Document/Exhibit Description Pages Size
1: 485BPOS Post-Amendment No. 14 83± 338K
3: EX-23 Consent of Independent Accountant 1 5K
4: EX-24 Power of Attorney -- powerofattorney 4± 19K
5: EX-99 Certificate of Secretary 1 6K
2: EX-99.G Custodian Agreement 21± 80K
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. 14 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 14 [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, 2002 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.
----
Dreyfus Balanced
Fund, Inc.
Seeks long-term capital growth and current income
PROSPECTUS January 1, 2002
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Contents
THE FUND
----------------------------------------------------
2 Goal/Approach
4 Main Risks
8 Past Performance
9 Expenses
10 Management
11 Financial Highlights
YOUR INVESTMENT
--------------------------------------------------------------------
12 Account Policies
15 Distributions and Taxes
16 Services for Fund Investors
18 Instructions for Regular Accounts
20 Instructions for IRAs
FOR MORE INFORMATION
-------------------------------------------------------------------------------
Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
The Fund
Dreyfus Balanced Fund, Inc.
--------------------------------
Ticker Symbol: DRBAX
GOAL/APPROACH
The fund seeks long-term capital growth and current income. To pursue this goal,
the fund invests in equity and fixed-income securities of U.S. and foreign
issuers. The proportion of the fund's assets invested in each type of security
will vary from time to time in accordance with Dreyfus' assessment of economic
conditions and investment opportunities. However, under normal market
conditions, the fund' s equity investments will range from 40% to 75% of its
portfolio, with a benchmark allocation of 60% . Fixed-income investments
(including cash and cash equivalents) will range from 25% to 60%, with a
benchmark allocation of 40%.
In allocating assets between stocks and bonds, the portfolio managers assess the
relative return and risks of each asset class using a model which analyzes
several factors, including interest-rate-adjusted price/earnings ratio, the
valuation and volatility levels of stocks relative to bonds, and other economic
factors, such as interest rates.
In selecting stocks, Dreyfus uses a valuation model to identify and rank stocks
within an industry or sector, based on:
(pound) VALUE, or how a stock is priced relative to its
perceived intrinsic worth
(pound) GROWTH, in this case the sustainability or growth of
earnings or cash flow
(pound) FINANCIAL PROFILE, which measures the financial
health of the company
Concepts to understand
BENCHMARK ALLOCATIONS: represent the asset mix Dreyfus expects to maintain when
its assessment of economic conditions and investment opportunities indicate that
the financial markets are fairly valued relative to each other.
INVESTMENT RANGE: indicates ordinarily expected variations from the benchmarks
and reflects expected shifts within specific asset classes.
Next, based on fundamental analysis, Dreyfus generally selects the most
attractive of the higher ranked securities. While the manager employs a
value-tilt approach, the fund can invest in a mix of value and growth companies.
Dreyfus manages risk by diversifying across companies and industries.
To select fixed-income investments for the fund, Dreyfus reviews the terms of
the instruments and evaluates the creditworthiness of the issuers, considering
all factors which it deems relevant, including, as applicable, a review of the
issuer' s cash flow; level of short-term debt; leverage; capitalization; the
quality and depth of management; profitability; return on assets; and economic
factors relative to the issuer's industry.
Up to 20% of the fund's fixed-income portfolio may be invested in securities
rated below investment grade (BB/Ba and lower), but no lower than B, or the
unrated equivalent as determined by Dreyfus (commonly referred to as "high yield
or "junk" bonds).
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
The Fund
MAIN RISKS
Because stocks and bonds fluctuate in price, the value of your investment in the
fund will go up and down, and you could lose money. 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's performance will be affected by its asset allocation.
If the manager favors an asset class during a period when that asset class
underperforms, the fund' s performance may be hurt.
The fund' s investments in equity securities are subject to the following
principal risks:
By investing in a mix of growth and value companies, the fund assumes the risk
of both and may achieve more modest gains than funds that use only one
investment style.
VALUE STOCK RISK. The fund's investments in value stocks are subject to 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.
GROWTH STOCK RISK. Because the stock prices of growth companies are based in
part on future expectations, they may fall sharply if earnings expectations are
not met or investors believe the prospects for a stock, industry or the economy
in general are weak, even if earnings do increase. Growth stocks also typically
lack the dividend yield that could cushion stock prices in market downturns.
Other potential risks
At times, the fund may invest in certain derivative securities, such as options
and futures contracts, and mortgage-related and asset-backed securities.
Derivatives can be illiquid, and a small investment in them could have a large
impact on the fund's performance. While used primarily to hedge the fund's
portfolio and manage exposure to certain markets, such strategies can increase
the fund's volatility and lower its return. The fund also may engage in foreign
currency transactions and sell short, which involves selling a security it does
not own in anticipation that the security's price will go down.
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.
SECTOR RISK. Because the fund may allocate relatively more assets to certain
industry sectors than others, the fund's performance may be more susceptible to
any developments which affect those sectors emphasized by the fund.
The fund' s investments in fixed-income securities are subject to the following
principal risks:
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 fund' s fixed-income portfolio, the more its share price is
likely to react to interest rates.
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 fixed-income 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.
Other potential risks
The fund may lend its portfolio 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 can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying the fund's gains or losses. At times, the
fund may also engage in short-term trading, which could produce higher
transaction costs and taxable distributions, lowering the fund's after-tax
performance.
The Fund
MAIN RISKS (CONTINUED)
MARKET RISK. The overall risk level will depend on the market sectors in which
the fund is invested and the current interest rate, liquidity and credit quality
of such sectors. Specific types of securities can become more difficult to sell
when there is no active trading market for them, and their value and the fund's
share price may fall dramatically.
ILLIQUIDITY. 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
face value. In such a market, the value of such securities and the fund's share
price may fall dramatically.
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
fixed-income investments may lengthen due to a drop in mortgage prepayments.
This is known as extension risk and would increase the fund's sensitivity to
rising interest rates and its potential for price declines.
Other potential risks
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, whether and to what extent a security
purchased in an IPO appreciates in value, and the asset base of the fund. As a
fund's asset base increases, IPOs often have a diminished effect on such fund's
performance.
Any foreign securities purchased by the fund include special risks, such as
exposure to currency fluctuations, changing political climate, lack of
comprehensive company information and potentially less liquidity.
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, its
performance may be more vulnerable to changes in the market value of a single
issuer or a group of issuers.
Under adverse market conditions, the fund could invest some or all of its assets
in money market securities. Although the fund would do this to avoid losses, it
could 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
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's performance from year to year. The
table compares the fund' s average annual total return to that of the 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.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
10.84 3.98 25.04 11.62 17.43 9.69 10.21 1.97
91 92 93 94 95 96 97 98 99 00
BEST QUARTER: Q4 '98 +10.83%
WORST QUARTER: Q3 '98 -7.13%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/01 WAS -12.39%.
--------------------------------------------------------
Average annual total return AS OF 12/31/00
[Enlarge/Download Table]
Since
inception
1 Year 5 Years (9/30/92)
--------------------------------------------------------------------------------------------
FUND 1.97% 10.07% 11.07%
S&P 500 -9.10% 18.33% 17.32%
LEHMAN BROTHERS
AGGREGATE BOND
INDEX 11.63% 6.46% 6.87%
CUSTOMIZED BLENDED
INDEX -0.81% 10.73% 13.34%
What this fund is --
and isn't
This fund is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Annual fund operating expenses are paid
out of fund assets, so their effect is included in the share price. The fund has
no sales charge (load) or Rule 12b-1 distribution fees.
--------------------------------------------------------
Fee table
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Shareholder services fee 0.00%
Other expenses 0.21%
-------------------------------------------------------
TOTAL 0.81%
--------------------------------------------------------
[Enlarge/Download Table]
Expense example
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------------------
$83 $259 $450 $1,002
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the fund's portfolio and
assisting in all aspects of the fund's operations.
SHAREHOLDER SERVICES FEE: a 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
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $181
billion in over 190 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
$2.6 trillion of assets under management, administration or custody, including
approximately $547 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) 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.
Portfolio management
Douglas Ramos manages the fund's asset allocation and the equity portion of the
fund's portfolio. Mr. Ramos has been employed by Dreyfus since July 1997 and is
co-director of Dreyfus equity research. Before joining Dreyfus, he was a senior
partner and investment counselor for Loomis, Sayles & Company. 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.
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.
[Enlarge/Download Table]
YEAR ENDED AUGUST 31
2001 2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 16.42 16.51 15.19 18.15 15.13
Investment operations:
Investment income -- net .39(1) .41(1) .42(1) .47 .45
Net realized and unrealized gain (loss)
on investments (1.65) 1.54 2.43 (.88) 3.65
Total from investment operations (1.26) 1.95 2.85 (.41) 4.10
Distributions:
Dividends from investment
income -- net (.39) (.43) (.45) (.46) (.44)
Dividends from net realized gain
on investments (.61) (1.61) (1.08) (2.09) (.64)
Total distributions (1.00) (2.04) (1.53) (2.55) (1.08)
Net asset value, end of period 14.16 16.42 16.51 15.19 18.15
Total return (%) (7.87) 12.62 19.37 (2.99) 28.06
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of operating expenses
to average net assets (%) .81 .96 .94 .91 .96
Ratio of interest expense
to average net assets (%) -- .00(2) .03 -- --
Ratio of net investment income
to average net assets (%) 2.60 2.54 2.62 2.76 2.71
Portfolio turnover rate (%) 294.70 160.38 162.40 177.85 235.56
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 195,010 198,578 188,215 359,521 347,259
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2 )AMOUNT REPRESENTS LESS THAN .01%.
The Fund
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) 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 IRAS $500 NO MINIMUM
AFTER THE FIRST
YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum 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.
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:
(pound) 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
(pound) the fund will not process wire, telephone or Dreyfus
TeleTransfer redemption requests for up to eight business days
following the purchase of those shares
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
DREYFUS $500 $500,000 FOR JOINT
ACCOUNTS
TELETRANSFER EVERY 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
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
(pound) refuse any purchase or exchange request that
could adversely affect the fund or its operations,
including those from any individual or group who, in the
fund' s view, is likely to engage in excessive trading
(usually defined as more than four exchanges out of the
fund within a calendar year)
(pound) refuse any purchase or exchange request in excess of
1% of the fund's total assets
(pound) change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) delay sending out redemption proceeds for up to
seven days (generally applies only in cases of very large
redemptions, excessive trading or during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; IRA accounts; accounts participating in
automatic investment programs; accounts opened through a financial institution.
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS DIVIDENDS from its net investment income
quarterly, and distributes any net capital gains it has realized once a year.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
--------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
--------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 8%/10% 18%/20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table at right also can provide a guide for your potential tax liability
when selling or exchanging fund shares. "Short-term capital gains" applies to
fund shares sold or exchanged up to 12 months after buying them. "Long-term
capital gains" applies to shares sold or exchanged after 12 months; the lower
rate shown applies to shares held for more than five years and, for the 28% or
above tax bracket, purchased after December 31, 2000.
Your Investment
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
--------------------------------------------------------
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
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
--------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment 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.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one Dreyfus fund into another. You can request your exchange in writing or
by phone. Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up Dreyfus
TeleTransfer on your account by providing bank account information and following
the instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:
(pound) for traditional, rollover, Roth and Education IRAs, call 1-800-645-656
(pound) for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
Your Investment
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9299, Boston MA 02205-8553
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to The Bank of New York, with these instructions:
* ABA# 021000018
* DDA# 8900117176
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900117176
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
DREYFUS TELETRANSFER Request Dreyfus TeleTransfer on your application. Call us
to request your transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 9263,
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.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian
P.O. Box 9552,
Boston, MA 02205-8568
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check (see "To Open an Account" at left).
By Telephone
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900117176
* the fund name
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).
Automatically
WITHOUT ANY INITIAL INVESTMENT Call us
to request a Dreyfus Step Program form. Complete and return the form along with
your application.
ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
All contributions will count as current year.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail in your request (see "To Open an Account" at left).
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS TRUST COMPANY, CUSTODIAN
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
For More Information
Dreyfus 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) 2002 Dreyfus Service Corporation 222P0102
-------------------------------------------------------------------------------
DREYFUS BALANCED FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 2002
-------------------------------------------------------------------------------
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, 2002, as it may be
revised from time to time. To obtain a copy of the Fund's Prospectus, please
write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
The Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
PAGE
Description of the Fund.........................................B-2
Management of the Fund.........................................B-22
Management Arrangements........................................B-26
How to Buy Shares..............................................B-29
Shareholder Services Plan......................................B-30
How to Redeem Shares...........................................B-31
Shareholder Services...........................................B-33
Portfolio Transactions.........................................B-36
Determination of Net Asset Value...............................B-39
Dividends, Distributions and Taxes.............................B-40
Performance Information........................................B-42
Information About the Fund.....................................B-43
Counsel and Independent Auditors...............................B-44
Appendix.......................................................B-45
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.
CONVERTIBLE SECURITIES. Convertible securities may be converted at either
a stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although convertible
bonds, as corporate debt obligations, enjoy seniority in right of payment to all
equity securities, and convertible preferred stock is senior to common stock, of
the same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income securities, the market
value of convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stock. A unique
feature of convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
Convertible securities provide for a stable stream of income with
generally higher yields than common stocks, but there can be no assurance of
current income because the issuers of the convertible securities may default on
their obligations. A convertible security, in addition to providing fixed
income, offers the potential for capital appreciation through the conversion
feature, which enables the holder to benefit from increases in the market price
of the underlying common stock. There can be no assurance of capital
appreciation, however, because securities prices fluctuate. Convertible
securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
WARRANTS. A warrant is an instrument 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.
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 than the market prices of securities that pay interest
periodically and are likely to respond to a greater degree to changes in
interest rates than securities 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."
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.
INVESTMENT COMPANIES. The Fund may invest in securities issued by
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. Investments in the securities of other investment
companies may involve duplication of advisory fees and certain other expenses.
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
some or all of its assets in money market instruments, including U.S. Government
securities, repurchase agreements, bank obligations and commercial paper. The
Fund also may purchase money market instruments when it has cash reserves or in
anticipation of taking a market position.
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 o 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. 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 of short maturity.
DERIVATIVES. The Fund may invest in, or enter into, derivatives, such as
options and futures, 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.
Although the Fund will not be a commodity pool, certain derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission which
limit the extent to which the Fund can invest in such derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts and
options for other purposes if the sum of the amount of initial margin deposits
and premiums paid for unexpired options with respect to such contracts, other
than for bona fide hedging purposes, exceeds 5% of the liquidation value of the
Fund's assets, after taking into account unrealized profits and unrealized
losses on such contracts and options; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the 5% limitation.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily variation margin system operated by the clearing agency
in order to reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated with
derivatives purchased on an exchange. 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.
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 or when-issued or
delay-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 delay-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
delay-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 or when-issued or delay-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 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"). 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, whether and to what extent a
security purchased in an IPO appreciates in value, and the asset base of the
Fund. As a fund's asset base increases, IPOs often have a diminished effect on
such fund's performance.
The Fund may invest in securities issued by companies in the technology
sector, which has been among the most volatile sectors of the 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 cancelled.
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 IBCA, Duff & Phelps ("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. See
"Appendix."
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. 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.
If, however, such other investment companies desire to invest in, or dispose of,
the same securities as the Fund, available investments or opportunities for
sales will be allocated equitably to each investment company. In some cases,
this procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund. The Fund,
together with other investment companies advised by the Manager and 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, or those received as part of a merger or
consolidation.
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 values 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. The Board 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 and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
BOARD MEMBERS
JOSEPH S. DIMARTINO, CHAIRMAN OF THE BOARD. Since January 1995, Chairman of the
Board of various funds in the Dreyfus Family of Funds. He also is a
director of The Muscular Dystrophy Association, Plan Vista Corporation
(formerly, HealthPlan Services), a provider of marketing, administrative
and risk management services to health and other benefit programs, Carlyle
Industries, Inc. (formerly, Belding Heminway Company, Inc.), a button
packager and distributor, and Century Business Services, Inc., a provider
of various outsourcing functions for small and medium size companies, The
Newark Group, a privately held company providing a national network of
paper recovery facilities, paperboard mills and paperboard converting
plants, and QuickCAT.com, Inc., a private company engaged in the
development of high speed movement, routing, storage and data across all
modes of data transport. Prior to January 1995, he was President, a
director and, until August 1994, Chief Operating Officer of the Manager
and Executive Vice President and a director of the Distributor. From
August 1994 to December 1994, he was a director of Mellon Financial
Corporation. He is 58 years old and his address is 200 Park Avenue, New
York, New York 10166.
DAVID P. FELDMAN, BOARD MEMBER. A director of several mutual funds in the 59
Wall Street Mutual Funds Group and The Jeffrey Company, a private
investment company. He was employed by AT&T from July 1961 to his
retirement in April 1997, most recently serving as Chairman and Chief
Executive Officer of AT&T Investment Management Corporation. He is 62
years old and his address is 200 Park Avenue, New York, New York 10166.
JAMES F. HENRY, BOARD MEMBER. President of the CPR Institute for Dispute
Resolution, a non-profit organization principally engaged in the
development of alternatives to business litigation. He was a partner of
Lovejoy, Wasson & Ashton, from January 1977 to September 1979. He was
President and a director of the Edna McConnell Clark Foundation, a
philanthropic organization, from September 1971 to December 1976. He is 71
years old and his address is c/o CPR Institute for Dispute Resolution, 366
Madison Avenue, New York, New York 10017.
ROSALIND GERSTEN JACOBS, BOARD MEMBER. Merchandise and marketing consultant.
From 1997 to 1998, she was a Director of Merchandise and Marketing for
Corporate Property Investors, a real estate investment company. From 1974
to 1976, she was owner and manager of a merchandise and marketing
consulting firm. Prior to 1974, she was a Vice President of Macy's, New
York. She is 76 years old and her address is 19 East 72nd Street, New
York, New York 10017.
DR. PAUL A. MARKS, BOARD MEMBER. President-Emeritus of Memorial
Sloan-Kettering Cancer Center. From 1980 to 1999, he was President and
Chief Executive Officer of Memorial Sloan-Kettering Cancer Center. He is
also a director emeritus of Pfizer, Inc., a pharmaceutical company, where
he served as a director from 1978 to 1996; and a director of Tularik,
Inc., a biotechnology company. He was Vice President for Health Sciences
and Director of the Cancer Center at Columbia University from 1973 to
September 1980, and Professor of Medicine and of Human Genetics and
Development at Columbia University from 1968 to 1982. He was a director of
Life Technologies, Inc., a life science company producing products for
cell and molecular biology and microbiology from 1986 to 1996, and a
director of Genos, Inc., a genomics company, from 1996 to 1999. He is 75
years old and his address is c/o Memorial Sloan-Kettering Cancer Center,
1275 York Avenue, New York, New York 10021.
DR. MARTIN PERETZ, BOARD MEMBER. EDITOR-IN-CHIEF OF THE NEW REPUBLIC
magazine and a lecturer in Social Studies at Harvard University, where
he has been a member of the faculty since 1965. He is a trustee of The
Academy for Liberal Education, an accrediting agency for colleges and
universities certified by the U.S. Department of Education. Dr. Peretz
is Co-Chairman of TheStreet.com, a financial daily published on the
Web. He is a director of The Electronic Newsstand, a distributor of
magazines on the Web, and Digital Learning Group, LLC, an on-line
publisher of college textbooks. He was a director of Bank Leumi Trust
Company of New York, and Carmel Container Corporation from 1988 to 1991,
and Leukosite, Inc., a biopharmaceutical company from 1993 to 1999. He
IS 62 YEARS OLD AND HIS ADDRESS IS C/O THE NEW REPUBLIC, 1220 19th
Street, N.W., Washington, D.C. 20036.
BERT W. WASSERMAN, BOARD MEMBER. Financial Consultant. He is also a
director of Malibu Entertainment International, Inc., the Lillian Vernon
Corporation, Winstar Communications, Inc. and PSC, Inc., a leading
manufacturer and marketer of bar code scanners. From January 1990 to
March 1995, he was Executive Vice President and Chief Financial Officer,
and from January 1990 to March 1993, a director of Warner
Communications, Inc. He is 69 years old and his address is 126 East
56th Street, Suite 12 North, New York, New York 10022-3613.
The Fund has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Fund, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Fund for election to the
Fund's Board.
Currently, 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 $500
per meeting and 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 fee of one-half the amount paid to them as Board
members. Prior to January 1, 2000, each Board member received from the Fund an
annual fee of $1,000 and an attendance fee of $500 per meeting. The Chairman of
the Board received an additional 25% of such compensation. The aggregate amount
of compensation paid to each Board member by the Fund for the fiscal year ended
August 31, 2001, 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, 2000, is as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
MEMBER FUND** BOARD MEMBERS
Joseph S. DiMartino $2,318 $805,537 (194)
David P. Feldman $1,853 $176,613 (56)
John M. Fraser, Jr.+ $550 $ 57,890 (42)
James F. Henry $1,853 $ 80,238 (28)
Rosalind Gersten Jacobs $1,853 $126,450 (45)
Irving Kristol++ $550 $ 26,642 (28)
Dr. Paul A. Marks $1,853 $ 79,238 (28)
Dr. Martin Peretz $1,853 $ 74,738 (28)
Bert W. Wasserman $1,853 $ 77,500 (28)
---------------------------
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Fund, for which the Board
member serves.
** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $3,007 for all Board members as a group.
+ Emeritus Board member since May 24, 2000.
++ Emeritus Board member since January 22, 2000.
OFFICERS OF THE FUND
STEPHEN E. CANTER, PRESIDENT. Chairman of the Board, Chief Executive Officer,
and Chief Operating Officer and a director of the Manager, and an officer
of 93 investment companies (comprised of 180 portfolios) managed by the
Manager. Mr. Canter also is a director or an Executive Committee Member of
the other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of the Manager. He is 56 years
old.
MARK N. JACOBS, EXECUTIVE VICE PRESIDENT. Executive Vice President,
Secretary and General Counsel of the Manager, and an officer of 94
investment companies (comprised of 193 portfolios) managed by the
Manager. He is 55 years old.
MICHAEL A. ROSENBERG, SECRETARY. Associate General Counsel of the Manager,
and an officer of 93 investment companies (comprised of 193 portfolios)
managed by the Manager. He is 41 years old.
STEVEN F. NEWMAN, ASSISTANT SECRETARY. Associate General Counsel of the
Manager, and an officer of 94 investment companies (comprised of 193
portfolios) managed by the Manager. He is 52 years old.
ROBERT R. MULLERY, ASSISTANT SECRETARY. Associate General Counsel of the
Manager, and an officer of 20 investment companies (comprised of 39
portfolios) managed by the Manager. He is 49 years old.
JAMES WINDELS, TREASURER. Director -Mutual Fund Accounting of the Manager, and
an officer of 93 investment companies (comprised of 195 portfolios)
managed by the Manager. He is 43 years old.
KENNETH J. SANDGREN, ASSISTANT TREASURER. Mutual Fund Tax Director of the
Manager, and an officer of 25 investment companies (comprised of 99
portfolios) managed by the Manager. He is 47 years old.
The address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166.
The Fund's Board members and officers, as a group, owned less than 1% of
the Fund's shares outstanding on December 7, 2001.
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 7, 2001: MLPF&S for the
sole benefit of its customers; Attention: Fund Administration; 4800 Deer Lake
Drive, East, FL 3, Jacksonville, FL 32246-6484 - 9.90%.
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 multibank 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.
Mellon is among the twenty largest bank holding companies in the United States
based on total assets.
The Manager provides management services pursuant to a Management
Agreement (the "Agreement") between the Fund and the Manager. The Agreement is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting 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).
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; Thomas F. Eggers, President and a director; Stephen R.
Byers, Chief Investment Officer, Vice Chairman and a director; Lawrence S.
Kash, Vice Chairman; Michael G. Millard, Vice Chairman and a director; J.
David Officer, Vice Chairman and a director; Ronald P. O'Hanley III, Vice
Chairman and a director; Mark N. Jacobs, Executive Vice President, General
Counsel and Secretary; William T. Sandalls, Jr., Executive Vice President;
Diane P. Durnin, Senior Vice President; Patrice M. Kozlowski, Senior Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Theodore A. Schachar, Vice President-Tax; 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 Mandell L. Berman, Steven G. Elliot, David F.
Lamere, Martin G. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
The Manager manages the Fund's portfolio of investments in accordance with
the stated policies of the Fund, subject to the approval of the Fund's Board.
The Manager is responsible for investment decisions, and provides the Fund with
portfolio managers who are authorized by the 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 Company 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, 1999, 2000 and 2001, the management fees paid by the Fund
amounted to $1,705,742, $1,142,087 and $1,199,516, 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 dealers a fee based on the amount invested through
such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs, or (ii) such
plan's or program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plan or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN. Dreyfus Transfer,
Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940
-9671, is the Fund's transfer and dividend disbursing agent. Under a transfer
agency agreement with the Fund, the Transfer Agent arranges for the maintenance
of shareholder account records for the Fund, the handling of certain
communications between shareholders and the Fund and the payment of dividends
and distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee computed on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses.
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 transactions charges.
HOW TO BUY SHARES
GENERAL. Fund shares are sold without a sales charge. You may be charged a
fee if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution. 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 securities dealer, bank or other financial institution which maintains an
omnibus account in the Fund and has made an aggregate minimum initial purchase
for its customers of $2,500. Subsequent investments must be at least $100.
However, the minimum initial investment is $750 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse, Roth
IRAs, IRAs set up under a Simplified Employee Pension Plan ("SEP-IRAs") and
rollover IRAs) and 403(b)(7) Plans with only one participant and $500 for
Dreyfus-sponsored Education IRAs, with no minimum for subsequent purchases. The
initial investment must be accompanied by the Account Application. For full-time
or part-time employees of the Manager or any of its affiliates or subsidiaries,
directors of the Manager, Board members of a fund advised by the Manager,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing, the minimum initial investment is $1,000. For full-time or
part-time employees of the Manager or any of its affiliates or subsidiaries who
elect to have a portion of their pay directly deposited into their Fund
accounts, the minimum initial investment is $50. The Fund reserves the right to
offer Fund shares without regard to minimum purchase requirements to employees
participating in certain qualified or non-qualified employee benefit plans or
other programs where contributions or account information can be transmitted in
a manner and form acceptable to the Fund. The Fund reserves the right to vary
further the initial and subsequent investment minimum requirements at any time.
Fund shares also are offered without regard to the minimum initial
INVESTMENT REQUIREMENTS THROUGH DREYFUS-AUTOMATIC Asset Builder(R), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect you against loss in a declining market.
Shares are sold on a continuous basis at the net asset value per share
next determined after an order in proper form is received by the Transfer Agent
or other entity authorized to receive orders on behalf of the Fund. Net asset
value per share is determined as of the close of trading on the floor of the New
York Stock Exchange (currently 4:00 p.m., Eastern time), on each day the New
York Stock Exchange is open for regular business. For purposes of determining
net asset value per share, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the New York Stock Exchange.
Net asset value per share is computed by dividing the value of the Fund's net
assets (i.e., the value of its assets less liabilities) by the total number of
shares outstanding. For information regarding the methods employed in valuing
Fund investments, see "Determination of Net Asset Value."
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution could
be held liable for resulting fees and/or losses.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase shares by telephone if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an Automated Clearing
House ("ACH") member may be so designated.
DREYFUS TELETRANSFER purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., Eastern time, on any day the Transfer Agent and
the New York Stock Exchange are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., Eastern time, on any day the
Transfer Agent and the New York Stock Exchange are open for business, or orders
made on Saturday, Sunday or any Fund holiday (e.g., when the New York Stock
Exchange is not open for business), will be credited to the shareholder's Fund
account on the second bank business day following such PURCHASE ORDER. TO
QUALIFY TO USE THE DREYFUS TELETRANSFER Privilege, the initial payment for
purchase of shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or Shareholder
Services Form on file. If the proceeds of a particular redemption are to be
wired to an account at any other bank, the request must be in writing and
signature-guaranteed. See How to Redeem SHARES--DREYFUS TELETRANSFER Privilege."
REOPENING AN ACCOUNT. You may reopen an account with a minimum investment
of $100 without filing a new Account Application during the calendar year the
account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan (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, 2001, the Fund made no payments to
the Distributor pursuant to the 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 or telephone 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 will 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 or letter redemption instructions from any
person representing himself or herself to be you and reasonably believed by the
Transfer Agent to be genuine. Ordinarily, the Fund will initiate payment for
shares redeemed pursuant to this Privilege on the next business day after
receipt if the Transfer Agent receives a redemption request in proper form.
Redemption proceeds ($1,000 minimum) will be transferred by Federal Reserve wire
only to the commercial bank account specified 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 that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an ACH member may be designated. Holders of jointly registered Fund OR
BANK ACCOUNTS MAY REDEEM THROUGH THE DREYFUS TELETRANSFER Privilege for transfer
to their bank account not more than $500,000 within any 30-day period. You
should be aware that if you have selected the Dreyfus TELETRANSFER Privilege,
any request for a wire redemption will be effected as A DREYFUS TELETRANSFER
transaction through the ACH system unless more prompt transmittal specifically
is requested. Redemption proceeds will be on deposit in your account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. See "How to Buy Shares--Dreyfus TELETRANSFER Privilege."
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 for shares of
other funds sold with a sales load (referred to herein as "Offered
Shares"), but if the sales load applicable to the Offered Shares
exceeds the maximum sales load that could have been imposed in
connection with the Purchased Shares (at the time the Purchased
Shares were acquired), without giving effect to any reduced loads,
the difference will be deducted.
To accomplish an exchange, under item D above, you must notify the
Transfer Agent of your prior ownership of fund shares and your account number.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this Privilege. By using the Telephone Exchange
Privilege, you authorize the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touch(R) automated telephone system) from any person
representing himself or herself to be you and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to limitations
as to the amount involved or number of telephone exchanges permitted. Shares
issued in certificate form are not eligible for telephone exchange. No fees
currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal administrative fee in accordance with
rules promulgated by the Securities and Exchange Commission.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
DREYFUS AUTO-EXCHANGE PRIVILEGE. Dreyfus Auto-Exchange Privilege permits
you to purchase (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. The Fund reserves the right to reject any
exchange request in whole or in part. Shares may be exchanged only between
accounts having identical names and other identifying designations. The Fund
Exchanges service or the Dreyfus Auto-Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
DREYFUS-AUTOMATIC ASSET BUILDER(R). DREYFUS-AUTOMATIC Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security,
or certain veterans', military or other payments from the U.S. Government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect.
DREYFUS PAYROLL SAVINGS PLAN. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. It is the sole responsibility of your employer to
arrange for transactions under the Dreyfus Payroll Savings Plan.
DREYFUS STEP PROGRAM. Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
THROUGH DREYFUS-AUTOMATIC Asset Builder(R), Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program
account, you must supply the necessary information on the Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary authorization
form(s), please call toll free 1-800-782-6620. You may terminate your
participation in this Program at any time by discontinuing YOUR PARTICIPATION IN
DREYFUS-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s). The Fund may modify or terminate this Program at any time. If
you wish to purchase Fund shares through the Dreyfus Step Program in conjunction
with a Dreyfus-sponsored retirement plan, you may do so only for IRAs, SEP-IRAs
and rollover IRAs.
DREYFUS DIVIDEND OPTIONS. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of another fund in the Dreyfus Family of Funds 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
imposition of a sales load in shares of other funds offered without
a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund that charges a sales load
may be invested in shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), but if the sales load
applicable to the Offered Shares exceeds the maximum sales load
charged by the fund from which dividends or distributions are being
swept (without giving effect to any reduced loads), the difference
will be deducted.
D. Dividends and distributions paid by a fund may be invested in shares
of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a designated
bank account. Only an account maintained at a domestic financial institution
which is an ACH member may be so designated. Banks may charge a fee for this
service.
AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits you to
request withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. Withdrawal
payments are the proceeds from sales of Fund shares, not the yield on the
shares. If withdrawal payments exceed reinvested dividends and distributions,
your shares will be reduced and eventually may be depleted. The Automatic
Withdrawal Plan may be terminated at any time by you, the Fund or the Transfer
Agent. Shares for which stock certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
CORPORATE PENSION/PROFIT-SHARING AND RETIREMENT PLANS. The Fund makes
available to corporations a variety of prototype pension and profit-sharing
plans, including a 401(k) Salary Reduction Plan. In addition, the Fund makes
available Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs, Education IRAs and rollover IRAs) and
403(b)(7) Plans. Plan support services also are available.
If you who wish to purchase Fund shares in conjunction with a Keogh Plan,
a 403(b)(7) Plan or an IRA, including a SEP-IRA, you may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares. All
fees charged are described in the appropriate form.
SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.
You should read the prototype retirement plan and the appropriate form of
custodial agreement for further details on eligibility, service fees and tax
implications, and should consult a tax adviser.
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 all relevant criteria, including: 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 sale by the broker of shares of funds managed by the
Manager. 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 the participating portfolios' 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).
Under the Manager's special trade allocation procedures applicable to
domestic and foreign initial and secondary public offerings and Rule 144A
transactions (collectively herein "IPOs"), all portfolio managers seeking to
participate in an IPO must use reasonable efforts to indicate their interest in
the IPO, by account or fund and in writing, to the Equity Trading Desk at least
24 hours to the pricing of a deal. Except upon prior written authorization from
the Director of Investments or his designee, an indication of interest submitted
on behalf of any fund or account must not exceed an amount based on the fund's
or account's approximate median position size.
Portfolio managers may specify by fund or account the minimum number of
shares deemed to be an adequate allocation. Portfolio managers may not decline
any allocation in excess of the minimum number of shares specified on the ground
that too few shares are available, and will not receive an allocation of fewer
than the minimum number of shares specified. If a portfolio manager does not
specify a minimum number of shares deemed to be an adequate allocation, a
"default minimum" equal to ten percent of the requested number of shares is
assumed. The default minimum adjustments may result in larger portfolios
participation in IPO to a lesser extent than smaller portfolios.
Based on the indications of interest received by the Equity Trading Desk,
the Chief Investment Officer's designee prepares an IPO Allocation Worksheet
indicating an appropriate order size for each fund or account, taking into
consideration (i) the number of shares requested for each fund or account (ii)
the relative size of each fund or account; (iii) each fund's or account's
investment objectives, style and portfolio composition, and (iv) any other
factors that may lawfully be considered in allocating IPO shares among funds and
accounts.
If there are insufficient securities to satisfy all orders as reflected on
the IPO Allocation Worksheet, the Manager's allocation generally shall be
distributed among participating funds or accounts pro rata on the basis of each
fund's or account's order. Allocations may also 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 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.
High turnover rates are likely to result in comparatively greater brokerage
expenses. The overall reasonableness of brokerage commissions paid is evaluated
by the Manager based upon its knowledge of available information as to the
general level of commissions paid by other institutional investors for
comparable services.
For the fiscal years ended August 31, 1999, 2000 and 2001, the Fund paid
total brokerage commissions of $571,669, $174,964, and $245,687, 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 $35,565, $58,209 and
$143,339, 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,
including Dreyfus Investment Services Corporation ("DISC") and Dreyfus Brokerage
Services, Inc ("DBS"). 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, 2001, the Fund paid brokerage
commissions of $4,200 to DBS, an affiliate of the Manager. This amount
represented approximately 2% of the aggregate brokerage commissions paid by the
Fund for transactions involving approximately 3% of the aggregate dollar value
of transactions for which the Fund paid brokerage commissions.
The aggregate amount of transactions during the fiscal year ended August
31, 2001 in securities effected on an agency basis through a broker in
consideration of, among other things, research services provided was $16,666,368
and the commissions and concessions related to such transactions were $22,010.
DETERMINATION OF NET ASSET VALUE
VALUATION OF PORTFOLIO SECURITIES. The Fund's securities, including
covered call options written by the Fund, are valued at the last sale price on
the securities exchange or national securities market on which such securities
primarily are traded. Securities not listed on an exchange or national
securities market, or securities in which there were no transactions, are valued
at the average of the most recent bid and asked prices, except that open short
positions are valued at the asked price. Bid price is used when no asked price
is available. Market quotations of foreign securities in foreign currencies are
translated into U.S. dollars at the prevailing rates of exchange. Any securities
or other assets for which recent market quotations are not readily available are
valued at fair value as determined in good faith 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 not valued by a
pricing service approved by the Fund's Board, are valued at fair value as
determined in good faith by the Board. The Board will review the method of
valuation on a current basis. In making their good faith valuation of restricted
securities, Board members generally will take the following factors into
consideration: restricted securities which are, or are convertible into,
securities of the same class of securities for which a public market exists
usually will be valued at market value less the same percentage discount at
which purchased. This discount will be revised periodically by the Board if it
believes that the discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for which
a public market exists usually will be valued initially at cost. Any subsequent
adjustment from cost will be based upon considerations deemed relevant by the
Board.
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 qualified as a "regulated investment
company" under the Code for the fiscal year ended August 31, 2001. 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 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 and distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividend or distribution and all future dividends and distributions payable to
you in additional Fund shares at net asset value. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
Any dividend or distribution paid shortly after an investor's purchase of
Fund shares may have the effect of reducing the aggregate net asset value of the
shares below the cost of his or her investment. Such a dividend or distribution
would be a return on investment in an economic sense, although taxable as stated
in "Dividends and Taxes" in the Prospectus. In addition, the Code provides that
if a shareholder has not held his or her shares more than six months (or shorter
period as the Internal Revenue Service may prescribe by regulation) 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.
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 share 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 connect 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.
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 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.
PERFORMANCE INFORMATION
The Fund's average annual total return for the 1, 5 and 8.93 year periods
ended August 31, 2001 was -7.87%, 9.00% and 9.57%, 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, 2001 was 125.97%. Total return is calculated by
subtracting the amount of the Fund's net asset value per share at the beginning
of a stated period from the net asset value per share at the end of the period
(after giving effect to the reinvestment of dividends and distributions during
the period), and dividing the result by the net asset value per share at the
beginning of the period.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, 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 exchanges out of the Fund during any calendar year or who makes exchanges
that appear to coincide with a market-timing strategy may be deemed to be
engaged in excessive trading. Accounts under common ownership or control will be
considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if, in the judgment of the Fund's management,
the Fund would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected or if
the Fund receives or anticipates receiving simultaneous orders that may
significantly affect the Fund (e.g., amounts equal to 1% or more of the Fund's
total assets). If an exchange request is refused, the Fund will take no other
action with respect to the shares until it receives further instructions from
the investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if the
amount of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components--redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but the
purchase order would be effective only at the net asset value next determined
after the fund being purchased receives the proceeds of the redemption, which
may result in the purchase being delayed.
To offset the relatively higher costs of servicing smaller accounts, the
Fund will charge regular accounts with balances below $2,000 an annual fee of
$12. The valuation of accounts and the deductions are expected to take place
during the last quarter of each year. The fee will be waived for any investor
whose aggregate Dreyfus mutual fund investments total at least $25,000, and will
not apply to IRA accounts or to accounts participating in automatic investment
programs or opened through a securities dealer, bank or other financial
institution, or to other fiduciary accounts.
The Fund 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, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the Fund.
485BPOS | Last “Page” of 26 | TOC | 1st | Previous | Next | ↓Bottom | Just 26th |
---|
APPENDIX
Rating Categories
Description of certain ratings assigned by Standard & Poor's Ratings
Services ("S&P"), Moody's Investors Service ("Moody's") and Fitch IBCA, Duff &
Phelps ("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) Form of Custody 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 adopted by the Registrant and its investment adviser
and principal underwriter are incorporated by reference to Exhibit
(p) of Post-Effective Amendment No. 11 to the Registration Statement
on Form N-1A, filed on December 29, 2000.
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.
[Enlarge/Download Table]
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER (CONTINUED)
----------------------------------------------------------------------------------
OFFICERS AND DIRECTORS OF INVESTMENT ADVISER
Name and Position
WITH DREYFUS OTHER BUSINESSES POSITION HELD DATES
MANDELL L. BERMAN Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
STEPHEN R. BYERS Dreyfus Service Corporation++ Senior Vice President 3/00 - Present
Director, Vice Chairman,
and Chief Investment Officer Gruntal & Co., LLC Partner 5/97 - 11/99
650 Madison Avenue Director 5/97 - 11/99
New York, NY 10022 Member of Executive 5/97 - 11/99
Committee
Executive Vice President 6/99 - 11/99
Chief Financial Officer 5/97 - 6/99
Treasurer 5/97 - 6/99
STEPHEN E. CANTER Mellon Financial Corporation+ Vice Chairman 6/01 - Present
Chairman of the Board,
Chief Executive Officer and Dreyfus Investment Chairman of the Board 1/97 - Present
Chief Operating Officer Advisors, Inc.++ Director 5/95 - Present
President 5/95 - Present
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - Present
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
The Boston Company Asset Director 2/99 - Present
Management, LLC*
TBCAM Holdings, Inc.* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Founders Asset Management, Member, Board of 12/97 - Present
LLC**** Managers
Acting Chief Executive 7/98 - 12/98
Officer
The Dreyfus Trust Company+++ Director 6/95 - Present
Chairman 1/99 - Present
President 1/99 - Present
Chief Executive Officer 1/99 - Present
THOMAS F. EGGERS Dreyfus Service Corporation++ Chief Executive Officer 3/00 - Present
President and Director and Chairman of the
Board
Executive Vice President 4/96 - 3/00
Director 9/96 - Present
Founders Asset Management, Member, Board of 2/99 - Present
LLC**** Managers
Dreyfus Investment Advisors, Inc. Director 1/00 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
Dreyfus Insurance Agency of Director 3/99 - Present
Massachusetts, Inc. +++
Dreyfus Brokerage Services, Inc. Director 11/97 - 6/98
6500 Wilshire Boulevard, 8th Floor,
Los Angeles, CA 90048
STEVEN G. ELLIOTT Mellon Financial Corporation+ Director 1/01 - Present
Director Senior Vice Chairman 1/99 - Present
Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
STEVEN G. ELLIOTT Mellon Bank, N.A.+ Director 1/01 - Present
Director (Continued) 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
Collection Services Corporation Controller 10/90 - 2/99
500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
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
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
LAWRENCE S. KASH Dreyfus Investment Director 4/97 - 12/99
Vice Chairman Advisors, Inc.++
Seven Six Seven Agency, Inc. ++ Director 1/97 - 4/99
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
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.
TBC Securities, Inc. President and Director 2/99 - Present
Medford, MA
The Boston Company, Inc.* Chairman & CEO 1/99 - Present
Exe. Vice President 4/98 - 1/99
Director 10/97 - 1/99
Sr. Vice President 6/93 - 4/98
Vice President 4/88 - 6/93
Boston Safe Deposit and Trust Chairman & CEO 1/99 - Present
Company Exec. Vice President 4/98 - 1/99
Sr. Vice President 6/93 - 4/98
Vice President 4/88 - 6/93
Mellon Private Trust Co., N.A. Chairman 4/97 - Present
2875 Northeast 191st Street, Director 4/97 - Present
DAVID F. LAMERE North Miami, FL 33180
(Continued)
Newton Management Limited Director 10/98 - Present
London, England
Laurel Capital Advisors, LLP+ Executive Committee 8/98 - Present
Mellon Bank, N.A.+ Exec. Management Group 8/01 - Present
Exec. Vice President 2/99 - 9/01
Sr. Vice President 6/93 - 4/98
Mellon Trust of New York National Chairman 4/98 - Present
Association Director 4/97 - 4/98
1301 Avenue of the Americas
New York, NY 10017
Mellon Trust of California Chairman 2/96 - Present
Los Angles, CA Director 4/92 - 2/96
Mellon United National Bank Chairman 2/95 - Present
2875 Northeast 191st Street Director 11/98 - Present
North Miami, FL 33180
RONALD P. O'HANLEY Mellon Financial Corporation+ Vice Chairman 6/01 - Present
Vice Chairman
Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Franklin Portfolio Associates, Director 3/97 - Present
LLC*
Boston Safe Deposit and Trust Executive Committee 1/99 - Present
Company* Member
Director 1/99 - Present
The Boston Company, Inc.* Executive Committee 1/99 - Present
Member 1/99 - Present
Director
Buck Consultants, Inc.++ Director 7/97 - Present
Newton Asset Management Limited Executive Committee 10/98 - Present
London, England Member
Director 10/98 - Present
Mellon Global Investments Non-Resident Director 11/98 - Present
Japan Co.
Tokyo, Japan
TBCAM Holdings, Inc.* Director 10/97 - Present
The Boston Company Asset Director 1/98 - Present
Management, LLC*
Boston Safe Advisors, Inc.* Chairman 6/97 - Present
Director 2/97 - Present
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 - Present
Mellon Bond Associates, LLP+ Trustee 1/98 - Present
Chairman 1/98 - Present
Mellon Equity Associates, LLP+ Trustee 1/98 - Present
Chairman 1/98 - Present
Mellon-France Corporation+ Director 3/97 - Present
Laurel Capital Advisors+ Trustee 3/97 - Present
MARTIN G. MCGUINN Mellon Financial Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 3/98
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
MICHAEL G. MILLARD Mellon Financial Corporation+ Vice Chairman 6/01 - Present
Director and Vice Chairman
Dreyfus Service Corporation++ Director 8/00 - Present
Executive Vice President 8/00 - Present
Senior Vice President 3/00 - 8/00
Executive Vice President - 5/98 - 3/00
Dreyfus Investment Division
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
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 - Present
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, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - 1/99
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - 6/99
Services, Inc.* Director 8/96 - 6/99
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
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 - Present
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
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
RICHARD F. SYRON Thermo Electron President 6/99 - Present
Director 81 Wyman Street Chief Executive Officer 6/99 - Present
Waltham, MA 02454-9046
American Stock Exchange Chairman 4/94 - 6/99
86 Trinity Place Chief Executive Officer 4/94 - 6/99
New York, NY 10006
MARK N. JACOBS Dreyfus Investment Director 4/97 - Present
GENERAL COUNSEL, Advisors, Inc.++ Secretary 10/77 - 7/98
Executive Vice President, and
SECRETARY The Dreyfus Trust Company+++ Director 3/96 - Present
The Truepenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - 3/99
Organization, Inc.++
WILLIAM T. SANDALLS, JR. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - 8/00
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97 - 12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
Wilmington, DE 19808
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
The Dreyfus Trust Company+++ Director 1/96 - Present
Dreyfus Service Organization, Treasurer 10/96 - 3/99
Inc.++
Dreyfus Insurance Agency of Director 5/97 - 3/99
Massachusetts, Inc.++++ Treasurer 5/97 - 3/99
Executive Vice President 5/97 - 3/99
DIANE P. DURNIN Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Senior Vice President - Product Marketing and Advertising
Development Division
PATRICE M. KOZLOWSKI None
Senior Vice President -
Corporate
Communications
WILLIAM H. MARESCA The Dreyfus Trust Company+++ Chief Financial Officer 3/99 - Present
Controller Treasurer 9/98 - Present
Director 3/97 - Present
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Director 8/00 - Present
Dreyfus Consumer Credit Corp. ++ Treasurer 10/98 - Present
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, De 19808
The Truepenny Corporation++ Vice President 10/98 - Present
Dreyfus Precious Metals, Inc. +++ Treasurer 10/98 - 12/98
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Corporation++ Vice President 10/98 - Present
Trotwood Hunters Site a Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Treasurer 3/99 - Present
Organization, Inc.++ Assistant Treasurer 3/93 - 3/99
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
MARY BETH LEIBIG None
Vice President -
Human Resources
THEODORE A. SCHACHAR Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
The Dreyfus Consumer Credit Chairman 6/99 - Present
Corporation ++ President 6/99 - Present
Dreyfus Investment Advisors, Vice President - Tax 10/96 - Present
Inc.++
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
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 Computer Sciences Corporation Vice President 1/96 - 7/98
El Segundo, CA
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.++
STEVEN F. NEWMAN Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
* 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.
++++ The address of the business so indicated is 53 State Street, Boston, Massachusetts 02109.
Item 27. Principal Underwriters
-------- ----------------------
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
1) Dreyfus A Bonds Plus, Inc.
2) Dreyfus Appreciation Fund, Inc.
3) Dreyfus Balanced Fund, Inc.
4) Dreyfus BASIC GNMA Fund
5) Dreyfus BASIC Money Market Fund, Inc.
6) Dreyfus BASIC Municipal Fund, Inc.
7) Dreyfus BASIC U.S. Government Money Market Fund
8) Dreyfus California Intermediate Municipal Bond Fund
9) Dreyfus California Tax Exempt Bond Fund, Inc.
10) Dreyfus California Tax Exempt Money Market Fund
11) Dreyfus Cash Management
12) Dreyfus Cash Management Plus, Inc.
13) Dreyfus Connecticut Intermediate Municipal Bond Fund
14) Dreyfus Connecticut Municipal Money Market Fund, Inc.
15) Dreyfus Florida Intermediate Municipal Bond Fund
16) Dreyfus Florida Municipal Money Market Fund
17) Dreyfus Founders Funds, Inc.
18) The Dreyfus Fund Incorporated
19) Dreyfus Global Bond Fund, Inc.
20) Dreyfus Global Growth Fund
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 Premier Fixed Income Funds
27) Dreyfus Index Funds, Inc.
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Preferred Money Market Funds
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Funds, Inc.
34) Dreyfus Investment Grade Bond Funds, Inc.
35) Dreyfus Investment Portfolios
36) The Dreyfus/Laurel Funds, Inc.
37) The Dreyfus/Laurel Funds Trust
38) The Dreyfus/Laurel Tax-Free Municipal Funds
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus MidCap Index Fund
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Municipal Cash Management
54) Dreyfus New York Tax Exempt Bond Fund, Inc.
55) Dreyfus New York Tax Exempt Intermediate Bond Fund
56) Dreyfus New York Tax Exempt Money Market Fund
57) Dreyfus U.S. Treasury Intermediate Term Fund
58) Dreyfus U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus Premier California Municipal Bond Fund
63) Dreyfus Premier Equity Funds, Inc.
64) Dreyfus Premier International Funds, Inc.
65) Dreyfus Premier GNMA Fund
66) Dreyfus Premier Opportunity Funds
67) Dreyfus Premier Worldwide Growth Fund, Inc.
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Equity Funds
72) Dreyfus Short-Intermediate Government Fund
73) Dreyfus Short-Intermediate Municipal Bond Fund
74) The Dreyfus Socially Responsible Growth Fund, Inc.
75) Dreyfus Stock Index Fund
76) Dreyfus Tax Exempt Cash Management
77) The Dreyfus Premier Third Century Fund, Inc.
78) Dreyfus Treasury Cash Management
79) Dreyfus Treasury Prime Cash Management
80) Dreyfus Variable Investment Fund
81) Dreyfus Worldwide Dollar Money Market Fund, Inc.
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
84) General Government Securities Money Market Funds, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Funds, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
90) MPAM Funds Trust
[Enlarge/Download Table]
(b)
Positions and
Name and principal Offices with
Business address Positions and offices with the Distributor Registrant
---------------- ------------------------------------------ ----------
Thomas F. Eggers * Chief Executive Officer and Chairman of the Board None
J. David Officer * President and Director None
Thomas E. Winnick * Director None
Charles Cardona * Executive Vice President and Director None
Anthony DeVivio ** Executive Vice President and Director None
Jude C. Metcalfe ** Executive Vice President None
Michael Millard ** Executive Vice President and Director None
Irene Papadoulis ** Director None
David K. Mossman ** Executive Vice President None
Jeffrey N. Nachman *** Executive Vice President and Chief Operations Officer None
William T. Sandalls, Jr. * Executive Vice President None
William H. Maresca * Chief Financial Officer and Director None
James Book **** Senior Vice President None
Ken Bradle ** Senior Vice President None
Stephen R. Byers * Senior Vice President None
Joseph Connolly * Senior Vice President None
Joseph Ecks + Senior Vice President None
William Glenn * Senior Vice President None
Lawrence S. Kash * Senior Vice President None
Bradley Skapyak * Senior Vice President None
Jane Knight * Chief Legal Officer and Secretary None
Stephen Storen * Chief Compliance Officer None
Jeffrey Cannizzaro * Vice President - Compliance None
John Geli ** Vice President None
Maria Georgopoulos * Vice President - Facilities Management None
William Germenis * Vice President - Compliance None
Walter T. Harris * Vice President None
Janice Hayles * Vice President None
Traci Hopkins * Vice President None
Hal Marshall * Vice President - Compliance None
Paul Molloy * Vice President None
B.J. Ralston ** Vice President None
Theodore A. Schachar * Vice President - Tax None
William Schalda * Vice President None
Bret Young * Vice President 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.
*** Principal business address is 6500 Wilshire Boulevard, 8th Floor, Los Angles, CA 90048.
**** Principal business address is One Mellon Bank Center, Pittsburgh, PA 15258.
+ Principal business address is One Boston Place, Boston, MA 02108.
Item 28. Location of Accounts and Records
------- --------------------------------
1. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
2. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
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 27th day of December, 2001.
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 12/27/01
-------------------------- Officer)
Stephen E. Canter
/S/JIM WINDELS* Treasurer 12/27/01
-------------------------- (Principal Accounting and
Jim Windels Financial Officer)
/S/JOSEPH S. DIMARTINO* Chairman of the Board 12/27/01
-------------------------- of Directors
Joseph S. DiMartino
/S/DAVID P. FELDMAN* Director 12/27/01
--------------------------
David P. Feldman
/S/JAMES F. HENRY* Director 12/27/01
--------------------------
James F. Henry
S/ROSALIND G. JACOBS* Director 12/27/01
--------------------------
Rosalind G. Jacobs
/S/PAUL A. MARKS* Director 12/27/01
--------------------------
Paul A. Marks
/S/MARTIN PERETZ* Director 12/27/01
--------------------------
Martin Peretz
/S/BERT W. WASSERMAN* Director 12/27/01
--------------------------
Bert W. Wasserman
*BY: ROBERT R. MULLERY
--------------------
Robert R. Mullery
Attorney-in-Fact
INDEX OF EXHIBITS
EXHIBITS
(g) Form of Custody Agreement with Mellon Bank, N.A...
OTHER EXHIBITS
(a) Powers of Attorney dated December 11, 2000........................
Powers of Attorney dated November 15, 2001........................
(b) Certificate of Assistant Secretary................................
Dates Referenced Herein and Documents Incorporated by Reference
↑Top
Filing Submission 0000890341-01-500011 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Tue., Apr. 30, 10:32:04.2am ET