Dreyfus
Global Growth
Fund
Investing in foreign and U.S. equity securities for capital growth
PROSPECTUS May 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Contents
THE FUND
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2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
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8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
16 Instructions for IRAs
FOR MORE INFORMATION
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Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
The Fund
Dreyfus Global Growth Fund
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Ticker Symbol: DSWIX
GOAL/APPROACH
The fund seeks capital growth. To pursue this goal, the fund invests primarily
in the stocks of foreign and U.S. companies. The fund generally maintains at
least 25% of its assets in U.S. companies. The fund focuses on proven growth
companies with strong name brands, growing market shares, high barriers to entry
and untapped market opportunities. The fund's stock investments may include
common stocks, preferred stocks and convertible securities.
In choosing stocks, the fund conducts a "bottom-up" approach, focusing on
individual stock selection rather than on macroeconomic factors. There are no
country allocation models or targets. The fund is particularly alert to
companies whose revenue growth and earnings growth are faster than those of
industry peers or the local market.
The fund typically sells a stock when its growth forecast is reduced, or its
valuation target is reached, or the portfolio manager decides to reduce the
weighting in its market.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
FOREIGN COMPANY: a company organized under the laws of a foreign country or for
which the principal trading market is in a foreign country; or a company
organized in the U.S. with a majority of its assets or business outside the U.S
GROWTH COMPANIES: companies whose earnings are expected to grow faster than the
overall market. Often, growth stocks have relatively high price-to-earnings and
price-to-book ratios, and tend to be more volatile than value stocks.
MAIN RISKS
Although stocks have historically been a leading choice of long-term investors,
they fluctuate in price. The value of your investment in the fund will go up and
down, which means that you could lose money.
The fund's performance will be influenced by political, social and economic
factors affecting foreign companies throughout the world. These risks include
changes in currency exchange rates, a lack of comprehensive company information,
political instability, and differing auditing and legal standards. Foreign
securities may be less liquid and more volatile than domestic securities.
The fund expects to invest primarily in the stocks of companies located in
developed countries, including the United States. However, the fund may also
invest in the stocks of companies located in emerging markets. These countries
generally have economic structures that are less diverse and mature, and
political systems that are less stable than those of developed countries.
Emerging markets may be more volatile than the markets of more mature economies,
and the securities of companies located in emerging markets are often subject to
rapid and large price fluctuations; however, these markets may also provide
higher long-term rates of return.
Under adverse market conditions, the fund could invest some or all of its assets
in money market securities. Although the fund would do this to avoid losses, it
could reduce the benefit from any upswing in the market. During such periods,
the fund may not achieve its investment objective.
Other potential risks
The fund may, at times, invest in derivative securities, such as options and
futures, and in foreign currencies. These practices can be used to hedge the
fund's portfolio or to increase returns; of course, such practices sometimes may
reduce returns or increase volatility. Derivatives can be illiquid, and a small
investment in certain derivatives could have a potentially large impact on the
fund's performance.
The fund can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying the fund's gains or losses.
The Fund
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's performance from year to year. The
table compares the fund's average annual total return to that of the Morgan
Stanley Capital International (MSCI) World Index, a widely recognized, unmanaged
index of global stock market performance. Of course, past performance is no
guarantee of future results.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit A]
BEST QUARTER: Q4 '99 +40.42%
WORST QUARTER: Q3 '98 -19.23%
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Average annual total return AS OF 12/31/99
1 Year 5 Years 10 Years
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FUND 45.24% 15.66% 10.94%
MSCI
WORLD INDEX 24.93% 19.76% 11.42%
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Annual fund operating expenses are paid
out of fund assets, so their effect is included in the share price. The fund has
no sales charge (load) or Rule 12b-1 distribution fees.
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Fee table
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Shareholder services fee 0.25%
Other expenses 0.41%
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TOTAL 1.41%
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Expense example
1 Year 3 Years 5 Years 10 Years
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$144 $446 $771 $1,691
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the fund's portfolio and
assisting in all aspects of the fund's operations.
SHAREHOLDER SERVICES FEE: the fee paid to the fund's distributor for shareholder
account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as transfer
agency, custody, professional and registration fees.
The Fund
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $127
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.75% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $485 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) each
have adopted a code of ethics that permits its personnel, subject to such code,
to invest in securities, including securities that may be purchased or held by
the fund. The Dreyfus code of ethics restricts the personal securities
transactions of its employees, and requires portfolio managers and other
investment personnel to comply with the code's preclearance and disclosure
procedures. Its primary purpose is to ensure that personal trading by Dreyfus
employees does not disadvantage any Dreyfus-managed fund.
Portfolio manager
Douglas A. Loeffler is the fund's primary portfolio manager. He has held this
position and has been employed by Dreyfus since February 1999 and has been
employed by Founders Asset Management, Inc., an affiliate of Dreyfus, since
1995.
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been independently audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report.
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
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PER-SHARE DATA ($)
Net asset value, beginning of period 34.76 34.52 34.62 36.97 32.99
Investment operations:
Investment income (loss) -- net (.11)(1) .16 (.01) .19 1.01
Net realized and unrealized gain
on investments 15.61 .24 4.19 4.19 2.97
Total from investment operations 15.50 .40 4.18 4.38 3.98
Distributions:
Dividends from investment income -- net (.01) (.16) (.11) (.18) --
Dividends in excess of investment
income -- net -- -- -- (.06) --
Dividends from net realized
gain on investments (3.11) -- (2.87) (6.22) --
Dividends in excess of net realized
gain on investments -- -- (1.30) (.27) --
Total distributions (3.12) (.16) (4.28) (6.73) --
Net asset value, end of period 47.14 34.76 34.52 34.62 36.97
Total return (%) 45.24 1.16 12.27 11.95 12.06(2)
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RATIOS/SUPPLEMENTAL DATA
Ratio of operating expenses
to average net assets (%) 1.41 1.32 1.34 1.39 1.46
Ratio of interest expense and
dividends on securities sold short
to average net assets (%) -- .04 .01 -- .01
Ratio of net investment income (loss)
to average net assets (%) (.30) .41 (.04) .51 .86
Portfolio turnover rate (%) 256.19 206.70 145.59 163.12 225.45
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Net assets, end of period ($ x 1,000) 87,141 78,684 91,475 96,176 104,561
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) EXCLUSIVE OF SALES CHARGE.
The Fund
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are generally 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.
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Minimum investments
Initial Additional
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REGULAR ACCOUNTS $2,500 $100
$500 FOR TELETRANSFER
INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 $250
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME. Your shares will be sold at the next
NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. Any certificates representing fund shares being sold
must be returned with your redemption request. Your order will be processed
promptly and you will generally receive the proceeds within a week.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
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Limitations on selling shares by phone
Proceeds sent by Minimum Maximum
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CHECK NO MINIMUM $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group
who, in the fund's view, is likely to engage in excessive trading
(usually defined as more than four exchanges out of the fund within a
calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; IRA accounts; accounts participating in
automatic investment programs; and accounts opened through a financial
institution.
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 30 days, the fund may close your account and
send you the proceeds.
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS DIVIDENDS from its net investment income,
and distributes any net capital gains it has realized once a year. Your
distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-deferred account). High portfolio turnover
and more volatile markets can result in taxable distributions to shareholders,
regardless of whether their shares increased in value. The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
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Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
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INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except in tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at right also can provide a guide for your potential tax liability
when selling or exchanging fund shares. "Short-term capital gains" applies to
fund shares sold or exchanged up to 12 months after buying them. "Long-term
capital gains" applies to shares sold or exchanged after 12 months.
Your Investment
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
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For investing
DREYFUS AUTOMATIC For making automatic investments ASSET
BUILDER((reg.tm)) from a designated
bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments from
DIRECT DEPOSIT your federal employment, Social Security
PRIVILEGE or other regular federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from one
Dreyfus fund into another (not available
for IRAs).
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For exchanging shares
DREYFUS AUTO- For making regular exchanges from one
EXCHANGE PRIVILEGE Dreyfus fund into another.
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For selling shares
DREYFUS AUTOMATIC For making regular withdrawals WITHDRAWAL
PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment products and services. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Experienced financial consultants can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one Dreyfus fund into another. You can request your exchange in writing or
by phone. Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:
* for traditional, rollover, Roth and Education IRAs, call 1-800-645-656
* for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
Your Investment
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to The Bank of New York, with these instructions:
* ABA# 021000018
* DDA# 8900119357
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900119357
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call us
to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check (see "To Open an Account" at left).
By Telephone
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900119357
* the fund name
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).
Automatically
WITHOUT ANY INITIAL INVESTMENT Call us
to request a Dreyfus Step Program form. Complete and return the form along with
your application.
ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
All contributions will count as current year.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required.
Mail in your request (see "To Open an Account" at left).
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS TRUST COMPANY, CUSTODIAN
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
For More Information
Dreyfus Global Growth Fund
-----------------------------
SEC file number: 811-4695
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to info@dreyfus.com
ON THE INTERNET Text-only versions of certain fund documents can be viewed
online or downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by E-mail request to publicinfo@sec.gov, or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation 033P0500
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DREYFUS GLOBAL GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
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This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Global Growth Fund (the "Fund"), dated May 1, 2000, 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
one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
The Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
PAGE
Description of the Fund...................................................B-2
Management of the Fund....................................................B-16
Management Arrangements...................................................B-19
How to Buy Shares.........................................................B-22
Shareholder Services Plan.................................................B-24
How To Redeem Shares......................................................B-25
Shareholder Services......................................................B-27
Determination of Net Asset Value..........................................B-31
Dividends, Distributions and Taxes........................................B-31
Portfolio Transactions....................................................B-33
Performance Information...................................................B-34
Information About the Fund................................................B-35
Counsel and Independent Auditors..........................................B-38
Year 2000 Issues..........................................................B-38
Appendix B-39
DESCRIPTION OF THE FUND
The Fund, a Massachusetts business trust, commenced operations in
April 10, 1987 as a limited partnership. On December 31, 1995, all of the assets
and liabilities of the partnership were transferred to the Fund in exchange for
shares of beneficial interest of the Fund. The Fund is an open-end, management
investment company, known as a mutual fund.
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Dreyfus Service Corporation (the "Distributor") is the distributor of
the Fund's shares.
CERTAIN PORTFOLIO SECURITIES
The following information supplements and should be read in
conjunction with the Fund's Prospectus.
DEPOSITARY RECEIPTS. The Fund may invest in the securities of foreign
issuers in the form of American Depositary Receipts and American Depositary
Shares (collectively, "ADRs") and Global Depositary Receipts and Global
Depositary Shares (collectively, "GDRs") and other forms of depositary receipts.
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. GDRs are receipts issued outside the
United States 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
GDRs in bearer form are designed for use outside the United States.
These securities may be purchased through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
underlying security and a depositary. 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. Convertible securities may be converted at
either a stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although convertible
bonds, as corporate debt obligations, enjoy seniority in right of payment to all
equity securities, and convertible preferred stock is senior to common stock, of
the same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
Convertible securities provide for a stable stream of income with
generally higher yields than common stocks, but there can be no assurance of
current income because the issuers of the convertible securities may default on
their obligations. A convertible security, in addition to providing fixed
income, offers the potential for capital appreciation through the conversion
feature, which enables the holder to benefit from increases in the market price
of the underlying common stock. There can be no assurance of capital
appreciation, however, because securities prices fluctuate. Convertible
securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
WARRANTS. A warrant is an instrument issued by a corporation which
gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time. The
Fund may invest up to 2% of its net assets in warrants, except that this
limitation does not apply to warrants purchased by the Fund that are sold in
units with, or attached to, other securities.
MONEY MARKET INSTRUMENTS. When the Manager determines that adverse
market conditions exist, the Fund may adopt a temporary defensive position and
invest some or all of its assets in money market instruments, including U.S.
Government securities, repurchase agreements, bank obligations and commercial
paper. The Fund also may purchase money market instruments when it has cash
reserves or in anticipation of taking a market position.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES.
The Fund may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Manager to be of comparable quality
to the other obligations in which the Fund may invest. Such securities also
include debt obligations of supranational entities. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
ILLIQUID SECURITIES. The Fund may invest up to 15% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment objective.
These securities may include securities that are not readily marketable, such as
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 privately negotiated, non-exchange traded options and
securities used to cover such options. As to these securities, the Fund is
subject to a risk that should the Fund desire to sell them when a ready buyer is
not available at a price the Fund deems representative of their value, the value
of the Fund's net assets could be adversely affected.
ZERO COUPON SECURITIES. The Fund may invest in zero coupon U.S.
Treasury securities, which are Treasury Notes and Bonds that have been stripped
of their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Zero coupon securities also are issued by corporations and financial
institutions which constitute a proportionate ownership of the issuer's pool of
underlying U.S. Treasury securities. A zero coupon security pays no interest to
its holder during its life and is sold at a discount to its face value at
maturity. The market prices of zero coupon securities generally are more
volatile than the market prices of securities that pay interest periodically and
are likely to respond to a greater degree to changes in interest rates than
non-zero coupon securities having similar maturities and credit qualities.
INVESTMENT TECHNIQUES
The following information supplements and should be read in
conjunction with the Fund's Prospectus.
FOREIGN CURRENCY TRANSACTIONS. The Fund may enter into foreign
currency transactions for a variety of purposes, including: to fix in U.S.
dollars, between trade and settlement date, the value of a security the Fund has
agreed to buy or sell; to hedge the U.S. dollar value of securities the Fund
already owns, particularly if it expects a decrease in the value of the currency
in which the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies. A short position 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. The
Fund's success in these transactions will depend principally on the Manager's
ability to predict accurately the future exchange rates between foreign
currencies and the U.S. dollar.
Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
LEVERAGE. Leveraging (that is, buying securities using borrowed money)
exaggerates the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed for leveraging is limited
to 33-1/3% of the value of the Fund's total assets. These borrowings will be
subject to interest costs which may or may not be recovered by appreciation of
the securities purchased; in certain cases, interest costs may exceed the return
received on the securities purchased. For borrowings for investment purposes,
the Investment Company Act of 1940, as amended (the "1940 Act") requires the
Fund to maintain continuous asset coverage (total assets including borrowings,
less liabilities exclusive of borrowings) of 300% of the amount borrowed. If the
required coverage should decline as a result of market fluctuations or other
reasons, the Fund may be required to sell some of its portfolio holdings within
three days to reduce the amount of its borrowings and restore the 300% asset
coverage, even though it may be disadvantageous from an investment standpoint to
sell securities at that time. The Fund also may be required to maintain minimum
average balances in connection with such borrowing or pay a commitment or other
fee to maintain a line of credit; either of these requirements would increase
the cost of borrowing over the stated interest rate.
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund of
an underlying debt instrument in return for cash proceeds based on a percentage
of the value of the security. The Fund retains the right to receive interest and
principal payments on the security. At an agreed upon future date, the Fund
repurchases the security at principal plus accrued interest. Except for these
transactions, the Fund's borrowings generally will be unsecured.
SHORT-SELLING. In these transactions, the Fund sells a security it
does not own in anticipation of a decline in the market value of the security.
To complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security was
sold by the Fund, which would result in a loss or gain, respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not make a short
sale which results in the Fund having sold short in the aggregate more than 5%
of the outstanding securities of any class of an issuer.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns. At no time will more than
15% of the value of the Fund's net assets be in deposits on short sales against
the box.
Until the Fund closes its short position or replaces the borrowed
security, the Fund will: (a) segregate permissible liquid assets in an amount
that, together with the amount deposited with the broker as collateral, always
equals the current value of the security sold short; or (b) otherwise cover its
short position.
LENDING PORTFOLIO SECURITIES. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. In connection with such loans, the
Fund continues to be entitled to payments in amounts equal to the dividends,
interest or other distributions payable on the loaned securities which affords
the Fund an opportunity to earn interest on the amount of the loan and at the
same time to earn income on the loaned securities' collateral. Loans of
portfolio securities may not exceed 33-1/3% of the value of the Fund's total
assets, and the Fund will receive collateral consisting of cash, U.S. Government
securities or irrevocable letters of credit which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement with
the Fund. In connection with its securities lending transactions, 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.
DERIVATIVES. The Fund may invest in, or enter into, derivatives, such
as options and futures, for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest than
"traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit a Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities. However, derivatives may entail investment
exposures that are greater than their cost would suggest, meaning that a small
investment in derivatives could have a large potential impact on the Fund's
performance.
If the Fund invests in derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Fund's return or
result in a loss. The Fund also could experience losses if its derivatives were
poorly correlated with its other investments, or if the Fund were unable to
liquidate its position because of an illiquid secondary market. The market for
many derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
derivatives.
Although the Fund will not be a commodity pool, certain derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission which
limit the extent to which the Fund can invest in such derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts and
options for other purposes if the sum of the amount of initial margin deposits
and premiums paid for unexpired options with respect to such contracts, other
than for bona fide hedging purposes, exceeds 5% of the liquidation value of the
Fund's assets, after taking into account unrealized profits and unrealized
losses on such contracts and options; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the 5% limitation.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily variation margin system operated by the clearing agency
in order to reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated with
derivatives purchased on an exchange. By contrast, no clearing agency guarantees
over-the-counter derivatives. Therefore, each party to an over-the-counter
derivative bears the risk that the counterparty will default. Accordingly, the
Manager will consider the creditworthiness of counterparties to over-the-counter
derivatives in the same manner as it would review the credit quality of a
security to be purchased by the Fund. Over-the-counter derivatives are less
liquid than exchange-traded derivatives since the other party to the transaction
may be the only investor with sufficient understanding of the derivative to be
interested in bidding for it.
FUTURES TRANSACTIONS--IN GENERAL. The Fund may enter into futures contracts in
U.S. domestic markets, or on exchanges located outside the United States.
Foreign markets may offer advantages such as trading opportunities or arbitrage
possibilities not available in the United States. Foreign markets, however, may
have greater risk potential than domestic markets. For example, some foreign
exchanges are principal markets so that no common clearing facility exists and
an investor may look only to the broker for performance of the contract. In
addition, any profits that the Fund might realize in trading could be eliminated
by adverse changes in the currency exchange rate, or the Fund could incur losses
as a result of those changes. Transactions on foreign exchanges may include both
commodities which are traded on domestic exchanges and those which are not.
Unlike trading on domestic commodity exchanges, trading on foreign commodity
exchanges is not regulated by the Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. Although the Fund
intends to purchase or sell futures contracts only if there is an active market
for such contracts, no assurance can be given that a liquid market will exist
for any particular contract at any particular time. Many futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that limit
or trading may be suspended for specified periods during the trading day.
Futures contract prices could move to the limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the securities being hedged and
the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate permissible
liquid assets to cover its obligations relating to its transactions in
derivatives. To maintain this required cover, the Fund may have to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a derivative position at a reasonable price. In addition,
the segregation of such assets will have the effect of limiting the Fund's
ability otherwise to invest those assets.
SPECIFIC FUTURES TRANSACTIONS. The Fund may purchase and sell stock index
futures contracts. A stock index future obligates the Fund to pay or receive an
amount of cash equal to a fixed dollar amount specified in the futures contract
multiplied by the difference between the settlement price of the contract on the
contract's last trading day and the value of the index based on the stock prices
of the securities that comprise it at the opening of trading in such securities
on the next business day.
The Fund may purchase and sell interest rate futures contracts. An
interest rate future obligates the Fund to purchase or sell an amount of a
specific debt security at a future date at a specific price.
The Fund may purchase and sell currency futures. A foreign currency
future obligates the Fund to purchase or sell an amount of a specific currency
at a future date at a specific price.
OPTIONS--IN GENERAL. The Fund may invest up to 5% of its assets, represented by
the premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20% of the
value of its net assets at the time such option contracts are written. A call
option gives the purchaser of the option the right to buy, and obligates the
writer to sell, the underlying security or securities at the exercise price at
any time during the option period, or at a specific date. Conversely, a put
option gives the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at the exercise price at
any time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with
respect to which the Fund owns the underlying security or otherwise covers the
transaction by segregating permissible liquid assets. A put option written by
the Fund is covered when, among other things, the Fund segregates permissible
liquid assets having a value equal to or greater than the exercise price of the
option to fulfill the obligation undertaken. The principal reason for writing
covered call and put options is to realize, through the receipt of premiums, a
greater return than would be realized on the underlying securities alone. The
Fund receives a premium from writing covered call or put options which it
retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow, or other unforeseen events, at times have rendered
certain of the clearing facilities inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
SPECIFIC OPTIONS TRANSACTIONS. The Fund may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities exchanges or traded
in the over-the-counter market. An option on a stock index is similar to an
option in respect of specific securities, except that settlement does not occur
by delivery of the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the stock index upon which
the option is based is greater than in the case of a call, or less than in the
case of a put, the exercise price of the option. Thus, the effectiveness of
purchasing or writing stock index options will depend upon price movements in
the level of the index rather than the price of a particular stock.
The Fund may purchase and sell call and put options on foreign
currency. These options convey the right to buy or sell the underlying currency
at a price which is expected to be lower or higher than the spot price of the
currency at the time the option is exercised or expires.
The Fund may purchase cash-settled options on interest rate swaps,
interest rate swaps denominated in foreign currency and equity index swaps in
pursuit of its investment objective. Interest rate swaps involve the exchange by
the Fund with another party of their respective commitments to pay or receive
interest (for example, an exchange of floating-rate payments for fixed-rate
payments) denominated in U.S. dollars or foreign currency. Equity index swaps
involve the exchange by the Fund with another party of cash flows based upon the
performance of an index or a portion of an index of securities which usually
includes dividends. A cash-settled option on a swap gives the purchaser the
right, but not the obligation, in return for the premium paid, to receive an
amount of cash equal to the value of the underlying swap as of the exercise
date. These options typically are purchased in privately negotiated transactions
from financial institutions, including securities brokerage firms.
Successful use by the Fund of options will be subject to the Manager's
ability to predict correctly movements in the prices of individual stocks, the
stock market generally, foreign currencies or interest rates. To the extent the
Manager's predictions are incorrect, the Fund may incur losses.
FUTURE DEVELOPMENTS. The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts and
any other derivatives which are not presently contemplated for use by the Fund
or which are not currently available but which may be developed, to the extent
such opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
FORWARD COMMITMENTS. The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The payment
obligation and the interest rate receivable on a forward commitment or
when-issued security are fixed when the Fund enters into the commitment, but the
Fund does not make payment until it receives delivery from the counterparty. The
Fund will commit to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. The Fund will segregate permissible
liquid assets at least equal at all times to the amount of the Fund's purchase
commitments.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose the Fund to
risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when-issued basis when the Fund
is fully or almost fully invested may result in greater potential fluctuation in
the value of the Fund's net assets and its net asset value per share.
INVESTMENT CONSIDERATIONS AND RISKS
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.
Because evidences of ownership of foreign securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect or restrict the payment of principal, interest and
dividends on the foreign securities to investors located outside the country of
the issuer, whether from currency blockage or otherwise. Moreover, foreign
securities held by the Fund may trade on days when the Fund does not calculate
its net asset value and thus affect the Fund's net asset value on days when
investors have no access to the Fund.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations.
FIXED-INCOME SECURITIES. The Fund may invest in convertible
securities, preferred stocks and debt securities when management believes that
such securities offer opportunities for capital growth. The debt securities in
which the Fund may invest must be rated at least Caa by Moody's Investors
Service, Inc. ("Moody's") or CCC by Standard & Poor's Ratings Group ("S&P"), or,
if unrated, deemed to be of comparable quality by the Manager. Even though
interest-bearing securities are investments which promise a stable stream of
income, the prices of such securities generally are inversely affected by
changes in interest rates and, therefore, are subject to the risk of market
price fluctuations. The values of fixed-income securities also may be affected
by changes in the credit rating or financial condition of the issuer. Certain
securities that may be purchased by the Fund, such as those rated Baa or lower
by Moody's and BBB or lower by S&P, may be subject to such risk with respect to
the issuing entity and to greater market fluctuations than certain lower
yielding, higher rated fixed-income securities. Once the rating of a portfolio
security has been changed, the Fund will consider all circumstances deemed
relevant in determining whether to continue to hold the security. See "Lower
Rated Securities" below and "Appendix."
LOWER RATED SECURITIES. The Fund intends to invest less than 5% of its
net assets in higher yielding (and, therefore, higher risk) debt securities such
as those rated Ba by Moody's or BB by S&P (collectively, the "Rating Agencies"),
or as low as Caa by Moody's or CCC by S&P. They may be subject to certain risks
with respect to the issuing entity and to greater market fluctuations than
certain lower yielding, higher rated fixed-income securities. The retail
secondary market for these securities may be less liquid than that of higher
rated securities; adverse conditions could make it difficult at times for the
Fund to sell certain securities or could result in lower prices than those used
in calculating the Fund's net asset value. See "Appendix" for a general
description of the Rating Agencies' ratings. The ratings of the Rating Agencies
represent their opinions as to the quality of the obligations which they
undertake to rate. Ratings are relative and subjective and, although ratings may
be useful in evaluating the safety of interest and principal payments, they do
not evaluate the market value risk of such obligations. Although these ratings
may be an initial criterion for selection of portfolio investments, the Manager
also will evaluate these securities and the ability of the issuers of such
securities to pay interest and principal. The Fund's ability to achieve its
investment objective may be more dependent on the Manager's credit analysis than
might be the case for a fund that invested in higher rated securities.
You 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 generally are
considered by the Rating Agencies to be, on balance, predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation and generally will involve more credit risk than
securities in the higher rating categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with the higher rated securities.
For example, during an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of these securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be affected adversely by
specific corporate developments, forecasts, or the unavailability of additional
financing. The risk of loss because of default by the issuer is significantly
greater for the holders of these securities because such securities generally
are unsecured and often are subordinated to other creditors of the issuer.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold only
to a limited number of dealers or institutional investors. To the extent a
secondary trading market for these securities does exist, it generally is not as
liquid as the secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on market price and yield and the
Fund's ability to dispose of particular issues when necessary to meet the Fund's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing the Fund's
portfolio and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.
These securities may be particularly susceptible to economic
downturns. It is likely that an economic recession would disrupt severely the
market for such securities and have an adverse impact on the value of such
securities, and could adversely affect the ability of the issuers of such
securities to repay principal and pay interest thereon, which would increase the
incidence of default for such securities.
The Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with the Distributor or any other persons concerning the
acquisition of such securities, and the Manager will review carefully the credit
and other characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon securities and pay-in-kind bonds, in which the
Fund may invest up to 5% of its total assets. Pay-in-kind bonds pay interest
through the issuance of additional securities. Zero coupon securities and
pay-in-kind bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Fund will realize no cash until
the cash payment date unless a portion of such securities are sold and, if the
issuer defaults, the Fund may obtain no return at all on its investment.
SIMULTANEOUS INVESTMENTS. Investment decisions for the Fund are made
independently from those of the other investment companies advised by the
Manager. If, however, such other investment companies desire to invest in, or
dispose of, the same securities as the Fund, available investment or
opportunities for sales will be allocated equitably to each investment company.
In some cases, this procedure may adversely affect the size of the position
obtained for or disposed of by the Fund or the price paid or received by the
Fund.
INVESTMENT RESTRICTIONS
The Fund's investment objective is a fundamental policy, which cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, the Fund has adopted
investment restrictions numbered 1 through 13 as fundamental policies.
Investment restriction number 14 is not a fundamental policy and may be changed
by a vote of a majority of the Fund's Board members at any time. The Fund may
not:
1. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of the Fund's investments in all such companies
to exceed 5% of the value of its total assets.
2. Purchase securities of closed-end investment companies, except (a)
in the open market where no commission except the ordinary broker's commission
is paid, which purchases are limited to a maximum of (i) 3% of the total voting
stock of any one closed-end investment company, (ii) 5% of its net assets with
respect to any one closed-end investment company and (iii) 10% of its net assets
in the aggregate, or (b) those received as part of a merger or consolidation.
The Fund may not purchase the securities of open-end investment companies other
than itself.
3. Purchase or retain the securities of any issuer if the officers or
Board members of the Fund or the officers or directors of the Manager
individually own beneficially more than 1/2 of 1% of the securities of such
issuer or together own beneficially more than 5% of the securities of such
issuer.
4. Invest in commodities, except that the Fund may purchase and sell
futures contracts, including those relating to indices, and options on futures
contracts or indices.
5. Purchase, hold or deal in real estate, or oil and gas interests,
but the Fund may purchase and sell securities that are secured by real estate
and may purchase and sell securities issued by companies that invest or deal in
real estate.
6. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of the
Fund's total assets). For purposes of this Investment Restriction, the entry
into options, futures contracts, including those relating to indices, and
options on futures contracts or indices shall not constitute borrowing.
7. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with portfolio transactions, such as
in connection with writing covered options and the purchase of securities on a
when-issued or delayed-delivery basis and collateral and initial or variation
margin arrangements with respect to options, futures contracts, including those
relating to indices, and options on futures contracts or indices.
8. Make loans to others, except through the purchase of debt
obligations or the entry into repurchase agreements. However, the Fund may lend
its portfolio securities in an amount not to exceed 33-1/3% of the value of its
total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the Fund's
Board.
9. 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.
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. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and this Statement of Additional
Information.
12. Invest more than 25% of its assets in investments in any
particular industry or industries (including banking), provided that, when the
Fund has adopted a temporary defensive posture, there shall be no limitation on
the purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
13. Purchase warrants in excess of 2% of net assets. For purposes of
this restriction, such warrants shall be valued at the lower of cost or market,
except that warrants acquired by the Fund in units or attached to securities
shall not be included within this 2% restriction.
14. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if, in
the aggregate, more than 15% of the value of the Fund's net assets would be so
invested.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in values or assets
will not constitute a violation of such restriction.
In addition, though not a fundamental policy, the Fund may not
purchase or sell real property or invest in limited partnership interests,
provided that the Fund may invest in marketable interests in real estate
investment trusts or marketable securities of companies which invest in real
estate.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of
the Fund. The Board approves all significant agreements between the Fund and
those companies that furnish services to the Fund. These companies are as
follows:
The Dreyfus Corporation...................Investment Adviser
Dreyfus Service Corporation...............Distributor
Dreyfus Transfer, Inc.....................Transfer Agent
The Bank of New York......................Custodian
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five years, are
shown below.
BOARD MEMBERS OF THE FUND
JOSEPH S. DiMARTINO, CHAIRMAN OF THE BOARD. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He also is
a director of The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk
management services to health and other benefit programs, Carlyle
Industries, Inc. (formerly, Belding Heminway, Inc.), a button packager
and distributor, Century Business Services, Inc. (formerly,
International Alliance Services Inc.), a provider of various
outsourcing functions for small and medium sized companies, and
QuikCAT.com, Inc., a private company engaged in the development of
high speed movement, routing, storage and encryption of data across
cable, wireless and all other modes of data transport. For more than
five years prior to January 1995, he was President, a director and,
until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of the Distributor. From
August 1994 until December 31, 1994, he was a director of Mellon
Financial Corporation. He is 56 years old and his address is 200 Park
Avenue, New York, New York 10166.
GORDON J. DAVIS, BOARD MEMBER. Since October 1994, senior partner with the
law firm of LeBoeuf, Lamb, Greene & MacRae. From 1983 to September
1994, Mr. Davis was a senior partner with the law firm of Lord Day &
Lord, Barrett Smith. From 1978 to 1983, he was Commissioner of Parks
and Recreation for the City of New York. He also is a Director of
Consolidated Edison, a utility company, and Phoenix Home Life
Insurance Company and a member of various other corporate and
not-for-profit boards. He is 58 years old and his address is 241
Central Park West, New York, New York 10024.
DAVID P. FELDMAN, BOARD MEMBER. Director of several mutual funds in the 59
Wall Street Mutual Funds Group, and of the Jeffrey Company, a private
investment company. Mr. Feldman was employed by AT&T from July 1961 to
his retirement in April 1997, most recently serving as Chairman and
Chief Executive Officer of AT&T Investment Management Corporation. He
is 60 years old and his address is 466 Lexington Avenue, New York, New
York 10017.
LYNN MARTIN, BOARD MEMBER. Professor, J.L. Kellogg Graduate School of
Management, Northwestern University. During the Spring Semester 1993,
she was a Visiting Fellow at the Institute of Politics, Kennedy School
of Government, Harvard University. She also is an advisor to the
international accounting firm of Deloitte & Touche, LLP and chair of
its Council for the Advancement of Women. From January 1991 through
January 1993, Ms. Martin served as Secretary of the United States
Department of Labor. From 1981 to 1991, she served in the United
States House of Representatives as a Congresswoman from the State of
Illinois. She also is a Director of Harcourt General, Inc., SBC
Communications, Inc., Ryder System, Inc., The Proctor & Gamble Co., a
consumer company, and TRW, Inc., an aerospace and automotive equipment
company. She is 60 years old and her address is c/o Deloitte & Touche,
LLP, Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, Illinois
60601.
DANIEL ROSE, BOARD MEMBER. Chairman and Chief Executive Officer of Rose
Associates, Inc., a New York based real estate development and
management firm. In July 1994, Mr. Rose received a Presidential
appointment to serve as a Director of the Baltic-American Enterprise
Fund, which will make equity investments and loans, and provide
technical business assistance to new business concerns in the Baltic
states. He also is Chairman of the Housing Committee of the Real
Estate Board of New York, Inc. He is 70 years old and his address is
c/o Rose Associates, Inc., 200 Madison Avenue, New York, New York
10016.
PHILIP L. TOIA, BOARD MEMBER. Retired. Mr. Toia was employed by the Manager
from August 1986 through January 1997, most recently serving as Vice
Chairman, Administration and Operations. He is 67 years old and his
address is 715 Hideaway Circle West, Marco Island, Florida 34145.
SANDER VANOCUR, BOARD MEMBER. Since January 1992, President of Old Owl
Communications, a full-service communications firm. From May 1995 to
June 1996, he was a Professional in Residence at the Freedom Forum in
Arlington, VA; from January 1994 to May 1995, he served as Visiting
Professional Scholar at the Freedom Forum Amendment Center at
Vanderbilt University; and from November 1989 to November 1995, he was
a director of the Damon Runyon-Walter Winchell Cancer Research Fund.
From June 1977 to December 1991, he was a Senior Correspondent of ABC
News and, from October 1986 to December 1991, he was Anchor of the ABC
News program "Business World," a weekly business program on the ABC
television network. He is 72 years old and his address is 2626
Sycamore Canyon Road, Santa Barbara, CA 93108.
ANNE WEXLER, BOARD MEMBER. Chairman of the Wexler Group, consultants
specializing in government relations and public affairs. She also is a
director of Wilshire Mutual Funds, Comcast Corporation, The New
England Electric System, and a member of the Council of Foreign
Relations and the National Park Foundation. She is 70 years old and
her address is c/o The Wexler Group, 1317 F Street, Suite 600, N.W.,
Washington, DC 20004.
REX WILDER, BOARD MEMBER. Financial Consultant. He is 79 years old and his
address is 290 Riverside Drive, New York, New York 10025.
The Fund has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Fund, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Fund for election to the
Fund's Board.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
to each Board member by the Fund and by all funds in the Dreyfus Family of Funds
for which such person was a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation)* during the year
ended December 31, 1999 is as follows:
Total Compensation
Aggregate From Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund** Board Member
- -------------------- -------------------- -------------------
Joseph S. DiMartino $5,000 $642,177 (189)
Gordon J. Davis $4,000 $ 89,625 (30)
David P. Feldman $4,000 $118,875 (56)
Lynn Martin $4,000 $ 40,875 (15)
Eugene McCarthy+ $1,750 $ 18,813 (15)
Daniel Rose $4,000 $ 78,625 (31)
Philip L. Toia $4,000 $ 40,875 (15)
Sander Vanocur $4,000 $ 78,625 (31)
Anne Wexler $3,750 $ 59,125 (28)
Rex Wilder $3,750 $ 40,875 (15)
- --------------------
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Fund, for which the Board
member serves.
** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $4,288 for all Board members as a group.
+ Board member Emeritus since March 29, 1996.
OFFICERS OF THE FUND
STEPHEN E. CANTER, PRESIDENT. President, Chief Operating Officer, Chief
Investment Officer and a director of the Manager, and an officer of
other investment companies advised and administered by the Manager.
Mr. Canter also is a Director or an Executive Committee Member of the
other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of the Manager. He is 54
years old.
MARK N. JACOBS, VICE PRESIDENT. Vice President, General Counsel and
Secretary of the Manager, and an officer of other investment companies
advised and administered by the Manager. He is 54 years old.
JOSEPH CONNOLLY, VICE PRESIDENT AND TREASURER. Director - Mutual Fund
Accounting of the Manager, and an officer of other investment
companies advised and administered by the Manager. He is 42 years old.
MICHAEL A. ROSENBERG, SECRETARY. Associate General Counsel of the Manager, and
an officer of other investment companies advised and administered by
the Manager. He is 40 years old.
STEVEN F. NEWMAN, ASSISTANT SECRETARY. Associate General Counsel and
Assistant Secretary of the Manager, and an officer of other investment
companies advised and administered by the Manager. He is 50 years old.
JAMES WINDELS, ASSISTANT TREASURER. Senior Treasury Manager of the Manager,
and an officer of other investment companies advised and administered
by the Manager. He is 41 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's outstanding shares on April 3, 2000.
MANAGEMENT ARRANGEMENTS
INVESTMENT ADVISER. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the twenty-five largest bank holding companies in the United
States based on total assets.
The Manager provides management services pursuant to a Management
Agreement (the "Agreement") between the Fund and the Manager. The Agreement is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting such approval. The Agreement is terminable without penalty, on
60 days' notice, by the Fund's Board or by vote of the holders of a majority of
the Fund's outstanding voting securities, or, on 90 days' notice, by the
Manager. The Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment Officer
and a director; Thomas F. Eggers, Vice Chairman--Institutional and a director;
Lawrence S. Kash, Vice Chairman; J. David Officer, Vice Chairman and a director;
Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr., Executive Vice
President; Stephen R. Byers, Senior Vice President; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Diane P. Durnin, Vice
President--Product Development; Patrice M. Kozlowski, Vice President--Corporate
Communications; Mary Beth Leibig, Vice President--Human Resources; Ray Van Cott,
Vice President--Information Systems; Theodore A. Schachar, Vice President--Tax;
Wendy Strutt, Vice President; Richard Terres, Vice President; William H.
Maresca, Controller; James Bitetto, Assistant Secretary; Steven F. Newman,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G.
Elliott, Martin C. McQuinn, Richard W. Sabo and Richard F. Syron, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions, and provides the
Fund with portfolio managers who are authorized by the Board to execute
purchases and sales of securities. The Fund's portfolio managers are Douglas A.
Loeffler, Scott A. Chapman and Thomas Arrington. The Manager also maintains a
research department with a professional staff of portfolio managers and
securities analysts who provide research services for the Fund and for other
funds advised by the Manager.
The Manager's code of ethics (the "Code") subjects its employees'
personal securities transactions to various restrictions to ensure that such
trading does not disadvantage any fund advised by the Manager. In that regard,
portfolio managers and other investment personnel of the Manager must preclear
and report their personal securities transactions and holdings, which are
reviewed for compliance with the Code, and are also subject to the oversight of
Mellon's Investment Ethics Committee. Portfolio managers and other investment
personnel of the Manager who comply with the Code's preclearance and disclosure
procedures and the requirements of the Committee, may be permitted to purchase,
sell or hold securities which also may be or are held in fund(s) they manage or
for which they otherwise provide investment advice.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager may pay the Distributor for shareholder
services from the Manager's own assets, including past profits but not including
the management fee paid by the Fund. The Distributor may use part or all of such
payments to pay Service Agents (as defined below) in respect of these services.
The Manager also may make such advertising and promotional expenditures, using
its own resources, as it from time to time may deem appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The expenses
borne by the Fund include: taxes, interest, loan commitment fees, dividends and
interest paid on securities sold short, brokerage fees and commissions, if any,
fees of Board members who are not officers, directors, employees or holders of
5% or more of the outstanding voting securities of the Manager or any of its
affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, industry association fees,
outside auditing and legal expenses, costs of maintaining the Fund's existence,
costs of independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and printing prospectuses
and statements of additional information for regulatory purposes and
distribution to existing shareholders and any extraordinary expenses. In
addition, Fund shares are subject to an annual service fee. See "Shareholder
Services Plan."
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of 0.75% of the value of
the Fund's average daily net assets. For the fiscal years ended December 31,
1997, 1998 and 1999, the management fees paid by the Fund to the Manager
amounted to $715,144, $673,379 and $524,762, respectively.
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund, exclusive of taxes, brokerage fees, interest on borrowings
and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the management fee, exceed
the expense limitation of any state having jurisdiction over the Fund, the Fund
may deduct from the payment to be made to the Manager under the Agreement, or
the Manager will bear, such excess expense to the extent required by state law.
Such deduction or payment, if any, will be estimated daily, and reconciled and
effected or paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
DISTRIBUTOR. The Distributor, a wholly-owned subsidiary of the Manager
located at 200 Park Avenue, New York, New York 10166, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement with the Fund which
is renewable annually.
The Distributor may pay dealers a fee based on the amount invested
through such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs, or (ii) such
plan's or program's aggregate investment in the Dreyfus Family or Funds or
certain other products made available by the Distributor to such plan or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN. Dreyfus
Transfer, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the Manager,
P.O. Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Fund, the handling of certain communications between shareholders and the
Fund and the payment of dividends and distributions payable by the Fund. For
these services, the Transfer Agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the Fund during the
month, and is reimbursed for certain out-of-pocket expenses.
The Bank of New York (the "Custodian"), 100 Church Street, New York,
New York 10286, is the Fund's custodian. The Custodian has no part in
determining the investment policies of the Fund or which securities are to be
purchased or sold by the Fund. Under a custody agreement with the Fund, the
Custodian holds the Fund's securities and keeps all necessary accounts and
records. For its custody services, the Custodian receives a monthly fee based on
the market value of the Fund's assets held in custody and receives certain
securities transactions charges.
HOW TO BUY SHARES
GENERAL. Fund shares are sold without a sales charge. You may be
charged a fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution (collectively, "Service Agents").
Stock certificates are issued only upon your written request. No certificates
are issued for fractional shares. The Fund reserves the right to reject any
purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which maintains an omnibus account in the Fund and has
made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. However, the minimum initial
investment is $750 for Dreyfus-sponsored Keogh Plans, IRAs (including regular
IRAs, spousal IRAs for a non-working spouse, Roth IRAs, IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs") and rollover IRAs) and 403(b)(7)
Plans with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum for subsequent purchases. Subsequent investments in a spousal
IRA must be at least $250. The initial investment must be accompanied by the
Account Application. For full-time or part-time employees of the Manager or any
of its affiliates or subsidiaries, directors of the Manager, Board members of a
fund advised by the Manager, including members of the Fund's Board, or the
spouse or minor child of any of the foregoing, the minimum initial investment is
$1,000. For full-time or part-time employees of the Manager or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund accounts, the minimum initial investment is $50. The
Fund reserves the right to offer Fund shares without regard to minimum purchase
requirements to employees participating in certain qualified or non-qualified
employee benefit plans or other programs where contributions or account
information can be transmitted in a manner and form acceptable to the Fund. The
Fund reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus-AUTOMATIC Asset Builder(R), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect you against loss in a declining market.
Shares are sold on a continuous basis at the net asset value per share
next determined after an order in proper form is received by the Transfer Agent
or other entity authorized to receive orders on behalf of the Fund. Net asset
value per share is determined as of the close of trading on the floor of the New
York Stock Exchange (currently 4:00 p.m., New York time), on each day the New
York Stock Exchange is open for business. For purposes of determining net asset
value per share, options and futures contracts will be valued 15 minutes after
the close of trading on the floor of the New York Stock Exchange. Net asset
value per share is computed by dividing the value of the Fund's net assets
(i.e., the value of its assets less liabilities) by the total number of shares
outstanding. The Fund's investments are valued based on market value, or where
market quotations are not readily available, based on fair value as determined
in good faith by or in accordance with procedures fixed by the Fund's Board. For
further information regarding the methods employed in valuing Fund investments,
see "Determination of Net Asset Value."
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution could
be held liable for resulting fees and/or losses.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase shares by telephone
if you have checked the appropriate box and supplied the necessary information
on the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your fund account. Only a bank account
maintained in a domestic financial institution which is an Automated Clearing
House ("ACH") member may be so designated.
Dreyfus TELETRANSFER purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., New York time, on any day that the Transfer Agent
and the New York Stock Exchange are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any day the
Transfer Agent and the New York Stock Exchange are open for business, or orders
made on Saturday, Sunday or any Fund holiday (e.g., when the New York Stock
Exchange is not open for business), will be credited to the shareholder's Fund
account on the second bank business day following such purchase order. To
qualify to use the Dreyfus TELETRANSFER Privilege, the initial payment for
purchase of shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or Shareholder
Services Form on file. If the proceeds of a particular redemption are to be
wired to an account at any other bank, the request must be in writing and
signature-guaranteed. See How to Redeem Shares--Dreyfus TELETRANSFER Privilege."
REOPENING AN ACCOUNT. You may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
The 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 fee at the annual rate of 0.25% of the value of the Fund's
average daily net assets. The services provided may include personal services
related 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. Under the Shareholder
Services Plan, the Distributor may make payments to Service Agents in respect to
these services.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred, must
be made to the Fund's Board for its review. In addition, the Shareholder
Services Plan provides that material amendments of the Shareholder Services Plan
must be approved by the Fund's Board, and by the Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund and have no direct
or indirect financial interest in the operation of the Shareholder Services Plan
or in any agreements entered into in connection with the Shareholder Services
Plan, by vote cast in person at a meeting called for the purpose of considering
such amendments. The Shareholder Services Plan is subject to annual approval by
such vote of the Board members cast in person at a meeting called for the
purpose of voting on the Shareholder Services Plan. The Shareholder Services
Plan is terminable at any time by vote of a majority of the Board members who
are not "interested persons" and who 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.
From August 23, 1994 through March 21, 2000, Premier Mutual Fund
Services, Inc. ("Premier") acted as the Fund's distributor and received payments
under the Plan. For the fiscal year ended December 31, 1999, the Fund paid
Premier $174,921 pursuant to the Plan.
HOW TO REDEEM SHARES
WIRE REDEMPTION PRIVILEGE. By using this Privilege, you authorize the
Transfer Agent to act on wire, telephone or letter redemption instructions from
any person representing himself or herself to be you 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 a redemption request in proper form.
Redemption proceeds ($1,000 minimum) will be transferred by Federal Reserve wire
only to the commercial bank account specified you on the Account Application or
Shareholder Services Form, or to a correspondent bank if the your bank is not a
member of the Federal Reserve System. Fees ordinarily are imposed by such bank
and borne by the investor. Immediate notification by the correspondent bank to
your bank is necessary to avoid a delay in crediting the funds to your bank
account.
If you have access to telegraphic equipment, you 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
If you do not have direct access to telegraphic equipment, you may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171,
toll free. You 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 "Share Certificates; Signatures."
DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an ACH member may be designated. Holders of jointly registered fund or
bank accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $500,000 within any 30-day period. You
should be aware that if you have selected the Dreyfus TELETRANSFER Privilege,
any request for a wire redemption will be effected as a TELETRANSFER transaction
through the ACH system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in your account at an ACH member bank
ordinarily two business days after receipt of the redemption request. See "How
to Buy Shares--Dreyfus TELETRANSFER Privilege."
SHARE 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 reserves the right
to make payments in whole or part in securities or other assets of the Fund 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
FUND EXCHANGES. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by the Manager, to the
extent such shares are offered for sale in your state of residence. 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 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"), but 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, you must notify the
Transfer Agent of your prior ownership of fund shares and your account number.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this Privilege. By using the Telephone Exchange
Privilege, you authorize the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touch(R) automated telephone system) from any person
representing himself or herself to be you or a representative of your Service
Agent, and reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or number of
telephone exchanges permitted. Shares issued in certificate form are not
eligible for telephone exchange. No fees currently are charged shareholders
directly in connection with exchanges, although the Fund reserves the right,
upon not less than 60 days' written notice, to charge shareholders a nominal
administrative fee in accordance with rules promulgated by the Securities and
Exchange Commission.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
DREYFUS AUTO-EXCHANGE PRIVILEGE. Dreyfus Auto-Exchange Privilege
permits you to purchase, in exchange for shares of the Fund, shares of certain
other funds in the Dreyfus Family of Funds of which you are a shareholder. This
Privilege is available only for existing accounts. Shares will be exchanged on
the basis of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by you. You will be notified if your
account falls below the amount designated to be exchanged under this Privilege.
In this case, your 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.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. Shares may be exchanged only between
accounts having identical names and other identifying designations. The Fund
Exchanges service or the Dreyfus Auto-Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
DREYFUS-AUTOMATIC ASSET BUILDER(R). 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.
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 U.S. Government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect.
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 ACH 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. It is the sole responsibility of your employer to
arrange for transactions under the Dreyfus Payroll Savings Plan.
DREYFUS STEP PROGRAM. Dreyfus Step Program enables you to purchase
Fund shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-AUTOMATIC Asset Builder(R), Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program
account, you must supply the necessary information on the Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary authorization
form(s), please call toll free 1-800-782-6620. You may terminate your
participation in this Program at any time by discontinuing your participation in
Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s). The Fund may modify or terminate this Program at any time. If
you wish to purchase Fund shares through the Dreyfus Step Program in conjunction
with a Dreyfus-sponsored retirement plan, you may do so only for IRAs, SEP-IRAs
and rollover IRAs.
DREYFUS DIVIDEND OPTIONS. Dreyfus Dividend Sweep allows you to invest
automatically your 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 you are 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
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 that charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), but if the sales
load applicable to the Offered Shares exceeds the maximum sales
load charged by the fund from which dividends or distributions
are being swept (without giving effect to any reduced loads), the
difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a fee
for this service.
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. Withdrawal
payments are the proceeds from sales of Fund shares, not the yield on the
shares. If withdrawal payments exceed reinvested dividends and distributions,
your shares will be reduced and eventually may be depleted. The Automatic
Withdrawal Plan may be terminated at any time by you, the Fund or the Transfer
Agent. Shares for which stock certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
CORPORATE PENSION/PROFIT-SHARING AND 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 regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs, Education IRAs and rollover IRAs) and
403(b)(7) Plans. Plan support services also are available.
If you who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, you 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.
You 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
VALUATION OF PORTFOLIO SECURITIES. Portfolio securities, including
covered call options written by the Fund, are valued at the last sale price on
the securities exchange or national securities market on which such securities
primarily are traded. Securities not listed on an exchange or national
securities market, or securities in which there were no transactions, are valued
at the average of the most recent bid and asked prices, except in the case of
open short positions where the asked price is used for valuation purposes. Bid
price is used when no asked price is available. Market quotations for foreign
securities in foreign currencies are translated into U.S. dollars at the
prevailing rates of exchange. Any securities or other assets for which recent
market quotations are not readily available are valued at fair value as
determined in good faith or in accordance with procedures established by the
Fund's Board. 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 portfolio securities. Expenses and fees, including the management fee,
are accrued daily and taken into account for the purpose of determining the net
asset value of Fund shares.
NEW YORK STOCK EXCHANGE CLOSINGS. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Management of the Fund believes that the Fund has qualified for the
fiscal year ended December 31, 1999 as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to
continue to so qualify as long as such qualification is in the best interests of
its shareholders. Such qualification relieves the Fund of any liability for
Federal income tax to the extent the Fund's net investment income and net
realized securities gains are distributed to shareholders in accordance with
applicable provisions of the Code. To qualify as a regulated investment company,
the Fund must distribute at least 90% of its net income (consisting of net
investment income and net short-term capital gain) to its shareholders and meet
certain asset diversification and other requirements. If the Fund did not
qualify as a regulated investment company, it would be treated for tax purposes
as an ordinary corporation subject to Federal income tax. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency.
If you elect to receive dividends and distributions in cash, and your
dividend and distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividend or distribution and all future dividends and distributions payable to
you in additional Fund shares at net asset value. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
Any dividend or distribution paid shortly after your purchase may have
the effect of reducing the aggregate net asset value of your shares below the
cost of the investment. Such a dividend or distribution would be a return on
investment in an economic sense, although taxable as stated under "Distributions
and Taxes" in the Fund's prospectus. In addition, the Code provides that if a
shareholder holds shares of the Fund for six months or less and has received a
capital gain distribution with respect to such shares, any loss incurred on the
sale of such shares will be treated as long-term capital loss to the extent of
the capital gain distribution received.
In general, dividends (other than capital gain dividends) paid by the
Fund to U.S. corporate shareholders may be eligible for the dividends received
deduction to the extent that the Fund's income consists of dividends paid by
U.S. corporations on shares that have been held by the Fund for at least 46 days
during the 90-day period commencing 45 days before the shares become
ex-dividend. In order to claim the dividends received deduction, the investor in
the Fund must have held its shares in the Fund for at least 46 days during the
90-day period commencing 45 days before the Fund shares become ex-dividend.
Additional restrictions on an investor's ability to claim the dividends received
deduction may apply.
The Fund may qualify for and make an election under which 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. The Fund may make an election 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 certain
distribution requirements. The foreign tax credit available to shareholders is
subject to certain limitations.
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 and non-U.S. dollar
denominated securities (including debt instruments and certain forward contracts
and options) may be treated as ordinary income or loss. In addition, all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds will be treated as ordinary income. Finally, all or a
portion of the gain realized from engaging in "conversion transactions"
(generally including certain transactions designed to convert ordinary income
into capital gain) may be treated as ordinary income.
Gain or loss, if any, realized by the Fund from certain forward
contracts and options transactions ("Section 1256 contracts") 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 Section 1256 contracts as well as
from closing transactions. In addition, any Section 1256 contracts remaining
unexercised at the end of the Fund's taxable year will be treated as sold for
its then fair market value, resulting in additional gain or loss to the Fund as
described above.
Offsetting positions held by the Fund involving certain financial
futures contracts or foreign currency forward contracts or options may be
considered, for tax purposes, to constitute "straddles." "Straddles" are defined
to include "offsetting positions" in actively traded personal property. To the
extent the straddle rules apply to positions established by the Fund, losses
realized by the Fund may be deferred to the extent of unrealized gain in the
offsetting position. In addition, short-term capital loss on straddle positions
may be recharacterized as long-term capital loss, and long-term capital gains on
straddle positions may be treated as short-term capital gains or ordinary
income. Certain of the straddle positions held by the Fund may constitute "mixed
straddles." The Fund may make one or more elections with respect to the
treatment of "mixed straddles," resulting in different tax consequences. In
certain circumstances, the provisions governing the tax treatment of straddles
override or modify certain of the provisions discussed above.
If the Fund either (1) holds an appreciated financial position with
respect to stock, certain debt obligations, or partnership interests
("appreciated financial position") and then enters into a short sale, futures,
forward, or offsetting notional principal contract (collectively, a "Contract")
respecting the same or substantially identical property or (2) holds an
appreciated financial position that is a Contract and then acquires property
that is the same as, or substantially identical to, the underlying property, the
Fund generally will be taxed as if the appreciated financial position were sold
at its fair market value on the date the Fund enters into the financial position
or acquires the property, respectively.
If the Fund invests 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 securities may be treated as
ordinary income under Section 1291 of the Code and, with respect to PFIC
securities that are marked-to-market, Section 1296 of the Code.
PORTFOLIO TRANSACTIONS
The Manager supervises the placement of orders on behalf of the Fund
for the purchase or sale of portfolio securities. Allocation of brokerage
transactions, including their frequency, is made in the Manager's best judgment
and in a manner deemed fair and reasonable to investors. The primary
consideration is prompt execution of orders at the most favorable net price.
Subject to this consideration, the brokers selected will include those that
supplement the Manager's research facilities with statistical data, investment
information, economic facts and opinions. Information so received is in addition
to and not in lieu of services required to be performed by the Manager and the
Manager's fee is not reduced as a consequence of the receipt of such
supplemental information. Such information may be useful to the Manager in
serving both the Fund and other funds which it manages and, conversely,
supplemental information obtained by the placement of business of other clients
may be useful to the Manager in carrying out its obligation to the Fund. Brokers
also will be selected based upon their sales of shares of the Fund or other
funds advised by the Manager or its affiliates, as well as their ability to
handle special executions such as are involved in large block trades or broad
distributions, provided the primary consideration is met. Large block trades
may, in certain cases, result from two or more funds managed by the Manager
being engaged simultaneously in the purchase or sale of the same security.
Certain of the Fund's transactions in securities of foreign issuers may not
benefit from the negotiated commission rates available to the Fund for
transactions in securities of domestic issuers. Foreign exchange transactions
are made with banks or institutions in the interbank market at prices reflecting
a mark-up or mark-down and/or commission.
The overall reasonableness of brokerage commissions paid is evaluated
by the Manager based upon its knowledge of available information as to the
general level of commissions paid by other institutional investors for
comparable services. In connection with its portfolio securities transactions
for the fiscal years ended December 31, 1997, 1998 and 1999, the Fund paid total
brokerage commissions of $340,602, $857,209 and $655,206, respectively. The
above amounts do not include gross spreads and concessions in connection with
principal transactions which, where determinable, totalled $58,956, $52,272 and
$0 for the fiscal years ended December 31, 1997, 1998 and 1999, respectively.
None of the aforementioned amounts was paid to the Distributor.
The aggregate amount of transactions during the fiscal year ended
December 31, 1999 in securities effected on an agency basis through a broker in
consideration of, among other things, research services provided was $2,300,938
and the commissions and concessions related to such transactions were $1,726.
PERFORMANCE INFORMATION
The Fund's average annual total return for the 1, 5 and 10 year
periods ended December 31, 1999 was 45.24%, 15.66% and 10.94%, respectively.
Average annual total return is calculated by determining the ending redeemable
value of an investment purchased with a hypothetical $1,000 payment made at the
beginning of the period (assuming the reinvestment of 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 distributions during the period), and dividing the result by the
net asset value per share at the beginning of the period. The Fund's total
return for the period April 10, 1987 (commencement of operations) to December
31, 1999 was 425.17%. Calculations of average annual total return and certain
calculations of total return will take into account the performance of the
Fund's predecessor, the assets and liabilities of which were transferred to the
Fund in exchange for shares of the Fund on December 31, 1995.
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical Services,
Inc., the 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.
From time to time, advertising materials for the Fund may refer to or discuss
then-current or past economic or financial conditions, developments and/or
events, including the increased opportunity to seek, or availability of,
short-term capital gains in a volatile market situation. Advertising material
for the Fund also may refer to Morningstar ratings and related analyses
supporting such ratings. Advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to, or
include commentary by, the portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
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 is organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts. Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Fund. However, the Fund's Agreement and Declaration of Trust
("Trust Agreement") disclaims shareholder liability for acts or obligations of
the Fund and requires that notice of such disclaimer be given in the agreement,
obligation or instrument entered into or executed by the Fund or a Board member.
The Trust Agreement provides for indemnification from the Fund's property for
all losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of a shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by the
Fund, the shareholder paying such liability will be entitled to reimbursement
from the general assets of the Fund. The Fund intends to conduct its operations
in a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Fund to hold a special meeting
of shareholders for purposes of removing a Board member from office. Fund
shareholders may remove a Board member by the affirmative vote of two-thirds of
the Fund's outstanding voting shares. In addition, the Board will call a meeting
of shareholders for the purpose of electing Board members if, at any time, less
than a majority of the Board members then holding office have been elected by
shareholders.
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is following a market-timing strategy or is
otherwise engaging in excessive trading, the Fund, with or without prior notice,
may temporarily or permanently terminate the availability of Fund Exchanges, or
reject in whole or part of any purchase or exchange request, with respect to
such investor's account. Such investors also may be barred from purchasing other
funds in the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes exchanges
that appear to coincide with a market-timing strategy may be deemed to be
engaged in excessive trading. Accounts under common ownership or control will be
considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if, in the judgment of the Fund's management,
the Fund would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected or if
the Fund receives or anticipates receiving simultaneous orders that may
significantly affect the Fund (e.g., amounts equal to 1% or more of the Fund's
total assets). If an exchange request is refused, the Fund will take no other
action with respect to the shares until it receives further instructions from
the investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if the
amount of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components--redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but the
purchase order would be effective only at the net asset value next determined
after the fund being purchased receives the proceeds of the redemption, which
may result in the purchase being delayed.
To offset the relatively higher costs of servicing smaller accounts,
the Fund will charge regular accounts with balances below $2,000 an annual fee
of $12. The valuation of accounts and the deductions are expected to take place
during the last four months of each year. The fee will be waived for any
investor whose aggregate Dreyfus mutual fund investments total at least $25,000,
and will not apply to IRA accounts or to accounts participating in automatic
investment programs or opened through a securities dealer, bank or other
financial institution, or to other fiduciary accounts.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, has been selected as independent auditors of the Fund.
YEAR 2000 ISSUES
The Fund could be adversely affected if the computer systems used by
the Manager and the Fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000.
The Manager has taken steps designed to avoid year 2000-related
problems in its systems and to monitor the readiness of other service providers.
In addition, issuers of securities in which the Fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the Fund's investments and its share price.
APPENDIX
Description of Standard & Poor's Ratings Group ("S&P") and Moody's
Investors Services, Inc. ("Moody's") ratings:
S&P
BOND RATINGS
AAA
Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB
Bonds rated BB have less near-term vulnerability to default than other
speculative grade debt. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B
Bonds rated B have a greater vulnerability to default but presently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Bonds rated CCC have a current identifiable vulnerability to default,
and are dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
S&P's letter ratings may be modified by the addition of a plus (+) or
a minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.
COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Issues assigned an A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1
This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3
Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
Moody's
BOND RATINGS
Aaa
Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and generally are referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what generally are known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa
Bonds rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba
Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and, therefore, not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
COMMERCIAL PAPER RATINGS
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be evidenced
by leading market positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Issuers (or related supporting institutions) rated Prime-3 (P-3) have
an acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirements for relatively
high financial leverage. Adequate alternate liquidity is maintained.