for offer and sale.
STOCK INDEX OPTIONS-The Fund may purchase and write put and call
options on stock indexes listed on U.S. or foreign securities exchanges or
traded in the over-the-counter market. A stock index fluctuates with
changes in the market values of the stocks included in the index.
The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in the Fund's
investments correlate with price movements of the stock index selected.
Because the value of an index option depends upon movements in the level
of the index rather than the price of a particular stock, whether the Fund
will realize a gain or loss from the purchase or writing of options on an
index depends upon movements in the level of stock prices in the stock
market generally or, in the case of certain indexes, in an industry or
market segment, rather than movements in the price of a particular stock.
Accordingly, successful use by the Fund of options on stock indexes will
be subject to the Advisers' ability to predict correctly movements in the
direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the
price of individual stocks.
When the Fund writes an option on a stock index, the Fund will place in
a segregated account with its custodian or sub-custodian cash or liquid
securities in an amount at least equal to the market value of the
underlying stock index and will maintain the account while the option is
open or otherwise will cover the transaction.
Page 4
FUTURES TRANSACTIONS-IN GENERAL-The Fund will not be a commodity
pool. However, as a substitute for a comparable market position in the
underlying securities and for hedging purposes, the Fund may engage in
futures and options on futures transactions, as described below.
The Fund may trade futures contracts and options on futures contracts
in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or, to
the extent permitted under applicable law, on exchanges located outside
the United States, such as the London International Financial Futures
Exchange and the Sydney Futures Exchange Limited. Foreign markets may
offer advantages such as trading in commodities that are not currently
traded in the United States or arbitrage possibilities not available in the
United States. Foreign markets, however, may have greater risk potential
than domestic markets. See "Risk Factors-Foreign Commodity
Transactions" below.
The Fund's commodities transactions must constitute bona fide hedging
or other permissible transactions pursuant to regulations promulgated by
the Commodity Futures Trading Commission (the "CFTC"). In addition, the
Fund may not engage in such transactions if the sum of the amount of
initial margin deposits and premiums paid for unexpired commodity
options, other than for bona fide hedging transactions, would exceed 5% of
the liquidation value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on such contracts it has entered
into; provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. Pursuant to regulations and/or published positions of
the Securities and Exchange Commission, the Fund may be required to
segregate cash or high quality money market instruments in connection
with its commodities transactions in an amount generally equal to the
value of the underlying commodity. To the extent the Fund engages in the
use of futures and options on futures for other than bonafide hedging
purposes, the Fund may be subject to additional risk.
Initially, when purchasing or selling futures contracts the Fund will be
required to deposit with its custodian in the broker's name an amount of
cash or cash equivalents up to approximately 10% of the contract amount.
This amount is subject to change by the exchange or board of trade on
which the contract is traded and members of such exchange or board of
trade may impose their own higher requirements. This amount is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of
the futures position, assuming all contractual obligations have been
satisfied. Subsequent payments, known as "variation margin," to and from
the broker will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known
as "marking-to-market." At any time prior to the expiration of a futures
contract, the Fund may elect to close the position by taking an opposite
position, at the then prevailing price, which will operate to terminate the
Fund's existing position in the contract.
Although the Fund intends to purchase or sell futures contracts only if
there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices during a single
trading day. Once the daily limit has been reached in a particular contract,
no trades may be made that day at a price beyond that limit or trading may
be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting the Fund to substantial losses. If it is
not possible, or the Fund determines not, to close a futures position in
anticipation of adverse price movements, the Fund will be required to
make daily cash payments of variation margin. In such circumstances, an
increase in the value of the portion of the portfolio being hedged, if any,
may offset partially or completely losses on the futures contract.
However, no assurance can be given that the price of the securities being
hedged will correlate with the price movements in a futures contract and
thus provide an offset to losses on the futures contract.
Page 5
In addition, to the extent the Fund is engaging in a futures transaction
as a hedging device, due to the risk of an imperfect correlation between
securities in the Fund's portfolio that are the subject of a hedging
transaction and the futures contract used as a hedging device, it is
possible that the hedge will not be fully effective in that, for example,
losses on the portfolio securities may be in excess of gains on the futures
contract or losses on the futures contract may be in excess of gains on the
portfolio securities that were the subject of the hedge. In futures
contracts based on indexes, the risk of imperfect correlation increases as
the composition of the Fund's portfolio varies from the composition of the
index. In an effort to compensate for the imperfect correlation of
movements in the price of the securities being hedged and movements in
the price of futures contracts, the Fund may buy or sell futures contracts
in a greater or lesser dollar amount than the dollar amount of the
securities being hedged if the historical volatility of the futures contract
has been less or greater than that of the securities. Such "over hedging"
or "under hedging" may adversely affect the Fund's net investment results
if market movements are not as anticipated when the hedge is established.
Successful use of futures by the Fund also is subject to the Advisers'
ability to predict correctly movements in the direction of the market or
interest rates. For example, if the Fund has hedged against the possibility
of a decline in the market adversely affecting the value of securities held
in its portfolio and prices increase instead, the Fund will lose part or all
of the benefit of the increased value of securities which it has hedged
because it will have offsetting losses in its futures positions. In addition,
in such situations, if the Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which
reflect the rising market. The Fund may have to sell securities at a time
when it may be disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the option exercise period.
The writer of the option is required upon exercise to assume an offsetting
futures position (a short position if the option is a call and a long position
if the option is a put). Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's
futures margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Call options sold by the Fund with respect to futures contracts will be
covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the prices of
which are expected to move relatively consistently with the instruments
underlying, the futures contract. Put options sold by the Fund with respect
to futures contracts will be covered in the same manner as put options on
specific securities as described above.
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES-The Fund
may purchase and sell stock index futures contracts and options on stock
index futures contracts.
A stock index future obligates the seller to deliver (and the purchaser
to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is
made. No physical delivery of the underlying stocks in the index is made.
With respect to stock indexes that are permitted investments, the Fund
intends to purchase and sell futures contracts on the stock index for
which it can obtain the best price with consideration also given to
liquidity.
The Fund may use index futures as a substitute for a comparable market
position in the underlying securities.
The price of stock index futures may not correlate perfectly with the
movement in the stock index because of certain market distortions. First,
all participants in the futures market are subject to margin deposit
Page 6
and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which would distort the normal relationship between the
index and futures markets. Secondly, from the point of view of
speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may
cause temporary price distortions.
CURRENCY FUTURES AND OPTIONS ON CURRENCY FUTURES-The Fund may
purchase and sell currency futures contracts and options thereon. See
"Call and Put Options on Specific Securities" above. By selling foreign
currency futures, the Fund can establish the number of U.S. dollars it will
receive in the delivery month for a certain amount of a foreign currency.
In this way, if the Fund anticipates a decline of a foreign currency against
the U.S. dollar, the Fund can attempt to fix the U.S. dollar value of some or
all of its securities that are denominated in that currency. By purchasing
foreign currency futures, the Fund can establish the number of U.S. dollars
it will be required to pay for a specified amount of a foreign currency in
the delivery month. Thus, if the Fund intends to buy securities in the
future and expects the U.S. dollar to decline against the relevant foreign
currency during the period before the purchase is effected, the Fund, for
the price of the currency future, can attempt to fix the price in U.S.
dollars of the securities it intends to acquire.
The purchase of options on currency futures will allow the Fund, for the
price of the premium it must pay for the option, to decide whether or not
to buy (in the case of a call option) or to sell (in the case of a put option)
a futures contract at a specified price at any time during the period
before the option expires. If the Fund, in purchasing an option, has been
correct in its judgment concerning the direction in which the price of a
foreign currency would move as against the U.S. dollar, it may exercise the
option and thereby take a futures position to hedge against the risk it had
correctly anticipated or close out the option position at a gain that will
offset, to some extent, currency exchange losses otherwise suffered by
the Fund. If exchange rates move in a way the Fund did not anticipate, the
Fund will have incurred the expense of the option without obtaining the
expected benefit. As a result, the Fund's profits on the underlying
securities transactions may be reduced or overall losses incurred.
FUTURE DEVELOPMENTS-The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts
and any other derivative investments which are not presently
contemplated for use by the Fund or which are not currently available but
which may be developed, to the extent such opportunities are both
consistent with the Fund's investment objective and legally permissible
for the Fund. Before entering into such transactions or making any such
investment, the Fund will provide appropriate disclosure in its prospectus.
LENDING PORTFOLIO SECURITIES-From time to time, the Fund may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain
transactions. Such loans may not exceed 33-1/3% of the value of the
Fund's total assets. In connection with such loans, the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. The
Fund can increase its income through the investment of such collateral.
The Fund continues to be entitled to payments in amounts equal to the
interest, dividends and other distributions payable on the loaned security
and receives interest on the amount of the loan. Such loans will be
terminable at any time upon specified notice. The Fund might experience
risk of loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Fund.
BORROWING MONEY-As a fundamental policy, the Fund is permitted to
borrow to the extent permitted under the Investment Company Act of
1940. However, the Fund currently intends to borrow money only for
temporary or emergency (not leveraging) purposes, in an amount up to 15%
of the value of the Fund's total assets (including the amount borrowed)
valued at the lesser of cost or market, less liabilities (not including the
amount borrowed) at the time the borrowing is made. While borrowings
exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
Page 7
CERTAIN PORTFOLIO SECURITIES
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS-The Fund's
assets may be invested in the securities of foreign issuers in the form of
American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs
are receipts typically issued by a United States bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental
Depositary Receipts ("CDRs"), are receipts issued in Europe typically by
non-United States banks and trust companies that evidence ownership of
either foreign or domestic securities. Generally, ADRs in registered form
are designed for use in the United States securities markets and EDRs and
CDRs in bearer form are designed for use in Europe. The Fund may invest in
ADRs, EDRs and CDRs through "sponsored" or "unsponsored" facilities. A
sponsored facility is established jointly by the issuer of the underlying
security and a depositary, whereas a depositary may establish an
unsponsored facility without participation by the issuer of the deposited
security. Holders of unsponsored depositary receipts generally bear all the
costs of such facilities and the depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to
pass through voting rights to the holders of such receipts in respect of the
deposited securities.
CONVERTIBLE SECURITIES-The Fund may purchase convertible securities,
which are fixed-income securities, such as bonds or preferred stock,
which may be converted at a stated price within a specified period of time
into a specified number of shares of common stock of the same or a
different issuer. Convertible securities are senior to common stock in a
corporation's capital structure, but usually are subordinated to non-
convertible debt securities. While providing a fixed-income stream
(generally higher in yield than the income derivable from a common stock
but lower than that afforded by a non-convertible debt security), a
convertible security also affords an investor the opportunity, through its
conversion feature, to participate in the capital appreciation of the
common stock into which it is convertible.
In general, the market value of a convertible security is the higher of
its "investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common
stock if the security is converted). As a fixed-income security, the market
value of a convertible security generally increases when interest rates
decline and generally decreases when interest rates rise. However, the
price of a convertible security also is influenced by the market value of
the security's underlying common stock. Thus, the price of a convertible
security generally increases as the market value of the underlying stock
increases, and generally decreases as the market value of the underlying
stock declines. Investments in convertible securities generally entail less
risk than investments in the common stock of the same issuer.
MONEY MARKET INSTRUMENTS--The Fund may invest, in the circumstances described
under " Management Policies," in the following types of money market
instruments.
U.S. GOVERNMENT SECURITIES. The Fund may purchase securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities,
which include U.S. Treasury securities that differ in their interest rates,
maturities and times of issuance. Treasury Bills have initial maturities of
one year or less; Treasury Notes have initial maturities of one to ten
years; and Treasury Bonds generally have initial maturities of greater
than ten years. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National
Mortgage Association pass-through certificates, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
Home Loan Banks, by the right of the issuer to borrow from the U.S.
Treasury; others, such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, such as
those issued by the Student Loan Marketing Association, only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. Principal and interest may fluctuate based on
generally recog-
Page 8
nized reference rates or the relationship of rates. While
the U.S. Government provides financial support to such U.S. Government-
sponsored agencies or instrumentalities, no assurance can be given that it
will always do so, because the U.S. Government is not obligated to do so by
law.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations of
domestic banks, foreign subsidiaries of domestic banks, foreign branches
of domestic banks, and domestic and foreign branches of foreign banks,
domestic savings and loan associations and other banking institutions.
With respect to such securities issued by foreign branches of domestic
banks, foreign subsidiaries of domestic banks, and domestic and foreign
branches of foreign banks, the Fund may be subject to additional
investment risks that are different in some respects from those incurred
by a fund which invests only in debt obligations of U.S. domestic issuers.
Such risks include possible future political and economic developments,
the possible imposition of foreign withholding taxes on interest income
payable on the securities, the possible establishment of exchange controls
or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities
and the possible seizure or nationalization of foreign deposits.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by the Fund will not benefit from insurance
from the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation. The Fund will
not invest more than 15% of the value of its net assets in time deposits
that are illiquid and in other illiquid securities.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. The other short-term obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
REPURCHASE AGREEMENTS. Repurchase agreements involve the acquisition
by the Fund of an underlying debt instrument, subject to an obligation of
the seller to repurchase, and the Fund to resell, the instrument at a fixed
price usually not more than one week after its purchase. Certain costs
may be incurred by the Fund in connection with the sale of the securities
if the seller does not repurchase them in accordance with the repurchase
agreement. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the securities, realization on the securities by the
Fund may be delayed or limited.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS. Commercial
paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs. The commercial paper
purchased by the Fund will consist only of direct obligations which, at the
time of their purchase, are (a) rated not lower than Prime-1 by Moody's
Investors Service, Inc. ("Moody's"), A-1 by Standard & Poor's Corporation
("S&P"), F-1 by Fitch Investors Service, Inc. ("Fitch") or Duff-1 by Duff &
Phelps, Inc. ("Duff"), (b) issued by companies having an outstanding
unsecured debt issue currently rated not lower than Aa3 by Moody's or AA-
by S&P, Fitch or Duff, or (c) if unrated, determined by the Advisers to be
of comparable quality to those rated obligations which may be purchased
by the Fund. The Fund may purchase floating and variable rate demand
notes and bonds, which are obligations ordinarily having stated maturities
in excess of one year, but which permit the holder to demand payment of
principal at any time or at specified intervals.
WARRANTS-The Fund may invest up to 5% of its net assets in warrants,
except that this limitation does not apply to warrants acquired in units or
attached to securities. A warrant is an instrument issued by a corporation
which gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time.
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
Page 9
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain options
traded in the over-the-counter market and securities used to cover such
options. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
CERTAIN FUNDAMENTAL POLICIES
The Fund may (i) borrow money to the extent permitted under the
Investment Company Act of 1940; and (ii) invest up to 25% of the value of
its total assets in the securities of issuers in a single industry, provided
that there is no such limitation on investments in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. This
paragraph describes fundamental policies of the Fund that cannot be
changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of the Fund's outstanding voting shares.
See "Investment Objective and Management Policies-Investment
Restrictions" in the Fund's Statement of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
The Fund may (i) purchase securities of any company having less than
three years' continuous operation (including operations of any
predecessors) if such purchase does not cause the value of its
investments in all such companies to exceed 5% of the value of its total
assets; (ii) pledge, hypothecate, mortgage or otherwise encumber its
assets, but only to secure permitted borrowings; and (iii) invest up to 15%
of the value of its net assets in repurchase agreements providing for
settlement in more than seven days after notice and in other illiquid
securities. See "Investment Objective and Management Policies-
Investment Restrictions" in the Fund's Statement of Additional Information.
RISK FACTORS
INVESTING IN FOREIGN SECURITIES-Foreign securities markets generally
are not as developed or efficient as those in the United States. Securities
of some foreign issuers are less liquid and more volatile than securities
of comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States. The issuers of
some of these securities, such as foreign bank obligations, may be subject
to less stringent or different regulations than are U.S. issuers. In addition,
there may be less publicly available information about a non-U.S. issuer,
and non-U.S. issuers generally are not subject to uniform accounting and
financial reporting standards, practices and requirements comparable to
those applicable to U.S. issuers.
Because stock certificates and other evidences of ownership of such
securities usually are held outside the United States, the Fund will be
subject to additional risks which include possible adverse political and
economic developments, possible seizure or nationalization of foreign
deposits and possible adoption of governmental restrictions that might
adversely affect the payment of principal, interest and dividends on the
foreign securities or might restrict the payment of principal, interest and
dividends to investors located outside the country of the issuers, whether
from currency blockage or otherwise. Custodial expenses for a portfolio of
non-U.S. securities generally are higher than for a portfolio of U.S.
securities.
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. In an attempt to control
inflation, wage and price controls have been imposed in certain developing
countries.
page 10
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations. Some currency exchange
costs may be incurred when the Fund changes investments from one
country to another.
Furthermore, some of these securities may be subject to brokerage
taxes levied by foreign governments, which have the effect of increasing
the cost of such investment and reducing the realized gain or increasing
the realized loss on such securities at the time of sale. Income received
by the Fund from sources within foreign countries may be reduced by
withholding or other taxes imposed by such countries. Tax conventions
between certain countries and the United States, however, may reduce or
eliminate such taxes. All such taxes paid by the Fund will reduce its net
income available for distribution to investors.
FOREIGN CURRENCY EXCHANGE-Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by
the forces of supply and demand in the foreign exchange markets and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
The foreign currency market offers less protection against defaults in
the forward trading of currencies than is available when trading in
currencies occurs on an exchange. Since a forward currency contract is not
guaranteed by an exchange or clearinghouse, a default on the contract
would deprive the Fund of unrealized profits or force the Fund to cover its
commitments for purchase or resale, if any, at the current market price.
FOREIGN COMMODITY TRANSACTIONS-Unlike trading on domestic
commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal
markets so that no common clearing facility exists and a trader may look
only to the broker for performance of the contract. In addition, unless the
Fund hedges against fluctuations in the exchange rate between the U.S.
dollar and the currencies in which trading is done on foreign exchanges,
any profits that the Fund might realize in trading could be eliminated by
adverse changes in the exchange rate, or the Fund could incur losses as a
result of those changes. Transactions on foreign exchanges may include
both commodities which are traded on domestic exchanges and those
which are not.
OTHER INVESTMENT CONSIDERATIONS-The Fund's net asset value is not
fixed and should be expected to fluctuate. You should purchase Fund shares
only as a supplement to an overall investment program and only if you are
willing to undertake the risks involved.
The securities in which the Fund invests may be subject to more abrupt
or erratic market movements than the securities of companies which are
not going through the difficulties that have made them attractive
investments for the Fund. This risk occurs principally because these
issuers typically are subject to a greater degree to changes, and
anticipated changes, in earnings and prospects. As a result, the Fund may
be subject to greater investment risks than those assumed by some other
investment companies. Small capitalization companies may be subject to
a greater degree of changes in earnings and business prospects and are
more volatile than larger companies.
Investors should be aware that equity securities fluctuate in value,
often based on factors unrelated to the value of the issuer of the
securities, and that fluctuations can be pronounced. Changes in the value
of the Fund's securities will result in changes in the value of a Fund share
and thus the Fund's return to investors.
The use of investment techniques such as engaging in financial futures
and options transactions and lending portfolio securities involves greater
risk than that incurred by many other funds with similar objectives. Using
these techniques may produce higher than normal portfolio turnover which
usually generates additional brokerage commissions and expenses. In
addition, short-term gains realized from portfolio transactions are
taxable to shareholders as ordinary income. The Fund's ability to engage in
certain short-term trans-
Page 11
actions may be limited by the requirement that,
to qualify as a regulated investment company, the Fund must earn less
than 30% of its gross income from the disposition of securities held for
less than three months. This 30% test limits the extent to which the Fund
may sell securities held for less than three months, write options
expiring in less than three months and invest in certain futures contracts,
among other strategies. With exception of the above requirement, the
amount of portfolio activity will not be a limiting factor when making
portfolio decisions. Under normal market conditions, the Fund's portfolio
turnover rate generally will not exceed 150%. See "Portfolio
Transactions" in the Statement of Additional Information.
The Fund's classification as a "non-diversified" investment company
means that the proportion of the Fund's assets that may be invested in the
securities of a single issuer is not limited by the Investment Company Act
of 1940. A "diversified" investment company is required by the
Investment Company Act of 1940 generally, with respect to 75% of its
total assets, to invest not more than 5% of such assets in the securities
of a single issuer and to hold not more than 10% of the outstanding voting
securities of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
which requires that, at the end of each quarter of its taxable year, (i) at
least 50% of the market value of the Fund's total assets be invested in
cash, U.S. Government securities, the securities of other regulated
investment companies and other securities, with such other securities of
any one issuer limited for the purposes of this calculation to an amount
not greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets be invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies). Since a relatively high percentage of the
Fund's assets may be invested in the securities of a limited number of
issuers, some of which may be within the same industry or economic
sector, the Fund's portfolio securities may be more susceptible to any
single economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.
Investment decisions for the Fund are made independently from those of
other investment companies or accounts advised by Dreyfus or M&G.
However, if such other investment companies or accounts are prepared to
invest in, or desire to dispose of, securities of the type in which the Fund
invests at the same time as the Fund, available investments or
opportunities for sales will be allocated equitably to each. In some cases,
this procedure may adversely affect the size of the position obtained for
or disposed of by the Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
Dreyfus, located at 200 Park Avenue, New York, New York 10166, was
formed in 1947 and serves as the Fund's investment adviser. As of May 31,
1994, Dreyfus managed or administered approximately $72 billion in
assets for more than $1.9 million investor accounts nationwide.
Dreyfus supervises and assists in the overall management of the Fund's
affairs under a Management Agreement with the Fund, subject to the
overall authority of the Fund's Board of Directors in accordance with
Maryland law.
Dreyfus has engaged M&G, located at Three Quays Tower Hill, London
EC3R 6BQ, England, to serve as the Fund's sub-investment adviser. M&G, a
registered investment adviser formed in 1961, is a wholly-owned
subsidiary of M&G Group P.L.C. As of May 31, 1994, M&G managed
approximately $21 billion in assets and serves as the investment adviser
of two other investment companies.
M&G, subject to the supervision and approval of Dreyfus, provides
investment advisory assistance and the day-to-day management of the
Fund's investments, as well as investment research and statistical
information, under a Sub-Investment Advisory Agreement with Dreyfus,
subject to the overall authority of the Fund's Board of Directors in
accordance with Maryland law. The Fund's primary investment officer will
be Paul D.A. Nix. He has been employed by M&G since 1968. The Fund's other
investment officers are identi-
Page 12
fied under "Management of the Fund" in the
Fund's Statement of Additional Information. Dreyfus also provides
research services for the Fund, as well as for other Funds advised by
Dreyfus, through a professional staff of portfolio managers and securities
analysts.
Under the Management Agreement, the Fund has agreed to pay Dreyfus a
monthly fee at the annual rate of .75 of 1% of the value of the Fund's
average daily net assets.
Under the Sub-Investment Advisory Agreement, Dreyfus has agreed to
pay M&G a monthly fee at the annual rate of .30 of 1% of the value of the
Fund's average daily net assets.
EXPENSES
All expenses incurred in the operation of the Fund will be borne by the
Fund, except to the extent specifically assumed by Dreyfus and/or M&G.
The expenses to be borne by the Fund will include: organizational costs,
taxes, interest, brokerage fees and commissions, if any, fees of Directors
who are not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of Dreyfus or M&G or their 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 independent pricing
services, costs of maintaining the Fund's existence, costs attributable to
investor services (including, without limitation, telephone and personnel
expenses), costs of shareholders' reports and meetings, and any
extraordinary expenses. The Fund is subject to an annual distribution fee
for advertising, marketing and distributing its shares and an annual
service fee for ongoing personal services relating to shareholder accounts
and services related to the maintenance of shareholder accounts. See
"Distribution Plan and Shareholder Services Plan."
The management fee paid by the Fund is higher than that paid by most
other investment companies. From time to time, Dreyfus may waive
receipt of its fee and/or voluntarily assume certain expenses of the Fund,
which would have the effect of lowering the overall expense ratio of the
Fund and increasing yield to investors at the time such amounts are
waived or assumed, as the case may be. The Fund will not pay Dreyfus at a
later time for any amounts it may waive, nor will the Fund reimburse
Dreyfus for any amounts it may assume.
Dreyfus may pay Dreyfus Service Corporation for shareholder and
distribution services from Dreyfus' own assets, including past profits but
not including the management fee paid by the Fund. Dreyfus Service
Corporation may use part or all of such payments to pay Service Agents in
respect of these services.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
The Bank of New York, 110 Washington Street, New York, New York
10286, is the Fund's Custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's Transfer and Dividend Disbursing Agent
(the "Transfer Agent").
HOW TO BUY FUND SHARES
The Fund's distributor is Dreyfus Service Corporation, a wholly-owned
subsidiary of Dreyfus located at 200 Park Avenue, New York, New York
10166. The shares it distributes are not deposits or obligations of The
Dreyfus Security Savings Bank, F.S.B. and therefore are not insured by the
Federal Deposit Insurance Corporation.
You can purchase Fund shares through Dreyfus Service Corporation or
certain financial institutions, securities dealers and other industry
professionals (collectively, "Service Agents") that have entered into
agreements with Dreyfus Service Corporation. Stock certificates are
issued only upon your written request. No certificates are issued for
fractional shares. The Fund reserves the right to reject any purchase
order.
Management understands that some Service Agents may impose certain
conditions on their clients which are different from those described in
this Prospectus, and, to the extent permitted by applicable regulatory
authority, may charge their clients direct fees which would be in addition
to any amounts which might be received under the Distribution Plan or
Shareholder Services Plan. Each Service Agent has agreed to transmit to
its clients a schedule of such fees. You should consult your Service Agent
in this regard.
Page 13
The minimum initial investment is $2,500, or $1,000 if you are a client
of a Service Agent which has made an aggregate minimum initial purchase
for its customers of $2,500. Subsequent investments must be at least
$100. The initial investment must be accompanied by the Fund's Account
Application. For full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Fund's Board, or the spouse
or minor child of any of the foregoing, the minimum initial investment is
$1,000. For full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment is $50.
The Fund reserves the right to offer Fund shares without regard to
minimum purchase requirements to employees participating in certain
qualified or non-qualified employee benefit plans or other programs where
contributions or account information can be transmitted in a manner and
form acceptable to the Fund. The Fund reserves the right to vary further
the initial and subsequent investment minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds," or, if for Dreyfus retirement plan
accounts, to "The Dreyfus Trust Company, Custodian." Payments to open
new accounts which are mailed should be sent to The Dreyfus Family of
Funds, P.O. Box 9387, Providence, Rhode Island 02940-9387, together with
your Account Application. For subsequent investments, your Fund account
number should appear on the check and an investment slip should be
enclosed and sent to The Dreyfus Family of Funds, P.O. Box 105, Newark,
New Jersey 07101-0105. For Dreyfus retirement plan accounts, both
initial and subsequent investments should be sent to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427.
Neither initial nor subsequent investments should be made by third party
check. Purchase orders may be delivered in person only to a Dreyfus
Financial Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND
WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank
having a correspondent bank in New York City. Immediately available funds
may be transmitted by wire to The Bank of New York, DDA
#8900103817/Dreyfus International Recovery Fund, Inc., for purchase of
Fund shares in your name. The wire must include your Fund account number
(for new accounts, your Taxpayer Identification Number ("TIN") should be
included instead), account registration and dealer number, if applicable. If
your initial purchase of Fund shares is by wire, please call 1-800-645-
6561 after completing your wire payment to obtain your Fund account
number. Please include your Fund account number on the Fund's Account
Application and promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is received.
You may obtain further information about remitting funds in this manner
from your bank. All payments should be made in U.S. dollars and, to avoid
fees and delays, should be drawn only on U.S. banks. A charge will be
imposed if any check used for investment in your account does not clear.
The Fund makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other 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
Page 14
Exchange. Net asset value per share is
computed by dividing the value of the Fund's net assets (i.e., the value of
its assets less liabilities) by the total number of shares outstanding. The
Fund's investments are valued based on market value or, where market
quotations are not readily available, based on fair value as determined in
good faith by the Fund's Board of Directors. For further information
regarding the methods employed in valuing the Fund's investments, see
"Determination of Net Asset Value" in the Fund's Statement of Additional
Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes"
and the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE
You may purchase Fund shares (minimum $500, maximum $150,000 per
day) by telephone if you have checked the appropriate box and supplied the
necessary information on the Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House
member may be so designated. The Fund may modify or terminate this
Privilege at any time or charge a service fee upon notice to shareholders.
No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-
3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents
may impose certain conditions on their clients which are different from
those in this Prospectus. You should consult your Service Agent in this
regard.
EXCHANGE PRIVILEGE
The Exchange Privilege enables you to purchase, in exchange for shares
of the Fund, shares of certain other funds managed or administered by
Dreyfus, to the extent such shares are offered for sale in your state of
residence. These funds have different investment objectives which may be
of interest to you. If you desire to use this Privilege, you should consult
your Service Agent or Dreyfus Service Corporation to determine if it is
available and whether any conditions are imposed on its use.
To use this Privilege, you or your Service Agent acting on your behalf
must give exchange instructions to the Transfer Agent in writing, by wire
or by telephone. If you previously have established the Telephone Exchange
Privilege, you may telephone exchange instructions by calling 1-800-221-
4060 or, if you are calling from overseas, call 1-401-455-3306. See "How
to Redeem Fund Shares-Procedures." Before any exchange, you must obtain
and should review a copy of the current prospectus of the fund into which
the exchange is being made. Prospectuses may be obtained from Dreyfus
Service Corporation. Except in the case of Personal Retirement Plans, the
shares being exchanged must have a current value of at least $500;
furthermore, when establishing a new account by exchange, the shares
being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
Telephone exchanges may be made only if the appropriate "YES" box has
been checked on the Account Application, or a separate signed Shareholder
Services Form is on file with the Transfer Agent. Upon an exchange into a
new account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried over to the
fund into which the exchange is made: Exchange Privilege, Wire
Redemption Privilege, Telephone Redemption Privilege, Dreyfus
TELETRANSFER Privilege and the dividend/capital gain distribution option
(except for Dreyfus Dividend Sweep) selected by the investor.
Page 15
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares of the fund from
which you are exchanging were: (a) purchased with a sales load, (b)
acquired by a previous exchange from shares purchased with a sales load,
or (c) acquired through reinvestment of dividends or distributions paid
with respect to the foregoing categories of shares. To qualify, at the time
of your exchange you must notify the Transfer Agent or your Service Agent
must notify Dreyfus Service Corporation. Any such qualification is subject
to confirmation of your holdings through a check of appropriate records.
See "Shareholder Services" in the Statement of Additional Information. No
fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the Securities and Exchange Commission. The
Fund reserves the right to reject any exchange request in whole or in part.
The Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares
of the Fund, in shares of other funds in the Dreyfus Family of Funds of
which you are currently an investor. The amount you designate, which can
be expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth
day of the month according to the schedule you have selected. Shares will
be exchanged at the then-current net asset value; however, a sales load
may be charged with respect to exchanges into funds sold with a sales
load. See "Shareholder Services" in the Statement of Additional
Information. The right to exercise this Privilege may be modified or
canceled by the Fund or the Transfer Agent. You may modify or cancel your
exercise of this Privilege at any time by mailing written notification to
The Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island
02940-9671. The Fund may charge a service fee for the use of this
Privilege. No such fee currently is contemplated. The exchange of shares
of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange by the shareholder and,
therefore, an exchanging shareholder may realize a taxable gain or loss.
For more information concerning this Privilege and the funds in the
Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may
be so designated. To establish a Dreyfus-AUTOMATIC Asset Builder
account, you must file an authorization form with the Transfer Agent. You
may obtain the necessary authorization form from Dreyfus Service
Corporation. You may cancel your participation in this Privilege or change
the amount of purchase at any time by mailing written notification to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-
9671, or, if for Dreyfus retirement plan accounts, to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427,
and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or
charge a service fee. No such fee currently is contemplated.
Page 16
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction)
by having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into
your Fund account. You may deposit as much of such payments as you elect.
To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of
payment that you desire to include in the Privilege. The appropriate form
may be obtained from Dreyfus Service Corporation. Death or legal
incapacity will terminate your participation in this Privilege. You may
elect at any time to terminate your participation by notifying in writing
the appropriate Federal agency. Further, the Fund may terminate your
participation upon 30 days' notice to you.
DREYFUS DIVIDEND 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
on the payment date dividends or dividends and capital gain distributions,
if any, from the Fund to a designated bank account. Only an account
maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for
this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these privileges by mailing written notification to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To
select a new fund after cancellation, you must submit a new Dividend
Options Form. Enrollment in or cancellation of these privileges is
effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for Dreyfus
Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated.
Shares held under Keogh Plans or IRAs are not eligible for Dreyfus
Dividend Sweep.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis.
Depending upon your employer's direct deposit program, you may have part
or all of your paycheck transferred to your existing Dreyfus account
electronically through the Automated Clearing House system at each pay
period. To establish a Dreyfus Payroll Savings Plan account, you must file
an authorization form with your employer's payroll department. Your
employer must complete the reverse side of the form and return it to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-
9671. You may obtain the necessary authorization form from Dreyfus
Service Corporation. You may change the amount of purchase or cancel the
authorization only by written notification to your employer. It is the sole
responsibility of your employer, not Dreyfus Service Corporation, Dreyfus,
the Fund, the Transfer Agent or any other person, to arrange for
transactions under the Dreyfus Payroll Savings Plan. The Fund may modify
or terminate this Privilege at any time or charge a service fee. No such
fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the
Automatic Withdrawal Plan can be obtained from Dreyfus Service
Corporation. There is a service
Page 17
charge of 50 cents for each withdrawal
check. The Automatic Withdrawal Plan may be ended at any time by you,
the Fund or the Transfer Agent. Shares for which certificates have been
issued may not be redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans, including
Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k) Salary
Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-
5566; for IRAs and IRA "Rollover Accounts," please call 1-800-645-6561;
and for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below.
When a request is received in proper form, the Fund will redeem the
shares at the next determined net asset value.
The Fund imposes no charges when shares are redeemed directly through
Dreyfus Service Corporation. Service Agents may charge a nominal 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 BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE
OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR
DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT
BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS
TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER
ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE
PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE
IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME
ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER
RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until
the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, the Wire Redemption Privilege, the Telephone
Redemption Privilege, or the Dreyfus TELETRANSFER Privilege. Other
redemption procedures may be in effect for investors who effect
transactions in Fund shares through Service Agents. The Fund makes
available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem or exchange Fund shares by telephone if you have
checked the appropriate box on the Fund's Account Application or have
filed a Shareholder Services Form with the Transfer Agent. If you select a
telephone redemption or exchange privilege, you authorize the Transfer
Agent to act on tele-
Page 18
phone instructions from any person representing
himself or herself to be you or a representative of your Service Agent, and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of
these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, the Fund's net asset value may
fluctuate.
REGULAR REDEMPTION-Under the regular redemption procedure, you may
redeem Fund shares by written request mailed to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Redemption
requests may be delivered in person only to a Dreyfus Financial Center.
THESE REQUESTS WILL BE FORWARDED TO THE FUND AND WILL BE
PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the nearest
Dreyfus Financial Center, please call one of the telephone numbers listed
under "General Information." Redemption requests must be signed by each
shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants
in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock
Exchanges Medallion Program. If you have any questions with respect to
signature-guarantees, please call one of the telephone numbers listed
under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE-You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank
which is a member of the Federal Reserve System, or a correspondent bank
if your bank is not a member. To establish the Wire Redemption Privilege,
you must check the appropriate box and supply the necessary information
on the Fund's Account Application or file a Shareholder Services Form
with the Transfer Agent. You may direct that redemption proceeds be paid
by check (maximum $150,000 per day) made out to the owners of record
and mailed to your address. Redemption proceeds of less than $1,000 will
be paid automatically by check. Holders of jointly registered Fund or bank
accounts may have redemption proceeds of only up to $250,000 wired
within any 30-day period. You may telephone redemption requests by
calling 1-800-221-4060 or, if you are calling from overseas, call 1-401-
455-3306. The Fund reserves the right to refuse any redemption request,
including requests made shortly after a change of address, and may limit
the amount involved or the number of such requests. This Privilege may be
modified or terminated at any time by the Transfer Agent or the Fund. The
Fund's Statement of Additional Information sets forth instructions for
transmitting redemption requests by wire. Shares held under Keogh Plans,
IRAs or other retirement plans, and shares for which certificates have
been issued, are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE-You may redeem Fund shares (maximum
$150,000 per day) by telephone if you have checked the appropriate box on
the Fund's Account Application or have filed a Shareholder Services Form
with the Transfer Agent. The redemption proceeds will be paid by check
and mailed to your address. You may telephone redemption instructions by
calling 1-800-221-4060 or, if you are calling from overseas, call 1-401-
455-3306. The Fund reserves the right to refuse any request made by
telephone, including requests made shortly after a change of address, and
may limit the amount
Page 19
involved or the number of telephone redemption
requests. This Privilege may be modified or terminated at any time by the
Transfer Agent or the Fund. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which certificates have been issued, are
not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE-You may redeem Fund shares (minimum
$500 per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Fund's Account Application or
have filed a Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between your Fund account and the bank
account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an Automated
Clearing House member may be so designated. Redemption proceeds will be
on deposit in your account at an Automated Clearing House member bank
ordinarily two days after receipt of the redemption request or, at your
request, paid by check (maximum $150,000 per day) and mailed to your
address. Holders of jointly registered Fund or bank accounts may redeem
through the Dreyfus TELETRANSFER Privilege for transfer to their bank
account only up to $250,000 within any 30-day period. The Fund reserves
the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved
or the number of such requests. The Fund may modify or terminate this
Privilege at any time or charge a service fee upon notice to shareholders.
No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-
3306. Shares held under Keogh Plans, IRAs or other retirement plans, and
shares issued in certificate form, are not eligible for this Privilege.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Fund shares are subject to a Distribution Plan and a Shareholder
Services Plan.
DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays Dreyfus Service
Corporation for advertising, marketing and distributing Fund shares at an
annual rate of .50 of 1% of the value of the Fund's average daily net
assets. Under the Distribution Plan, Dreyfus Service Corporation may make
payments to Service Agents in respect of these services. Dreyfus Service
Corporation determines the amounts to be paid to Service Agents. Service
Agents receive such fees in respect of the average daily value of Fund
shares owned by their clients. From time to time, Dreyfus Service
Corporation may defer or waive receipt of fees under the Distribution Plan
while retaining the ability to be paid by the Fund under the Distribution
Plan thereafter. The fees payable to Dreyfus Service Corporation under the
Distribution Plan for advertising, marketing and distributing Fund shares
and for payments to Service Agents are payable without regard to actual
expenses incurred.
The Fund bears the costs of preparing and printing prospectuses and
statements of additional information used for regulatory purposes and for
distribution to existing Fund shareholders. Under the Distribution Plan, the
Fund bears (a) the costs of preparing, printing and distributing
prospectuses and statements of additional information used for other
purposes and (b) the costs associated with implementing and operating the
Distribution Plan, the aggregate of such amounts not to exceed in any
fiscal year of the Fund the greater of $100,000 or .005 of 1% of the value
of the Fund's average daily net assets for such fiscal year.
SHAREHOLDER SERVICES PLAN
Under the Shareholder Services Plan, the Fund pays Dreyfus Service
Corporation for the provision of certain services to Fund shareholders a
fee at the annual rate of .25 of 1% of the value of the Fund's average daily
net assets. The services provided may include personal services relating
to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and
services related to the maintenance of shareholder accounts. Dreyfus
Service Corporation may make payments to Service Agents in respect of
these services. Dreyfus Service Corporation determines the amounts to be
paid to
Page 20
Service Agents. Each Service Agent is required to disclose to its
clients any compensation payable to it by the Fund pursuant to the
Shareholder Services Plan and any other compensation payable by their
clients in connection with the investment of their assets in Fund shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily pays dividends from its net investment income and
distributes net realized securities gains, if any, once a year, but the Fund
may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent
with the provisions of the Investment Company Act of 1940. The Fund will
not make distributions from net realized securities gains unless capital
loss carryovers, if any, have been utilized or have expired. You may choose
whether to receive dividends and distributions in cash or to reinvest in
additional Fund shares at net asset value. All expenses are accrued daily
and deducted before declaration of dividends to investors.
Dividends, derived from net investment income,
together with distributions from net realized short-term securities gains
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 and all or a portion of any gains realized from the sale or
other disposition of certain market discount bonds, paid by the Fund to a
foreign investor generally are subject to U.S. nonresident withholding
taxes at the rate of 30%, unless the foreign investor claims the benefit of
a lower rate specified in a tax treaty. Distributions from net realized
long-term securities gains paid by the Fund to a foreign investor as well
as the proceeds of any redemptions from a foreign investor's account,
regardless of the extent to which gain or loss may be realized, generally
will not be subject to U.S. nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his non-U.S. residency status.
Notice as to the tax status of your dividends and distributions will be
mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions
from securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be
realized, paid to a shareholder 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.
It is expected that the Fund will qualify as a "regulated investment
company" under the Code so long as such qualification is in the best
interests of its shareholders. Such qualification relieves the Fund of any
liabili-
Page 21
ty for Federal income tax to the extent its earnings are distributed
in accordance with applicable provisions of the Code. In addition, the Fund
is subject to a non-deductible 4% excise tax, measured with respect to
certain undistributed amounts of taxable investment income and capital
gains.
You should consult your tax adviser regarding specific questions as to
Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on the basis
of average annual total return and/or total return.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased
with an initial payment of $1,000 and that the investment was redeemed
at the end of a stated period of time, after giving effect to the
reinvestment of dividends and distributions during the period. The return
is expressed as a percentage rate which, if applied on a compounded
annual basis, would result in the redeemable value of the investment at
the end of the period. Advertisements of the Fund's performance will
include the Fund's average annual total return for one, five and ten year
periods, or for shorter periods depending upon the length of time during
which the Fund has operated. Computations of average annual total return
for periods of less than one year represent an annualization of the Fund's
actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the
income and principal changes for a specified period and dividing by the net
asset value per share at the beginning of the period. Advertisements may
include the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type
and quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment
companies using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Morgan Stanley Capital International World
Index, Standard & Poor's 500 Composite Stock Price Index, Standard &
Poor's MidCap 400 Index, the Dow Jones Industrial Average, Morningstar,
Inc. and other industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on March 31, 1994, and
has not engaged in active business to the date of this Prospectus. The Fund
is authorized to issue 300 million shares of Common Stock, par value
$.001 per share. Each share has one vote.
Unless otherwise required by the Investment Company Act of 1940,
ordinarily it will not be necessary for the Fund to hold annual meetings of
shareholders. As a result, Fund shareholders may not consider each year
the election of Directors or the appointment of auditors. However,
pursuant to the Fund's By-Laws, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Fund to hold a special
meeting of shareholders for purposes of removing a Director from office
or for any other purpose. Fund shareholders may remove a Director by the
affirmative vote of a majority of the Fund's outstanding voting shares. In
addition, the Board of Directors will call a meeting of shareholders for
the purpose of electing Directors if, at any time, less than a majority of
the Directors then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Page 22
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll
free 1-800-645-6561. In New York City, call 1-718-895-1206; on Long
Island, call 794-5452.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IN THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFER OF THE FUND'S SHARES, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY
PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 23
DREYFUS
INTERNATIONAL
RECOVERY FUND, INC.
PROSPECTUS
(LION LOGO)
(COPYRIGHT LOGO) 1994, DREYFUS SERVICE CORPORATION, DISTRIBUTOR
DREYFUS INTERNATIONAL RECOVERY FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JUNE 22, 1994
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of Dreyfus International Recovery Fund, Inc. (the "Fund"), dated
June 22, 1994, as it may be revised from time to time. To obtain a copy of
the Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144, or call the following numbers:
Call Toll Free -- 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's
investment adviser. Dreyfus has engaged M&G Investment Management Limited
("M&G") to serve as the Fund's sub-investment adviser and provide day-to-day
management of the Fund's investments, subject to the supervision of Dreyfus.
Dreyfus and M&G are referred to collectively as the "Advisers."
Dreyfus Service Corporation (the "Distributor"), a wholly-
owned subsidiary of Dreyfus, is the distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . B-11
Management Arrangements . . . . . . . . . . . . . . . . . . . . B-14
Distribution Plan and Shareholder Services Plan . . . . . . . . B-16
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . B-17
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . B-18
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . B-20
Determination of Net Asset Value. . . . . . . . . . . . . . . . B-23
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . B-24
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . B-26
Performance Information . . . . . . . . . . . . . . . . . . . . B-27
Information About the Fund. . . . . . . . . . . . . . . . . . . B-28
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . . . . B-28
Financial Statement . . . . . . . . . . . . . . . . . . . . . . B-30
Report of Independent Auditors. . . . . . . . . . . . . . . . . B-31
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Description
of the Fund."
Portfolio Securities
Bank Obligations. Domestic commercial banks organized under
Federal law are supervised and examined by the Comptroller of the Currency
and are required to be members of the Federal Reserve System and to have
their deposits insured by the Federal Deposit Insurance Corporation (the
"FDIC"). Domestic banks organized under state law are supervised and
examined by state banking authorities but are members of the Federal Reserve
System only if they elect to join. In addition, state banks whose
certificates of deposit ("CDs") may be purchased by the Fund are insured by
the FDIC (although such insurance may not be of material benefit to the
Fund, depending on the principal amount of the CDs of each bank held by the
Fund) and are subject to Federal examination and to a substantial body of
Federal law and regulation. As a result of Federal or state laws and
regulations, domestic branches of domestic banks whose CDs may be purchased
by the Fund generally are required, among other things, to maintain
specified levels of reserves, are limited in the amounts which they can loan
to a single borrower and are subject to other regulation designed to promote
financial soundness. However, not all of such laws and regulations apply to
the foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches of foreign
banks, such as CDs and time deposits ("TDs"), may be general obligations of
the parent banks in addition to the issuing branch, or may be limited by the
terms of a specific obligation and governmental regulation. Such
obligations are subject to different risks than are those of domestic banks.
These risks include foreign economic and political developments, foreign
governmental restrictions that may adversely affect payment of principal and
interest on the obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. These foreign branches and
subsidiaries are not necessarily subject to the same or similar regulatory
requirements that apply to domestic banks, such as mandatory reserve
requirements, loan limitations, and accounting, auditing and financial
record keeping requirements. In addition, less information may be publicly
available about a foreign branch of a domestic bank or about a foreign bank
than about a domestic bank.
Obligations of United States branches of foreign banks may
be general obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation or by Federal or
state regulation as well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a foreign bank with
assets in excess of $1 billion may be subject to reserve requirements
imposed by the Federal Reserve System or by the state in which the branch is
located if the branch is licensed in that state.
In addition, Federal branches licensed by the Comptroller of
the Currency and branches licensed by certain states ("State Branches") may
be required to: (1) pledge to the regulator, by depositing assets with a
designated bank within the state, a certain percentage of their assets as
fixed from time to time by the appropriate regulatory authority; and (2)
maintain assets within the state in an amount equal to a specified
percentage of the aggregate amount of liabilities of the foreign bank
payable at or through all of its agencies or branches within the state. The
deposits of Federal and State Branches generally must be insured by the FDIC
if such branches take deposits of less than $100,000.
In view of the foregoing factors associated with the
purchase of CDs and TDs issued by foreign branches of domestic banks, by
foreign subsidiaries of domestic banks, by foreign branches of foreign banks
or by domestic branches of foreign banks, the Advisers carefully evaluate
such investments on a case-by-case basis.
Emerging Market Securities. 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.
Repurchase Agreements. The Fund's custodian or sub-
custodian will have custody of, and will hold in a segregated account,
securities acquired by the Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Fund. In an attempt to reduce the risk of
incurring a loss on a repurchase agreement, the Fund will enter into
repurchase agreements only with domestic banks with total assets in excess
of one billion dollars, or primary government securities dealers reporting
to the Federal Reserve Bank of New York, with respect to securities of the
type in which the Fund may invest, and will require that additional
securities be deposited with it if the value of the securities purchased
should decrease below the resale price. The Advisers will monitor on an
ongoing basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. The Fund will consider on an ongoing basis
the creditworthiness of the institutions with which it enters into
repurchase agreements.
Commercial Paper and Other Short-Term Corporate Obligations.
Variable rate demand notes include variable amount master demand notes,
which are obligations that permit the Fund to invest fluctuating amounts at
varying rates of interest pursuant to direct arrangements between the Fund,
as lender, and the borrower. These notes permit daily changes in the
amounts borrowed. As mutually agreed between the parties, the Fund may
increase the amount under the notes at any time up to the full amount
provided by the note agreement, or decrease the amount, and the borrower may
repay up to the full amount of the note without penalty. Because these
obligations are direct lending arrangements between the lender and borrower,
it is not contemplated that such instruments generally will be traded, and
there generally is no established secondary market for these obligations,
although they are redeemable at face value, plus accrued interest, at any
time. Accordingly, where these obligations are not secured by letters of
credit or other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. In connection with floating and variable rate demand obligations,
the Advisers will consider, on an ongoing basis, earning power, cash flow
and other liquidity ratios of the borrower, and the borrower's ability to
pay principal and interest on demand. Such obligations frequently are not
rated by credit rating agencies, and the Fund may invest in them only if at
the time of an investment the borrower meets the criteria set forth in the
Fund's Prospectus for other commercial paper issuers.
Illiquid Securities. When purchasing securities that have
not been registered under the Securities Act of 1933, as amended, and are
not readily marketable, the Fund will endeavor to obtain the right to
registration at the expense of the issuer. Generally, there will be a lapse
of time between the Fund's decision to sell any such security and the
registration of the security permitting sale. During any such period, the
price of the securities will be subject to market fluctuations. However, if
a substantial market of qualified institutional buyers develops pursuant to
Rule 144A under the Securities Act of 1933, as amended, for certain
unregistered securities held by the Fund, the Fund intends to treat certain
unregistered securities as liquid securities in accordance with procedures
approved by the Fund's Board of Directors. Because it is not possible to
predict with assurance how the market for restricted securities pursuant to
Rule 144A will develop, the Fund's Board of Directors has directed the
Advisers to monitor carefully the Fund's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a
period of time, qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, the Fund's investing in such securities
may have the effect of increasing the level of illiquidity in the Fund's
portfolio during such period.
Management Policies
The Fund engages in the following practices in furtherance
of its objective.
Options Transactions. The Fund may engage in options
transactions, such as purchasing or writing covered call or put options.
The principal reason for writing covered call options is to realize, through
the receipt of premiums, a greater return than would be realized on the
Fund's portfolio securities alone. In return for a premium, the writer of a
covered call option forfeits the right to any appreciation in the value of
the underlying security above the strike price for the life of the option
(or until a closing purchase transaction can be effected). Nevertheless,
the call writer retains the risk of a decline in the price of the underlying
security. Similarly, the principal reason for writing covered put options
is to realize income in the form of premiums. The writer of a covered put
option accepts the risk of a decline in the price of the underlying
security. The size of the premiums that the Fund may receive may be
adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing activities.
Options written ordinarily will have expiration dates
between one and nine months from the date written. The exercise price of
the options may be below, equal to or above the market values of the
underlying securities at the time the options are written. In the case of
call options, these exercise prices are referred to as "in-the-money," "at-
the-money" and "out-of-the-money," respectively. The Fund may write (a) in-
the-money call options when the Advisers expect that the price of the
underlying security will remain stable or decline moderately during the
option period, (b) at-the-money call options when the Advisers expect that
the price of the underlying security will remain stable or advance
moderately during the option period and (c) out-of-the-money call options
when the Advisers expect that the premiums received from writing the call
option plus the appreciation in market price of the underlying security up
to the exercise price will be greater than the appreciation in the price of
the underlying security alone. In these circumstances, if the market price
of the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by
the premium received. Out-of-the-money, at-the-money and in-the-money put
options (the reverse of call options as to the relation of exercise price to
market price) may be utilized in the same market environments that such call
options are used in equivalent transactions.
So long as the Fund's obligation as the writer of an option
continues, the Fund may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring the Fund to deliver, in the
case of a call, or take delivery of, in the case of a put, the underlying
security against payment of the exercise price. This obligation terminates
when the option expires or the Fund effects a closing purchase transaction.
The Fund can no longer effect a closing purchase transaction with respect to
an option once it has been assigned an exercise notice.
While it may choose to do otherwise, the Fund generally will
purchase or write only those options for which the Advisers believe there is
an active secondary market so as to facilitate closing transactions. There
is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary
market may exist. A liquid secondary market in an option may cease to exist
for a variety of reasons. In the past, for example, higher than anticipated
trading activity or order flow, or other unforeseen events, at times have
rendered certain clearing facilities inadequate and resulted in the
institution of special procedures, such as trading rotations, restrictions
on certain types of orders or trading halts or suspensions in one or more
options. There can be no assurance that similar events, or events that
otherwise may interfere with the timely execution of customers' orders, will
not recur. In such event, it might not be possible to effect closing
transactions in particular options. If as a covered call option writer the
Fund is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise or it otherwise
covers its position.
Stock Index Options. The Fund may purchase and write put
and call options on stock indexes listed on U.S. or foreign securities
exchanges or traded in the over-the-counter market. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
Options on stock indexes are similar to options on stock
except that (a) the expiration cycles of stock index options are generally
monthly, while those of stock options are currently quarterly, and (b) the
delivery requirements are different. Instead of giving the right to take or
make delivery of a stock at a specified price, an option on a stock index
gives the holder the right to receive a cash "exercise settlement amount"
equal to (i) the amount, if any, by which the fixed exercise price of the
option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of exercise,
multiplied by (ii) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the stock index upon which the option
is based being greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. The amount of cash
received will be equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount. The writer may
offset its position in stock index options prior to expiration by entering
into a closing transaction on an exchange or it may let the option expire
unexercised.
Futures Contracts and Options on Futures Contracts. Upon
exercise of an option, the writer of the option will deliver to the holder
of the option the futures position and the accumulated balance in the
writer's futures margin account, which represents the amount by which the
market price of the futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of options on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time of
sale, there are no daily cash payments to reflect changes in the value of
the underlying contract; however, the value of the option does change daily
and that change would be reflected in the net asset value of the Fund.
Foreign Currency Transactions. If the Fund enters into a
currency transaction, it will deposit, if so required by applicable
regulations, with its custodian cash or readily marketable securities in a
segregated account of the Fund in an amount at least equal to the value of
the Fund's total assets committed to the consummation of the forward
contract. If the value of the securities placed in the segregated account
declines, additional cash or securities will be placed in the account so
that the value of the account will equal the amount of the Fund's commitment
with respect to the contract.
At or before the maturity of a forward contract, the Fund
either may sell a security and make delivery of the currency, or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on the
same maturity date, the same amount of the currency which it is obligated to
deliver. If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund, at the time of execution of the offsetting
transaction, will incur a gain or loss to the extent movement has occurred
in forward contract prices. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a
currency and the date it enters into an offsetting contract for the purchase
of the currency, the Fund will realize a gain to the extent the price of the
currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will suffer a
loss to the extent the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.
The cost to the Fund of engaging in currency transactions
varies with factors such as the currency involved, the length of the
contract period and the market conditions then prevailing. Because
transactions in currency exchange usually are conducted on a principal
basis, no fees or commissions are involved. The use of forward currency
exchange contracts does not eliminate fluctuations in the underlying prices
of the securities, but it does establish a rate of exchange that can be
achieved in the future. If a devaluation generally is anticipated, the Fund
may not be able to contract to sell the currency at a price above the
devaluation level it anticipates. The requirements for qualification as a
regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), may cause the Fund to restrict the degree to which it
engages in currency transactions. See "Dividends, Distributions and Taxes."
Lending Portfolio Securities. To a limited extent, the Fund
may lend its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value
of the securities loaned. By lending its portfolio securities, the Fund can
increase its income through the investment of the cash collateral. For
purposes of this policy, the Fund considers collateral consisting of U.S.
Government securities or irrevocable letters of credit issued by banks whose
securities meet the standards for investment by the Fund to be the
equivalent of cash. From time to time, the Fund may return to the borrower
or a third party which is unaffiliated with the Fund, and which is acting as
a "placing broker," a part of the interest earned from the investment of
collateral received for securities loaned.
The Securities and Exchange Commission currently requires
that the following conditions must be met whenever portfolio securities are
loaned: (1) the Fund must receive at least 100% cash collateral from the
borrower; (2) the borrower must increase such collateral whenever the market
value of the securities rises above the level of such collateral; (3) the
Fund must be able to terminate the loan at any time; (4) the Fund must
receive reasonable interest on the loan, as well as any dividends, interest
or other distributions payable on the loaned securities, and any increase in
market value; (5) the Fund may pay only reasonable custodian fees in
connection with the loan; and (6) while voting rights on the loaned
securities may pass to the borrower, the Fund's Board of Directors must
terminate the loan and regain the right to vote the securities if a material
event adversely affecting the investment occurs. These conditions may be
subject to future modification.
Risk Factors--Lower Rated Securities. The Fund is permitted
to invest in securities rated below Baa by Moody's Investors Service, Inc.
("Moody's") and below BBB by Standard & Poor's Corporation ("S&P"), Fitch
Investors Service, Inc. ("Fitch") and Duff & Phelps, Inc. ("Duff") and as
low as the lowest rating assigned by Moody's, S&P, Fitch or Duff. Such
securities, though higher yielding, are characterized by risk. Although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market value risk of these securities.
The Fund will rely on the Advisers' judgment, analysis and experience in
evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of
these securities tend to be more sensitive to economic conditions than are
higher rated securities and will fluctuate over time. These securities are
considered by S&P, Moody's, Fitch and Duff, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation and generally will involve more
credit risk than securities in the higher rating categories.
Issues of certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of
such issuers generally is greater than is the case with the higher rated
securities. For example, during an economic downturn or a sustained period
of rising interest rates, highly leveraged issuers of these securities may
not have sufficient revenues to meet their interest payment obligations.
The issuer's ability to service its debt obligations also may be affected
adversely by specific corporate developments, forecasts, or the
unavailability of additional financing. The risk of loss because of default
by the issuer is significantly greater for the holders of these securities
because such securities generally are unsecured and often are subordinated
to other creditors of the issuer.
Because there is no established retail secondary market for
many of these securities, the Fund anticipates that such securities could be
sold only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these securities does exist, it
generally is not as liquid as the secondary market for higher rated
securities. The lack of a liquid secondary market may have an adverse
impact on market price and yield and the Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the Fund's securities and
calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play
a greater role in valuation because less reliable, objective data may be
available.
These securities may be particularly susceptible to economic
downturns. It is likely that any economic recession could disrupt severely
the market for such securities and may have an adverse impact on the value
of such securities. In addition, it is likely that any such economic
downturn could adversely affect the ability of the issuers of such
securities to repay principal and pay interest thereon and increase the
incidence of default for such securities.
The Fund may acquire these securities during an initial
offering. Such securities may involve special risks because they are new
issues. The Fund has no arrangement with the Distributor or any other
persons concerning the acquisition of such securities, and the Advisers will
review carefully the credit and other characteristics pertinent to such new
issues.
Investment Restrictions. The Fund has adopted investment
restrictions numbered 1 through 8 as fundamental policies. These
restrictions cannot be changed without approval by the holders of a majority
(as defined in the Investment Company Act of 1940, as amended (the "Act"))
of the Fund's outstanding voting shares. Investment restrictions numbered 9
through 14 are not fundamental policies and may be changed by vote of a
majority of the Fund's Directors at any time. The Fund may not:
1. Invest more than 25% of the value of its total assets in
the securities of issuers in any single industry, provided that there shall
be no limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
2. Invest in commodities, except that the Fund may purchase
and sell options, forward contracts, futures contracts, including those
relating to indexes, and options on futures contracts or indexes.
3. Purchase, hold or deal in real estate, or oil, gas or
other mineral leases or exploration or development programs, but the Fund
may purchase and sell securities that are secured by real estate or issued
by companies that invest or deal in real estate or real estate investment
trusts.
4. Borrow money, except to the extent permitted under the
Act. For purposes of this Investment Restriction, the entry into options,
forward contracts, futures contracts, including those relating to indexes,
and options on futures contracts or indexes shall not constitute borrowing.
5. Make loans to others, except through the purchase of
debt obligations and the entry into repurchase agreements. However, the
Fund may lend its portfolio securities in an amount not to exceed 33-1/3% of
the value of its total assets. Any loans of portfolio securities will be
made according to guidelines established by the Securities and Exchange
Commission and the Fund's Board of Directors.
6. Act as an underwriter of securities of other issuers,
except to the extent the Fund may be deemed an underwriter under the
Securities Act of 1933, as amended, by virtue of disposing of portfolio
securities.
7. Issue any senior security (as such term is defined in
Section 18(f) of the Act), except to the extent the activities permitted in
Investment Restriction Nos. 2, 4, 11 and 12 may be deemed to give rise to a
senior security.
8. Purchase securities on margin, but the Fund may make
margin deposits in connection with transactions in options, forward
contracts, futures contracts, including those relating to indexes, and
options on futures contracts or indexes.
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 indexes, and options on futures contracts or
indexes.
12. Purchase, sell or write puts, calls or combinations
thereof, except as described in the Fund's Prospectus and Statement of
Additional Information.
13. Enter into repurchase agreements providing for
settlement in more than seven days after notice or purchase securities which
are illiquid, if, in the aggregate, more than 15% of the value of the Fund's
net assets would be so invested.
14. Purchase securities of other investment companies,
except to the extent permitted under the Act.
If a percentage restriction is adhered to at the time of
investment, a later change in percentage resulting from a change in values
or assets will not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the
restrictions listed above so as to permit the sale of Fund shares in certain
states. Should the Fund determine that a commitment is no longer in the
best interest of the Fund and its shareholders, the Fund reserves the right
to revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with
information as to their principal business occupations during at least the
last five years, are shown below. Each Director who is deemed to be an
"interested person" of the Fund, as defined in the Act, is indicated by an
asterisk.
Directors and Officers of the Fund
*JOSEPH S. DiMARTINO, President, Director and Investment Officer. President,
Chief Operating Officer and a director of Dreyfus, Executive Vice
President and a director of the Distributor and an officer, director
or trustee of other investment companies advised or administered by
Dreyfus. He is also a director of Noel Group, Inc., Vice President
and former Treasurer and director of the National Muscular Dystrophy
Association and a Trustee of Bucknell University. His address is 200
Park Avenue, New York, New York 10166.
JOHN M. FRASER, JR., Director. President of Fraser Associates, a service
company for planning and arranging corporate meetings and other
events. From September 1975 to June 1978, he was Executive Vice
President of Flagship Cruises, Ltd. Prior thereto, he was Senior
Vice President and Resident Director of the Swedish-American Line for
the United States and Canada. His address is 965 Fifth Avenue, New
York, New York 10021.
ROBERT R. GLAUBER, Director. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard
University since January 1992. He was Under Secretary of the
Treasury for Finance at the U.S. Treasury Department from May 1989 to
January 1992. For more than five years prior thereto, he was a
Professor of Finance at the Graduate School of Business
Administration of Harvard University and, from 1985 to 1989, Chairman
of its Advanced Management Program. His address is 79 John F.
Kennedy Street, Cambridge, Massachusetts 02138.
JAMES F. HENRY, Director. President of the Center for Public Resources, a
non-profit organization principally engaged in the development of
alternatives to business litigation. He was of counsel to the law
firm of Lovejoy, Wasson & Ashton from October 1975 to December 1976
and from October 1979 to June 1983, and was a partner of that firm
from January 1977 to September 1979. From September 1971 to December
1976, he was President and a director of the Edna McConnell Clark
Foundation, a philanthropic organization. His address is c/o Center
for Public Resources, 366 Madison Avenue, New York, New York 10017.
ROSALIND GERSTEN JACOBS, Director. Director of Merchandise and Marketing for
Corporate Property Investors, a real estate investment company. From
1974 to 1976, she was owner and manager of a merchandise and
marketing consulting firm. Prior to 1974, she was Vice President of
Macy's, New York. Her address is c/o Corporate Property Investors,
305 East 47th Street, New York, New York 10017.
*IRVING KRISTOL, Director. President and principal shareholder of Irving
Kristol, Inc., which serves as a consultant to Dreyfus on economic
matters. He is also John M. Olin Distinguished Fellow of the
American Enterprise Institute for Public Policy Research. From 1969
to 1988, he was Professor of Social Thought at the Graduate School of
Business Administration, New York University. From September 1969 to
August 1979, he was Henry R. Luce Professor of Urban Values at New
York University. He is also co-editor of The Public Interest
magazine and an author or co-editor of several books. He is also a
director of Lincoln National Corporation, an insurance company, and
Warner-Lambert Company, a pharmaceutical and consumer products
company. His address is c/o The Public Interest, 1112 16th Street,
N.W., Suite 530, Washington, D.C. 20036.
DR. PAUL A. MARKS, Director. President and Chief Executive Officer of
Memorial Sloan-Kettering Cancer Center. He was Vice President for
Health Sciences and Director of the Cancer Center at Columbia
University from 1973 to September 1980, and Professor of Medicine and
of Human Genetics and Development at Columbia University from 1968 to
1982. He is also a director of Pfizer, Inc., a pharmaceutical
company, Tularik, Inc., a biotechnology company, the Charles H.
Revson Foundation and Life Technologies, Inc., a life science company
providing products for cell and molecular biology and microbiology.
His address is c/o Memorial Sloan-Kettering Cancer Center, 1275 York
Avenue, New York, New York 10021.
DR. MARTIN PERETZ, Director. Editor-in-Chief of The New Republic magazine
and a lecturer in social studies at Harvard University, where he has
been a member of the faculty since 1965. He is also a director of
Bank of Leumi Trust Company of New York and Carmel Container
Corporation. His address is c/o The New Republic, 1220 19th Street,
N.W., Washington, D.C. 20036.
*HOWARD STEIN, Director. Chairman of the Board and Chief Executive Officer
of Dreyfus, Chairman of the Board of the Distributor and an officer,
director, trustee or general partner of other investment companies
advised or administered by Dreyfus. His address is 200 Park Avenue,
New York, New York 10166.
BERT W. WASSERMAN, Director. Executive Vice President and Chief Financial
Officer since January 1990 and a director from January 1990 to March
1993 of Time Warner Inc. From 1981 to 1990, he was a member of the
Office of the President and a director of Warner Communications Inc.
He is also a member of the Chemical Bank National Advisory Board, a
trustee of the Baruch School of the College of the City of New York
and a director of the New Germany Fund. His address is c/o Time
Warner Inc., 75 Rockefeller Plaza, New York, New York 10019.
Mrs. Jacobs, Messrs. Fraser, Glauber, Henry Kristol and Wasserman and
Drs. Marks and Peretz are also directors of Dreyfus A Bonds Plus, Inc.,
Dreyfus Balanced Fund, Inc., Dreyfus Growth Opportunity Fund, Inc., Dreyfus
Global Bond Fund, Inc., Dreyfus Growth and Income Fund, Inc., Dreyfus
International Equity Fund, Inc., Dreyfus Capital Growth Fund (A Premier
Fund) and Dreyfus Money Market Instruments, Inc., and trustees of Dreyfus
Institutional Money Market Fund and Dreyfus Variable Investment Fund. Mr.
Fraser is also a director of The Dreyfus Focus Funds, Inc. In addition,
Mr. Glauber is a director of Dreyfus Asset Allocation Fund, Inc., Dreyfus
California Municipal Income, Inc., The Dreyfus Fund Incorporated, Dreyfus
Municipal Income, Inc., Dreyfus New York Municipal Income, Inc., Dreyfus
Short-Term Income Fund, Inc. and Dreyfus Worldwide Dollar Money Market Fund,
Inc. and a trustee of Dreyfus U.S. Government Income Fund, Dreyfus
Institutional Short Term Treasury Fund and Dreyfus Short-Intermediate
Municipal Bond Fund.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the
Directors of the Fund who are not "interested persons" of the Fund, as
defined in the Act, will be selected and nominated by the Directors who are
not "interested persons" of the Fund.
Officers of the Fund Not Listed Above
PAUL D.A. NIX, Executive Vice President. Chairman, International Investment
Committee and a Director of M&G. He is an officer of other
investment companies managed by Dreyfus and/or M&G.
MARK N. JACOBS, Vice President. Secretary and Deputy General Counsel of
Dreyfus and an officer of other investment companies advised or
administered by Dreyfus.
JEFFREY N. NACHMAN, Vice President and Treasurer. Vice President-Mutual Fund
Accounting of Dreyfus and an officer of other investment companies
advised or administered by Dreyfus.
THOMAS J. DURANTE, Controller. Senior Accounting Manager in the Fund
Accounting Department of Dreyfus and an officer of other investment
companies advised or administered by Dreyfus.
DANIEL C. MACLEAN, Secretary. Vice President and General Counsel of Dreyfus,
Secretary of the Distributor and an officer of other investment
companies advised or administered by Dreyfus.
MICHAEL A. ROSENBERG, Assistant Secretary. Assistant General Counsel since
March 1994 and, from October 1991 to March 1994, staff attorney in
the legal department of Dreyfus and since December 1993 an officer of
other investment companies advised or administered by Dreyfus. From
October 1990 to October 1991, Associate with Shereff, Friedman,
Hoffman & Goodman. From 1986 to September, 1989, Financial Analyst
with the Securities and Exchange Commission, Division of Investment
Management.
CHRISTINE PAVALOS, Assistant Secretary. Assistant Secretary of
Dreyfus, the Distributor and other investment companies advised or
administered by Dreyfus.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Management Agreement. Dreyfus supervises investment
management of the Fund pursuant to the Management Agreement (the "Management
Agreement") dated June 13, 1994 between Dreyfus and the Fund. The
Management Agreement is subject to annual approval by (i) the Fund's Board
of Directors or (ii) vote of a majority (as defined in the Act) of the
Fund's outstanding voting securities, provided that in either event its
continuance also is approved by a majority of the Fund's Directors who are
not "interested persons" (as defined in the Act) of the Fund or Dreyfus, by
vote cast in person at a meeting called for the purpose of voting on such
approval. The Management Agreement is terminable without penalty, on 60
days' notice, by the Fund's Directors or by vote of the holders of a
majority of the Fund's shares, or, on not less than 90 days' notice, by
Dreyfus. The Management Agreement will terminate automatically in the event
of its assignment (as defined in the Act).
In addition to the persons named in the section entitled
"Management of the Fund," the following persons also are officers and/or
directors of Dreyfus: Julian M. Smerling, Vice Chairman of the Board of
Directors; Alan M. Eisner, Vice President and Chief Financial Officer; David
W. Burke, Vice President and Chief Administrative Officer; Robert F. Dubuss,
Vice President; Elie M. Genadry, Vice President--Institutional Sales; Peter
A. Santoriello, Vice President; Kirk V. Stumpp, Vice President--New Product
Development; Philip L. Toia, Vice President; John J. Pyburn, Assistant Vice
President; Katherine C. Wickham, Assistant Vice President--Human Resources;
Maurice Bendrihem, Controller; and Mandell L. Berman, Alvin E. Friedman,
Lawrence M. Greene, Abigail Q. McCarthy and David B. Truman, directors.
Dreyfus pays the salaries of all officers and employees
employed by both it and the Fund, maintains office facilities, and furnishes
the Fund statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services. Dreyfus also may make such advertising and promotional
expenditures using its own resources, as it from time to time deems
appropriate.
Sub-Investment Advisory Agreement. M&G provides investment
advisory assistance and day-to-day management of the Fund's investments
pursuant to the Sub-Investment Advisory Agreement (the "Sub-Advisory
Agreement") dated June 13, 1994 between M&G and Dreyfus. The Sub-Advisory
Agreement is subject to annual approval by (i) the Fund's Board of Directors
or (ii) vote of a majority (as defined in the Act) of the Fund's outstanding
voting securities, provided that in either event the continuance also is
approved by a majority of the Fund's Directors who are not "interested
persons" (as defined in the Act) of the Fund or M&G, by vote cast in person
at a meeting called for the purpose of voting on such approval. The
Sub-Advisory Agreement is terminable without penalty, (i) by Dreyfus on 60
days' notice, (ii) by the Fund's Board of Directors or by vote of the
holders of a majority of the Fund's shares on 60 days' notice, or (iii) by
M&G on not less than 90 days' notice. The Sub-Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the
Act) or upon the termination of the Management Agreement for any reason.
The following persons are officers and/or directors of M&G:
Laurence E. Linaker, Chairman of the Board of Directors; David L. Morgan,
Managing Director and a director; John P. Allard, John W. Boeckmann, Gordon
P. Craig, Robert A. R. Hayes, Richard S. Hughes, David J. Hutchins, Peter D.
Jones, James R.D. Korner, Ewen A. Macpherson, Paul R. Marsh, Michael G.
McLintock, Nigel D. Morrison, Roger D. Nightingale, Paul D.A. Nix, William
J. Nott, Neil A. Pegrum, Duncan N. Robertson, J. Christopher Whitaker,
directors; and Anthony J. Ashplant, Secretary.
M&G provides day-to-day management of the Fund's investments
in accordance with the stated policies of the Fund, subject to the
supervision of Dreyfus and approval of the Fund's Board of Directors.
Dreyfus and M&G provide the Fund with Investment Officers who are authorized
by the Board of Directors to execute purchases and sales of securities. The
Fund's Investment Officers are Joseph S. DiMartino, David L. Morgan, Paul
D.A. Nix and William Vincent. Dreyfus also maintains a research department
with a professional staff of portfolio managers and securities analysts who
provide research services for the Fund as well as other funds advised by
Dreyfus. All purchases and sales are reported for the Board of Directors'
review at the meeting subsequent to such transactions.
Expenses. All expenses incurred in the operation of the
Fund are borne by the Fund, except to the extent specifically assumed by
Dreyfus and/or M&G. The expenses borne by the Fund include: organizational
costs, taxes, interest, brokerage fees and commissions, if any, fees of
Directors who are not officers, directors, employees or holders of 5% or
more of the outstanding voting securities of Dreyfus or M&G or any of their
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, and
any extraordinary expenses. The Fund is subject to an annual distribution
fee for advertising, marketing and distributing its shares and an annual
service fee for ongoing personal services relating to shareholder accounts
and services related to the maintenance of shareholder accounts. See
"Distribution Plan and Shareholder Services Plan."
Dreyfus and M&G have agreed that if in any fiscal year the
aggregate expenses of the Fund, exclusive of interest, taxes, brokerage and
(with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the management fee,
exceed the expense limitation of any state having jurisdiction over the
Fund, Dreyfus and M&G will bear the excess expense in proportion to their
management fee and sub-advisory fee to the extent required by state law.
Such payment, if any, will be estimated daily, and reconciled and paid on a
monthly basis.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Distribution
Plan and Shareholder Services Plan."
The Fund's shares are subject to a Distribution Plan and a
Shareholder Services Plan.
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the
Securities and Exchange Commission under the Act provides, among other
things, that an investment company may bear expenses of distributing its
shares only pursuant to a plan adopted in accordance with the Rule. The
Fund's Board of Directors has adopted such a plan (the "Distribution Plan")
with respect to the Fund's shares, pursuant to which the Fund pays the
Distributor for advertising, marketing and distributing the Fund's shares.
Under the Distribution Plan, the Distributor may make payments to certain
financial institutions, securities dealers and other financial industry
professionals (collectively, "Service Agents") in respect to these services.
The Fund's Board of Directors believes that there is a reasonable likelihood
that the Distribution Plan will benefit the Fund and its shareholders. In
some states, certain financial institutions effecting transactions in Fund
shares may be required to register as dealers pursuant to state law.
A quarterly report of the amounts expended under the
Distribution Plan, and the purposes for which such expenditures were
incurred, must be made to the Directors for their review. In addition, the
Distribution Plan provides that it may not be amended to increase materially
the costs which Fund shareholders may bear for distribution pursuant to the
Distribution Plan without shareholder approval and that other material
amendments of the Distribution Plan must be approved by the Board of
Directors, and by the Directors who are not "interested persons" (as defined
in the Act) of the Fund and have no direct or indirect financial interest in
the operation of the Distribution Plan or in any agreements entered into in
connection with the Distribution Plan, by vote cast in person at a meeting
called for the purpose of considering such amendments. The Distribution
Plan is subject to annual approval by such vote of the Directors cast in
person at a meeting called for the purpose of voting on the Distribution
Plan. The Distribution Plan was so approved by the Directors at a meeting
held on June 13, 1994. The Distribution Plan may be terminated at any time
by vote of a majority of the Directors who are not "interested persons" and
have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreements entered into in connection with the
Distribution Plan or by vote of the holders of a majority of the Fund's
shares.
Shareholder Services Plan. The Fund has adopted a
Shareholder Services Plan, pursuant to which the Fund pays the Distributor
for the provision of certain services to Fund shareholders.
A quarterly report of the amounts expended under the
Shareholder Services Plan, and the purposes for which such expenditures were
incurred, must be made to the Directors for their review. In addition, the
Shareholder Services Plan provides that it may not be amended without
approval of the Directors, and by the Directors who are not "interested
persons" (as defined in the Act) of the Fund and have no direct or indirect
financial interest in the operation of the Shareholder Services Plan or in
any agreements entered into in connection with the Shareholder Services
Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Shareholder Services Plan is subject to
annual approval by such vote of the Directors cast in person at a meeting
called for the purpose of voting on the Shareholder Services Plan. The
Shareholder Services Plan was so approved on June 13, 1994. The Shareholder
Services Plan is terminable at any time by vote of a majority of the
Directors who are not "interested persons" and have no direct or indirect
financial interest in the operation of the Shareholder Services Plan or in
any agreements entered into in connection with the Shareholder Services
Plan.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's
distributor pursuant to an agreement which is renewable annually. The
Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer
purchase orders may be made between the hours of 8:00 a.m. and 4:00 p.m.,
New York time, on any business day that The Shareholder Services Group,
Inc., the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"), and the New York Stock Exchange are open. Such purchases will be
credited to the shareholder's Fund account on the next bank business day.
To qualify to use the Dreyfus TeleTransfer Privilege, the initial payment
for purchase of Fund shares must be drawn on, and redemption proceeds paid
to, the same bank and account as are designated on the Account Application
or Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Fund Shares--
Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account
with a minimum investment of $100 without filing a new Account Application
during the calendar year the account is closed or during the following
calendar year, provided the information on the old Account Application is
still applicable.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Wire Redemption Privilege. By using this Privilege, the
investor authorizes the Transfer Agent to act on wire or telephone
redemption instructions from any person representing himself or herself to
be the investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege on
the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds will be transferred
by Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form.
Redemption proceeds, if wired, must be in the amount of $1,000 or more and
will be wired to the investor's account at the bank of record designated in
the investor's file at the Transfer Agent, if the investor's bank is a
member of the Federal Reserve System, or to a correspondent bank if the
investor's bank is not a member. Fees ordinarily are imposed by such bank
and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire
redemption requests to the Transfer Agent by employing the following
transmittal code which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic
equipment may have the wire transmitted by contacting a TRT Cables operator
at 1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to
receive redemption proceeds, a written request must be sent to the Transfer
Agent. This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware
that if they have selected the Dreyfus TeleTransfer Privilege, any request
for a wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Fund Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates
representing Fund shares to be redeemed must be submitted with the
redemption request. Written redemption requests must be signed by each
shareholder, including each holder of a joint account, and each signature
must be guaranteed. Signatures on endorsed certificates submitted for
redemption also must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock
Exchanges Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may
accept other suitable verification arrangements from foreign investors, such
as consular verification. For more information with respect to signature-
guarantees, please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay
in cash all redemption requests by any shareholder of record, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Board of Directors reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency or any time
a cash distribution would impair the liquidity of the Fund to the detriment
of the existing shareholders. In such event, the securities would be valued
in the same manner as the Fund's portfolio is valued. If the recipient sold
such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period when the
New York Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services."
Exchange Privilege. Shares of other funds purchased by
exchange will be purchased on the basis of relative net asset value per
share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales load and
additional shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein as
"Purchased Shares") may be exchanged for shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum sales load
that could have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders
must notify the Transfer Agent of their prior ownership of fund shares and
their account number.
To use this Privilege, an investor or the investor's Service
Agent acting on the investor's behalf must give exchange instructions to the
Transfer Agent in writing, by wire or by telephone. Telephone exchanges may
be made only if the appropriate "YES" box has been checked on the Account
Application, or a separate signed Shareholder Services Form is on file with
the Transfer Agent. By using this Privilege, the investor authorizes the
Transfer Agent to act on telephonic, telegraphic or written exchange
instructions from any person representing himself or herself to be the
investor 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 "Exchange Privilege"
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.
The Exchange Privilege and Dreyfus Auto-Exchange Privilege
are available to shareholders resident in any state in which shares of the
fund being acquired may legally be sold. Shares may be exchanged only
between accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other
funds may be obtained from the Distributor, 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144. The Fund reserves the right to reject any
exchange request in whole or in part. The Exchange Privilege or Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan
permits an investor with a $5,000 minimum account to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis. Withdrawal payments are the proceeds from sales of Fund shares, not
the yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. An Automatic Withdrawal Plan may be established by completing
the appropriate application available from the Distributor. There is a
service charge of $.50 for each withdrawal check. Automatic Withdrawal may
be terminated at any time by the investor, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through
the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows
investors to invest on the payment date their dividends or dividends and
capital gain distributions, if any, from the Fund in shares of another fund
in the Dreyfus Family of Funds of which the investor is a shareholder.
Shares of other funds purchased pursuant to this privilege will be purchased
on the basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are offered
without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales load charged by
the fund from which dividends or distributions are being swept, without
giving effect to any reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested
in shares of other funds that impose a contingent deferred sales charge and
the applicable contingent deferred sales charge, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Personal Retirement
Plans. The Fund makes available to corporations a variety of prototype
pension and profit-sharing plans including a 401(k) Salary Reduction Plan.
In addition, the Fund makes available Keogh Plans, IRAs, including SEP-IRAs
and IRA "Rollover Accounts," and 403(b)(7) Plans. Plan support services
also are available. For details, please contact the Dreyfus Group
Retirement Plans, a division of the Distributor. See Prospectus for
telephone numbers.
Investors who wish to purchase Fund shares in conjunction
with a Keogh Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may
request from the Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7)
Plans or IRAs may charge a fee, payment of which could require the
liquidation of shares. All fees charged are described in the appropriate
form.
Shares may be purchased in connection with these plans only
by direct remittance to the entity acting as custodian. Purchases for these
plans may not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary
Reduction Plans, 403(b)(7) Plans and SEP-IRAs with more than one
participant, is $2,500 with no minimum or subsequent purchases. The minimum
initial investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and
403(b)(7) Plans with only one participant, is normally $750, with no minimum
on subsequent purchases. Individuals who open an IRA may also open a non-
working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and
the appropriate form of Custodial Agreement for further details on
eligibility, service fees and tax implications, and should consult a tax
adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
Valuation of Portfolio Securities. The Fund's securities,
including covered call options written by the Fund, are valued at the last
sale price on the securities exchange or national securities market on which
such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked
prices, except in the case of open short positions where the asked price is
used for valuation purposes. Bid price is used when no asked price is
available. Any assets or liabilities initially expressed in terms of
foreign currency will be translated into dollars at the midpoint of the New
York interbank market spot exchange rate as quoted on the day of such
translation by the Federal Reserve Bank of New York or if no such rate is
quoted on such date, at the exchange rate previously quoted by the Federal
Reserve Bank of New York or at such other quoted market exchange rate as may
be determined to be appropriate by the Advisers. Forward currency contracts
will be valued at the current cost of offsetting the contract. Because of
the need to obtain prices as of the close of trading on various exchanges
throughout the world, the calculation of net asset value does not take place
contemporaneously with the determination of prices of a majority of the
Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Any securities or other assets for which recent
market quotations are not readily available are valued at fair value as
determined in good faith by the Fund's Board of Directors. Expenses and
fees of the Fund, including the management fee paid by the Fund and
distribution and service fees, are accrued daily and taken into account for
the purpose of determining the net asset value of Fund shares.
Restricted securities, as well as securities or other assets for
which market quotations are not readily available, or are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Directors generally
will take the following factors into consideration: restricted securities
which are, or are convertible into, securities of the same class of
securities for which a public market exists usually will be valued at market
value less the same percentage discount at which purchased. This discount
will be revised periodically by the Board of Directors if the Directors
believe that it no longer reflects the value of the restricted securities.
Restricted securities not of the same class as securities for which a public
market exists usually will be valued initially at cost. Any subsequent
adjustment from cost will be based upon considerations deemed relevant by
the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on
which the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
It is expected that the Fund will qualify as a "regulated
investment company" under the Code, as long as such qualification is in the
best interests of its shareholders. As a regulated investment company, the
Fund will pay no Federal income tax on net investment income and net
realized securities gains to the extent that such income and gains are
distributed to shareholders in accordance with applicable provisions of the
Code. To qualify as a regulated investment company, the Fund must pay out
to its shareholders at least 90% of its net income (consisting of net
investment income and net short-term capital gain), must derive less than
30% of its annual gross income from gain on the sale of securities held for
less than three months, and must meet certain asset diversification and
other requirements. Accordingly, the Fund may be restricted in the selling
of securities held for less than three months. The Code, however, allows
the Fund to net certain offsetting positions, making it easier for the Fund
to satisfy the 30% test. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency.
Any dividend or distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of the investment. Such a dividend or distribution would be
a return of investment in an economic sense, although taxable as stated
above. In addition, the Code provides that if a shareholder holds shares of
the Fund for six months or less and has received a capital gain distribution
with respect to such shares, any loss incurred on the sale of such shares
will be treated as long-term capital loss to the extent of the capital gain
distribution received.
Depending upon the composition of the Fund's income, the entire
amount or a portion of the dividends from net investment income may qualify
for the dividends received deduction allowable to qualifying U.S. corporate
shareholders ("dividends received deduction"). In general, dividend income
of the Fund distributed to the Fund's 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 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 more than 46 days 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. In addition, the Code provides other limitations with
respect to the ability of a qualifying corporate shareholder to claim the
dividends received deduction in connection with holding Fund shares.
The Fund may qualify for and may make an election permitted under
Section 853 of the Code so that shareholders may be eligible to claim a
credit or deduction on their Federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of qualified taxes paid or incurred by the Fund to foreign countries
(which taxes relate primarily to investment income). The Fund may make an
election under Section 853, provided that more than 50% of the value of the
Fund's total assets at the close of the taxable year consists of securities
in foreign corporations, and the Fund satisfies the applicable distribution
provisions of the Code. The foreign tax credit available to shareholders is
subject to certain limitations imposed by the Code.
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 foreign currencies (including
foreign currency denominated bank deposits) and non-U.S. dollar denominated
securities (including debt instruments and certain forward contracts and
options) may be treated as ordinary income or loss under Section 988 of the
Code. In addition, all or a portion of any gain realized from the sole or
other disposition of certain market discount bonds will be treated as
ordinary income under Section 1278. Finally, all or a portion of the gain
realized from engaging in "conversion transactions" may be treated as
ordinary income under Section 1258. "Conversion transactions" are defined
to include certain forward, futures, option and straddle transactions,
transactions marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, 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 and 1258 of the Code, which, in certain circumstances, overrides or
modifies the provisions of Sections 1256 and 988. As such, all or a portion
of any short or long-term capital gain from certain "straddle" and/or
conversion transactions may be recharacterized to ordinary income.
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"
and the conversion transaction 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.
If the Fund acquires shares in an entity that is classified as a
"passive foreign investment company" ("PFIC") for federal income tax
purposes, the operation of certain provisions of the Code applying to PFICs
could result in the imposition of certain federal income taxes on the Fund.
In addition, gain realized from the sale or other disposition of PFIC shares
may be treated as ordinary income under Section 1291 of the Code.
Investment by the Fund in securities issued at a discount or
providing for deferred interest or for payment of interest in the form of
additional obligations could under special tax rules affect the amount,
timing and character of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the
Fund could be required to accrue as income each year a portion of the
discount (or deemed discount) at which such securities were issued and to
distribute such income. In such case, the Fund may have to dispose of
securities which it might otherwise have continued to hold in order to
generate cash to satisfy these distribution requirements.
PORTFOLIO TRANSACTIONS
Dreyfus assumes general supervision over placing orders on behalf
of the Fund for the purchase or sale of investment securities. Allocation
of brokerage transactions, including their frequency, is made in Dreyfus'
best judgment and in a manner deemed fair and reasonable to shareholders.
The primary consideration is prompt execution of orders at the most
favorable net price. Subject to this consideration, the brokers selected
will include those that supplement the Advisers' research facilities with
statistical data, investment information, economic facts and opinions.
Information so received is in addition to and not in lieu of services
required to be performed by the Advisers and the Advisers' fees are not
reduced as a consequence of the receipt of such supplemental information.
Such information may be useful to Dreyfus in serving both the Fund
and other funds which it advises and to M&G in serving both the Fund and the
other funds or accounts it advises, and, conversely, supplemental
information obtained by the placement of business of other clients may be
useful to the Advisers in carrying out their obligations to the Fund.
Brokers also will be selected because of their ability to handle special
executions such as are involved in large block trades or broad distribu-
tions, provided the primary consideration is met. Large block trades may,
in certain cases, result from two or more funds advised or administered by
Dreyfus being engaged simultaneously in the purchase or sale of the same
security. Certain of the Fund's transactions in securities of foreign
issuers may not benefit from the negotiated commission rates available to
the Fund for transactions in securities of domestic issuers. When
transactions are executed in the over-the-counter market, the Fund will deal
with the primary market makers unless a more favorable price or execution
otherwise is obtainable. Foreign exchange transactions are made with banks
or institutions in the interbank market at prices reflecting a mark-up or
mark-down and/or commission.
Portfolio turnover may vary from year to year as well as within a
year. It is anticipated that in any fiscal year the turnover rate may
approach the 150% level; however, in periods in which extraordinary market
conditions prevail, the Advisers will not be deterred from changing
investment strategy as rapidly as needed, in which case higher turnover
rates can be anticipated which would result in greater brokerage expenses.
The overall reasonableness of brokerage commissions paid is evaluated by the
Advisers based upon their knowledge of available information as to the
general level of commissions paid by other institutional investors for
comparable services.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
Average annual total return is calculated by determining the
ending redeemable value of an investment purchased at a net asset value per
share with a hypothetical $1,000 payment made at the beginning of the period
(assuming the reinvestment of dividends and distributions), dividing by the
amount of the initial investment, taking the "n"th root of the quotient
(where "n" is the number of years in the period) and subtracting 1 from the
result.
Total return is calculated by subtracting the amount of the Fund's
net asset value per share at the beginning of a stated period from the net
asset value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period) and dividing
the result by the net asset value per share at the beginning of the period.
Comparative performance may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical
Services, Inc., Standard & Poor's 500 Composite Stock Price Index, the Dow
Jones Industrial Average, Money Magazine, Morningstar, Inc. and other
industry publications. From time to time, the Fund may compare its
performance against inflation with the performance of other instruments
against inflation, such as short-term Treasury Bills (which are direct
obligations of the U.S. Government) and FDIC-insured bank money market
accounts. In addition, advertising for the Fund may indicate that investors
may consider diversifying their investment portfolios in order to seek
protection of the value of their assets against inflation. From time to
time, advertising materials for the Fund may refer to or discuss then-
current or past economic or financial conditions, development and/or events.
The Fund's advertising materials also may refer to the integration of the
world's securities markets, discuss the investment opportunities available
worldwide and mention the increasing importance of an investment strategy
including foreign investments. In addition, advertising materials for the
Fund also may refer to, or include commentary by the Fund's portfolio
managers relating to their investment strategy, portfolio holdings, recovery
investing, current or past business, political, economic or financial
conditions and other matters of general interest to shareholders. Such
materials may also describe awards bestowed upon M&G or refer to the clients
of M&G.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights
and are freely transferable.
The Fund will send annual and semi-annual financial statements to
all its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
The Bank of New York, 110 Washington Street, New York, New York
10286, is the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's transfer and dividend disbursing agent.
Neither The Bank of New York nor The Shareholder Services Group, Inc. has
any part in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares of Common Stock being sold pursuant to the Fund's Prospectus.
Ernst & Young, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
DREYFUS INTERNATIONAL RECOVERY FUND, INC.
Statement of Assets and Liabilities
June 17, 1994
ASSETS
Cash $100,000
Deferred organization and initial offering expenses 73,000
Total Assets $173,000
LIABILITIES
Accrued organization and initial offering expenses 73,000
NET ASSETS applicable to 8,000 shares of
Common Stock ($.001 par value) issued
and outstanding (300 million
shares authorized) . . . . . . . . . . . . . . . . . . .$100,000
========
NET ASSET VALUE, offering and redemption price per
share ($100,000 \ 8,000 shares) . . . . . . . . . . . .$ 12.50
========
NOTE - Dreyfus International Recovery Fund, Inc. (the "Fund") was
organized as a Maryland corporation on March 31, 1994 and has had no
operations since that date other than matters relating to its organization
and registration as a non-diversified, open-end investment company under
the Investment Company Act of 1940 and the Securities Act of 1933 and the
sale and issuance of 8,000 shares of Common Stock to The Dreyfus
Corporation ("Initial Shares"). Organization expenses payable by the Fund
have been deferred and will be amortized from the date operations commence
over a period which it is expected that a benefit will be realized, not to
exceed five years. If any of the Initial Shares are redeemed during the
amortization period by any holder thereof, the redemption proceeds will be
reduced by any unamortized organization expenses in the same proportion as
the number of Initial Shares being redeemed bears to the number of Initial
Shares outstanding at the time of the redemption.
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Directors
Dreyfus International Recovery Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Dreyfus International Recovery Fund, Inc. as of June 17, 1994. The
statement of assets and liabilities is the responsibility of the Fund's
management. Our responsibility is to express an opinion on the statement
of assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of assets and liabilities. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement
of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of
Dreyfus International Recovery Fund, Inc. at June 17, 1994, in conformity
with generally accepted accounting principles.
New York, New York
June 17, 1994
Ernst & Young
