Document/Exhibit Description Pages Size
1: 485BPOS Post-Effective Amendment No. 16 92± 370K
5: EX-23 Consent of Independent Accountant 1 5K
6: EX-99 Certificate of Secretary 1 6K
3: EX-99 Code of Ethics 114± 351K
2: EX-99 Custodian Agreement 23± 85K
4: EX-99 Power of Attorney 4± 20K
File Nos. 33-50350
811-7068
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 16 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 16 [X]
(Check appropriate box or boxes.)
Dreyfus Balanced Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
X on January 1, 2004 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
BAL222P0104
10/31/03
Dreyfus Balanced Fund, Inc.
Seeks long-term capital growth and current income
PROSPECTUS January 1, 2004
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.
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
Contents
THE FUND
--------------------------------
1 Goal/Approach
2 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
------------------------------------------
8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
13 Instructions for Regular Accounts
15 Instructions for IRAs
FOR MORE INFORMATION
-------------------------------------------------
SEE BACK COVER.
Dreyfus Balanced Fund, Inc.
----------------------
Ticker Symbol: DRBAX
The Fund
GOAL/APPROACH
The fund seeks long-term capital growth and current income. To pursue its goal,
the fund invests in a diversified mix of stocks (including common stocks,
preferred stocks and convertible securities, including those purchased in
initial public offerings or shortly thereafter) and fixed-income securities
(including U.S. government bonds and notes, corporate bonds, convertible debt
securities, preferred stocks, asset-backed securities, mortgage-related
securities, inflation-indexed bonds, and foreign bonds). The fund's normal asset
allocation is approximately 60% stocks and 40% fixed-income securities. However,
the fund is permitted to invest up to 75%, and as little as 40%, of its assets
in stocks and up to 60%, and as little as 25%, of its assets in fixed-income
securities. In allocating assets between stocks and fixed-income securities, the
portfolio managers assess the relative return and risks of each asset class,
analyzing several factors, including interest rate adjusted price/earnings
ratios, the valuation and volatility levels of stocks relative to fixed-
income-securities, and other economic factors, such as interest rates.
In choosing stocks, the fund employs fundamental analysis, generally seeking
companies with strong positions in their industries, and companies with a
catalyst that can trigger a price increase (such as accelerating earnings
growth, a corporate restructuring or change in management). The portfolio
manager seeks to create a broadly diversified core portfolio comprised of growth
stocks, value stocks and stocks that exhibit characteristics of both investment
styles. The manager selects stocks based on:
o value, or how a stock is priced relative to its perceived intrinsic
worth
o growth, in this case the sustainability or growth of earnings or cash
flow
o financial profile, which measures the financial health of the company
The fund typically sells a security when the portfolio manager believes that
there has been a negative change in the fundamental factors surrounding the
company, the company has become fully valued or a more attractive opportunity
has been identified.
In choosing fixed-income securities, the fund managers review economic, market
and other factors, leading to valuations by sector, maturity and quality. The
portfolio's bond component consists primarily of domestic and foreign bonds
issued by corporations or governments and rated investment grade or considered
to be of comparable quality by Dreyfus.
Generally, the fund seeks to maintain a fixed-income portfolio with an
investment grade (BBB/Baa) average credit quality. However, the fund may invest
up to 20% of its assets in lower-rated securities ("high yield" or "junk"
bonds), but not rated lower than B at the time of purchase. In choosing market
sectors and securities for investment, the fund managers review the issuer's
financial strength, industry and sector prospects, interest rates and liquidity
conditions. The fund may, but is not required to, use derivatives, such as
futures and options, as a substitute for taking a position in an underlying
asset, to increase returns, to manage interest rate risk, or as part of a
hedging strategy. The fund also may engage in short-selling, typically for
hedging purposes, such as to limit exposure to a possible market decline in the
value of its portfolio securities.
Concepts to understand
BOND RATING: a ranking of a bond's quality, based on its ability to pay interest
and repay principal. Bonds are rated from a high of "AAA" or "Aaa" (highly
unlikely to default) through a low of "D" (companies already in default).
FUNDAMENTAL ANALYSIS: a method of securities valuation that attempts to measure
a security's intrinsic value by analyzing "real" data (company financials,
economic outlook, etc.) and other factors (management, industry conditions,
competition, etc.).
The Fund 1
MAIN RISKS
The stock and bond markets can perform differently from each other at any given
time (as well as over the long term), so the fund will be affected by its asset
allocation. If the fund favors an asset class during a period when that class
underperforms, performance may be hurt. The fund's principal risks are discussed
below. The value of your investment in the fund will fluctuate, sometimes
dramatically, which means you could lose money.
o MARKET RISK. The value of a security may decline due to general market
conditions which are not specifically related to a particular company,
such as real or perceived adverse economic conditions, changes in the
general outlook for corporate earnings, changes in interest or currency
rates or adverse investor sentiment generally. They also may decline
because of factors that affect a particular industry or industries,
such as labor shortages or increased production costs and competitive
conditions within an industry.
o ISSUER RISK. The value of a security may decline for a number of
reasons which directly relate to the issuer, such as management
performance, financial leverage and reduced demand for the issuer's
products or services.
o FOREIGN INVESTMENT RISK. To the extent the fund invests in foreign
securities, its performance will be influenced by political, social and
economic factors affecting investments in foreign companies. Special
risks associated with investments in foreign companies include exposure
to currency fluctuations, less liquidity, less developed or less
efficient trading markets, lack of comprehensive company information,
political instability and differing auditing and legal standards.
Investments in foreign currencies are subject to the risk that those
currencies will decline in value relative to the U.S. dollar, or, in
the case of hedged positions, that the U.S. dollar will decline
relative to the currency being hedged. Each of these risks could
increase the fund's volatility.
o DERIVATIVES RISK. The fund may invest in derivative instruments, such
as options, futures and options on futures (including those relating to
stocks, indexes, foreign currencies and interest rates), swaps and
other credit derivatives, CMOs, stripped mortgage-backed securities and
asset-backed securities. A small investment in derivatives could have a
potentially large impact on the fund's performance. Certain
derivatives, such as stripped mortgage-backed securities, may move in
the same direction as interest rates. The use of derivatives involves
risks different from, or possibly greater than, the risks associated
with investing directly in the underlying assets. Derivatives can be
highly volatile, illiquid and difficult to value, and there is the risk
that changes in the value of a derivative held by the fund will not
correlate with the fund's other investments.
o MARKET SECTOR RISK. The fund may overweight or underweight certain
companies, industries or market sectors, which may cause the fund's
performance to be more or less sensitive to developments affecting
those companies, industries or sectors.
o LEVERAGING RISK. The use of leverage, such as engaging in reverse
repurchase agreements, lending portfolio securities and engaging in
forward commitment transactions, will magnify the fund's gains or
losses.
o SHORT SALE RISK. The fund may make short sales, which involves selling
a security it does not own in anticipation that the security's price
will decline. Short sales expose the fund to the risk that it will be
required to buy the security sold short (also known as "covering" the
short position) at a time when the security has appreciated in value,
thus resulting in a loss to the fund.
The fund's investments in equity securities also are subject to the following
principal risks:
o GROWTH AND VALUE STOCK RISK. By investing in a mix of growth and value
companies, the fund assumes the risks of both. Investors often expect
growth companies to increase their earnings at a certain rate. If these
expectations are not met, investors can punish the stocks inordinately,
even if earnings do increase. In addition, growth stocks typically lack
the dividend yield that may cushion stock prices in market downturns.
Value stocks involve the risk that they may never reach what the
manager believes is their full market value, either because the market
fails to recognize the stock's intrinsic worth or the manager misgauged
that worth. They also may decline in price, even though in theory they
are already undervalued.
o MIDSIZE COMPANY STOCK RISK. Investments in midsize company stocks tend
to be more volatile than large company stocks and could have a
disproportionate effect on performance.
2
o IPO RISK. The fund may purchase securities of companies in initial
public offerings (IPOs). The prices of securities purchased in IPOs can
be very volatile. The effect of IPOs on the fund's performance depends
on a variety of factors, including the number of IPOs the fund invests
in relative to the size of the fund and whether and to what extent a
security purchased in an IPO appreciates or depreciates in value. As a
fund's asset base increases, IPOs often have a diminished effect on
such fund's performance.
The fund's investments in bonds also are subject to the following principal
risks:
o INTEREST RATE RISK. Prices of bonds tend to move inversely with changes
in interest rates. Typically, a rise in rates will adversely affect
bond prices and, accordingly, the fund's share price. The longer the
effective maturity and duration of the bond portion of the fund, the
more its share price is likely to react to interest rates.
o CREDIT RISK. Failure of an issuer to make timely interest or principal
payments, or a decline or perception of a decline in the credit quality
of a bond, can cause a bond's price to fall, potentially lowering the
fund's share price. Although the fund's bond investments are primarily
in investment grade bonds, it may invest to a limited extent in high
yield ("junk") bonds which involve greater credit risk, including the
risk of default, than investment grade bonds and are considered
speculative. The prices of high yield bonds can fall dramatically in
response to bad news about the issuer or its industry, or the economy
in general.
o CALL RISK. Some bonds give the issuer the option to call, or redeem,
the bonds before their maturity date. If an issuer "calls" its bond
during a time of declining interest rates, the portfolio might have to
reinvest the proceeds in an investment offering a lower yield.
o LIQUIDITY RISK. When there is no active trading market for specific
types of securities, it can become more difficult to sell the
securities at or near their perceived value. In such a market, the
value of such securities and the fund's share price may fall
dramatically.
o INFLATION-INDEXED BOND RISK. Interest payments on inflation-indexed
bonds can be unpredictable and will vary as the principal and/or
interest is periodically adjusted based on the rate of inflation. If
the index measuring inflation falls, the interest payable on these
securities will be reduced. The U.S. Treasury has guaranteed that in
the event of a drop in prices, it would repay the par amount of its
inflation-indexed bonds. Inflation-indexed bonds issued by corporations
generally do not guarantee repayment of principal. Any increase in the
principal amount of an inflation-indexed bond will be considered
taxable ordinary income, even though investors do not receive their
principal until maturity.
o PREPAYMENT AND EXTENSION RISK. When interest rates fall, the principal
on mortgage-backed and certain asset-backed securities may be prepaid.
The loss of higher yielding, underlying mortgages and the reinvestment
of proceeds at lower interest rates can reduce the fund's potential
price gain in response to falling interest rates, reduce the fund's
yield, or cause the fund's share price to fall. When interest rates
rise, the effective duration of the fund's mortgage-related and other
asset-backed securities may lengthen due to a drop in prepayments of
the underlying mortgages or other assets. This is known as extension
risk and would increase the fund's sensitivity to rising rates and its
potential for price declines.
o NON-DIVERSIFICATION RISK. The fund is non-diversified, which means that
a relatively high percentage of the fund's assets may be invested in a
limited number of issuers. Therefore, the fund's performance may be
more vulnerable to changes in the market value of a single issuer and
more susceptible to risks associated with a single economic, political
or regulatory occurrence than a diversified fund.
Other potential risks
Under adverse market conditions, the fund could invest some or all of its assets
in U.S. Treasury securities and money market securities. Although the fund would
do this for temporary defensive purposes, it could have the effect of reducing
the benefit from any upswing in the market. During such periods, the fund may
not achieve its investment objective.
The fund may engage in short-term trading, which could produce higher
transaction costs and taxable distributions and lower the fund's after-tax
performance.
The fund may lend its securities to brokers, dealers and other financial
institutions. In connection with such loans, the fund will receive collateral
from the borrower equal to at least 100% of the value of the loaned securities.
Should the borrower of the securities fail financially, the fund may experience
delays in recovering the loaned securities or exercising its rights in the
collateral.
The Fund 3
PAST PERFORMANCE
The bar chart and table shown illustrate 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 returns to those of the S&P
500((reg.tm)), a widely recognized unmanaged index of stock performance; the
Lehman Brothers Aggregate Bond Index, a widely recognized unmanaged index of
bond performance; and a customized blended index composed of 60% S&P
500((reg.tm)) and 40% Lehman Brothers Aggregate Bond Index. All returns assume
reinvestment of dividends and distributions. Of course, past performance is no
guarantee of future results.
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates, and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on the investor's tax situation and may
differ from those shown, and the after-tax returns shown are not relevant to
investors who hold their shares through tax-deferred arrangements such as 401(k)
plans or individual retirement accounts.
--------------------------------------------------------------------------------
Year-by-year total returns AS OF 12/31 EACH YEAR (%)
10.84 3.98 25.04 11.62 17.43 9.69 10.21 1.97 -4.46 -16.47
93 94 95 96 97 98 99 00 01 02
BEST QUARTER: Q4 '98 +10.83%
WORST QUARTER: Q3 '01 -12.59%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/03 WAS 9.32%.
[Enlarge/Download Table]
1 Year 5 Years 10 Years
---------------------------------------------------------------------------------------------------------------------------------
FUND
RETURNS BEFORE TAXES -16.47% -0.33% 6.39%
FUND
RETURNS AFTER TAXES
ON DISTRIBUTIONS -17.18% -2.22% 4.00%
FUND
RETURNS AFTER TAXES
ON DISTRIBUTIONS AND
SALE OF FUND SHARES -10.09% -0.70% 4.40%
S&P 500
REFLECTS NO DEDUCTION FOR
FEES, EXPENSES OR TAXES -22.09% -0.58% 9.34%
LEHMAN BROTHERS
AGGREGATE
BOND INDEX
REFLECTS NO DEDUCTION FOR
FEES, EXPENSES OR TAXES 10.25% 7.55% 7.51%
CUSTOMIZED
BLENDED INDEX
REFLECTS NO DEDUCTION FOR
FEES, EXPENSES OR TAXES -9.15% 3.28% 9.08%
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.
4
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.
--------------------------------------------------------------------------------
Fee table
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Shareholder services fee 0.08%
Other expenses 0.38%
--------------------------------------------------------------------------------
TOTAL 1.06%
--------------------------------------------------------------------------------
[Enlarge/Download Table]
Expense example
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------------------------------------------
$108 $337 $585 $1,294
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 returns 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 of up to 0.25% used to reimburse 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 5
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages approximately $166
billion in approximately 200 mutual fund portfolios. For the past fiscal year,
the fund paid Dreyfus a management fee at the annual rate of 0.60% 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
$3.2 trillion of assets under management, administration or custody, including
approximately $625 billion under management. Mellon provides financial services
for institutions, corporations and individuals, offering institutional asset
management, mutual funds, private wealth management, asset servicing, human
resources services and treasury services. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
Douglas Ramos has managed the fund's asset allocation and the equity portion of
the fund's portfolio, a position he has held since joining Dreyfus in July 1997.
He is also co-director of Dreyfus equity research. Since December 2001, the
Dreyfus Taxable Fixed Income Team, which consists of sector specialists,
collectively makes investment decisions for the fixed-income portion of the
fund's portfolio. The team's specialists focus on, and monitor conditions in,
the different sectors of the fixed-income market. Once different factors have
been analyzed, the sector specialists then decide on allocation weights and
recommend securities for investment.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) have
each 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.
6
[Enlarge/Download Table]
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, which is available upon request.
YEAR ENDED AUGUST 31,
2003 2002(1) 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($):
Net asset value, beginning of period 11.87 14.16 16.42 16.51 15.19
Investment operations: Investment income -- net .17(2) .27(2) .39(2) .41(2) .42(2)
Net realized and unrealized gain (loss)
on investments .65 (2.25) (1.65) 1.54 2.43
Total from investment operations .82 (1.98) (1.26) 1.95 2.85
Distributions: Dividends from investment income -- net (.23) (.31) (.39) (.43) (.45)
Dividends from net realized gain
on investments -- -- (.61) (1.61) (1.08)
Total distributions (.23) (.31) (1.00) (2.04) (1.53)
Net asset value, end of period 12.46 11.87 14.16 16.42 16.51
Total Return (%) 7.09 (14.21) (7.87) 12.62 19.37
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to average net assets 1.06 1.01 .81 .96 .94
Ratio of interest expense to average net assets .00(3) .00(3) -- .00(3) .03
Ratio of net investment income to average net assets 1.47 2.02 2.60 2.54 2.62
Portfolio turnover rate 288.05 200.50 295.43 160.38 162.40
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 135,785 159,480 195,010 198,578 188,215
(1) AS REQUIRED, EFFECTIVE SEPTEMBER 1, 2001, THE FUND HAS ADOPTED THE
PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES
AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON FIXED-INCOME SECURITIES ON A
SCIENTIFIC BASIS AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME.
THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED AUGUST 31, 2002 WAS TO
DECREASE NET INVESTMENT INCOME PER SHARE BY $.01, INCREASE NET REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY $.01, AND DECREASE THE
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 2.13% TO 2.02%.
PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO SEPTEMBER
1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) AMOUNT REPRESENTS LESS THAN .01%.
The Fund 7
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) on days the exchange is open for regular business. Your order will be
priced at the next NAV calculated after your order is accepted by the fund 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.
--------------------------------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------------------------------
REGULAR ACCOUNTS $2,500 $100
$500 FOR DREYFUS
TELETRANSFER INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION SAVINGS $500 NO MINIMUM
ACCOUNTS 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 Dreyfus
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 herein. 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.
8
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 shares recently purchased by check, Dreyfus TeleTransfer or
Automatic Asset Builder, please note that:
o if you send a written request to sell such shares, the fund may delay
sending the proceeds for up to eight business days following the
purchase of those shares
o the fund will not process wire, telephone, online or Dreyfus
TeleTransfer redemption requests for up to eight business days
following the purchase of those shares
Limitations on selling shares by phone or online through Dreyfus.com
Proceeds Minimum Maximum
sent by phone/online phone/online
--------------------------------------------------------------------------------
CHECK* NO MINIMUM $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS EVERY 30 DAYS/
$20,000 PER DAY
DREYFUS $500 $500,000 FOR JOINT
TELETRANSFER ACCOUNTS EVERY 30 DAYS/
$20,000 PER DAY
* NOT AVAILABLE ONLINE ON ACCOUNTS WHOSE ADDRESS HAS BEEN CHANGED WITHIN THE
LAST 30 DAYS.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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 9
ACCOUNT POLICIES (CONTINUED)
General policies
Unless you decline teleservice privileges on your application, the fund's
transfer agent is authorized to act on telephone or online instructions from any
person representing himself or herself to be you and reasonably believed by the
transfer agent to be genuine. You may be responsible for any fraudulent
telephone or online order as long as the fund's transfer agent takes reasonable
measures to confirm that instructions are genuine. The fund reserves the right
to:
o 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 purchases/redemptions or exchanges
(so called roundtrips) during any twelve-month period)
o refuse any purchase or exchange request in excess of 1% of the fund's
total assets
o change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
o change its minimum investment amounts
o 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 policy
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
10
DISTRIBUTIONS AND TAXES
The fund earns dividends, interest and other income from its investments, and
distributes this income (less expenses) to shareholders as dividends. The fund
also realizes capital gains from its investments, and distributes these gains
(less any losses) to shareholders as capital gain distributions. The fund
normally pays dividends quarterly and capital gain distributions annually. Fund
dividends and capital gains will be reinvested in the fund unless you instruct
the fund otherwise. There are no fees or sales charges on reinvestments.
Distributions paid by the fund are subject to federal income tax, and may also
be subject to state or local taxes (unless you are investing through a
tax-advantaged retirement account). For federal tax purposes, in general,
certain fund distributions, including dividends and distributions of short-term
capital gains, are taxable to you as ordinary income. Other fund distributions,
including dividends from U.S. companies and certain foreign companies and
distributions of long-term capital gains are taxable to you as qualified
dividends and capital gains.
High portfolio turnover and more volatile markets can result in significant
taxable distributions to shareholders, regardless of whether their shares have
increased in value. The tax status of any distribution generally is the same
regardless of how long you have been in the fund and whether you reinvest your
distributions or take them in cash.
If you buy shares when the fund has realized but not yet distributed income or
capital gains, you will be "buying a dividend" by paying the full price for the
shares and then receiving a portion back in the form of a taxable distribution.
Your sale of shares, including exchanges into other funds, may result in a
capital gain or loss for tax purposes. A capital gain or loss on your investment
in the fund generally is the difference between the cost of your shares and the
amount you receive when you sell them.
The tax status of your distributions will be detailed in your annual tax
statement from the fund. Because everyone's tax situation is unique, please
consult your tax adviser before investing.
Your Investment 11
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.
--------------------------------------------------------------------------------
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
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security 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).
--------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges from
EXCHANGE PRIVILEGE one Dreyfus fund into another.
--------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
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, by
phone or online. 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 a higher one.
Dreyfus TeleTransfer privilege
To move money between your bank account and your Dreyfus fund account with a
phone call or online, use the Dreyfus TeleTransfer privilege. You can set up
Dreyfus TeleTransfer on your account by providing bank account information and
following the instructions on your application.
Dreyfus Express((reg.tm)) voice-activated account access
You can easily manage your Dreyfus accounts, check your account balances,
purchase fund shares, 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. Certain requests may require the services of a representative.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. 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.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional and Roth
IRAs, and Education Savings Accounts.
Here's where you call for information:
o for traditional, rollover and Roth IRAs, and Education Savings
Accounts, call 1-800-645-6561
o for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
12
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 55299,
Boston MA 02205-8553
By Telephone
WIRE Call us to request an account
application and an account number. Have your bank send your investment to The
Bank of New York, with these instructions:
* ABA# 021000018
* DDA# 8900117176
* the fund name
* your account number
* name(s) of investor(s)
Return your application with the account number on the application.
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
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900117176
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "111" before your 14-digit account
number.
DREYFUS TELETRANSFER Request Dreyfus TeleTransfer on your application. Call us
to request your transaction.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* 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 55263, Boston, MA 02205-8501
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.
DREYFUS 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.
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.
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.
Your Investment 13
INSTRUCTIONS FOR REGULAR ACCOUNTS (continued)
TO OPEN AN ACCOUNT
Online (www.dreyfus.com)
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
TO ADD TO AN ACCOUNT
DREYFUS TELETRANSFER Request Dreyfus TeleTransfer on your application. Visit
the Dreyfus Web site to request your transaction.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
WIRE Visit the Dreyfus Web site to request your transaction. Be sure the fund
has your bank account information on file. Proceeds will be wired to your bank.
DREYFUS TELETRANSFER Visit the Dreyfus Web site to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be sent
to your bank by electronic check.
CHECK Visit the Dreyfus Web site to request your transaction. A check will be
sent to the address of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative 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.
14
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 55552, Boston, MA 02205-8568
By Telephone
Automatically
WITHOUT ANY INITIAL INVESTMENT Call us to request a Dreyfus Step Program
form. Complete and return the form along with your application.
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).
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900117176
* the fund name
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but insert "111" before your 14-digit 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).
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.
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 (see "Account
Policies -- Selling Shares").
Mail in your request (see "To Open an Account" at left).
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
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.
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.
Your Investment 15
NOTES
NOTES
For More Information
Dreyfus Balanced Fund, Inc.
--------------------------------------
SEC file number: 811-7068
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 managers 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, after paying a duplicating fee, by visiting the
SEC's Public Reference Room in Washington, DC (for information, call
1-202-942-8090) or by E-mail request to publicinfo@sec.gov, or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2004 Dreyfus Service Corporation 222P0104
________________________________________________________________________________
DREYFUS BALANCED FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 2004
________________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Balanced Fund, Inc. (the "Fund"), dated January 1, 2004, 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, visit the Dreyfus.com website, 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-23
Management Arrangements...................................................B-29
How to Buy Shares.........................................................B-32
Shareholder Services Plan.................................................B-34
How To Redeem Shares......................................................B-35
Shareholder Services......................................................B-37
Portfolio Transactions....................................................B-40
Determination of Net Asset Value..........................................B-44
Dividends, Distributions and Taxes........................................B-45
Summary of The Proxy Voting Policy, Procedures and Guidelines of
The Dreyfus Family Of Funds.............................................B-48
Performance Information...................................................B-49
Information About the Fund................................................B-51
Counsel and Independent Auditors..........................................B-52
Appendix..................................................................B-53
DESCRIPTION OF THE FUND
The Fund is a Maryland corporation that commenced operations on
September 30, 1992. 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.
COMMON AND PREFERRED STOCKS. Stocks represent shares of ownership in a
company. Generally, preferred stock has a specified dividend and ranks after
bonds and before common stocks in its claim on income for dividend payments
and on assets should the company be liquidated. After other claims are
satisfied, common stockholders participate in company profits on a pro-rata
basis; profits may be paid out in dividends or reinvested in the company to
help it grow. Increases and decrease in earnings are usually reflected in a
company's stock price, so common stocks generally have the greatest
appreciation and depreciation potential of all corporate securities. While
most preferred stocks pay a dividend, the Fund may purchase preferred stock
where the issuer has omitted, or is in danger of omitting, payment of its
dividend. Such investments would be made primarily for their capital
appreciation potential. The Fund may purchase trust preferred securities
which are preferred stocks issued by a special purpose trust subsidiary
backed by subordinated debt of the corporate parent. These securities
typically bear a market rate coupon comparable to interest rates available on
debt of a similarly rated company. Holders of the trust preferred securities
have limited voting rights to control the activities of the trust and no
voting rights with respect to the parent company.
CORPORATE DEBT SECURITIES. Corporate debt securities include corporate
bonds, debentures, notes and other similar instruments, including certain
convertible securities. Debt securities may be acquired with warrants
attached. Corporate income-producing securities also may include forms of
preferred or preference stock. The rate of interest on a corporate debt
security may be fixed, floating or variable, and may vary inversely with
respect to a reference rate. The rate of return or return of principal on
some debt obligations may be linked or indexed to the level of exchange rates
between the U.S. dollar and a foreign currency or currencies.
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 a form of derivative that gives the holder the
right to subscribe to a specified amount of the issuing corporation's capital
stock at a set price for a specified period of time. The Fund may invest up
to 5% of its net assets in warrants, except that this limitation does not
apply to warrants purchased by the Fund that are sold in units with, or
attached to, other securities.
ZERO COUPON, PAY-IN-KIND AND STEP-UP 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 holders during
its life and is sold at a discount to its face value at maturity. The Fund
may invest in pay-in-kind bonds which are bonds which generally pay interest
through the issuance of additional bonds. The Fund also may purchase step-up
coupon bonds which are debt securities which typically do not pay interest
for a specified period of time and then pay interest at a series of different
rates. The market prices of these securities generally are more volatile and
are likely to respond to a greater degree to changes in interest rates than
the market prices of securities that pay interest periodically having similar
maturities and credit qualities. In addition, unlike bonds that 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.
Federal income tax law requires the holder of a zero coupon security or of
certain pay-in-kind or step-up bonds to accrue income with respect to these
securities prior to the receipt of cash payments. To maintain its
qualification as a regulated investment company and avoid liability for
Federal income taxes, the Fund may be required to distribute such income
accrued with respect to these securities and may have to dispose of portfolio
securities under disadvantageous circumstances in order to generate cash to
satisfy these distribution requirements. See "Dividends, Distributions and
Taxes."
INFLATION-INDEXED BONDS. The Fund may invest in inflation-indexed
bonds, such as Treasury Inflation-Protection Securities ("TIPS") which are
fixed-income securities whose value is periodically adjusted according to the
rate of inflation. Two structures are common. The U.S. Treasury and some
other issuers utilize a structure that accrues inflation into the principal
value of the bond. Most other issuers pay out the Consumer Price Index
("CPI") accruals as part of a semiannual coupon.
Inflation-indexed securities issued by the U.S. Treasury have varying
maturities and pay interest on a semi-annual basis equal to a fixed
percentage of the inflation-adjusted principal amount. If the periodic
adjustment rate measuring inflation falls, the principal value of
inflation-indexed bonds will be adjusted downward, and consequently the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal
upon maturity (as adjusted for inflation) is guaranteed in the case of U.S.
Treasury inflation-indexed bonds, even during a period of deflation.
However, the current market value of the bonds is not guaranteed and will
fluctuate. The Fund also may invest in other inflation-related bonds which
may or may not provide a similar guarantee. If a guarantee of principal is
not provided, the adjusted principal value of the bond repaid at maturity may
be less than the original principal amount.
The value of inflation-indexed bonds is expected to change in response
to changes in real interest rates. Real interest rates in turn are tied to
the relationship between nominal interest rates and the rate of inflation.
Therefore, if the rate of inflation rises at a faster rate than nominal
interest rates, real interest rates might decline, leading to an increase in
value of inflation-indexed bonds. In contrast, if nominal interest rates
increase at a faster rate than inflation, real interest rates might rise,
leading to a decrease in value of inflation-indexed bonds. Any increase in
the principal amount of an inflation-indexed bond will be considered taxable
ordinary income, even though investors do not receive their principal until
maturity.
While these securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline
in value. If interest rates rise due to reasons other than inflation (for
example, due to changes in currency exchange rates), investors in these
securities may not be protected to the extent that the increase is not
reflected in the bond's inflation measure.
The periodic adjustment of U.S. inflation-indexed bonds is tied to the
Consumer Price Index for Urban Consumers ("CPI-U"), which is calculated
monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement
of changes in the cost of living, made up components such as housing, food,
transportation and energy. Inflation-indexed bonds issued by a foreign
government are generally adjusted to reflect a comparable inflation index
calculated by that government. There can be no assurance that the CPI-U or
any foreign inflation index will accurately measure the real rate of
inflation in the prices of goods and services. Moreover, there can be no
assurance that the rate of inflation in a foreign country will be correlated
to the rate of inflation in the United States.
MORTGAGE-RELATED SECURITIES. Mortgage-related securities are a form of
derivative collateralized by pools of commercial or residential mortgages.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. These
securities may include complex instruments such as collateralized mortgage
obligations and stripped mortgage-backed securities, mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs"),
adjustable rate mortgages, real estate investment trusts ("REITs"), including
debt and preferred stock issued by REITS, as well as other real
estate-related securities, including those with fixed, floating and variable
interest rates, those with interest rates based on multiples of changes in a
specified index of interest rates and those with interest rates that change
inversely to changes in interest rates, as well as those that do not bear
interest.
RESIDENTIAL MORTGAGE-RELATED SECURITIES--The Fund may invest in
mortgage-related securities representing participation interests in pools of
one- to four-family residential mortgage loans issued or guaranteed by
governmental agencies or instrumentalities, such as the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"), or issued
by private entities. Residential mortgage-related securities may be issued
using a variety of structures, including multi-class structures featuring
senior and subordinated classes.
Mortgage-related securities issued by GNMA include GNMA Mortgage
Pass-Through Certificates (also know as "Ginnie Maes") which are guaranteed
as to the timely payment of principal and interest by GNMA and such guarantee
is backed by the full faith and credit of the United States. GNMA
certificates also are supported by the authority of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-related
securities issued by FNMA include FNMA Guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely the obligations
of FNMA and are not backed by or entitled to the full faith and credit of the
United States. Fannie Maes are guaranteed as to timely payment of principal
and interest by FNMA.
Mortgage-related securities issued by FHLMC include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCs"). Freddie
Macs are not guaranteed by the United States or by any Federal Home Loan Bank
and do not constitute a debt or obligation of the United States or of any
Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of
interest, which is guaranteed by FHLMC. FHLMC guarantees either ultimate
collection or timely payment of all principal payments on the underlying
mortgage loans. When FHLMC does not guarantee timely payment of principal,
FHLMC may remit the amount due on account of its guarantee of ultimate
payment of principal at any time after default on an underlying mortgage, but
in no event later than one year after it becomes payable.
COMMERCIAL MORTGAGE-RELATED SECURITIES--Commercial mortgage-related
securities generally are multi-class debt or pass-through certificates
secured by mortgage loans on commercial properties. These mortgage-related
securities generally are structured to provide protection to the holders of
senior classes against potential losses on the underlying mortgage loans.
This protection generally is provided by having the holders of subordinated
classes of securities ("Subordinated Securities") take the first loss if
there are defaults on the underlying commercial mortgage loans. Other
protection, which may benefit all of the classes or particular classes, may
include issuer guarantees, reserve funds, additional Subordinated Securities,
cross-collateralization and over-collateralization.
SUBORDINATED SECURITIES--The Fund may invest in Subordinated Securities
issued or sponsored by commercial banks, savings and loan institutions,
mortgage bankers, private mortgage insurance companies and other
non-governmental issuers. Subordinated Securities have no governmental
guarantee, and are subordinated in some manner as to the payment of principal
and/or interest to the holders of more senior mortgage-related securities
arising out of the same pool of mortgages. The holders of Subordinated
Securities typically are compensated with a higher stated yield than are the
holders of more senior mortgage-related securities. On the other hand,
Subordinated Securities typically subject the holder to greater risk than
senior mortgage-related securities and tend to be rated in a lower rating
category, and frequently a substantially lower rating category, than the
senior mortgage-related securities issued in respect of the same pool of
mortgage. Subordinated Securities generally are likely to be more sensitive
to changes in prepayment and interest rates and the market for such
securities may be less liquid than is the case for traditional fixed-income
securities and senior mortgage-related securities.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND MULTI-CLASS
PASS-THROUGH-SECURITIES--A CMO is a multiclass bond backed by a pool of
mortgage pass-through certificates or mortgage loans. CMOs may be
collateralized by (a) Ginnie Mae, Fannie Mae, or Freddie Mac pass-through
certificates, (b) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans' Affairs, (c)
unsecuritized conventional mortgages, (d) other mortgage-related securities,
or (e) any combination thereof.
Each class of CMOs, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause it to be
retired substantially earlier than the stated maturities or final
distribution dates. The principal and interest on the underlying mortgages
may be allocated among the several classes of a series of a CMO in many
ways. One or more tranches of a CMO may have coupon rates which reset
periodically at a specified increment over an index, such as the London
Interbank Offered Rate ("LIBOR") (or sometimes more than one index). These
floating rate CMOs typically are issued with lifetime caps on the coupon rate
thereon. The Fund also may invest in inverse floating rate CMOs. Inverse
floating rate CMOs constitute a tranche of a CMO with a coupon rate that
moves in the reverse direction to an applicable index such as LIBOR.
Accordingly, the coupon rate thereon will increase as interest rates
decrease. Inverse floating rate CMOs are typically more volatile than fixed
or floating rate tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying
inversely to a multiple of an applicable index creates a leverage factor.
Inverse floaters based on multiples of a stated index are designed to be
highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and loss of principal. The markets
for inverse floating rate CMOs with highly leveraged characteristics at times
may be very thin. The Fund's ability to dispose of its positions in such
securities will depend on the degree of liquidity in the markets for such
securities. It is impossible to predict the amount of trading interest that
may exist in such securities, and therefore the future degree of liquidity.
STRIPPED MORTGAGE-BACKED SECURITIES--The Fund also may invest in stripped
mortgage-backed securities which are created by segregating the cash flows
from underlying mortgage loans or mortgage securities to create two or more
new securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage securities may be partially
stripped so that each investor class receives some interest and some
principal. When securities are completely stripped, however, all of the
interest is distributed to holders of one type of security, known as an
interest-only security, or IO, and all of the principal is distributed to
holders of another type of security known as a principal-only security, or
PO. Strips can be created in a pass-through structure or as tranches of a
CMO. The yields to maturity on IOs and POs are very sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may not fully recoup its
initial investment in IOs. Conversely, if the underlying mortgage assets
experience less than anticipated prepayments of principal, the yield on POs
could be materially and adversely affected.
REAL ESTATE INVESTMENT TRUSTS--A REIT is a corporation, or a business trust
that would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
The Code permits a qualifying REIT to deduct dividends paid, thereby
effectively eliminating corporate level Federal income tax and making the
REIT a pass-through vehicle for Federal income tax purposes. To meet the
definitional requirements of the Code, a REIT must, among other things,
invest substantially all of its assets in interests in real estate (including
mortgages and other REITs) or cash and government securities, derive most of
its income from rents from real property or interest on loans secured by
mortgages on real property, and distribute to shareholders annually a
substantial portion of its otherwise taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own
real estate directly and the value of, and income earned by, the REITs
depends upon the income of the underlying properties and the rental income
they earn. Equity REITs also can realize capital gains (or losses) by
selling properties that have appreciated (or depreciated) in value. Mortgage
REITs can make construction, development or long-term mortgage loans and are
sensitive to the credit quality of the borrower. Mortgage REITs derive their
income from interest payments on such loans. Hybrid REITs combine the
characteristics of both equity and mortgage REITs, generally by holding both
ownership interests and mortgage interests in real estate. The value of
securities issued by REITs are affected by tax and regulatory requirements
and by perceptions of management skill. They also are subject to heavy cash
flow dependency, defaults by borrowers or tenants, self-liquidation and the
possibility of failing to qualify for tax-free status under the Code or to
maintain exemption from the Investment Company Act of 1940, as amended (the
"1940 Act").
ADJUSTABLE-RATE MORTGAGE LOANS ("ARMS")--ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest
rate for a specified period of time, generally for either the first three,
six, twelve, thirteen, thirty-six, or sixty scheduled monthly payments.
Thereafter, the interest rates are subject to periodic adjustment based on
changes in an index. ARMs typically have minimum and maximum rates beyond
which the mortgage interest rate may not vary over the lifetime of the
loans. Certain ARMs provide for additional limitations on the maximum amount
by which the mortgage interest rate may adjust for any single adjustment
period. Negatively amortizing ARMs may provide limitations on changes in the
required monthly payment. Limitations on monthly payments can result in
monthly payments that are greater or less than the amount necessary to
amortize a negatively amortizing ARM by its maturity at the interest rate in
effect during any particular month.
PRIVATE ENTITY SECURITIES--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely
payment of principal and interest on mortgage-related securities backed by
pools created by non-governmental issuers often is supported partially by
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance. The insurance and guarantees are issued by
government entities, private insurers and the mortgage poolers. There can be
no assurance that the private insurers or mortgage poolers can meet their
obligations under the policies, so that if the issuers default on their
obligations the holders of the security could sustain a loss. No insurance
or guarantee covers the Fund or the price of the Fund's shares.
Mortgage-related securities issued by non-governmental issuers generally
offer a higher rate of interest than government-agency and government-related
securities because there are no direct or indirect government guarantees of
payment.
OTHER MORTGAGE-RELATED SECURITIES--Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage
loans on real property, including CMO residuals. Other mortgage-related
securities may be equity or debt securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.
ASSET-BACKED SECURITIES. Asset-backed securities are a form of
derivative. The securitization techniques used for asset-backed securities
are similar to those used for mortgage-related securities. These securities
include debt securities and securities with debt-like characteristics. The
collateral for these securities has included home equity loans, automobile
and credit card receivables, boat loans, computer leases, airplane leases,
mobile home loans, recreational vehicle loans and hospital account
receivables. The Fund may invest in these and other types of asset-backed
securities that may be developed in the future.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may provide the Fund
with a less effective security interest in the related collateral than do
mortgage-backed securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available
to support payments on these securities.
U.S. TREASURY INFLATION-PROTECTION SECURITIES. U.S. Treasury securities
include Treasury Inflation-Protection Securities ("TIPS"), which are
securities issued by the U.S. Treasury designed to provide investors a long
term investment vehicle that is not vulnerable to inflation. The interest
rate paid by TIPS is fixed, while the principal value rises or falls
semi-annually based on changes in a published Consumer Price Index. Thus, if
inflation occurs, the principal and interest payments on the TIPS are
adjusted accordingly to protect investors from inflationary loss. During a
deflationary period, the principal and interest payments decrease, although
the TIPS' principal will not drop below its face amount at maturity.
In exchange for the inflation protection, TIPS generally pay lower
interest rates than typical Treasury securities. Only if inflation occurs
will TIPS offer a higher real yield than a conventional Treasury bond of the
same maturity. In addition, at times, the secondary market for these
securities may not be as active or liquid as the secondary market for
conventional Treasury securities. Principal appreciation and interest
payments on TIPS will be taxed annually as ordinary interest income for
Federal income tax calculations. As a result, any appreciation in principal
must be counted as interest income in the year the increase occurs, even
though the investor will not receive such amounts until the TIPS are sold or
mature. Principal appreciation and interest payments will be exempt from
state and local income taxes.
INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies. Under the 1940 Act, the Fund's investment in
such securities, subject to certain exceptions, currently is limited to (i)
3% of the total voting stock of any one investment company, (ii) 5% of the
Fund's total assets with respect to any one investment company and (iii) 10%
of the Fund's total assets in the aggregate. As a shareholder of another
investment company, the Fund would bear, along with other shareholders, its
pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
The Fund also may invest its uninvested cash reserves or cash it receives as
collateral from borrowers of its portfolio securities in connection with the
Fund's securities lending program in shares of one or more money market funds
advised by the Manager. Such investments will not be subject to the
limitations described above, except that the Fund's aggregate investment of
uninvested cash reserves in such money market funds may not exceed 25% of its
total assets. See "Lending Portfolio Securities."
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.
MONEY MARKET INSTRUMENTS. When the Manager determines that adverse
market conditions exist, the Fund may adopt a temporary defensive position
and invest up to 100% 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.
INVESTMENT TECHNIQUES
The following information supplements and should be read in conjunction
with the Fund's Prospectus.
DURATION AND PORTFOLIO MATURITY. The Fund invests without regard to
maturity or duration limitations. Under normal conditions, the Fund expects
that the dollar-weighted average maturity of its fixed-income portfolio will
be between two and ten years.
As a measure of a fixed-income security's cash flow, duration is an
alternative to the concept of "term maturity" in assessing the price
volatility associated with changes in interest rates. Generally, the longer
the duration, the more volatility an investor should expect. For example,
the market price of a bond with a duration of three years would be expected
to decline 3% if interest rates rose 1%. Conversely, the market price of the
same bond would be expected to increase 3% if interest rates fell 1%. The
market price of a bond with a duration of six years would be expected to
increase or decline twice as much as the market price of a bond with a
three-year duration. Duration is a way of measuring a security's maturity in
terms of the average time required to receive the present value of all
interest and principal payments as opposed to its term to maturity. The
maturity of a security measures only the time until the final payment is due;
it does not take account of the pattern of a security's cash flows over time,
which would include how cash flow is affected by prepayments and by changes
in interest rates. Incorporating a security's yield, coupon interest
payments, final maturity and option features into one measure, duration is
computed by determining the weighted average maturity of a bond's cash flows,
where the present values of the cash flows serve as weights. In computing
the duration of the Fund, the Manager will estimate the duration of
obligations that are subject to features such as prepayment or redemption by
the issuer, put options retained by the investor or other imbedded options,
taking into account the influence of interest rates on prepayments and coupon
flows.
For purposes of calculating average effective portfolio maturity, a
security that is subject to redemption at the option of the issuer on a
particular date (the "call date") which is prior to the security's stated
maturity may be deemed to mature on the call dated rather than on its stated
maturity date. The call date of a security will be used to calculate average
effective portfolio maturity when the Manager reasonably anticipates, based
upon information available to it, that the issuer will exercise its right to
redeem the security. The Manager may base its conclusion on such factors as
the interest-rate paid on the security compared to prevailing market rates,
the amount of cash available to the issuer of the security, events affecting
the issuer of the security, and other factors that may compel or make it
advantageous for the issuer to redeem a security prior to its stated
maturity.
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 ability of the Manager 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, or failure
to intervene, by U.S. or foreign governments or central banks, or by currency
controls or political developments in the United States or abroad.
LEVERAGE. Leveraging (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. 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 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,
broker/dealers or other financial institutions. 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. As a result of these transactions, the
Fund is exposed to greater potential fluctuations in the value of its assets
and its net asset value per share. To the extent the Fund enters into a
reverse repurchase agreement, the Fund will segregate permissible liquid
assets at least equal to the aggregate amount of its reverse repurchase
obligations, plus accrued interest, in certain cases, in accordance with
releases promulgated by the Securities and Exchange Commission. The
Securities and Exchange Commission views reverse repurchase transactions as
collateralized borrowings by the Fund. Except for these transactions, the
Fund's borrowings generally will be unsecured.
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 remains the owner of the loaned securities and continues to
be entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities. The Fund also has the right
to terminate a loan at any time. The Fund may call the loan to vote proxies
if a material issue affecting the Fund's investment is to be voted upon.
Loans of portfolio securities may not exceed 33-1/3% of the value of the
Fund's total assets (including the value of all assets received as collateral
for the loan). 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. If the collateral consists of a
letter of credit or securities, the borrower will pay the Fund a loan premium
fee. If the collateral consists of cash, the Fund will reinvest the cash and
pay the borrower a pre-negotiated fee or "rebate" from any return earned on
the investment. The Fund may participate in a securities lending program
operated by Mellon Bank, N.A., as lending agent (the "Lending Agent"). The
Lending Agent will receive a percentage of the total earnings of the Fund
derived from lending its portfolio securities. Should the borrower of the
securities fail financially, the Fund may experience delays in recovering the
loaned securities or exercising its rights in the collateral. Loans are made
only to borrowers that are deemed by the Manager to be of good financial
standing. In a loan transaction, the Fund will also bear the risk of any
decline in value of securities acquired with cash collateral. The Fund will
minimize this risk by limiting the investment of cash collateral to money
market funds advised by the Manager, repurchase agreements or other high
quality instruments with short maturities.
DERIVATIVES. The Fund may invest in, or enter into, derivatives, such
as options and futures, options on futures contracts, credit derivatives,
mortgage-related securities and asset-backed securities, for a variety of
reasons, including, with respect to options and futures, 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 the 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.
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. In 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.
The Fund will not be a commodity pool. In addition, the Fund has
claimed an exclusion from the definition of commodity pool operator and,
therefore, is not subject to registration or regulation as a pool operator
under the Commodity Exchange Act.
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 commodities which are traded on domestic
exchanges or 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.
CREDIT DERIVATIVES. The Fund may engage in credit derivative transactions,
such as those involving default price risk derivatives and market spread
derivatives. Default price risk derivatives are linked to the price of
reference securities or loans after a default by the issuer or borrower,
respectively. Market spread derivatives are based on the risk that changes
in market factors, such as credit spreads, can cause a decline in the value
of a security, loan or index. There are three basic transactional forms for
credit derivatives: swaps, options and structured instruments. The use of
credit derivatives is a highly specialized activity which involves strategies
and risks different from those associated with ordinary portfolio security
transactions. If the Manager is incorrect in its forecasts of default risks,
market spreads or other applicable factors, the investment performance of the
Fund would diminish compared with what it would have been if these techniques
were not used. Moreover, even if the Manager is correct in its forecasts,
there is a risk that a credit derivative position may correlate imperfectly
with the price of the asset or liability being hedged. There is no limit on
the amount of credit derivative transactions that may be entered into by the
Fund. The Fund's risk of loss in a credit derivative transaction varies with
the form of the transaction. For example, if the Fund purchases a default
option on a security, and if no default occurs with respect to the security,
the Fund's loss is limited to the premium it paid for the default option. In
contrast, if there is a default by the grantor of a default option, the
Fund's loss will include both the premium it paid for the option and the
decline in value of the underlying security that the default option hedged.
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 and options on futures 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
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 this Statement of Additional Information.
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. The Fund also may make short sales "against the box," in
which the Fund enters into a short sale of a security it owns.
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.
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, it will: (a) segregate permissible liquid assets in an amount
that, together with the amount provided as collateral, always equals the
current value of the security sold short; or (b) otherwise cover its short
position.
FORWARD COMMITMENTS. The Fund may purchase or sell securities on a
forward commitment, when-issued or delayed-delivery basis, which means
delivery and payment take place a number of days after the date of the
commitment to purchase or sell the securities at a predetermined price and/or
yield. Typically, no interest accrues to the purchaser until the security is
delivered. When purchasing a security on a forward commitment basis, the
Fund assumes the rights and risks of ownership of the security, including the
risk of price and yield fluctuations, and takes such fluctuations into
account when determining its net asset value. Because the Fund is not
required to pay for these securities until the delivery date, these risks are
in addition to the risks associated with the Fund's other investments. If
the Fund is fully or almost fully invested when forward commitment purchases
are outstanding, such purchases may result in a form of leverage. The Fund
intends to engage in forward commitments to increase its portfolio's
financial exposure to the types of securities in which it invests.
Leveraging the portfolio in this manner will increase the Fund's exposure to
changes in interest rates and will increase the volatility of its returns.
The Fund will 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, when-issued or
delayed-delivery 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 or delayed-delivery basis may expose the Fund to risks because
they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or delayed-delivery 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, when-issued or
delayed-delivery basis when the Fund is fully or almost fully invested may
result in greater potential fluctuation in the value of the Fund's net assets
and its net asset value per share.
CERTAIN INVESTMENT CONSIDERATIONS AND RISKS
EQUITY SECURITIES. Equity securities, including common stocks, and
certain preferred stocks, convertible securities and warrants, fluctuate in
value, often based on factors unrelated to the value of the issuer of the
securities, and such fluctuations can be pronounced. Changes in the value of
the Fund's investments will result in changes in the value of its shares and
thus the Fund's total return to investors.
The Fund may purchase securities of companies in initial public
offerings ("IPOs") or shortly thereafter. An IPO is a corporation's first
offering of stock to the public. Shares are given a market value reflecting
expectations for the corporation's future growth. Special rules of the
National Association of Securities Dealers, Inc. apply to the distribution of
IPOs. Corporations offering IPOs generally have limited operating histories
and may involve greater investment risk. The prices of these companies'
securities can be very volatile, rising and falling rapidly, sometimes based
solely on investor perceptions rather than economic reasons.
The Fund may invest in securities issued by companies in the technology
sector, which has been among the most volatile sectors of the stock market.
Technology companies involve greater risk because their revenues and earnings
tend to be less predictable (and some companies may be experiencing
significant losses) and their share prices tend to be more volatile. Certain
technology companies may have limited product lines, markets or financial
resources, or may depend on a limited management group. In addition, these
companies are strongly affected by worldwide technological developments, and
their products and services may not be economically successful or may quickly
become outdated. Investor perception may play a greater role in determining
the day-to-day value of technology stocks than it does in other sectors.
Fund investments made in anticipation of future products and services may
decline dramatically in value if the anticipated products or services are
delayed or canceled.
FIXED-INCOME SECURITIES. The debt securities in which the Fund may
invest must be rated at least B by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Services ("S&P") or Fitch Ratings
("Fitch" and together with Moody's and S&P, the "Rating Agencies") or, if
unrated, deemed to be of comparable quality by the Manager. The debt
securities in which the Fund invests have remaining maturities of 40 years or
less and, under normal market conditions, the dollar-weighted average
maturity of the Fund's portfolio invested in debt securities is expected to
be between two and ten years. During periods of rapidly rising interest
rates, the dollar-weighted average portfolio maturity of the Fund's debt
securities may be shortened to one year or less. Even though
interest-bearing securities are investments which promise a stable stream of
income, the prices of such securities are inversely affected by changes in
interest rates and, therefore, are subject to the risk of market price
fluctuations. Certain securities that may be purchased by the Fund, such as
those with interest rates that fluctuate directly or indirectly based on
multiples of a stated index, are designed to be highly sensitive to changes
in interest rates and can subject the holders thereof to extreme reductions
of yield and possibly loss of principal. The values of fixed-income
securities also may be affected by changes in the credit rating or financial
condition of the issuer. Certain securities purchased by the Fund, such as
those rated Baa or lower by Moody's and BBB or lower by S&P and Fitch, 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.
LOWER RATED SECURITIES. The Fund may invest up to 20% of its assets
invested in fixed- income securities in higher yielding (and therefore higher
risk) debt securities such as those rated Ba by Moody's or BB by S&P or
Fitch, or as low as those rated B by a Rating Agency. Such securities,
though higher yielding, are characterized by risk. See "Appendix" for a
general description of the Rating Agencies' ratings. Although ratings may be
useful in evaluating the safety of interest and principal payments, they do
not evaluate the market value risk of these securities. The Fund will rely
on the Manager's judgment, analysis and experience in evaluating the
creditworthiness of an issuer.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities. These securities generally are considered by the Rating
Agencies to be 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 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, or the issuer's inability to
meet specific projected business 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 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, the Manager's 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.
An economic recession could adversely affect the ability of the issuers of
lower rated securities to repay principal and pay interest thereon, which
would increase the incidence of default for such securities. It is likely
that any economic recession also would disrupt severely the market for such
securities and have an adverse impact on their value.
The Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. The Fund
has no arrangement with any persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon securities, pay-in-kind bonds and step-up coupon
bonds. In addition to the risks associated with the credit rating of the
issuers, the market prices of these securities may be very volatile during
the period no interest is paid.
MORTGAGE-RELATED SECURITIES. Mortgage-related securities are complex
derivative instruments, subject to both credit and prepayment risk, and may
be more volatile and less liquid than more traditional debt securities.
Although certain mortgage-related securities are guaranteed by a third party
(such as a U.S. Government agency or instrumentality with respect to
government-related mortgage-backed securities) or otherwise similarly
secured, the market value of these securities, which may fluctuate, is not
secured. If a mortgage-related security is purchased at a premium, all or
part of the premium may be lost if there is a decline in the market value of
the security, whether resulting from changes in interest rates or prepayments
on the underlying mortgage collateral. Mortgage-related securities are
subject to credit risks associated with the performance of the underlying
mortgage properties and to prepayment risk. In certain instances, the credit
risk associated with mortgage-related securities can be reduced by third
party guarantees or other forms of credit support. Improved credit risk does
not reduce prepayment risk which is unrelated to the rating assigned to the
mortgage-related security. Prepayment risk can lead to fluctuations in value
of the mortgage-related security which may be pronounced. Adverse changes in
economic conditions and circumstances are more likely to have an adverse
impact on mortgage-related securities secured by loans on certain types of
commercial properties than on those secured by loans on residential
properties. In addition, these securities are subject to prepayment risk,
although commercial mortgages typically have shorter maturities than
residential mortgages and prepayment protection features. Some
mortgage-related securities have structures that make their reactions to
interest rate changes and other factors difficult to predict, making their
value highly volatile.
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 and
interest on the foreign securities to investors located outside the country
of the issuer, whether from currency blockage or otherwise. Foreign
securities held by the Fund may trade on days when the Fund does not
calculate its net asset value and this may affect the Fund's net asset value
or 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.
SIMULTANEOUS INVESTMENTS. Investment decisions for the Fund are made
independently from those of other investment companies advised by the
Manager. The Manager has adopted written trade allocation procedures for its
equity and fixed income trading desks. Under the procedures, portfolio
managers or the trading desks will ordinarily seek to aggregate (or "bunch")
orders that are placed or received concurrently for more than one investment
company or account. 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. The Fund, together with other investment
companies or accounts advised by the Manager or its affiliates, may own
significant positions in portfolio companies which, depending on market
conditions, may affect adversely the Fund's ability to dispose of some or all
of its positions should it desire to do so.
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 7 as fundamental
policies. Investment restrictions numbered 8 through 13 are not fundamental
policies and may be changed by vote of a majority of the Fund's Board members
at any time. The Fund may not:
1. Invest in commodities, except that the Fund may purchase and sell
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
2. Purchase, hold or deal in real estate, or oil, gas or other
mineral leases or exploration or development programs, but the Fund may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate. In particular, the Fund may
purchase mortgage-backed securities and real estate investment trust
securities.
3. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of the
Fund's total assets). For purposes of this investment restriction, the entry
into options, forward contracts, futures contracts, including those relating
to indices, and options on futures contracts or indices shall not constitute
borrowing.
4. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Fund may
lend its portfolio securities in an amount not to exceed 33-1/3% of the value
of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange Commission
and the Fund's Board.
5. Act as an underwriter of securities of other issuers, except to
the extent the Fund may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.
6. Invest more than 25% of its assets in the securities of issuers
in any single industry, provided there shall be no limitation on the purchase
of obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
7. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent the activities permitted in
Investment Restriction Nos. 1, 3, 9 and 10 may be deemed to give rise to a
senior security.
8. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
9. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with writing covered put and call
options and the purchase of securities on a when-issued or forward commitment
basis and collateral and initial or variation margin arrangements with
respect to options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices.
10. Purchase, sell or write puts, calls or combinations thereof,
except as may be described in the Fund's Prospectus and this Statement of
Additional Information.
11. 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.
12. 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.
13. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will
not constitute a violation of such restriction. With respect to Investment
Restriction No. 3, however, if borrowings exceed 33-1/3% of the value of the
Fund's total assets as a result of a change in values or assets, the Fund
must take steps to reduce such borrowings at least to the extent of such
excess.
The Fund and the Manager have received an exemptive order from the
Securities and Exchange Commission which, among other things, permits the
Fund to use cash collateral received in connection with lending the Fund's
securities and other uninvested cash to purchase shares of one or more
registered money market funds advised by the Manager in excess of the
limitations imposed by the 1940 Act.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of
the Fund and approves all significant agreements with 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
Mellon Bank, N.A............................ Custodian
BOARD MEMBERS OF THE FUND1
Board members and officers of the Fund, together with information as to
their positions with the Fund, principal occupations and other board
memberships and affiliations, are shown below.
[Enlarge/Download Table]
Name (Age) Principal Occupation Other Board Memberships and
POSITION WITH FUND DURING PAST 5 YEARS AFFILIATIONS
Joseph S. DiMartino (60) Corporate Director and The Muscular Dystrophy
Chairman of the Board Trustee Association, DIRECTOR
Levcor International, Inc., an
apparel fabric processor,
DIRECTOR
Century Business Services, Inc., a
provider of outsourcing
functions for small and medium
size companies, DIRECTOR
The Newark Group, a provider of a
national market of paper
recovery facilities, paperboard
mills and paperboard converting
plants, DIRECTOR
David P. Feldman (63) Corporate Director BBH Mutual Funds Group (11
Board Member and Trustee funds), DIRECTOR
The Jeffrey Company, a private
investment company, DIRECTOR
QMED, a medical device company,
DIRECTOR
James F. Henry (72) President, CPR None
Board Member Institute for
Dispute Resolution,
a non-profit
organization
principally engaged
in the development
of alternatives to
business litigation
(Retired 2003)
Rosalind Gersten Jacobs Merchandise and None
(78) marketing consultant
Board Member
Dr. Paul A. Marks (77) President and Chief Pfizer, Inc., pharmaceutical
Board Member Executive Officer of company,
Memorial DIRECTOR-EMERITUS
Sloan-Kettering Atom Pharm, DIRECTOR
Cancer Center Lazard Freres & Company, LLC,
(Retired 1999) SENIOR ADVISER
Dr. Martin Peretz (64) Editor-in-Chief of Academy for Liberal Education, an
Board Member The New Republic accrediting agency for colleges
Magazine and universities certified by
Lecturer in Social the U.S. Department of
Studies at Harvard Education, DIRECTOR
University Digital Learning Group, LLC., an
Co-Chairman of online publisher of college
TheStreet.com, a textbooks, DIRECTOR
financial daily on Harvard Center for Blood
the web Research, TRUSTEE
Bard College, TRUSTEE
YIVO Institute for Jewish
Research, Trustee
Bert W. Wasserman (70) Financial Consultant Lillian Vernon Corporation,
Board Member DIRECTOR
_____________
1 None of the Board members are "interested persons" of the Fund,
as defined in the 1940 Act.
Board members are elected to serve for an indefinite term. The Fund
has standing audit, nominating and compensation committees, each comprised of
its Board members who are not "interested persons" of the Fund, as defined in
the 1940 Act. The function of the audit committee is to oversee the Fund's
financial and reporting policies and certain internal control matters; 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; and the function of the compensation committee is to establish the
appropriate compensation for serving on the Board. The nominating committee
does not normally consider nominees recommended by shareholders. The Fund
also has a standing pricing committee comprised of any one Board member. The
function of the pricing committee is to assist in valuing the Fund's
investments. The audit committee met six times during the fiscal year ended
August 31, 2003. The pricing, nominating and compensation committees did not
meet during the last fiscal year.
The table below indicates the dollar range of each Board member's
ownership of Fund shares and shares of other funds in the Dreyfus Family of
Funds for which he or she is a Board member, in each case as of December 31,
2002.
Aggregate Holding of Funds in the
Dreyfus Family of Funds for which
Fund Responsible as a Board Member
Joseph S. DiMartino None Over $100,000
David P. Feldman None $50,001 - $100,000
James F. Henry None Over $100,000
Rosalind Gersten Jacobs None $10,001 - $50,000
Dr. Paul A. Marks None None
Dr. Martin Peretz None $10,001 - $50,000
Bert W. Wasserman None Over $100,000
As of December 31, 2002, none of the Board members or their immediate
family members owned securities of the Manager, the Distributor or any person
(other than a registered investment company) directly or indirectly
controlling, controlled by or under common control with the Manager or the
Distributor.
The Fund pays its Board members its allocated portion of an annual
retainer of $40,000 and a per meeting fee of $6,000 (with a minimum of $500
per meeting and $500 per telephone meeting) attended for the Fund and eight
other funds (comprised of 24 portfolios) in the Dreyfus Family of Funds, and
reimburses them for their expenses. The Chairman of the Board receives an
additional 25% of such compensation. Emeritus Board members are entitled to
receive an annual retainer and a per meeting attended fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation
paid to each Board member by the Company for the fiscal year ended August 31,
2003, and by all funds in the Dreyfus Family of Funds for which such person
is a Board member (the number of portfolios of such funds is set forth in
parenthesis next to each Board member's total compensation) for the year
ended December 31, 2002, was as follows:
Total Compensation From the
Name of Aggregate Compensation Fund Complex
BOARD MEMBER FROM THE FUND* PAID TO BOARD MEMBER(**)
Joseph S. DiMartino $1,916 $815,938 (191)
David P. Feldman $1,532 $167,000 (53)
John M. Fraser, Jr.+ $406 $32,500 (43)
James F. Henry $1,532 $71,000 (24)
Rosalind Gersten Jacobs $1,532 $117,000 (37)
Irving Kristol++ $406 $23,250 (24)
Dr. Paul A. Marks $1,393 $70,000 (24)
Dr. Martin Peretz $1,532 $71,000 (24)
Bert W. Wasserman $1,404 $71,000 (24)
________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $1,760 for all Board members as a
group.
** Represents the number of separate portfolios comprising the
investment companies in the Fund Complex, including the Fund, for
which the Board member serves.
+ Emeritus Board member since May 24, 2000.
++ Emeritus Board member since January 22, 2000.
OFFICERS OF THE COMPANY
STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief
Executive Officer and Chief Operating Officer of the Manager, and an
officer of 95 investment companies (comprised of 186 portfolios)
managed by the Manager. Mr. Canter also is a Board member and, where
applicable, 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 58 years old and has been an
employee of the Manager since May 1995.
STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief
Investment Officer, Vice Chairman and a director of the Manager, and an
officer of 95 investment companies (comprised of 186 portfolios)
managed by the Manager. Mr. Byers also is an officer, director or an
Executive Committee Member of certain other investment management
subsidiaries of Mellon Financial Corporation, each of which is an
affiliate of the Manager. He is 50 years old and has been an employee
of the Manager since January 2000. Prior to joining the Manager, he
served as an Executive Vice President - Capital Markets, Chief
Financial Officer and Treasurer at Gruntal & Co., L.L.C.
MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President,
Secretary and General Counsel of the Manager, and an officer of 96
investment companies (comprised of 202 portfolios) managed by the
Manager. He is 57 years old and has been an employee of the Manager
since June 1977.
MICHAEL A. ROSENBERG, SECRETARY SINCE MARCH 2000. Associate General Counsel
of the Manager, and an officer of 93 investment companies (comprised of
195 portfolios) managed by the Manager. He is 43 years old and has
been an employee of the Manager since October 1991.
STEVEN F. NEWMAN, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General
Counsel and Assistant Secretary of the Manager, and an officer of 96
investment companies (comprised of 202 portfolios) managed by the
Manager. He is 54 years old and has been an employee of the Manager
since July 1980.
ROBERT R. MULLERY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General
Counsel of the Manager, and an officer of 26 investment companies
(comprised of 59 portfolios) managed by the Manager. He is 51 years
old and has been an employee of the Manager since May 1986.
JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director--Mutual Fund
Accounting of the Manager, and an officer of 96 investment companies
(comprised of 202 portfolios) managed by the Manager. He is 45 years
old and has been an employee of the Manager since April 1985.
KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds
Tax Director of the Manager, and an officer of 96 investment companies
(comprised of 202 portfolios) managed by the Manager. He is 49 years
old and has been an employee of the Manager since June 1993.
ERIK D. NAVILOFF, ASSISTANT TREASURER since December 2002. Senior
Accounting Manager - Taxable Fixed Income Funds of the Manager, and an
officer of 18 investment companies (comprised of 73 portfolios) managed
by the Manager. He is 35 years old and has been an employee of the
Manager since November 1992.
RICHARD CASSARO, ASSISTANT TREASURER SINCE AUGUST 2003. Senior Accounting
Manager - Equity Funds of the Manager, and an officer of 25 investment
companies (comprised of 101 portfolios) managed by the Manager. He is
44 years old and has been an employee of the Manager since September
1982.
ROBERT J. SVAGNA, ASSISTANT TREASURER since December 2002. Senior
Accounting Manager - Equity Funds of the Manager, and an officer of 25
investment companies (comprised of 102 portfolios) managed by the
Manager. He is 36 years old and has been an employee of the Manager
since November 1990.
WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER
2002. Vice President and Anti-Money Laundering Compliance Officer of
the Distributor, and the Anti-Money Laundering Compliance Officer of 91
investment companies (comprised of 197 portfolios) managed by the
Manager. He is 33 years old and has been an employee of the
Distributor since October 1998. Prior to joining the Distributor, he
was a Vice President of Compliance Data Center, Inc.
The address of each Board member and officer of the Fund is 200 Park
Avenue, New York, New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares outstanding on December 5, 2003.
The following persons are known by the Fund to own of record 5% or more
of the Fund's outstanding voting securities as of December 5, 2003:
Nationwide Corporation, Portfolio Account, Gary Berndt, Office of Finance,
P.O. Box 182029, Columbus, OH 43218 - 51.68%; Charles Schwab & Co., Inc.,
Reinvest Account, 101 Montgomery Street, San Francisco, CA 94104-4122 -
5.52%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT 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 global financial 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.
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 Fund's outstanding voting
securities, 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 on such approval. The Agreement is
terminable without penalty, on not more than 60 days' notice, by the Fund's
Board or by vote of the holders of a majority of the Fund's shares, or, on
not less than 90 days' notice, by the Manager. The Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
In approving the current Agreement, the Board considered a number of
factors, including the nature and quality of the services provided by the
Manager; the investment philosophy and investment approach as applied to the
Fund by the Manager; the investment management expertise of the Manager in
respect of the Fund's investment strategies; the personnel, resources and
experience of the Manager; the Fund's performance history and the management
fees paid to the Manager relative to those of mutual funds with similar
investment objectives, strategies and restrictions; the Manager's costs of
providing services under the Agreement; and ancillary benefits the Manager
may receive from its relationship with the Fund.
The following persons are officers and/or directors of the Manager:
Stephen E. Canter, Chairman of the Board, Chief Executive Officer and Chief
Operating Officer; Michael G. Millard, President and a director; Stephen R.
Byers, Chief Investment Officer, Vice Chairman and a director; J. Charles
Cardona, Vice Chairman and a director; Lawrence S. Kash, Vice Chairman; J.
David Officer, Vice Chairman and a director; Ronald P. O'Hanley III, Vice
Chairman and a director; Diane P. Durnin, Executive Vice President; Mark N.
Jacobs, Executive Vice President, General Counsel and Secretary; Patrice M.
Kozlowski, Senior Vice President-Corporate Communications; Mary Beth Leibig,
Vice President-Human Resources; Theodore A. Schachar, Vice President-Tax;
Angela Price, Vice President; Wendy H. Strutt, Vice President; Ray Van Cott,
Vice President-Information Systems; William H. Maresca, Controller; James
Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary; and
Steven G. Elliott, David F. Lamere, Martin G. McGuinn and Richard W. Sabo,
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 Fund's Board to
execute purchases and sales of securities. Douglas R. Ramos is the Fund's
portfolio manager responsible for asset allocation and the equity portion of
the Fund's portfolio. The Taxable Fixed-Income Team manages the fixed-income
portion of the Fund's portfolio, and consists of the following persons:
Gerald Thunelius, Kenneth Smalley, Greg Jordan, Michael Hoeh, Samuel
Weinstock, William Howarth and Martin Fetherston. 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.
Mellon Bank, N.A., the Manager's parent, and its affiliates may have
deposit, loan and commercial banking or other relationships with the issuers
of securities purchased by the Fund. The Manager has informed the Fund that
in making its investment decisions it does not obtain or use material inside
information that Mellon Bank, N.A. or its affiliates may possess with respect
to such issuers.
The Manager's Code of Ethics 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 of Ethics and are also
subject to the oversight of Mellon's Investment Ethics Committee. Portfolio
managers and other investment personnel who comply with the preclearance and
disclosure procedures of the Code of Ethics 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 securities dealers, banks or other financial
institutions 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 deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The expenses
borne by the Fund include: taxes, interest, loan commitment fees, dividends
and interest on securities sold short, brokerage fees and commissions, if
any, fees of Board members who are not officers, directors, employees or
holders of 5% or more of the outstanding voting securities of the Manager,
Securities and Exchange Commission fees, state Blue Sky qualification fees,
advisory fees, charges of custodians, transfer and dividend disbursing
agents' fees, all costs of insurance obtained other than under a blanket
policy covering one or more other investment companies managed by the
Manager, 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 for regulatory
purposes and for distribution to existing shareholders, and any extraordinary
expenses. In addition, the Fund is subject to an annual service fee for
ongoing personal services relating to shareholder accounts and services
related to the maintenance of shareholder accounts. 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 0.60% of the value
of the Fund's average daily net assets. All fees and expenses are accrued
daily and deducted before declaration of dividends to shareholders. For the
fiscal years ended August 31, 2001, 2002 and 2003, the management fees paid
by the Fund amounted to $1,199,516, $1,092,863 and $832,592, respectively.
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund, exclusive of taxes, brokerage, interest on borrowings
and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the management fee, exceed
the expense limitation of any state having jurisdiction over the Fund, the
Fund may deduct from the payment to be made to the Manager under the
Agreement, or the Manager will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be estimated
daily, and reconciled and effected or paid, as the case may be, on a monthly
basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of 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 a securities dealer, bank or other financial
institution (collectively, "Service Agents"), that have entered into
agreements with the Distributor a fee based on the amount invested through
such Service Agents in Fund shares by employees participating in qualified or
non-qualified employee benefit plans, including pension, profit-sharing and
other deferred compensation plans, whether established by corporations,
partnerships, non-profit entities or state and local governments ("Retirement
Plans"), or other programs. The term "Retirement Plans" does not include
IRAs, IRA "Rollover Accounts" or IRAs set up under a Simplified Employee
Pension Plan ("SEP-IRAs"). Generally, the Distributor may pay such Service
Agents a fee of up to 1% of the amount invested through the Service Agents.
The Distributor, however, may pay Service Agents 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. Sponsors of such
Retirement Plans or the participants therein should consult their Service
Agent for more information regarding any such fee payable to the Service
Agent.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN. Dreyfus
Transfer, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the
Manager, 200 Park Avenue, New York, New York 10166, 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.
Mellon Bank, N.A. (the "Custodian"), One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, is the Fund's custodian. 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 transaction 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 Service
Agent. Third parties may receive payments from the Manager in connection with
their offering of Fund shares to their customers, or for marketing,
distribution or other services. The receipt of such payments could create an
incentive for the third party to offer the Fund instead of other mutual funds
where such payments are not received. Please consult a representative of
your plan or financial institution for further information.
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, SEP-IRAs and rollover
IRAs) and 403(b)(7) Plans with only one participant and $500 for
Dreyfus-sponsored Education Savings Accounts, with no minimum for subsequent
purchases. The initial investment must be accompanied by the Account
Application. For full-time or part-time employees of the 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.
Fund shares are offered without regard to the minimum initial investment
requirements to Board members of a fund advised by the Manager, including
members of the Fund's Board, who elect to have all or a portion of their
compensation for serving in that capacity automatically allocated to the
Fund. The Fund reserves the right to offer Fund shares without regard to
minimum purchase requirements to employees participating in certain
Retirement 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.
Management understands that some Service Agents may impose certain
conditions on their clients which are different from those described in the
Fund's Prospectus and this Statement of Additional Information, and, to the
extent permitted by applicable regulatory authority, may charge their clients
direct fees. You should consult your Service Agents in this regard.
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 (usually 4:00 p.m., Eastern time), on
days the New York Stock Exchange is open for regular business. For purposes
of determining net asset value per share, certain options and futures
contracts may 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. For information
regarding the methods employed in valuing the Fund's 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
or online 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,
which will subject the purchase order to a processing delay. 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. If
purchase orders are received by 4:00 p.m., Eastern time, on any day the
Transfer Agent and the New York Stock Exchange are open for regular business
Fund shares will be purchased at the share price determined on the next bank
business day following such purchase order. If purchase orders are made
after 4:00 p.m., Eastern time, on any day the Transfer Agent and the New York
Stock Exchange are open for regular business, or made on Saturday, Sunday or
any Fund holiday (e.g., when the New York Stock Exchange is not open for
business) Fund shares will be purchased at the share price determined 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 sent 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 (the "Plan") pursuant
to which the Fund reimburses the Distributor an amount not to exceed an
annual rate of 0.25% of the value of the Fund's average daily net assets for
certain allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the Board
for its review. In addition, the Plan provides that material amendments of
the Plan must be approved by the Board, and by the Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund or the Manager
and have no direct or indirect financial interest in the operation of the
Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Plan is subject to annual approval by such
vote cast in person at a meeting called for the purpose of voting on the
Plan. The Plan is terminable at any time by vote of a majority of the Board
members who are not "interested persons" and have no direct or indirect
financial interest in the operation of the Plan.
For the fiscal year ended August 31, 2003, the Fund paid $111,184 to
the Distributor pursuant to the Shareholder Services Plan.
HOW TO REDEEM SHARES
GENERAL. The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption request
in proper form, except as provided by the rules of the Securities and
Exchange Commission. However, if you have purchased Fund shares by check, by
Dreyfus TELETRANSFER Privilege or through Dreyfus-AUTOMATIC Asset Builder(R)
and subsequently submit a written redemption request to the Transfer Agent,
the Fund may delay sending the redemption proceeds for up to eight business
days after the purchase of such shares. In addition, the Fund will reject
requests to redeem shares by wire, telephone, online or pursuant to the
Dreyfus TELETRANSFER Privilege for a period of up to eight business days
after receipt by the Transfer Agent of the purchase check, the Dreyfus
TELETRANSFER purchase or the Dreyfus-AUTOMATIC Asset Builder(R) order against
which such redemption is requested. These procedures will not apply if your
shares were purchased by wire payment, or if you otherwise have a sufficient
collected balance in your account to cover the redemption request. Fund
shares may not be redeemed until the Transfer Agent has received your Account
Application.
WIRE REDEMPTION PRIVILEGE. By using this Privilege, you authorize the
Transfer Agent to act on telephone, letter or online 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 by the Transfer Agent of the redemption request in
proper form. Redemption proceeds ($1,000 minimum) will be transferred by
Federal Reserve wire only to the commercial bank account specified by you on
the Account Application or Shareholder Services Form, or to a correspondent
bank if 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.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone or online
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. You should be aware
that if you have selected the Dreyfus TELETRANSFER Privilege, any request for
a Dreyfus TELETRANSFER transaction will be effected 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."
STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each holder
of a joint account, and each signature must be guaranteed. Signatures on
endorsed certificates submitted for redemption also must be guaranteed. The
Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations, as well as from participants in the New York Stock Exchange
Medallion Signature Program, the Securities Transfer Agents Medallion Program
("STAMP"), and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-Guaranteed"
must appear with the signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators, trustees or
guardians, and may accept other suitable verification arrangements from
foreign investors, such as consular verification. For more information with
respect to signature-guarantees, please call one of the telephone numbers
listed on the cover.
REDEMPTION COMMITMENT. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such amount,
the Board 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 or
shares of certain funds advised by Founders Asset Management, LLC
("Founders"), an affiliate of 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
without a sales load 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
required), without giving effect to any reduced loads, the
difference may 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, by telephone or online. The ability to issue
exchange instructions by telephone or online 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 this Privilege, you authorize the Transfer Agent to act on
telephonic and online instructions (including over the Dreyfus Express(R) voice
response telephone system) from any person representing himself or herself to
be you and reasonably believed by the Transfer Agent to be genuine.
Exchanges may be subject to limitations as to the amount involved or number
of exchanges permitted. Shares issued in certificate form are not eligible
for telephone or online 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.
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.
DREYFUS AUTO-EXCHANGE PRIVILEGE. Dreyfus Auto-Exchange Privilege
permits you to purchase (on a semi-monthly, monthly, quarterly, or annual
basis), in exchange for shares of the Fund, shares of certain other funds in
the Dreyfus Family of Funds or shares of certain funds advised by Founders 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, or visiting the Dreyfus.com website. The
Fund reserves the right to reject any exchange request in whole or in part.
Shares may be exchanged only between accounts having certain identical
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
or shares of certain funds advised by Founders 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 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 without a sales load in shares of other
funds sold with a sales load.
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.
Certain retirement plans, including Dreyfus-sponsored retirement plans,
may permit certain participants to establish an automatic withdrawal plan
from such retirement plans. Participants should consult their retirement
plan sponsor and tax adviser for details. Such a withdrawal plan is
different than 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 and rollover IRAs), Education Savings
Accounts 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 or Education Savings
Accounts, 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.
PORTFOLIO TRANSACTIONS
GENERAL. The Manager assumes general supervision over the placement of
securities buy and sell orders on behalf of the funds it manages. In
choosing brokers, the Manager evaluates the ability of the broker to execute
the particular transaction (taking into account the market for the stock and
the size of the order) at the best combination of price and quality of
execution. In selecting brokers no factor is necessarily determinative, and
seeking to obtain best execution for all trades takes precedence over all
other considerations. Brokers are selected after a review of relevant
criteria, which may include: the actual price to be paid for the shares; the
broker's knowledge of the market for the particular stock; the broker's
reliability; the broker's integrity or ability to maintain confidentiality;
the broker's research capability; commission rates; a broker's ability to
ensure that the shares will be delivered on settlement date; a broker's
ability to handle specific orders of various size and complexity; the
broker's financial condition; the broker's willingness to commit capital; and
the broker's infrastructure and operational capabilities. At various times
and for various reasons, certain factors will be more important than others
in determining which broker to use.
The Manager has adopted written trade allocation procedures for its
equity and fixed income trading desks. Under the procedures, portfolio
managers and the trading desks ordinarily will seek to aggregate (or "bunch")
orders that are placed or received concurrently for more than one account.
In some cases, this policy may adversely affect the price paid or received by
a fund or account, or the size of the position obtained or liquidated.
Generally, bunched trades will be allocated among the participating accounts
based on the number of shares designated for each account on the trade
order. If securities available are insufficient to satisfy the requirements
of the participating portfolios, available securities generally are allocated
among funds and accounts pro rata. In the case of equity securities, the pro
rata allocation is based on the participating portfolios' order sizes. In
the case of debt securities, the pro rata allocation is based on asset
sizes. In allocating trades made on a combined basis, the trading desks seek
to achieve the same net unit price of the securities for each participating
client. Because a pro rata allocation may not always adequately accommodate
all facts and circumstances, the trade allocation procedures allow the
allocation of securities on a basis other than pro rata. For example,
adjustments may be made to eliminate de minimis positions, to give priority
to funds or accounts with specialized investment policies and objectives or
to take into account participating portfolios' unique characteristics (e.g.,
available cash, industry or issuer concentration, duration, credit exposure).
IPO ALLOCATIONS. The Manager has adopted IPO procedures that require
portfolio managers seeking to participate in an IPO to use reasonable efforts
to indicate their interest in the IPO, in writing, to Dreyfus's Equity
Trading Desk at least 24 hours before the pricing of the shares offered in
the IPO. Generally, the number of shares requested by a portfolio manager
must be limited to the number of IPO shares which, if received, would not
exceed a position that is .50% greater than the fund's average equity
position.
Portfolio managers may specify a minimum number of shares deemed to be
an adequate allocation for a fund, and will not receive an allocation of less
than the number of shares so specified. Portfolio managers must accept an
allocation that is equal to or greater than the minimum number of shares
requested, but are not required to accept shares in excess of the amount
requested. Any DE MINIMIS adjustment may result in larger funds
participating in IPOs to a lesser extent than smaller funds.
A portfolio manager who indicates an interest in participating in an
IPO on behalf of less than all of the funds under his or her management must
explain why shares are not being requested on behalf of each
non-participating fund.
Based on the indications of interest, the Equity Trading Desk
establishes an appropriate order size for each fund. In establishing the
appropriate order sizes, the following factors may be considered: (i) the
number of shares requested for each fund; (ii) the relative size of each
fund; (iii) each fund's investment objectives, style and portfolio
composition; and (iv) any other factors relevant to achieving a fair and
equitable allocation among funds.
If there are insufficient securities to satisfy all orders, allocations
are generally made among participating funds PRO RATA on the basis of each
fund's order size. Allocations may deviate from a strict PRO RATA allocation
if the Chief Investment Officer or his designee determines that it is fair
and equitable to allocate on other than a PRO RATA basis.
Certain funds or groups of funds (each a "Rotational Group") may
participate in IPOs on a rotational basis. Each Rotational Group
participates in an IPO based on a pre-determined sequential order and only
one Rotational Group may participate in a particular IPO. Shares allocated
to a Rotational Group generally are re-allocated PRO RATA to the funds in the
group based on the order size as determined by the Equity Trading Desk.
SOFT DOLLARS. Subject to the policy of seeking the best combination of
price and execution, the Fund may execute transactions with brokerage firms
that provide, along with brokerage services, research services and products,
as defined in Section 28(e) of the Securities Exchange Act of 1934. Section
28(e) provides a "safe harbor" to investment managers who use commission
dollars of their advised accounts to obtain investment research and brokerage
services and products. These arrangements are often called soft dollar
arrangements. Research and brokerage services and products that provide
lawful and appropriate assistance to the manager in performing investment
decision-making responsibilities fall within the safe harbor.
The services and products provided under these arrangements permit the
Manager to supplement its own research and analysis activities, and provide
it with information from individuals and research staffs of many securities
firms.
Some of the research products or services received by the Manager may
have both a research function and a non-research administrative function (a
"mixed use"). If the Manager determines that any research product or service
has a mixed use, the Manager will allocate in good faith the cost of such
service or product accordingly. The portion of the product or service that
the Manager determines will assist it in the investment decision-making
process may be paid for in soft dollars. The non-research portion is paid
for by the Manager directly. Any such allocation may create a conflict of
interest for the Manager.
The Manager generally considers the amount and nature of research,
execution and other services provided by brokerage firms, as well as the
extent to which such services are relied on, and attempts to allocate a
portion of the brokerage business of its clients on the basis of that
consideration. Neither the research services nor the amount of brokerage
given to a particular brokerage firm are made pursuant to any agreement or
commitment with any of the selected firms that would bind the Manager to
compensate the selected brokerage firm for research provided. The Manager
endeavors to direct sufficient commissions to broker/dealers that have
provided it with research to ensure continued receipt of research the Manager
believes is useful. Actual brokerage commissions received by a broker/dealer
may be more or less than the suggested allocations.
The Manager may receive a benefit from the research services and
products that are not passed on to the Fund in the form of a direct monetary
benefit. Further, research services and products may be useful to the
Manager in providing investment advice to the Fund or clients it advises.
Likewise, information made available to the Manager from brokerage firms
effecting securities transactions for the Fund may be utilized on behalf of
another fund or client. Thus, there may be no correlation between the amount
of brokerage commissions generated by a particular fund or client and the
indirect benefits received by that fund or client.
The aggregate amount of transactions of the Fund during the fiscal year
ended August 31, 2003 in securities effected on an agency basis through a
broker in consideration of, among other things, research services provided
was $14,949,259, and the commissions and concessions related to such
transactions were $26,967.
Certain brokers and dealers who provide quality brokerage and execution
services also furnish research services to the Manager. The Manager has
adopted a brokerage allocation policy embodying the concepts of Section 28(e)
of the Securities Exchange Act of 1934 ("Section 28(e)"), which permits an
investment adviser to cause an account to pay commission rates in excess of
those another broker or dealer would have charged for effecting the same
transaction, if the adviser determines in good faith that the commission paid
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be made in terms of either a particular
transaction involved or the overall responsibilities of the adviser with
respect to the accounts over which it exercises investment discretion.
Research may not necessarily benefit all accounts paying commissions to such
brokers. The Manager may receive research, as defined in Section 28(e), in
connection with selling concessions and designations in fixed price offerings
for non-ERISA accounts.
The Manager may deem it appropriate to cause one of its advisory
clients to sell a security and another of its advisory clients to purchase
the same security at or about the same time. Under such circumstances, the
Manager may arrange to have the purchase and sale transaction effected
directly between its clients ("cross transactions"). Cross transactions will
be effected pursuant to procedures adopted under Rule 17a-7 under the 1940
Act.
Portfolio turnover may vary from year to year, as well as within a
year. In periods in which extraordinary market conditions prevail, the
Manager will not be deterred from changing the Fund's investment strategy as
rapidly as needed, in which case high turnover rates can be anticipated which
would result in greater brokerage expenses.
The overall reasonableness of brokerage commissions paid is evaluated
by the Manager based upon its knowledge of available information as to the
general level of commissions paid by other institutional investors for
comparable services. When transactions are executed in the over-the-counter
market, the Fund will deal with the primary market makers unless a more
favorable price or execution otherwise is obtainable.
For the fiscal years ended August 31, 2001, 2002 and 2003, the Fund
paid total brokerage commissions of $245,687, $182,513 and $150,422,
respectively, none of which was paid to the Distributor. The above figures
for brokerage commissions do not include gross spreads and concessions on
principal transactions, which, where determinable, amounted to $143,339,
$21,058 and $16,047, respectively, for such periods, none of which was paid
to the Distributor.
Consistent with the policy of obtaining the most favorable net price,
brokerage transactions may be conducted through the Manager or its
affiliates. The Fund's Board has adopted procedures in conformity with Rule
17e-1 under the 1940 Act to ensure that all brokerage commissions paid to the
Manager or its affiliates are reasonable and fair.
During the fiscal year ended August 31, 2003, the Fund paid brokerage
commissions of $150 to an affiliate of the Manager. This amount represented
approximately 0.1% of the aggregate brokerage commissions paid by the Fund
for transactions involving approximately 0.2% of the aggregate dollar value
of transactions for which the Fund paid brokerage commissions.
REGULAR BROKER-DEALERS. A Fund may execute transactions with one or
more of its "regular brokers or dealers," as defined in Rule 10b-1 under the
1940 Act. Rule 10b-1 provides that a "regular broker or dealer" is one of
the ten brokers or dealers that, during the Fund's most recent fiscal year
(i) received the greatest dollar amount of brokerage commissions from
participating, either directly or indirectly, in the Fund's portfolio
transactions, (ii) engaged as principal in the largest dollar amount of the
Fund's portfolio transactions or (iii) sold the largest dollar amount of the
Fund's securities. The following is a chart of the Fund's acquired securities
of its regular brokers or dealers for the fiscal year ended August 31, 2003.
------------------------------------------------------------------
NAME OF REGULAR BROKER OR DEALER AGGREGATE VALUE PER
ISSUER
------------------------------------------------------------------
------------------------------------------------------------------
Banc of America Securities LLC $1,213,000
------------------------------------------------------------------
------------------------------------------------------------------
Citigroup Global Markets Inc. $2,763,000
------------------------------------------------------------------
------------------------------------------------------------------
Goldman, Sachs & Co. $ 726,000
------------------------------------------------------------------
------------------------------------------------------------------
Merrill Lynch, Pierce, Fenner & Smith $ 161,000
Inc.
------------------------------------------------------------------
------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. $7,129,000
------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
VALUATION OF PORTFOLIO SECURITIES. The Fund's 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 listed on the NASDAQ
National Market System for which market quotations are available are valued
at the official closing price or, if there is no official closing price on
that day; at the last sale price. Securities not listed on an exchange or
national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked
prices, except in the case of open short positions where the asked price is
used for valuation purposes. Bid price is used when no asked price is
available. Any assets or liabilities initially expressed in terms of foreign
currency will be translated into U.S. dollars at the midpoint of the New York
interbank market spot exchange rate as quoted on the day of such translation
or, if no such rate is quoted on such date, such other quoted market exchange
rate as may be determined to be appropriate by the Manager. Forward currency
contracts will be valued at the current cost of offsetting the contract. If
the Fund has to obtain prices as of the closing of trading on various
exchanges throughout the world, the calculation of net asset value may not
take place contemporaneously with the determination of prices of certain of
the Fund's securities. Any securities or other assets for which recent
market quotations are not readily available are valued at fair value as
determined in good faith by the Board. Short-term investments may be carried
at amortized cost, which approximates value. 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.
Restricted securities, as well as securities or other assets for which
recent market quotations are not readily available or are determined by the
Fund not to reflect accurately fair value (such as when an event occurs after
the close of the exchange on which the security is principally traded and
that is determined by the Fund to have changed the value of the security),
are valued at fair value as determined in good faith based on procedures
approved by the Board. The valuation of a security based on fair value
procedures may differ from the security's most recent closing price, and from
the prices used by other mutual funds to calculate their net asset values.
Restricted securities which are, or are convertible into, other securities of
the same class of securities for which a public market exists usually will be
valued at market value less the same percentage discount at which such
restricted securities were purchased. This discount will be revised by the
Board, if the Board members believe that it no longer reflects the value of
the restricted securities. Restricted securities not of the same class as
securities for which a public market exists usually will be valued initially
at cost. Any subsequent adjustment from cost will be based upon
considerations deemed relevant by the Fund's Board.
NEW YORK STOCK EXCHANGE CLOSINGS. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Management believes that the Fund has qualified as a "regulated
investment company" under the Code for the fiscal year ended August 31,
2003. The Fund intends to continue to so qualify if such qualification is in
the best interests of its shareholders. As a regulated investment company,
the Fund will pay no Federal income tax on net investment income and net
realized securities gains to the extent that such income and gains are
distributed to shareholders in accordance with applicable provisions of the
Code. To qualify as a regulated investment company, the Fund must distribute
at least 90% of its net income (consisting of net investment income and net
short-term capital gain) to its shareholders and must meet certain asset
diversification and other requirements. If the Fund does 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 or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividends or distributions 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 of Fund
shares 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 of investment in an economic sense as described herein. In
addition, if a shareholder has not held the shares of the Fund for more than
six months 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 a
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.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gain or
loss realized from the disposition of foreign currencies (including foreign
currency denominated bank deposits) and non-U.S. dollar denominated
securities (including debt instruments and certain forward contracts and
options) may be treated as ordinary income or loss. 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") (other than
those taxed under Section 988 of the Code) 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 and options 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 their then fair market value, resulting in additional gain or
loss to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain futures or
forward contracts or options transactions with respect to actively traded
personal property may be considered, for tax purposes, to constitute
"straddles." 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 positions") and then enters into a futures, forward,
or offsetting notional principal contract (collectively, a "Contract") with
respect to 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 enters into certain derivatives (including forward
contracts, long positions under notional principal contracts, and related
puts and calls) with respect to equity interests in certain pass-thru
entities (including other regulated investment companies, real estate
investment trusts, partnerships, real estate mortgage investment conduits and
certain trusts and foreign corporations), long-term capital gain with respect
to the derivative may be recharacterized as ordinary income to the extent it
exceeds the long-term capital gain that would have been realized had the
interest in the pass-thru entity been held directly by the Fund during the
term of the derivative contract. Any gain recharacterized as ordinary income
will be treated as accruing at a constant rate over the term of the
derivative contract and may be subject to an interest charge. The Treasury
has authority to issue regulations expanding the application of these rules
to derivatives with respect to debt instruments and/or stock in corporations
that are not pass-thru entities.
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 held
beyond the end of the Fund's taxable year may be treated as ordinary income.
Investment by the Fund in securities issued or acquired at a discount,
or providing for deferred interest or for payment of interest in the form of
additional obligations could under special tax rules affect the amount,
timing and character of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the
Fund could be required to accrue a portion of the discount (or deemed
discount) at which the securities were issued each year and to distribute
such income in order to maintain its qualification as a regulated investment
company. In such case, the Fund may have to dispose of securities which it
might otherwise have continued to hold in order to generate cash to satisfy
these distribution requirements.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.
SUMMARY OF THE PROXY VOTING POLICY, PROCEDURES AND GUIDELINES OF THE
DREYFUS FAMILY OF FUNDS
The Board of each fund in the Dreyfus Family of Funds has delegated to
the Manager the authority to vote proxies of companies held in the fund's
portfolio. The Manager, through its participation on the Mellon Proxy Policy
Committee (the "MPPC"), applies Mellon's Proxy Voting Policy, related
procedures, and voting guidelines when voting proxies on behalf of the funds.
The Manager recognizes that an investment adviser is a fiduciary that
owes its clients, including funds it manages, a duty of utmost good faith and
full and fair disclosure of all material facts. An investment adviser's duty
of loyalty requires an adviser to vote proxies in a manner consistent with
the best interest of its clients and precludes the adviser from subrogating
the clients' interests to its own. In addition, an investment adviser voting
proxies on behalf of a fund must do so in a manner consistent with the best
interests of the fund and its shareholders.
The Manager seeks to avoid material conflicts of interest by
participating in the MPPC, which applies detailed, pre-determined written
proxy voting guidelines (the "Voting Guidelines") in an objective and
consistent manner across client accounts, based on internal and external
research and recommendations provided by a third party vendor, and without
consideration of any client relationship factors. Further, the MPPC engages
a third party as an independent fiduciary to vote all proxies of funds
managed by Mellon or its affiliates (including the Dreyfus Family of Funds),
and may engage an independent fiduciary to vote proxies of other issuers at
its discretion.
All proxies received by the funds are reviewed, categorized, analyzed
and voted in accordance with the Voting Guidelines. The guidelines are
reviewed periodically and updated as necessary to reflect new issues and any
changes in Mellon's or the Manager's policies on specific issues. Items that
can be categorized under the Voting Guidelines are voted in accordance with
any applicable guidelines or referred to the MPPC, if the applicable
guidelines so require. Proposals that cannot be categorized under the Voting
Guidelines are referred to the MPPC for discussion and vote. Additionally,
the MPPC reviews proposals where it has identified a particular company,
industry or issue for special scrutiny. With regard to voting proxies of
foreign companies, the MPPC weighs the cost of voting and potential inability
to sell the securities (which may occur during the voting process) against
the benefit of voting the proxies to determine whether or not to vote. With
respect to securities lending transactions, the MPPC seeks to balance the
economic benefits of continuing to participate in an open securities lending
transaction against the inability to vote proxies.
When evaluating proposals, the MPPC recognizes that the management of a
publicly-held company may need protection from the market's frequent focus on
short-term considerations, so as to be able to concentrate on such long-term
goals as productivity and development of competitive products and services.
In addition, the MPPC generally supports proposals designed to provide
management with short-term insulation from outside influences so as to enable
them to bargain effectively with potential suitors to the extent such
proposals are discrete and not bundled with other proposals. The MPPC
believes that a shareholder's role in the governance of a publicly-held
company is generally limited to monitoring the performance of the company and
its management and voting on matters which properly come to a shareholder
vote. However, the MPPC generally opposes proposals designed to insulate an
issuer's management unnecessarily from the wishes of a majority of
shareholders. Accordingly, the MPPC generally votes in accordance with
management on issues that the MPPC believes neither unduly limit the rights
and privileges of shareholders nor adversely affect the value of the
investment.
On questions of social responsibility where economic performance does
not appear to be an issue, the MPPC attempts to ensure that management
reasonably responds to the social issues. Responsiveness will be measured by
management's efforts to address the particular social issue including, where
appropriate, assessment of the implications of the proposal to the ongoing
operations of the company. The MPPC will pay particular attention to repeat
issues where management has failed in its commitment in the intervening
period to take actions on issues.
In evaluating proposals regarding incentive plans and restricted stock
plans, the MPPC typically employs a shareholder value transfer model. This
model seeks to assess the amount of shareholder equity flowing out of the
company to executives as options are exercised. After determining the cost
of the plan, the MPPC evaluates whether the cost is reasonable based on a
number of factors, including industry classification and historical
performance information. The MPPC generally votes against proposals that
permit or are silent on the repricing or replacement of stock options without
shareholder approval.
PERFORMANCE INFORMATION
The Fund's average annual total return for the 1, 5 and 10 year periods
ended August 31, 2003 was 7.09%, 2.62% and 6.67%, respectively. Average
annual total return is calculated by determining the ending redeemable value
of an investment purchased at net asset value per share with a hypothetical
$1,000 payment made at the beginning of the period (assuming the reinvestment
of dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number of
years in the period) and subtracting 1 from the result.
The Fund's total return for the period September 30, 1992 (commencement
of operations) through August 31, 2003 was 107.61%. Total return is
calculated by subtracting the amount of the Fund's net asset value per share
at the beginning of a stated period from the net asset value per share at the
end of the period (after giving effect to the reinvestment of dividends and
distributions during the period), and dividing the result by the net asset
value per share at the beginning of the period.
From time to time, the after-tax returns of the Fund may be advertised
or otherwise reported. The formula for computing after-tax returns assumes
an initial one-time investment of $1,000 and the deduction of the maximum
sales load, if any, and other charges from this initial investment.
After-tax returns (including those reflecting Fund distributions and/or
redemption of Fund shares) are calculated using the then-current highest
individual Federal marginal income tax rates, and do not reflect the impact
of state and local taxes. After-tax returns on distributions and redemptions
are computed assuming a complete sale of Fund shares at the end of the period
and reflect reinvested amounts. The formula assumes that the taxable amount
and tax character of each distribution are as specified by the Fund on the
dividend declaration date, adjusted to reflect subsequent
recharacterizations, and ignores the effect of either the alternative minimum
tax or phaseouts of certain tax credits, exemptions, and deductions for
taxpayers whose adjusted gross income is above a specified amount.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper Leader
Ratings, Inc., Standard & Poor's 500 Composite Stock Price Index, Standard &
Poor's MidCap 400 Index, the Dow Jones Industrial Average, Morningstar, Inc.,
Lehman Brothers Aggregate Bond Index, and other indices or industry
publications.
From time to time, advertising material for the Fund may include
biographical information relating to one or more of its portfolio managers
and may refer to, or include commentary by a 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. In addition, from time to time advertising materials for the Fund
may refer to Morningstar ratings and related analysis supporting the
ratings. From time to time advertising materials may refer to studies
performed by the Manager or its affiliates, such as "The Dreyfus Tax Informed
Investing Study" or "The Dreyfus Gender Investment Comparison Study (1996 &
1997)" or other such studies.
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.
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 a majority 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 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 purchases/redemptions
or exchanges (so called roundtrips) during any twelve-month period 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.
The Fund will send 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, 5 Times Square, New York, New York 10036,
independent auditors, have been selected as independent auditors of the Fund.
APPENDIX
Rating Categories
Description of certain ratings assigned by S&P, Moody's and Fitch:
S&P
LONG-TERM
AAA
An obligation rated 'AAA' has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA
An obligation rated 'AA' differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A
An obligation rated 'A' is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB
An obligation rated 'BBB' exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB
An obligation rated 'BB' is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
the obligor's inadequate capacity to meet its financial commitment on the
obligation.
B
An obligation rated 'B' is more vulnerable to nonpayment than obligations
rated 'BB', but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet
its financial commitment on the obligation.
Note: The ratings 'AA' to `B" may be modified by the addition of a plus (+)
or minus (-) sign designation to show relative standing within the major
rating categories.
SHORT-TERM
A-1
A short-term obligation rated 'A-1' is rated in the highest category by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are given a plus sign (+)
designation. This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.
MOODY'S
LONG-TERM
Aaa
Bonds rated 'Aaa' are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." 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 are generally 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 risk appear somewhat larger than
the '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 some time 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 thereby 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.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification 'Aa' through `B'. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
PRIME RATING SYSTEM (SHORT-TERM)
Issuers rated PRIME-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries.
High rates of return on funds employed.
Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
Well-established access to a range of financial markets and assured
sources of alternate liquidity.
FITCH
LONG-TERM INVESTMENT GRADE
AAA
HIGHEST CREDIT QUALITY. 'AAA' ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for
timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA
VERY HIGH CREDIT QUALITY. 'AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A
HIGH CREDIT QUALITY. 'A' ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong.
This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB
GOOD CREDIT QUALITY. 'BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
LONG-TERM SPECULATIVE GRADE
BB
SPECULATIVE. `BB' ratings indicate that there is a possibility of credit risk
developing, particularly as a result of adverse economic change over time;
however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.
B
HIGHLY SPECULATIVE. `B' ratings indicate that significant credit risk
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent
upon a sustained favorable business and economic environment.
SHORT-TERM
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and
thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F1
HIGHEST CREDIT QUALITY. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
Notes to long-term and short-term ratings: A plus (+) or minus (-) sign
designation may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA' long term
rating category, or to short-term ratings other than `F1.'
Dreyfus Balanced Fund, Inc.
PART C. OTHER INFORMATION
-------------------------------
Item 23. Exhibits.
------- -----------------------------------------------------
(a) Registrant's Articles of Incorporation are incorporated by
reference to Exhibit (1) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on December 14, 1995.
(b) Registrant's By-Laws are incorporated by reference to Exhibit (b)
of Post-Effective Amendment No. 11 to the Registration Statement on
Form N-1A, filed on December 29, 2000.
(d) Management Agreement is incorporated by reference to Exhibit (5) of
Post-Effective Amendment No. 4 to the Registration Statement on
Form N-1A, filed on October 26, 1994.
(e) Distribution Agreement is incorporated by reference to Exhibit (d)
of Post-Effective Amendment No. 11 to the Registration Statement on
Form N-1A, filed on December 29, 2000.
(g) Custody and Services Agreement with Mellon Bank, N.A.
(h) Shareholder Services Plan, as revised, is incorporated by reference
to Exhibit (9) of Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on October 26, 1994.
(i) Opinion and consent of Registrant's counsel is incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on December 14, 1995.
(j) Consent of Independent Auditors.
(p) Code of Ethics.
Other Exhibits
--------------
(a) Powers of Attorney.
(b) Certificate of Assistant Secretary.
Item 24. Persons Controlled by or under Common Control with Registrant.
------- --------------------------------------------------------------
Not Applicable
Item 25. Indemnification
------- ---------------
The Statement as to the general effect of any contract,
arrangements or statute under which a Board member, officer,
underwriter or affiliated person of the Registrant is insured or
indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any
Board member, officer, affiliated person or underwriter for their
own protection, is incorporated by reference to Item 25(b) of
Part C of Post-Effective Amendment No. 11 to the Registration
Statement on Form N-1A, filed on December 29, 2000.
Reference is also made to the Distribution Agreement attached as
Exhibit 23(e) of Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A, filed on December 29, 2000.
Item 26. Business and Other Connections of Investment Adviser.
------- ----------------------------------------------------
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the
investment adviser and manager for sponsored investment companies
registered under the Investment Company Act of 1940 and as an
investment adviser to institutional and individual accounts.
Dreyfus also serves as sub-investment adviser to and/or
administrator of other investment companies. Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus, serves
primarily as a registered broker-dealer. Dreyfus Investment
Advisors Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans,
institutions and individuals.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER (CONTINUED)
OFFICERS AND DIRECTORS OF INVESTMENT ADVISER
[Enlarge/Download Table]
Name and Position
WITH DREYFUS OTHER BUSINESSES POSITION HELD DATES
STEPHEN R. BYERS Lighthouse Growth Advisors LLC++ Member, Board of Managers 9/02 - Present
Director, Vice Chairman, and President 9/02 - 11/02
Chief Investment Officer
Dreyfus Service Corporation++ Senior Vice President 3/00 - Present
Founders Asset Management, Member, Board of Managers 6/02 - Present
LLC****
Dreyfus Investment Advisors, Chief Investment Officer 2/02 - Present
Inc. ++ and Director
STEPHEN E. CANTER Mellon Financial Corporation+ Vice Chairman 6/01 - Present
Chairman of the Board,
Chief Executive Officer and Mellon Bank, N.A.+ Vice Chairman 6/01 - Present
Chief Operating Officer
Standish Mellon Asset Management Board Manager 7/03 - Present
Company, LLC*
Mellon Growth Advisors, LLC* Board Member 1/02 - 7/03
Dreyfus Investment Chairman of the Board 1/97 - 2/02
Advisors, Inc.++ Director 5/95 - 2/02
President 5/95 - 2/02
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - 7/03
Member
Mellon Equity Associates, LLP+ Executive Committee 1/99 - Present
Member
Franklin Portfolio Associates, Director 2/99 - Present
LLC*
Franklin Portfolio Holdings, Inc.* Director 2/99 - Present
TBCAM Holdings, LLC* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Founders Asset Management Member, Board of 12/97 - Present
LLC**** Managers
The Dreyfus Trust Company+++ Director 6/95 - Present
Chairman 1/99 - Present
President 1/99 - Present
Chief Executive Officer 1/99 - Present
J. CHARLES CARDONA Dreyfus Investment Advisors, Chairman of the Board 2/02 - Present
Director and Vice Chairman Inc.++
Boston Safe Advisors, Inc.++ Director 10/01 - Present
Dreyfus Service Corporation++ Executive Vice President 2/97 - Present
Director 8/00 - Present
STEVEN G. ELLIOTT Mellon Financial Corporation+ Director 1/01 - Present
Director Senior Vice Chairman 1/99 - Present
Chief Financial Officer 1/90 - Present
Mellon Bank, N.A.+ Director 1/01 - Present
Senior Vice Chairman 3/98 - Present
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Executive Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+
Mellon Financial Services Treasurer 12/87 - Present
Corporation # 5+
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
LAWRENCE S. KASH The Dreyfus Trust Company+++ Director 12/94 - Present
Vice Chairman
Mellon Bank, N.A.+ Executive Vice President 6/92 - Present
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
DAVID F. LAMERE Mellon Financial Corporation + Vice Chairman 9/01 - Present
Director
Wellington-Medford II Properties, President and Director 2/99 - Present
Inc.
Medford, MA
TBC Securities Co., Inc. President and Director 2/99 - Present
Medford, MA
The Boston Company, Inc. * Chairman & CEO 1/99 - Present
Boston Safe Deposit and Trust Chairman & CEO 1/99 - Present
Company*
Mellon Private Trust Co., N.A. Chairman 4/97 - 8/00
2875 Northeast 191st Street, Director 4/97 - 8/00
North Miami, FL 33180
Newton Management Limited Director 10/98 - Present
London, England
Laurel Capital Advisors, LLP+ Executive Committee Member 8/98 - Present
Mellon Bank, N.A. + Vice Chairman 8/01 - Present
Exec. Management Group
Exec. Vice President 8/01 - Present
2/99 - 9/01
Mellon Trust of New York National Chairman 4/98 - 8/00
Association
1301 Avenue of the Americas
New York, NY 10017
Mellon Trust of California Chairman 2/96 - 8/00
Los Angles, CA
Mellon United National Bank Chairman 2/95 - Present
2875 Northeast 191st Street, Director 11/98 - Present
North Miami, FL 33180
Mellon Asset Holdings, Inc. + President 3/99 - Present
Director 6/99 - Present
Mellon Global Investing Corp. + President 1/00 - Present
MARTIN G. MCGUINN Mellon Financial Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
MICHAEL G. MILLARD Lighthouse Growth Advisors LLC++ Member, Board of Managers 9/02 - Present
Director and President Vice President 9/02 - 11/02
Dreyfus Service Corporation++ Chairman of the Board 4/02 - Present
Chief Executive Officer 4/02 - Present
Director 8/00 - Present
Executive Vice President 8/00 - 5/02
Senior Vice President 3/00 - 8/00
Executive Vice President - 5/98 - 3/00
Dreyfus Investment Division
Dreyfus Service Organization, Inc.++ Director 4/02 - Present
Dreyfus Insurance Agency of Director 4/02 - Present
Massachusetts Inc. ++
Founders Asset Management Member, Board of Managers 5/01 - Present
LLC****
Boston Safe Advisors, Inc. ++ Director 10/01 - Present
RONALD P. O'HANLEY Mellon Financial Corporation+ Vice Chairman 6/01 - Present
Vice Chairman
and Director Mellon Bank, N.A. + Vice Chairman 1/97 - Present
Mellon Growth Advisors, LLC* Board Member 1/02 - 7/03
TBC General Partner, LLC* President 7/03 - Present
Standish Mellon Asset Management Board Member 7/01 - 7/03
Holdings, LLC
One Financial Center
Boston, MA 02211
Standish Mellon Asset Management Board Member 7/01 - Present
Company, LLC
One Financial Center
Boston, MA 02211
Franklin Portfolio Holdings, LLC* Director 12/00 - Present
Franklin Portfolio Associates, Director 4/97 - Present
LLC*
Pareto Partners (NY) Partner Representative 2/00 - Present
505 Park Avenue
NY, NY 10022
Boston Safe Deposit and Trust Executive Committee 1/99 - 1/01
Company* Member
Director 1/99 - 1/01
The Boston Company, Inc.* Executive Committee 1/99 - 1/01
Member 1/99 - 1/01
Director
Buck Consultants, Inc.++ Director 7/97 - Present
Newton Management Limited Executive Committee 10/98 - Present
London, England Member
Director 10/98 - Present
Mellon Global Investments Japan Ltd. Non-Resident Director 11/98 - Present
Tokyo, Japan
TBCAM Holdings, LLC* Director 1/98 - Present
Fixed Income (MA) Trust* Trustee 6/03 - Present
Fixed Income (DE) Trust* Trustee 6/03 - Present
Boston Safe Advisors, Inc. ++ Chairman 6/97 - 10/01
Director 2/97 - 10/01
Pareto Partners Partner Representative 5/97 - Present
271 Regent Street
London, England W1R 8PP
Mellon Capital Management Director 2/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - 7/03
Mellon Bond Associates, LLP+ Trustee 1/98 - 7/03
Chairman 1/98 - 7/03
Mellon Equity Associates, LLP+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon Global Investing Corp. * Director 5/97 - Present
Chairman 5/97 - Present
Chief Executive Officer 5/97 - Present
J. DAVID OFFICER Dreyfus Service Corporation++ President 3/00 - Present
Vice Chairman Executive Vice President 5/98 - 3/00
and Director Director 3/99 - Present
MBSC, LLC++ Manager, Board of Managers 4/02 - Present
and President
Boston Safe Advisors, Inc.++ Director 10/01 - Present
Dreyfus Transfer, Inc.++ Chairman and Director 2/02 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++
Dreyfus Brokerage Services, Inc. Chairman 3/99 - 1/02
6500 Wilshire Boulevard, 8th Floor,
Los Angeles, CA 90048
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
North Miami Beach, FL 33180
Mellon Bank, N.A.+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
Boston Safe Deposit and Trust Director 7/96 - Present
Company*
Mellon Trust of New York Director 6/96 - Present
1301 Avenue of the Americas
New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon United National Bank Director 3/98 - Present
1399 SW 1st Ave., Suite 400
Miami, Florida
Boston Group Holdings, Inc.* Director 12/97 - Present
Dreyfus Financial Services Corp. + Director 9/96 - 4/02
Dreyfus Investment Services Director 4/96 - Present
Corporation+
RICHARD W. SABO Founders Asset Management President 12/98 - Present
Director LLC**** Chief Executive Officer 12/98 - Present
DIANE P. DURNIN Seven Six Seven Agency, Inc. ++ Director 4/02 - Present
Executive Vice President
MARK N. JACOBS Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++
Executive Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
PATRICE M. KOZLOWSKI None
Senior Vice President -
Corporate
Communications
WILLIAM H. MARESCA Lighthouse Growth Advisors LLC++ Member, Board of Managers 9/02 - Present
Controller Vice President and 9/02 - Present
Treasurer
Chief Financial Officer
The Dreyfus Trust Company+++ Treasurer 3/99 - Present
Director 9/98 - Present
3/97 - Present
MBSC, LLC++ Chief Financial Officer and 4/02 - Present
Manager, Board of Managers
Boston Safe Advisors, Inc. ++ Chief Financial Officer and 10/01 - Present
Director
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Director 8/00 - Present
Dreyfus Consumer Credit Treasurer 10/98 - Present
Corporation ++
Dreyfus Investment Advisors, Inc. ++ Treasurer 10/98 - Present
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
c/o Mellon Corporation Director 2/02 - Present
Two Greenville Center
4001 Kennett Pike
Suite 218
Greenville, DE 19807
The TruePenny Corporation++ Vice President 10/98 - Present
Director 2/02 - Present
The Trotwood Corporation++ Vice President 10/98 - 7/99
Trotwood Hunters Corporation++ Vice President 10/98 - 7/99
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - 7/99
Dreyfus Transfer, Inc. ++ Chief Financial Officer 5/98 - Present
Dreyfus Service Treasurer 3/99 - Present
Organization, Inc.++
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++
MARY BETH LEIBIG None
Vice President -
Human Resources
ANGELA E. PRICE None
Vice President
THEODORE A. SCHACHAR Lighthouse Growth Advisors LLC++ Assistant Treasurer 9/02 - Present
Vice President - Tax
Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
MBSC, LLC++ Vice President -Tax 4/02 - Present
The Dreyfus Consumer Credit Chairman 6/99 - Present
Corporation ++ President 6/99 - Present
Dreyfus Investment Advisors, Vice President - Tax 10/96 - Present
Inc.++
Dreyfus Service Organization, Vice President - Tax 10/96 - Present
Inc.++
WENDY STRUTT None
Vice President
RAYMOND J. VAN COTT Mellon Financial Corporation+ Vice President 7/98 - Present
Vice President -
Information Systems
JAMES BITETTO The TruePenny Corporation++ Secretary 9/98 - Present
Assistant Secretary
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
The Dreyfus Consumer Credit Vice President and Director 2/02 - Present
Corporation++
STEVEN F. NEWMAN Dreyfus Transfer, Inc. ++ Vice President 2/97 - Present
Assistant Secretary Director 2/97 - Present
Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
**** The address of the business so indicated is 2930 East Third Avenue, Denver, Colorado 80206.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ The address of the business so indicated is 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
Item 27. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
1) CitizensSelect Funds
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Balanced Fund, Inc.
5) Dreyfus BASIC Money Market Fund, Inc.
6) Dreyfus BASIC U.S. Mortgage Securities Fund
7) Dreyfus BASIC U.S. Government Money Market Fund
8) Dreyfus Bond Funds, Inc.
9) Dreyfus California Intermediate Municipal Bond Fund
10) Dreyfus California Tax Exempt Bond Fund, Inc.
11) Dreyfus California Tax Exempt Money Market Fund
12) Dreyfus Cash Management
13) Dreyfus Cash Management Plus, Inc.
14) Dreyfus Connecticut Intermediate Municipal Bond Fund
15) Dreyfus Connecticut Municipal Money Market Fund, Inc.
16) Dreyfus Fixed Income Securities
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) Dreyfus Founders Funds, Inc.
20) The Dreyfus Fund Incorporated
21) Dreyfus GNMA Fund, Inc.
22) Dreyfus Government Cash Management Funds
23) Dreyfus Growth and Income Fund, Inc.
24) Dreyfus Growth and Value Funds, Inc.
25) Dreyfus Growth Opportunity Fund, Inc.
26) Dreyfus Index Funds, Inc.
27) Dreyfus Institutional Cash Advantage Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Preferred Money Market Funds
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) Dreyfus Investment Grade Funds, Inc.
34) Dreyfus Investment Portfolios
35) The Dreyfus/Laurel Funds, Inc.
36) The Dreyfus/Laurel Funds Trust
37) The Dreyfus/Laurel Tax-Free Municipal Funds
38) Dreyfus LifeTime Portfolios, Inc.
39) Dreyfus Liquid Assets, Inc.
40) Dreyfus Massachusetts Intermediate Municipal Bond Fund
41) Dreyfus Massachusetts Municipal Money Market Fund
42) Dreyfus Massachusetts Tax Exempt Bond Fund
43) Dreyfus Midcap Index Fund, Inc.
44) Dreyfus Money Market Instruments, Inc.
45) Dreyfus Municipal Bond Fund, Inc.
46) Dreyfus Municipal Cash Management Plus
47) Dreyfus Municipal Funds, Inc.
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Money Market Fund, Inc.
51) Dreyfus New York Municipal Cash Management
52) Dreyfus New York Tax Exempt Bond Fund, Inc.
53) Dreyfus New York Tax Exempt Intermediate Bond Fund
54) Dreyfus New York Tax Exempt Money Market Fund
55) Dreyfus U.S. Treasury Intermediate Term Fund
56) Dreyfus U.S. Treasury Long Term Fund
57) Dreyfus 100% U.S. Treasury Money Market Fund
58) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
59) Dreyfus Pennsylvania Municipal Money Market Fund
60) Dreyfus Premier California Municipal Bond Fund
61) Dreyfus Premier Equity Funds, Inc.
62) Dreyfus Premier Fixed Income Funds
63) Dreyfus Premier International Funds, Inc.
64) Dreyfus Premier GNMA Fund
65) Dreyfus Premier Municipal Bond Fund
66) Dreyfus Premier New Jersey Municipal Bond Fund, Inc.
67) Dreyfus Premier New Leaders Fund, Inc.
68) Dreyfus Premier New York Municipal Bond Fund
69) Dreyfus Premier Opportunity Funds
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Stock Funds
72) The Dreyfus Premier Third Century Fund, Inc.
73) Dreyfus Premier Value Equity Funds
74) Dreyfus Premier Worldwide Growth Fund, Inc.
75) Dreyfus Short-Intermediate Government Fund
76) Dreyfus Short-Intermediate Municipal Bond Fund
77) The Dreyfus Socially Responsible Growth Fund, Inc.
78) Dreyfus Stock Index Fund, Inc.
79) Dreyfus Tax Exempt Cash Management
80) Dreyfus Treasury Cash Management
81) Dreyfus Treasury Prime Cash Management
82) Dreyfus Variable Investment Fund
83) Dreyfus Worldwide Dollar Money Market Fund, Inc.
84) General California Municipal Bond Fund, Inc.
85) General California Municipal Money Market Fund
86) General Government Securities Money Market Funds, Inc.
87) General Money Market Fund, Inc.
88) General Municipal Bond Fund, Inc.
89) General Municipal Money Market Funds, Inc.
90) General New York Municipal Bond Fund, Inc.
91) General New York Municipal Money Market Fund
92) Mellon Funds Trust
[Enlarge/Download Table]
((b)
Positions
Name and principal and Offices with
Business address Positions and offices with the Distributor Registrant
---------------- ------------------------------------------ ----------
Michael G. Millard * Chief Executive Officer and Chairman of the Board None
J. David Officer * President and Director None
J. Charles Cardona * Executive Vice President and Director None
Anthony DeVivio ** Executive Vice President and Director None
James Neiland* Executive Vice President and Director None
Irene Papadoulis ** Executive Vice President and Director None
Prasanna Dhore * Executive Vice President None
Noreen Ross * Executive Vice President None
Matthew R. Schiffman * Executive Vice President and Director None
William H. Maresca * Chief Financial Officer and Director None
Ken Bradle ** Senior Vice President None
Stephen R. Byers * Senior Vice President Executive Vice
President
Lawrence S. Kash * Senior Vice President None
Walter Kress * Senior Vice President None
Matthew Perrone ** Senior Vice President None
Bradley J. Skapyak * Senior Vice President None
Bret Young * Senior Vice President None
Jane Knight * Chief Legal Officer and Secretary None
Stephen Storen * Chief Compliance Officer None
Maria Georgopoulos * Vice President - Facilities Management None
William Germenis * Vice President Anti-Money
Laundering
Compliance Officer
Tracy Hopkins * Vice President None
Donna Impagliazzo * Vice President None
Mary Merkle * Vice President None
Paul Molloy * Vice President None
James Muir * Vice President None
Anthony Nunez * Vice President - Finance None
Gary Pierce * Vice President - Finance None
Theodore A. Schachar * Vice President - Tax None
William Schalda * Vice President None
John Shea * Vice President - Finance None
Susan Verbil * Vice President - Finance None
William Verity * Vice President - Finance None
James Windels * Vice President Treasurer
James Bitetto * Assistant Secretary None
Ronald Jamison * Assistant Secretary None
* Principal business address is 200 Park Avenue, New York, NY 10166.
** Principal business address is 144 Glenn Curtiss Blvd., Uniondale, NY 11556-0144.
Item 28. Location of Accounts and Records
------- --------------------------------
1. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
2. Boston Financial Services, Inc.
One American Express Plaza
Providence, Rhode Island 02903
3. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 29. Management Services
------- -------------------
Not Applicable
Item 30. Undertakings
------- ------------
None
SIGNATURES
------------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it
meets all of the requirements for effectiveness of this Amendment to
the Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York on the day 23rd of
December 2003.
DREYFUS BALANCED FUND, INC.
BY: /s/Stephen E. Canter*
Stephen E. Canter, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signatures Title Date
/S/ STEPHEN E. CANTER * President (Principal Executive 12/23/03
--------------------------- Officer)
Stephen E. Canter
/S/JIM WINDELS* Treasurer 12/23/03
-------------------------- (Principal Accounting and
Jim Windels Financial Officer)
/S/JOSEPH S. DIMARTINO* Chairman of the Board of 12/23/03
-------------------------- Directors
Joseph S. DiMartino
/S/DAVID P. FELDMAN* Director 12/23/03
--------------------------
David P. Feldman
/s/JAMES F. HENRY* Director 12/23/03
--------------------------
James F. Henry
S/ROSALIND G. JACOBS* Director 12/23/03
--------------------------
Rosalind G. Jacobs
/S/PAUL A. MARKS* Director 12/23/03
--------------------------
Paul A. Marks
/s/MARTIN PERETZ* Director 12/23/03
--------------------------
Martin Peretz
/s/BERT W. WASSERMAN* Director 12/23/03
--------------------------
Bert W. Wasserman
*BY: /S/ ROBERT R. MULLERY
---------------------
Robert R. Mullery
Attorney-in-Fact
INDEX OF EXHIBITS
OTHER EXHIBITS
(a) Powers of Attorney dated December 11, 2000......................
Powers of Attorney dated November 14, 2001......................
(b) Certificate of Assistant Secretary..............................
EXHIBITS
(g) Custody and Services Agreement with Mellon Bank, N.A.
(j) Consent of Independent Auditors.................................
(p) Code of Ethics..................................................
Dates Referenced Herein and Documents Incorporated by Reference
↑Top
Filing Submission 0000890341-03-000015 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Fri., Mar. 29, 12:58:02.1am ET