Dreyfus Capital Value Fund, Inc.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 4
4 General Description of Registrant 5
5 Management of the Fund 20
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 35
7 Purchase of Securities Being Offered 21
8 Redemption or Repurchase 29
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
- ---------
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-27
13 Investment Objectives and Policies B-2
14 Management of the Fund B-10
15 Control Persons and Principal B-12
Holders of Securities
16 Investment Advisory and Other B-13
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
Dreyfus Capital Value Fund, Inc.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-25
18 Capital Stock and Other Securities B-27
19 Purchase, Redemption and Pricing B-15; B-18;
of Securities Being Offered B-22
20 Tax Status *
21 Underwriters B-15
22 Calculations of Performance Data B-25
23 Financial Statements B-33
Items in
Part C of
Form N-1A
_________
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-3
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-29
30 Location of Accounts and Records C-39
31 Management Services C-39
32 Undertakings C-39
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
- ---------------------------------------------------------------------------
DREYFUS CAPITAL VALUE FUND
(A Premier Fund)
(LION LOGO)
PROSPECTUS JANUARY 28, 1994
- ----------------------------------------------------------------------------
Dreyfus Capital Value Fund(A Premier Fund)(the "Fund") is an open-end,
diversified, management investment company, known as a
mutual fund. Its goal is to maximize total return, consisting of capital
appreciation and current income. The Fund invests in a wide range of equity
and debt securities and money market instruments.
You can purchase or redeem shares by telephone using Dreyfus TELETRANSFER.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
adviser.
By this Prospectus, Class A and Class B shares of the Fund are being
offered. Class A shares are subject to a sales charge imposed at the time of
purchase and Class B shares are subject to a contingent deferred sales charge
imposed on redemptions made within six years of purchase. Other differences
between the two Classes include the services offered to and the expenses
borne by each Class and certain voting rights, as described herein. The Fund
offers these alternatives so an investor may choose the method of purchasing
shares that is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares and other circumstances.
This Prospectus sets forth concisely information about the Fund that you
should know before investing. It should be read and retained for future
reference.
Part B (also known as the Statement of Additional Information), dated
January 28, 1994, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be
of interest to some investors. It has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. For a free copy,
write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call 1-800-645-6561. When telephoning, ask for Operator 666.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. THE
FUND'S SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL. THE FUND'S SHARE PRICE AND INVESTMENT RETURN FLUCTUATE AND ARE
NOT GUARANTEED.
- ----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Fee Table................................................. 3
Condensed Financial Information........................... 4
Alternative Purchase Methods.............................. 5
Description of the Fund................................... 5
Management of the Fund.................................... 20
How to Buy Fund Shares.................................... 21
Shareholder Services...................................... 25
How to Redeem Fund Shares................................. 29
Distribution Plan and Shareholder Services Plan........... 32
Dividends, Distributions and Taxes........................ 33
Performance Information................................... 34
General Information....................................... 35
Page 2
<TABLE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..................... 4.50% -_
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)....... -_ 4.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees......................................... .75% .75%
12b-1 Fees.............................................. -_ .75%
Service Fees............................................ .25% .25%
Other Expenses.......................................... .68% .68%
Total Fund Operating Expenses........................... 1.68% 2.43%
</TABLE>
EXAMPLE
An investor would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and
(2) except where noted, redemption at
the end of each time period:
<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
<S> <C> <C> <C> <C>
CLASS A:......................... $61 $96 $132 $235
CLASS B:......................... $65 $106 $150 $241
ASSUMING NO REDEMPTION OF
CLASS B SHARES:.............. $25 $76 $130 $241
</TABLE>
*Ten-year figures assume conversion of Class B shares to Class A
shares at end of sixth year following the date of purchase.
- --------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES
A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY
RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
- ----------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will bear,
directly or indirectly, the payment of which will reduce investors'
return on an annual basis. For Class B shares, Other Expenses are
estimated based on expenses incurred by the Class A shares. Prior to
January 15, 1993, Class A shares were subject to 12b-1 fees, but no
service fees. Long-term investors in Class B shares could pay more in
12b-1 fees than the economic equivalent of paying a front-end sales
charge. Certain Service Agents (as defined below) may charge their
clients direct fees for effecting transactions in Fund shares; such fees
are not reflected in the foregoing table. See "Management of the Fund,"
"How to Buy Fund Shares" and "Distribution Plan and Shareholder Services
Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by
Ernst & Young, the Fund's independent auditors, whose report thereon
appears in the Statement of Additional Information. Further financial
data and related notes are included in the Statement of Additional
Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a
share of common stock outstanding, total investment return, ratios to
average net assets and other supplemental data for each year indicated.
This information has been derived from information provided in the Fund's
financial statements.
<TABLE>
CLASS A CLASS B
--------------------------------------------------------------------- -----------
YEAR ENDED
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------------------------------
PER SHARE DATA 1986(1)(2) 1987(1) 1988(1) 1989(1) 1990(1) 1991 1992 1993 1993(3)
------ ------ ------ ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year...... $7.25 $9.54 $12.84 $12.68 $14.42 $15.08 $12.97 $12.40 $10.58
------ ------ ------ ------ ------ ------ ------ ------ ------
Investment from Operations:
Investment income_net(4).... .03 .07 .58 .90 .89 .73 .40 .24 .03
Net realized and unrealized gain
(loss) on investments(4).... 2.26 3.59 (.18) 1.60 .61 (.89) (.39) (.62) .71
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS..... 2.29 3.66 .40 2.50 1.50 (.16) .01 (.38) .74
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income--net(4).......... -_ (.03) (.15) (.76) (.84) (.99) (.57) (.61) -_
Dividends from net realized gain
on investments(4)...... -_ (.33) (.41) -_ -_ (.96) -_ -- -_
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS..... -_ (.36) (.56) (.76) (.84) (1.95) (.57) (.61) -_
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year... $9.54 $12.84 $12.68 $14.42 $15.08 $12.97 $12.41 $11.42 $11.32
====== ======= ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN (5) 31.59%(6) 39.72% 3.29% 20.95% 10.53% (.70%)( .02%) (2.70%) 6.99%(6)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to
average net assets....... 1.47%(6) 1.50% 1.24% 1.22% 1.20% 1.19% 1.19% 1.23% 1.49%(6)
Ratio of dividends and interest
on securities sold short
to average net assets...... -_ .15% .13% .03% .26% .49% .39% .45% .31%(6)
Ratio of net investment income
to average net assets...... .45%(6) 2.25% 6.08 6.93% 6.64% 5.58% 2.83% 1.94% .83%(6)
Decrease reflected in above
expense ratios due to
expense reimbursements... .84%(6) .29% -_ -_ -_ -_ -_ -_ -_
Portfolio Turnover Rate.... 140.99% 102.16% 56.31% 19.46% 62.84% 154.07% 344.29% 41.78% 41.78%
Net Assets, end of year
(000's Omitted)....... $9,444 $139,796 $502,442 $607,192 $741,267 $755,450 $537,392 $412,316 $30,378
- -----------------
(1) Per share data restated to reflect a 100% stock dividend at the close of business on February 16, 1990.
(2) From October 10, 1985 (commencement of operations) to September 30, 1986.
(3) From January 15, 1993 (commencement of initial offering) to September 30, 1993.
(4) Per share data for 1986 and 1987 has been restated for comparative purposes.
(5) Exclusive of sales charge.
(6) Not annualized.
</TABLE>
Page 4
ALTERNATIVE PURCHASE METHODS
The Fund offers you two methods of purchasing Fund shares; you
may choose the Class of shares that best suits your needs, given the
amount of your purchase, the length of time you expect to hold your
shares and any other relevant circumstances. Each Class A and Class B
share represents an identical pro rata interest in the Fund's investment
portfolio.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of
4.50% of the public offering price imposed at the time of purchase.
The initial sales charge may be reduced or waived for certain purchases.
See "How to Buy Fund Shares _ Class A Shares." These shares are subject
to an annual service fee at the rate of .25 of 1% of the value of the
average daily net assets of Class A. See "Distribution Plan and
Shareholder Services Plan _ Shareholder Services Plan."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 4% contingent deferred sales charge ("CDSC"), which
is assessed only if you redeem Class B shares within six years of
purchase. See "How to Buy Fund Shares _ Class B Shares" and "How to
Redeem Fund Shares_Contingent Deferred Sales Charge -- Class B Shares."
These shares also are subject to an annual service fee at the rate of
.25 of l% of the value of the average daily net assets of Class B. In
addition, Class B shares are subject to an annual distribution fee at the
rate of .75 of 1% of the value of the average daily net assets of Class
B. See "Distribution Plan and Shareholder Services Plan." The
distribution fee paid by Class B will cause such Class to have a higher
expense ratio and to pay lower dividends than Class A. Approximately six
years after the date of purchase, Class B shares automatically will
convert to Class A shares, based on the relative net asset values for
shares of each Class, and will no longer be subject to the distribution
fee. Class B shares that have been acquired through the reinvestment of
dividends and distributions will be converted on a pro rata basis
together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the
total Class B shares not acquired through the reinvestment of dividends
and distributions.
You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee and CDSC on
Class B shares prior to conversion would be less than the initial sales
charge on Class A shares purchased at the same time, and to what extent,
if any such differential would be offset by the return of Class A. In
this regard, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution fees on Class B shares may exceed the initial sales charge
on Class A shares during the life of the investment. Generally, Class A
shares may be more appropriate for investors who invest $100,000 or more
in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's goal is to maximize total return, consisting of
capital appreciation and current income. The Fund's investment objective
cannot be changed without approval by the holders of a majority (as
defined in the Investment Company Act of 1940) of the Fund's outstanding
voting shares. There can be no assurance that the Fund's investment
objective will be achieved.
MANAGEMENT POLICIES
The Fund seeks to achieve its investment objective by
following an asset allocation strategy that contemplates shifts, which
may be frequent, among a wide range of investments and market sectors.
The Fund will invest in equity securities of domestic and foreign
issuers, including common stocks, preferred stocks, convertible
securities and warrants; debt securities of domestic and foreign issuers,
including bonds, debentures and notes; and domestic and foreign money
market instruments. The Fund will not invest more than 25% of its assets
in securities of foreign issuers.
Page 5
Dreyfus and Comstock Partners, Inc. ("Comstock Partners"), the
Fund's sub-investment adviser (collectively, the "Advisers"), have broad
latitude in selecting the class of investments and market sectors in
which the Fund will invest. The Fund will not be managed as a balanced
portfolio and is not required to maintain a portion of its investments in
each of the Fund's permitted investment types at all times. Thus, during
the course of a business cycle, for example, the Fund may invest solely
in equity securities, debt securities or money market instruments, or in
a combination of these classes of investments. The asset allocation mix
for the Fund will be determined by the Advisers at any given time in
light of their assessment of current economic conditions and investment
opportunities. The asset allocation mix selected will be a primary
determinant of the Fund's investment performance.
EQUITY AND DEBT SECURITIES
The Fund intends to invest in domestic and foreign equity and
debt securities. The Fund generally seeks to invest in securities that
the Advisers have determined offer above average potential for total
return. In making this determination, they take into account factors
including price-earnings ratios, cash flow and the relationship of asset
value to market value of the securities. The Fund will be alert to
companies engaged in restructuring efforts, such as mergers, acquisitions
and divestitures of less profitable units.
The Fund typically purchases a debt security if the Advisers
believe that the yield and potential for capital appreciation of the
security are sufficiently attractive in light of the risks of ownership
of the security. In determining whether the Fund should invest in
particular debt securities, the Advisers consider factors such as: the
price, coupon and yield to maturity; their assessment of the credit
quality of the issuer; the issuer's available cash flow and the related
coverage ratios; the property, if any, securing the obligation; and the
terms of the debt securities, including the subordination, default,
sinking fund and early redemption provisions. They also will review the
ratings, if any, assigned to the securities by Moody's Investors Service,
Inc. or Standard & Poor's Corporation or other recognized rating
agencies. The judgment of the Advisers as to credit quality of a debt
security may differ, however, from that suggested by the ratings
published by a rating service.
The Fund is not subject to any limit on the percentage of its
assets that may be invested in debt securities having a certain rating.
Thus, it is possible that a substantial portion of the Fund's assets may
be invested in debt securities that are unrated or rated in the lowest
categories of the recognized rating services (i.e., securities rated C by
Moody's Investors Service, Inc. or D by Standard & Poor's Corporation).
Low-rated and unrated securities have special risks relating to the
ability of the Fund to receive timely, or perhaps ultimate, payment of
principal and interest. They are considered to have speculative
characteristics and to be of poor quality; some obligations in which the
Fund may invest, such as debt securities rated D by Standard & Poor's
Corporation, may be in default. The Fund intends to invest less than 35%
of its assets in debt securities rated Ba or lower by Moody's Investors
Service, Inc. and BB or lower by Standard & Poor's Corporation. See "Risk
Factors_Lower Rated Securities" below for a discussion of certain risks.
The Fund generally invests in United States equity and debt
securities, including convertible securities, that are listed on
securities exchanges or traded in the over-the-counter market. Foreign
securities in which the Fund may invest may be listed on foreign
securities exchanges or traded in the over-the-counter market. For
further information about certain portfolio securities, see "Certain
Portfolio Securities" below.
The Fund also may purchase to a limited extent securities
representing the right to receive the capital appreciation above a
certain amount, and other securities representing the right to receive
dividends and all other attributes of beneficial ownership, in respect of
an entity's common stock or other similar instrument. These securities
typically are sold as shares in unit investment trusts. The percentage of
the Fund's assets that may be invested in shares of unit investment
trusts is subject to the limitations set forth in the Investment Company
Act of 1940.
Page 6
MONEY MARKET INSTRUMENTS
The money market instruments in which the Fund may invest
include: U.S. Government securities; bank obligations, including
certificates of deposit, time deposits and bankers' acceptances and other
short-term obligations of domestic or foreign banks, domestic savings and
loan associations and other banking institutions having total assets in
excess of $1 billion; commercial paper of any rating; and repurchase
agreements involving U.S. Government securities. The Fund may invest up
to 100% of its assets in money market instruments, but at no time will
the Fund's investments in bank obligations, including time deposits,
exceed 25% of its assets. See "Certain Portfolio Securities" below.
INVESTMENT TECHNIQUES
LEVERAGE THROUGH BORROWING
The Fund may borrow for investment purposes. This borrowing,
which is known as leveraging, generally will be unsecured, except to the
extent the Fund enters into reverse repurchase agreements described
below. The Investment Company Act of 1940 requires the Fund to maintain
continuous asset coverage (that is, total assets including borrowings,
less liabilities exclusive of borrowings) of 300% of the amount borrowed.
If the 300% asset 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 debt and restore
the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. Leveraging may
exaggerate the effect on net asset value of any increase or decrease in
the market value of the Fund's portfolio. Money borrowed for leveraging
will be subject to interest costs which may or may not be recovered by
appreciation of the securities purchased; in certain cases, interest
costs may exceed the return received on the securities purchased. The
Fund also may be required to maintain minimum average balances in
connection with such borrowing or to 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.
Among the forms of borrowing in which the Fund may engage is
the entry into reverse repurchase agreements with banks, brokers or
dealers. These transactions involve 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. In certain types of agreements, there is no agreed upon
repurchase date and interest payments are calculated daily, often based
on the prevailing overnight repurchase rate. The Fund will maintain in a
segregated custodial account cash, cash equivalents or U.S. Government
securities or other high quality liquid debt securities 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. These agreements, which are treated as if
reestablished each day, are expected to provide the Fund with a flexible
borrowing tool.
SHORT-SELLING
The Fund may make short sales, which are transactions in which
the Fund sells a security it does not own in anticipation of a decline in
the market value of that security. To complete such a transaction, the
Fund must borrow the security to make delivery to the buyer. The Fund
then is obligated to replace the security borrowed by purchasing it 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. Until the security is replaced, the Fund is required to pay to the
lender amounts equal to any dividends or interest which accrue during the
period of the loan. To borrow the security, the Fund also may be required
to pay a premium, which would increase the cost of the security sold. The
proceeds of the short sale will be retained by the broker, to the extent
necessary to meet margin requirements, until the short position is closed
out.
Page 7
Until the Fund replaces a borrowed security in connection with
a short sale, the Fund will: (a) maintain daily a segregated account,
containing cash or U.S. Government securities, at such a level that (i)
the amount deposited in the account plus the amount deposited with the
broker as collateral will equal the current value of the security sold
short and (ii) the amount deposited in the segregated account plus the
amount deposited with the broker as collateral will not be less than the
market value of the security at the time it was sold short; or (b)
otherwise cover its short position.
The Fund will incur a loss as a result of the short sale if
the price of the security increases between the date of the short sale
and the date on which the Fund replaces the borrowed security. The Fund
will realize a gain if the security declines in price between those
dates. This result is the opposite of what one would expect from a cash
purchase of a long position in a security. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any
premium or amounts in lieu of dividends or interest the Fund may be
required to pay in connection with a short sale .
The Fund may purchase call options to provide a hedge against
an increase in the price of a security sold short by the Fund. When the
Fund purchases a call option it has to pay a premium to the person
writing the option and a commission to the broker selling the option. If
the option is exercised by the Fund, the premium and the commission paid
may be more than the amount of the brokerage commission charged if the
security were to be purchased directly. See "Call and Put Options on
Specific Securities" below.
The Fund anticipates that the frequency of short sales will
vary substantially in different periods, and it does not intend that any
specified portion of its assets, as a matter of practice, will be
invested in short sales. However, no securities will be sold short if,
after effect is given to any such short sale, the total market value of
all securities sold short would exceed 25% of the value of the Fund's net
assets. The Fund may not sell short the securities of any single issuer
listed on a national securities exchange to the extent of more than 5% of
the value of the Fund's net assets. The Fund may not sell short the
securities of any class of an issuer to the extent, at the time of the
transaction, of more than 5% of the outstanding securities of that class.
In addition to the short sales discussed above, the Fund may
make short sales "against the box," a transaction in which the Fund
enters into a short sale of a security which the Fund owns. The proceeds
of the short sale are held by a broker until the settlement date at which
time the Fund delivers the security to close the short position. The Fund
receives the net proceeds from the short sale. The Fund at no time will
have more than 15% of the value of its net assets in deposits on short
sales against the box.
CALL AND PUT OPTIONS ON SPECIFIC SECURITIES
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options in respect of
specific securities (or groups or "baskets" of specific securities) in
which the Fund may invest. The Fund may write covered call and put option
contracts to the extent of 20% of the value of its net assets at the time
such option contracts are written. A call option gives the purchaser of
the option the right to buy, and obligates the writer to sell, the
underlying security or securities at the exercise price at any time
during the option period. Conversely, a put option gives the purchaser of
the option the right to sell, and obligates the writer to buy, the
underlying security or securities at the exercise price at any time
during the option period. A covered call option sold by the Fund, which
is a call option with respect to which the Fund owns the underlying
security or securities, exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price
of the underlying security or securities or to possible continued holding
of a security or securities which might otherwise have been sold to
protect against depreciation in the market price thereof. A covered put
option sold by the Fund exposes the Fund during the term of the option to
a decline in price of the underlying security or securities. A put option
sold by the Fund is covered when, among other things, cash or liquid
securities are placed in a segregated account with the Fund's custodian
to fulfill the obligation undertaken.
Page 8
To close out a position when writing covered options, the Fund
may make a "closing purchase transaction," which involves purchasing an
option on the same security or securities with the same exercise price
and expiration date as the option which it has previously written. To
close out a position as a purchaser of an option, the Fund may make a
"closing sale transaction," which involves liquidating the Fund's
position by selling the option previously purchased. The Fund will
realize a profit or loss from a closing purchase transaction depending
upon the difference between the amount paid to purchase an option and the
amount received from the sale thereof.
The Fund intends to treat certain options in respect of
specific securities that are not traded on a securities exchange and the
securities underlying covered call options written by the Fund as
illiquid securities. See "Certain Portfolio Securities _ Illiquid
Securities" below.
The Fund will purchase options only to the extent permitted by
the policies of state securities authorities in states where shares of
the Fund are qualified for offer and sale.
STOCK INDEX OPTIONS
The Fund may purchase and write call and put options on stock
indexes listed on national securities exchanges or traded in the
over-the-counter market as an investment vehicle for the purpose of
realizing its investment objective or for the purpose of hedging its
portfolio. A stock index fluctuates with changes in the market values of
the stocks included in the index.
The effectiveness of purchasing or writing stock index options
will depend upon the extent to which price movements in the Fund's
portfolio correlate with price movements of the stock index selected.
Because the value of an index option depends upon movements in the level
of the index rather than the price of a particular stock, whether the
Fund will realize a gain or loss from the purchase or writing of options
on an index depends upon movements in the level of stock prices in the
stock market generally or, in the case of certain indexes, in an industry
or market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on stock
indexes will be subject to the Advisers' ability to predict correctly
movements in the direction of the stock market generally or of a
particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks.
When the Fund writes an option on a stock index, it will place
in a segregated account with its custodian cash or liquid securities in
an amount at least equal to the market value of the underlying stock
index and will maintain the account while the option is open or will
otherwise cover the transaction.
FUTURES TRANSACTIONS -- IN GENERAL
The Fund is not a commodity pool. However, as a substitute for
a comparable market position in the underlying securities and for hedging
purposes, the Fund may engage in futures and options on futures
transactions, including those relating to indexes, as described below.
The Fund may trade futures contracts and options on futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade
and the International Monetary Market of the Chicago Mercantile Exchange,
or, to the extent permitted under applicable law, on exchanges located
outside the United States, such as the London International Financial
Futures Exchange and the Sydney Futures Exchange Limited. Foreign markets
may offer advantages such as trading in commodities that are not
currently traded in the United States or arbitrage possibilities not
available in the United States. Foreign markets, however, may have
greater risk potential than domestic markets. See "Risk Factors - Foreign
Commodity Transactions" below.
The Fund's commodities transactions must constitute bona fide
hedging or other permissible transactions pursuant to regulations
promulgated by the Commodity Futures Trading Commission (the "CFTC"). In
addition, the Fund may not engage in such transactions if the sum of the
amount of initial margin deposits and premiums paid for unexpired
commodity options, other than for bona fide hedging transactions, would
exceed 5% of the liquidation
Page 9
value of the Fund's assets, after taking
into account unrealized profits and unrealized losses on such contracts
it has entered into; provided, however, that in the case of an option
that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the 5%. Pursuant to regulations and/or
published positions of the Securities and Exchange Commission, the Fund
may be required to segregate cash or high quality money market
instruments in connection with its commodities transactions in an amount
generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting the Fund's ability to
otherwise invest those assets.
Initially, when purchasing or selling futures contracts the
Fund will be required to deposit with its custodian in the broker's name
an amount of cash or cash equivalents up to approximately 10% of the
contract amount. This amount is subject to change by the exchange or
board of trade on which the contract is traded and members of such
exchange or board of trade may impose their own higher requirements. This
amount is known as "initial margin" and is in the nature of a performance
bond or good faith deposit on the contract which is returned to the Fund
upon termination of the futures position, assuming all contractual
obligations have been satisfied. Subsequent payments, known as "variation
margin," to and from the broker will be made daily as the price of the
index or securities underlying the futures contract fluctuates, making
the long and short positions in the futures contract more or less
valuable, a process known as "marking-to-market." At any time prior to
the expiration of a futures contract, the Fund may elect to close the
position by taking an opposite position at the then prevailing price,
which will operate to terminate the Fund's existing position in the
contract.
Although the Fund intends to purchase or sell futures
contracts only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. Many futures exchanges and boards of
trade limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached
in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract prices could move to the limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially
subjecting the Fund to substantial losses. If it is not possible, or the
Fund determines not, to close a futures position in anticipation of
adverse price movements, the Fund will be required to make daily cash
payments of variation margin. In such circumstances, an increase in the
value of the portion of the portfolio being hedged, if any, may offset
partially or completely losses on the futures contract. However, no
assurance can be given that the price of the securities being hedged will
correlate with the price movements in a futures contract and thus provide
an offset to losses on the futures contract.
In addition, to the extent the Fund is engaging in a futures
transaction as a hedging device, due to the risk of an imperfect
correlation between securities in the Fund's portfolio that are the
subject of a hedging transaction and the futures contract used as a
hedging device, it is possible that the hedge will not be fully effective
in that, for example, losses on the portfolio securities may be in excess
of gains on the futures contract or losses on the futures contract may be
in excess of gains on the portfolio securities that were the subject of
the hedge. In futures contracts based on indexes, the risk of imperfect
correlation increases as the composition of the Fund's portfolio varies
from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being
hedged and movements in the price of futures contracts, the Fund may buy
or sell futures contracts in a greater or lesser dollar amount than the
dollar amount of the securities being hedged if the historical volatility
of the futures contract has been less or greater than that of the
securities. Such "over hedging" or "under hedging" may adversely affect
the Fund's net investment results if market movements are not as
anticipated when the hedge is established.
Page 10
Successful use of futures by the Fund also is subject to the
Advisers' ability to predict correctly movements in the direction of the
market or interest rates. For example, if the Fund has hedged against the
possibility of a decline in the market adversely affecting the value of
securities held in its portfolio and prices increase instead, the Fund
will lose part or all of the benefit of the increased value of securities
which it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may, but will not necessarily, be
at increased prices which reflect the rising market. The Fund may have to
sell securities at a time when it may be disadvantageous to do so.
An option on a futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if
the option is a put) at a specified exercise price at any time during the
option exercise period. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if
the option is a call and a long position if the option is a put). Upon
exercise of the option, the assumption of offsetting futures positions by
the writer and holder of the option will be accompanied by delivery of
the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract,
at exercise, exceeds, in the case of a call, or is less than, in the case
of a put, the exercise price of the option on the futures contract.
Call options sold by the Fund with respect to futures
contracts will be covered by, among other things, entering into a long
position in the same contract at a price no higher than the strike price
of the call option, or by ownership of the instruments underlying, or
instruments the prices of which are expected to move relatively
consistently with the instruments underlying, the futures contract. Put
options sold by the Fund with respect to futures contracts will be
covered in the same manner as put options on specific securities as
described above.
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES -- The
Fund may purchase and sell stock index futures contracts and options on
stock index futures contracts.
A stock index future obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount
times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of the underlying stocks in the
index is made. With respect to stock indexes that are permitted
investments, the Fund intends to purchase and sell futures contracts on
the stock index for which it can obtain the best price with consideration
also given to liquidity.
The Fund may use index futures as a substitute for a
comparable market position in the underlying securities.
There can be no assurance of the Fund's successful use of
stock index futures as a hedging device. In addition to the possibility
that there may be an imperfect correlation, or no correlation at all,
between movements in the stock index future and the portion of the
portfolio being hedged, the price of stock index futures may not
correlate perfectly with the movement in the stock index because of
certain market distortions. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which would distort the
normal relationship between the index and futures markets. Secondly, from
the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures
market also may cause temporary price distortions. Because of the
possibility of price distortions in the futures market and the imperfect
correlation between movements in the stock index and movements in the
price of stock index futures, a correct forecast of general market trends
by the Advisers still may not result in a successful hedging transaction.
Page 11
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE
FUTURES CONTRACTS -- The Fund may invest in interest rate futures
contracts and options on interest rate futures contracts as a substitute
for a comparable market position and to hedge against adverse movements
in interest rates.
To the extent the Fund has invested in interest rate futures
contracts or options on interest rate futures contracts as a substitute
for a comparable market position, the Fund will be subject to the
investment risks of having purchased the securities underlying the
contract.
The Fund may purchase call options on interest rate futures
contracts to hedge against a decline in interest rates and may purchase
put options on interest rate futures contracts to hedge its portfolio
securities against the risk of rising interest rates.
The Fund may sell call options on interest rate futures
contracts to partially hedge against declining prices of portfolio
securities. If the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The Fund may sell put options
on interest rate futures contracts to hedge against increasing prices of
the securities which are deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is higher than
the exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any increase in the price
of securities which the Fund intends to purchase. If a put or call option
sold by the Fund is exercised, the Fund will incur a loss which will be
reduced by the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio securities
and changes in the value of its futures positions, the Fund's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of its portfolio securities.
The Fund also may sell options on interest rate futures
contracts as part of closing purchase transactions to terminate its
options positions. No assurance can be given that such closing
transaction can be effected or that there will be a correlation between
price movements in the options on interest rate futures and price
movements in the Fund's portfolio securities which are the subject of the
hedge. In addition, the Fund's purchase of such options will be based
upon predictions as to anticipated interest rate trends, which could
prove to be inaccurate.
FUTURES CONTRACTS BASED ON AN INDEX OF DEBT SECURITIES AND OPTIONS ON
SUCH FUTURES CONTRACTS
The Fund may purchase and sell futures contracts based on an
index of debt securities and options on such futures contracts to the
extent they currently exist and, in the future, may be developed. At
least one exchange trades futures contracts on an index of long-term
municipal bonds, and the Fund reserves the right to conduct futures and
options transactions based on an index which may be developed in the
future to correlate with price movements in certain categories of debt
securities.
The Fund's investment strategy in employing futures contracts
based on an index of debt securities will be similar to that used by it
in other financial futures transactions. The Fund also may purchase and
write call and put options on such index futures and enter into closing
transactions with respect to such options.
CURRENCY FUTURES AND OPTIONS ON CURRENCY FUTURES
The Fund may purchase and sell currency futures contracts and
options thereon. See "Futures Transactions -- In General" and "Call and
Put Options on Specific Securities" above. By selling foreign currency
futures, the Fund can establish the number of U.S. dollars it will
receive in the delivery month for a certain amount of a foreign currency.
In this way, if the Fund anticipates a decline of a foreign currency
against the U.S. dollar, the Fund can attempt to fix the U.S. dollar
value of some or all of the securities held in its portfolio that are
denominated in that currency. By purchasing foreign currency futures, the
Fund can establish the number of U.S. dol-
Page 12
lars it will be required to pay for a specified amount of a foreign
currency in the delivery month. Thus, if the Fund intends to buy securities
in the future and expects the U.S. dollar to decline against the relevant
foreign currency during the period before the purchase is effected, the
Fund can attempt to fix the price in U.S. dollars of the securities it
intends to acquire.
The purchase of options on currency futures will allow the
Fund, for the price of a premium it must pay for the option, to decide
whether or not to buy (in the case of a call option) or to sell (in the
case of a put option) a futures contract at a specified price at any time
during the period before the option expires. If the Fund, in purchasing
an option, has been correct in its judgment concerning the direction in
which the price of a foreign currency would move as against the U.S.
dollar, it may exercise the option and thereby take a futures position to
hedge against the risk it had correctly anticipated or close out the
option position at a gain that will offset, to some extent, currency
exchange losses otherwise suffered by the Fund. If exchange rates move in
a way the Fund did not anticipate, the Fund will have incurred the
expense of the option without obtaining the expected benefit. As a
result, the Fund's profits on the underlying securities transactions may
be reduced or overall losses incurred.
FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in currency exchange transactions to
protect against uncertainty in the level of future exchange rates in
connection with hedging and other non-speculative strategies involving
specific settlement transactions. The Fund will conduct its currency
exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, or through entering into
forward contracts to purchase or sell currencies. A forward currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which must be more than two days from the date
of the contract, at a price set at the time of the contract. Transaction
hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of the Fund generally arising in
connection with the purchase or sale of its portfolio securities.
These contracts are entered into in the interbank market conducted
directly between currency traders (typically commercial banks or other
financial institutions) and their customers.
OPTIONS ON FOREIGN CURRENCY
The Fund may purchase and sell call and put options on foreign
currency for the purpose of hedging against changes in future currency
exchange rates. Call options convey the right to buy the underlying
currency at a price which is expected to be lower than the spot price of
the currency at the time the option expires. Put options convey the right
to sell the underlying currency at a price which is anticipated to be
higher than the spot prices of the currency at the time the option
expires. The Fund may use foreign currency options for the same purposes
that it could use currency forward and futures transactions as described
herein. See also "Call and Put Options on Specific Securities" above.
LENDING PORTFOLIO SECURITIES
From time to time, the Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. Such loans may not
exceed 33 1/3% of the value of the Fund's total assets. In connection
with such loans, the Fund will receive collateral consisting of cash,
U.S. Government securities or irrevocable letters of credit which will be
maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The Fund can increase its
income through the investment of such collateral. The Fund continues to
be entitled to payments in amounts equal to the interest, dividends or
other distributions payable on the loaned security and receives interest
on the amount of the loan. Such loans will be terminable at any time upon
specified notice. The Fund might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction
breaches its agreement with the Fund.
Page 13
FUTURE DEVELOPMENTS
The Fund may take advantage of opportunities in the area of
options and futures contracts and options on futures contracts and any
other derivative investments which are not presently contemplated for use
by the Fund or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the
Fund's investment objective and legally permissible for the Fund. Before
entering into such transactions or making any such investment, the Fund
will provide appropriate disclosure in its prospectus.
FORWARD COMMITMENTS
The Fund may purchase securities on a when-issued or forward
commitment basis, which means that delivery and payment take place a
number of days after the date of the commitment to purchase. The payment
obligation and the interest rate that will be received on a when-issued
security are fixed at the time the Fund enters into the commitment. The
Fund will make commitments to purchase such securities only with the
intention of actually acquiring the securities, but the Fund may sell
these securities before the settlement date if it is deemed advisable.
The Fund will not accrue income in respect of a security purchased on a
when-issued or forward commitment basis prior to its stated delivery
date.
Securities purchased on a when-issued or forward commitment
basis and certain other securities held in the Fund's portfolio are
subject to changes in value (both 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 when-issued or forward
commitment 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 forward commitment 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. A
segregated account of the Fund consisting of cash, cash equivalents or
U.S. Government securities or other high quality liquid debt securities
at least equal at all times to the amount of the when-issued or forward
commitments will be established and maintained at the Fund's custodian
bank. Purchasing securities on a when-issued or forward commitment basis
when the Fund is fully or almost fully invested may result in greater
potential fluctuations in the value of the Fund's net assets and its net
asset value per share.
CERTAIN PORTFOLIO SECURITIES
CONVERTIBLE SECURITIES
A convertible security is a fixed-income security, such as a
bond or preferred stock, which may be converted at a stated price within
a specified period of time into a specified number of shares of common
stock of the same or different issuer. Convertible securities are senior
to common stock in a corporation's capital structure, but usually are
subordinated to non-convertible debt securities. While providing a
fixed-income stream (generally higher in yield than the income derivable
from a common stock but lower than that afforded by a non-convertible
debt security), a convertible security also affords an investor the
opportunity, through its conversion feature, to participate in the
capital appreciation of the common stock into which it is convertible.
In general, the market value of a convertible security is the
higher of its "investment value" (i.e., its value as a fixed-income
security) or its "conversion value" (i.e., the value of the underlying
shares of common stock if the security is converted). As a fixed-income
security, the market value of a convertible security generally increases
when interest rates decline and generally decreases when interest rates
rise. However, the price of a convertible security also is influenced by
the market value of the security's underlying common stock. Thus, the
price of a convertible security generally increases as the market value
of the underlying stock increases, and generally decreases as the market
value of the underlying stock declines. Investments in convertible
securities generally entail less risk than investments in the common
stock of the same issuer.
Page 14
WARRANTS
A warrant is an instrument issued by a corporation which gives
the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of
time.
ILLIQUID SECURITIES
The Fund may invest up to 15% of the value of its net assets
in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain options
traded in the over-the-counter market and securities used to cover such
options. As to these securities, the Fund is subject to a risk that
should the Fund desire to sell them when a ready buyer is not available
at a price the Fund deems representative of their value, the value of the
Fund's net assets could be adversely affected. However, if a substantial
market of qualified institutional buyers develops pursuant to Rule 144A
under the Securities Act of 1933, as amended, for certain unregistered
securities held by the Fund, the Fund intends to treat such securities as
liquid securities in accordance with procedures approved by the Fund's
Board of Directors. Because it is not possible to predict with assurance
how the market for restricted securities pursuant to Rule 144A will
develop, the Fund's Board of Directors has directed Dreyfus to monitor
carefully the Fund's investments in such securities with particular
regard to trading activity, availability of reliable price information
and other relevant information. To the extent that for a period of time,
qualified institutional buyers cease purchasing restricted securities
pursuant to Rule 144A, the Fund's investing in such securities may have
the effect of increasing the level of illiquidity in the Fund's portfolio
during such period.
U.S. GOVERNMENT SECURITIES
Securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities include U.S. Treasury securities, which
differ in their interest rates, maturities and times of issuance.
Treasury Bills have initial maturities of one year or less; Treasury
Notes have initial maturities of one to ten years; and Treasury Bonds
generally have initial maturities of greater than ten years. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of
the U.S. Treasury; others, such as those of the Federal Home Loan Banks,
by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of
the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. Principal and interest may fluctuate based on
generally recognized reference rates or the relationship of rates. While
the U.S. Government provides financial support to such U.S.
Government-sponsored agencies and instrumentalities, no assurance can be
given that it will always do so since it is not so obligated by law. The
Fund will invest in such securities only when it is satisfied that the
credit risk with respect to the issuer is minimal.
ZERO COUPON U.S. TREASURY 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. The Fund also may invest in zero coupon securities issued by
financial institutions which constitute a proportionate ownership of the
issuer's pool of underlying U.S. Treasury securities. A zero coupon
security pays no interest to its holder during its life and is sold at a
Page 15
discount to its face value at maturity. The amount of the discount
fluctuates with the market price of the security. The market prices of
zero coupon securities generally are more volatile than the market prices
of securities that pay interest periodically and are likely to respond to
a greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.
REPURCHASE AGREEMENTS
Repurchase agreements involve the acquisition by the Fund of
an underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Fund to resell, the instrument at a fixed price,
usually not more than one week after its purchase. The Fund's custodian
or sub-custodian will have custody of, and will hold in a segregated
account, securities acquired by the Fund under a repurchase agreement.
Repurchase agreements are considered by the staff of the Securities and
Exchange Commission to be loans by the Fund. In an attempt to reduce the
risk of incurring a loss on a repurchase agreement, the Fund will enter
into repurchase agreements only with domestic banks with total assets in
excess of one billion dollars or primary government securities dealers
reporting to the Federal Reserve Bank of New York, with respect to
securities of the type in which the Fund may invest, and will require
that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price. The Advisers
will monitor on an ongoing basis the value of the collateral to assure
that it always equals or exceeds the repurchase price. Certain costs may
be incurred by the Fund in connection with the sale of the securities if
the seller does not repurchase them in accordance with the repurchase
agreement. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the securities, realization on the securities by
the Fund may be delayed or limited. The Fund will consider on an ongoing
basis the creditworthiness of the institutions with which it enters into
repurchase agreements.
BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time (in no event longer
than seven days) at a stated interest rate.
Certificates of deposit are negotiable certificates evidencing
the obligation of a bank to repay funds deposited with it for a specified
period of time.
Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These and
other short-term instruments reflect the obligation both of the bank and
of the drawer to pay the face amount of the instrument upon maturity. The
other short-term obligations may include uninsured, direct obligations
bearing fixed, floating or variable interest rates.
COMMERCIAL PAPER
Commercial paper consists of short-term, unsecured promissory
notes issued to finance short-term credit needs.
CERTAIN FUNDAMENTAL POLICIES
The Fund may (i) borrow money to the extent permitted under
the Investment Company Act of 1940; (ii) pledge, mortgage and hypothecate
its assets, but only to secure permitted borrowings and to the extent
related to the deposit of assets in escrow in connection with portfolio
transactions; (iii) invest up to 5% of its total assets in the
obligations of any issuer, except that up to 25% of the value of the
Fund's total assets may be invested, and obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities may be
purchased, without regard to any such limitation; and (iv) invest up to
25% of its total assets in the securities of issuers in any industry,
provided that there shall be no such limitation on investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. This paragraph describes fundamental policies that
cannot be changed without approval by
Page 16
the holders of a majority (as defined in the Investment Company Act of
1940) of the Fund's outstanding voting shares. See "Investment Objective
and Management Policies - Investment Restrictions" in the Statement of
Additional Information.
ADDITIONAL NON-FUNDAMENTAL POLICY
The Fund may invest up to 15% of the value of its net assets
in repurchase agreements providing for settlement in more than seven days
after notice and in other illiquid securities. See "Investment Objective
and Management Policies--Investment Restrictions" in the Statement of
Additional Information.
RISK FACTORS
CERTAIN INVESTMENT TECHNIQUES
The use of investment techniques such as short-selling,
engaging in financial futures and options and currency transactions,
leverage through borrowing, purchasing securities on a forward commitment
basis and lending portfolio securities involves greater risk than that
incurred by many other funds with a similar objective. Using these
techniques may produce higher than normal portfolio turnover and may
affect the degree to which the Fund's net asset value fluctuates. Higher
portfolio turnover rates are likely to result in comparatively greater
brokerage commissions. See "Portfolio Transactions" in the Statement of
Additional Information. Portfolio turnover will not be a limiting factor
when making portfolio decisions.
INVESTING IN FOREIGN SECURITIES
In making foreign investments, the Fund will give appropriate
consideration to the following factors, among others.
Foreign securities markets generally are not as developed or
efficient as those in the United States. Securities of some foreign
issuers are less liquid and more volatile than securities of comparable
U.S. issuers. Similarly, volume and liquidity in most foreign securities
markets are less than in the United States and, at times, volatility of
price can be greater than in the United States. The issuers of some of
these securities, such as foreign bank obligations, may be subject to
less stringent or different regulation than are U.S. issuers. In
addition, there may be less publicly available information about a
non-U.S. issuer, and non-U.S. issuers generally are not subject to
uniform accounting and financial reporting standards, practices and
requirements comparable to those applicable to U.S. issuers.
Because stock certificates and other evidences of ownership of
such securities usually are held outside the United States, the Fund will
be subject to additional risks which include possible adverse political
and economic developments, possible seizure or nationalization of foreign
deposits and possible adoption of governmental restrictions which might
adversely affect the payment of principal and interest on the foreign
securities or might restrict the payment of principal and interest to
investors located outside the country of the issuer, whether from
currency blockage or otherwise. Custodial expenses for a portfolio of
non-U.S. securities generally are higher than for a portfolio of U.S.
securities.
Since foreign securities often are purchased with and payable
in currencies of foreign countries, the value of these assets as measured
in U.S. dollars may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations. Some currency exchange
costs may be incurred when the Fund changes investments from one country
to another.
Furthermore, some of these securities may be subject to
brokerage taxes levied by foreign governments, which have the effect of
increasing the cost of such investment and reducing the realized gain or
increasing the realized loss on such securities at the time of sale.
Income received by the Fund from sources within foreign countries may be
reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States, however, may
reduce or eliminate such taxes. All such taxes paid by the Fund will
reduce its net income available for distribution to shareholders.
Page 17
FOREIGN CURRENCY EXCHANGE
Currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply
and demand in the foreign exchange markets and the relative merits of
investments in different countries, actual or perceived changes in
interest rates and other complex factors, as seen from an international
perspective. Currency exchange rates also can be affected unpredictably
by intervention by U.S. or foreign governments or central banks or the
failure to intervene or by currency controls or political developments in
the U.S. or abroad.
The foreign currency market offers less protection against
defaults in the forward trading of currencies than is available when
trading in currencies occurs on an exchange. Since a forward currency
contract is not guaranteed by an exchange or clearinghouse, a default on
the contract would deprive the Fund of unrealized profits or force the
Fund to cover its commitments for purchase or resale, if any, at the
current market price.
FOREIGN COMMODITY TRANSACTIONS
Unlike trading on domestic commodity exchanges, trading on
foreign commodity exchanges is not regulated by the CFTC and may be
subject to greater risks than trading on domestic exchanges. For example,
some foreign exchanges are principal markets so that no common clearing
facility exists and a trader may look only to the broker for performance
of the contract. In addition, unless the Fund hedges against fluctuations
in the exchange rate between the U.S. dollar and the currencies in which
trading is done on foreign exchanges, any profits that the Fund might
realize in trading could be eliminated by adverse changes in the exchange
rate, or the Fund could incur losses as a result of those changes.
Transactions on foreign exchanges may include both commodities which are
traded on domestic exchanges and those which are not.
LOWER RATED SECURITIES
You should carefully consider the relative risks of investing
in the higher yielding (and, therefore, higher risk) debt securities in
which the Fund may invest without limitation when management believes
that such securities offer opportunities for capital growth. Management's
decision to invest in these securities is not subject to shareholder
approval. These are securities such as those rated Ba by Moody's
Investors Service, Inc. or BB by Standard & Poor's Corporation or as low
as the lowest rating assigned by Moody's Investors Service, Inc. or
Standard & Poor's Corporation. They generally are not meant for
short-term investing and may be subject to certain risks with respect to
the issuing entity and to greater market fluctuations than certain lower
yielding, higher rated fixed-income securities. Obligations rated Ba by
Moody's Investors Service, Inc. are judged to have speculative elements;
their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate.
Obligations rated BB by Standard & Poor's Corporation are regarded as
having predominantly speculative characteristics and, while such
obligations have less near-term vulnerability to default than other
speculative grade debt, they face major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payment.
Obligations rated C by Moody's Investors Service, Inc. are regarded as
having extremely poor prospects of ever attaining any real investment
standing. Obligations rated D by Standard & Poor's Corporation are in
default and the payment of interest and/or repayment of principal is in
arrears. Such obligations, though high yielding, are characterized by
great risk. See "Appendix" in the Statement of Additional Information for
a general description of Moody's Investors Service, Inc. and Standard &
Poor's Corporation securities ratings. The ratings of Moody's Investors
Service, Inc. and Standard & Poor's Corporation represent their opinions
as to the quality of the securities which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective
and, although ratings may be useful in evaluating
Page 18
the safety of interest and principal payments, they do not evaluate
the market value risk of these securities. Therefore, although these
ratings may be an initial criterion for selection of portfolio
investments, the Advisers also will evaluate these securities and the
ability of the issuers of such securities to pay interest and principal.
The Fund's ability to achieve its investment objective may be more
dependent on the Advisers' credit analysis than might be the case for a
fund that invested in higher rated 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.
The market price and yield of debt securities rated Ba or
lower by Moody's Investors Service, Inc. and BB or lower by Standard &
Poor's Corporation are more volatile than those of higher rated
securities. Factors adversely affecting the market price and yield of
these securities will adversely affect the Fund's net asset value. In
addition, the retail secondary market for these securities may be less
liquid than that of higher rated securities; adverse market conditions
could make it difficult at times for the Fund to sell certain securities
or could result in lower prices than those used in calculating the Fund's
net asset value.
The market values of certain lower rated debt securities tend
to reflect individual corporate developments to a greater extent than do
higher rated securities, which react primarily to fluctuations in the
general level of interest rates, and tend to be more sensitive to
economic conditions than are higher rated securities. Companies that
issue such 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.
The Fund may invest in lower rated zero coupon securities and
pay-in-kind bonds (bonds which pay interest through the issuance of
additional bonds), which involve special considerations. These securities
may be subject to greater fluctuations in value due to changes in
interest rates than interest-bearing securities and thus may be
considered more speculative than comparably rated interest-bearing
securities. See "Other Investment Considerations" below, and "Investment
Objective and Management Policies_Risk Factors_Lower Rated Securities"
and "Dividends, Distributions and Taxes" in the Statement of Additional
Information.
OTHER INVESTMENT CONSIDERATIONS
The Fund's net asset value is not fixed and should be expected
to fluctuate. You should purchase Fund shares only as a supplement to an
overall investment program and only if you are willing to undertake the
risks involved. 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. The values of
fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuing entities. See "Lower Rated
Securities" above.
Federal income tax law requires the holder of a zero coupon
security or of certain pay-in-kind 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.
Investment decisions for the Fund are made independently from
those of the other investment companies or accounts advised by Dreyfus or
Comstock Partners. However, if such other investment companies or
accounts are prepared to invest in, or desire to dispose of, securities
of the type in which the Fund invests at the same time as the Fund,
available investments or opportunities for sales will be allocated
equitably to each. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the Fund or the price
paid or received by the Fund.
Page 19
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
Dreyfus, located at 200 Park Avenue, New York, New York 10166,
was formed in 1947 and serves as the Fund's investment adviser. As of
December 31, 1993, Dreyfus managed or administered approximately $78
billion in assets for more than 1.9 million investor accounts nationwide.
Dreyfus supervises and assists in the overall management of
the Fund's affairs under an Investment Advisory Agreement with the Fund,
subject to the overall authority of the Fund's Board of Directors in
accordance with Maryland law.
Under the terms of the Investment Advisory Agreement, the Fund
has agreed to pay Dreyfus an annual fee, payable monthly, as set forth
below:
<TABLE>
ANNUAL FEE AS A PERCENTAGE OF
AVERAGE NET ASSETS AVERAGE DAILY NET ASSETS
---------------------- ----------------------------------
<S> <C> <C>
0 up to $25 million................. .60 of 1%
$25 up to $75 million............... .50 of 1%
$75 up to $200 million.............. .45 of 1%
$200 up to $300 million............. .40 of 1%
In excess of $300 million........... .375 of 1%
</TABLE>
For the fiscal year ended September 30, 1993, the Fund paid
Dreyfus a monthly investment advisory fee at the effective annual rate of
.43 of 1% of the value of the Fund's average daily net assets.
Dreyfus may pay Dreyfus Service Corporation for shareholder
and distribution services from its own monies, including past profits but
not including the investment advisory fee paid by the Fund. Dreyfus
Service Corporation may pay part or all of these payments to securities
dealers or others for servicing and distribution.
SUB-INVESTMENT ADVISER
Comstock Partners, a registered investment adviser located at
10 Exchange Place, Suite 2010, Jersey City, New Jersey 07302-3913, was
formed in 1986 and serves as the Fund's sub-investment adviser. As of
July 30, 1993, Comstock Partners managed approximately $1 billion in
assets for three investment companies and several discretionary accounts.
Comstock Partners, subject to the supervision and approval of
Dreyfus, provides investment advisory assistance and the day-to-day
management of the Fund's portfolio, as well as research and statistical
information under a Sub-Investment Advisory Agreement with the Fund,
subject to the overall authority of the Fund's Board of Directors in
accordance with Maryland law. Investment decisions for the Fund are made
by the Investment Policy Committee of Comstock Partners and no person is
primarily responsible for making recommendations to that committee. See
"Management of the Fund" in the Fund's Statement of Additional
Information. Comstock Partners and Dreyfus also provide research services
for the Fund as well as for other funds advised by Comstock Partners or
Dreyfus through their respective professional staffs of portfolio
managers and security analysts.
Stanley Salvigsen, Chairman of the Board and Chief Executive
Officer of Comstock Partners and Charles L. Minter, Vice Chairman and
Chief Operating Officer of Comstock Partners are Investment Officers of
the Fund. In the October 1986 issue of Institutional Investor, Mr.
Salvigsen was selected as the leading portfolio strategist during the
preceding 12-month period, as determined by a survey of the opinions of
research or investment managers at a selected group of large money
management organizations. Subsequent to 1986, Mr. Salvigsen has not been
evaluated in connection with this survey, which considers only
brokerage-firm analysts. Mr. Salvigsen's past performance, or opinions of
others as to the quality of such performance, is no guarantee of future
performance by the Fund.
Page 20
Under the terms of the Sub-Investment Advisory Agreement, the
Fund has agreed to pay Comstock Partners an annual fee, payable monthly,
as set forth below:
<TABLE>
ANNUAL FEE AS A PERCENTAGE OF
AVERAGE NET ASSETS AVERAGE DAILY NET ASSETS
---------------------- ----------------------------------
<S> <C> <C>
0 up to $25 million................. . .15 of 1%
$25 up to $75 million............... . .25 of 1%
$75 up to $200 million.............. . .30 of 1%
$200 up to $300 million............. . .35 of 1%
In excess of $300 million........... . .375 of 1%
</TABLE>
For the fiscal year ended September 30, 1993, the Fund paid
Comstock Partners a monthly sub-investment advisory fee at the effective
annual rate of .32 of 1% of the value of the Fund's average daily net
assets.
EXPENSES
The aggregate fee paid to the Advisers is higher than that
paid by most other investment companies. From time to time, Dreyfus
and/or Comstock Partners may waive receipt of their fees and/or
voluntarily assume certain expenses of the Fund, which would have the
effect of lowering the overall expense ratio of the Fund and increasing
yield to investors at the time such amounts are waived or assumed, as the
case may be. The Fund will not pay Dreyfus or Comstock Partners at a
later time for any amounts which may be waived, nor will the Fund
reimburse Dreyfus and/or Comstock Partners for any amounts which may be
assumed.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
The Shareholder Services Group, Inc., a subsidiary of First
Data Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is
the Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent").
The Bank of New York, 110 Washington Street, New York, New York 10286, is
the Fund's Custodian.
HOW TO BUY FUND SHARES
The Fund's distributor is Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus, located at 200 Park Avenue, New York,
New York 10166. The shares it distributes are not deposits or obligations
of The Dreyfus Security Savings Bank, F.S.B. and therefore are not
insured by the Federal Deposit Insurance Corporation.
Fund shares can be purchased through Dreyfus Service
Corporation or certain financial institutions (which may include banks),
securities dealers and other industry professionals (collectively,
"Service Agents") that have entered into agreements with Dreyfus Service
Corporation. Service Agents may receive different levels of compensation
for selling different Classes of shares.
Management understands that some Service Agents may impose
certain conditions on their clients which are different from those
described in this Prospectus, and, to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be
in addition to any amounts which might be received under the Shareholder
Services Plan. Each Service Agent has agreed to transmit to its clients a
schedule of such fees. You should consult your Service Agent in this
regard.
When purchasing Fund shares, you must specify whether the
purchase is for Class A or Class B shares. Stock certificates are issued
only upon your written request. No certificates are issued for fractional
shares. The Fund reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are
a client of a Service Agent which has made an aggregate minimum initial
purchase for its customers of $2,500. Subsequent investments must be at
least $100. The initial investment must be accompanied by the Fund's
Account Application. For full-time or part-time employees of Dreyfus, or
any of its affiliates or subsidiaries, directors of Dreyfus, Board
members of a fund advised by Dreyfus, including members of the Fund's
Board, or the spouse or minor child of any of the foregoing, the minimum
initial investment is $1,000. For full-time or part-time employees of
Dreyfus or
Page 21
any of its affiliates or subsidiaries who elect to have a
portion of their pay directly deposited into their Fund account, the
minimum initial investment is $50. Full-time employees of Comstock
Partners may purchase Fund shares without regard to minimum initial
investment requirements. The Fund reserves the right to offer Fund shares
without regard to minimum purchase requirements to employees
participating in certain qualified or non-qualified employee benefit
plans or other programs where contributions or account information can be
transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made
payable to "The Dreyfus Family of Funds," or, if for Dreyfus retirement
plan accounts, to "The Dreyfus Trust Company, Custodian." Payments to
open new accounts which are mailed should be sent to The Dreyfus Family
of Funds, P.O. Box 9387, Providence, Rhode Island 02940-9387, together
with your Account Application indicating which Class of shares is being
purchased. For subsequent investments, your Fund account number should
appear on the check and an investment slip should be enclosed and sent to
The Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105.
For Dreyfus retirement plan accounts, both initial and subsequent
investments should be sent to The Dreyfus Trust Company, Custodian, P.O.
Box 6427, Providence, Rhode Island 02940-6427. Neither additional nor
subsequent investments should be made by third party check. Purchase
orders may be delivered in person only to a Dreyfus Financial Center.
THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call one of the telephone numbers listed under "General
Information."
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to The Bank of New York,
DDA#8900119551/ Dreyfus Capital Value Fund _ Class A shares or
DDA#8900115181/ Dreyfus Capital Value Fund _ Class B shares, as the case
may be, for purchase of Fund shares in your name. The wire must include
your Fund account number (for new accounts, please include your Taxpayer
Identification Number ("TIN") instead), account registration and dealer
number, if applicable. If your initial purchase of Fund shares is by
wire, please call 1-800-645-6561 after completing your wire payment to
obtain your Fund account number. Please include your Fund account number
on the Fund's Account Application and promptly mail the Account
Application to the Fund, as no redemptions will be permitted until the
Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be
made in U.S. dollars and, to avoid fees and delays, should be drawn only
on U.S. banks. A charge will be imposed if any check used for investment
in your account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through
compatible computer facilities.
Subsequent investments also may be made by electronic transfer
of funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct
the institution to transmit immediately available funds through the
Automated Clearing House to The Bank of New York with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and your Fund account number preceded by the digits "1111."
Fund shares are sold on a continuous basis. Net asset value
per share is determined as of the close of trading on the floor of the
New York Stock Exchange (currently 4:00 p.m., New York time), on each day
the New York Stock Exchange is open for business. For purposes of
determining net asset value, options and futures contracts will be valued
15 minutes after the close of trading on the floor of the New York Stock
Exchange. Net asset value per share of each Class is computed by dividing
the value of the Fund's net assets represented by such Class (i.e., the
Page 22
value of its assets less liabilities) by the total number of shares of
such Class outstanding. The Fund's investments are valued based on market
value, or where market quotations are not readily available, based on
fair value as determined in good faith by the Board of Directors. For
further information regarding the methods employed in valuing Fund
investments, see "Determination of Net Asset Value" in the Fund's
Statement of Additional Information.
Federal regulations require that you provide a certified TIN
upon opening or reopening an account. See "Dividends, Distributions and
Taxes" and the Fund's Account Application for further information
concerning this requirement. Failure to furnish a certified TIN to the
Fund could subject you to a $50 penalty imposed by the Internal Revenue
Service (the "IRS").
If an order is received by the Transfer Agent or other agent
by the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m., New York time) on any business day, Fund shares
will be purchased at the public offering price determined as of such
close of trading on the floor of the New York Stock Exchange on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the New York Stock
Exchange on the next business day, except where shares are purchased
through a dealer as provided below.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to Dreyfus Service Corporation by the close
of its business day (normally 5:15 p.m., New York time) will be based on
the public offering price per share determined as of the close of trading
on the floor of the New York Stock Exchange on that day. Otherwise, the
orders will be based on the next determined public offering price. It is
the dealers' responsibility to transmit orders so that they will be
received by Dreyfus Service Corporation before the close of its business
day.
CLASS A SHARES
The public offering price for Class A shares is the net asset
value per share of that Class plus a sales load as shown below:
<TABLE>
TOTAL SALES LOAD
---------------------------------------
AS A % OF AS A % OF DEALERS' REALLOWANCE
OFFERING PRICE NET ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION PER SHARE PER SHARE OFFERING PRICE
------------------------------ --------------- ----------------- ----------------
<S> <C> <C> <C>
Less than $50,000.................... 4.50 4.70 4.25
$50,000 to less than $100,000........ 4.00 4.20 3.75
$100,000 to less than $250,000....... 3.00 3.10 2.75
$250,000 to less than $500,000....... 2.50 2.60 2.25
$500,000 to less than $1,000,000..... 2.00 2.00 1.75
$1,000,000 to less than $3,000,000... 1.00 1.00 1.00
$3,000,000 to less than $5,000,000... .50 .50 .50
$5,000,000 and over.................. .25 .25 .25
</TABLE>
If you were an actual beneficial owner of Fund shares held in
a Fund account on April 16, 1987, you may purchase Class A shares for
that Fund account without a sales load.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with Dreyfus Service Corporation pertaining to the sale of Fund
shares (or which otherwise have a brokerage related or clearing
arrangement with an NASD member firm or financial institution with
respect to the sale of Fund shares) may purchase Class A shares for
themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children at net asset value,
provided that they have furnished Dreyfus Service Corporation with such
information it may request from time to time in order to verify
eligibility for this privilege. This privilege also applies to full-time
employees of financial institutions affiliated with NASD member firms
whose full-time employees are eligible to purchase Class A shares at net
asset value. In addition, Class A shares are offered at net asset value
to full-time employees of Comstock Partners
Page 23
and full-time or part-time employees of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Fund's Board, or the spouse
or minor child of any of the foregoing. Class A shares purchased in
connection with the Dreyfus Managed Portfolio program will be purchased
at net asset value.
Class A shares will be offered at net asset value without a
sales load to 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 initial investment in the Dreyfus
Family of Funds or certain other products made available by Dreyfus
Service Corporation to such plans or programs exceeds one million dollars
("Eligible Benefit Plans"). The determination of the number of employees
eligible for participation in a plan or program shall be made on the date
that Class A shares are first purchased by or on behalf of employees
participating in such plan or program and on each subsequent January 1st.
Dreyfus Service Corporation may pay dealers a fee of up to .5% of the
amount invested through such dealers in Class A shares at net asset value
by employees participating in Eligible Benefit Plans. All present
holdings of shares of funds in the Dreyfus Family of Funds by Eligible
Benefit Plans will be aggregated to determine the fee payable with
respect to each such purchase of Class A shares. Dreyfus Service
Corporation reserves the right to cease paying these fees at any time.
Dreyfus Service Corporation 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.
Class A shares also may be purchased (including by exchange)
at net asset value without a sales load for Dreyfus-sponsored IRA
"Rollover Accounts" with the distribution proceeds from a qualified
retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided that, at
the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) satisfied the requirements set forth
under either clause (i) or clause (ii) above and all or a portion of such
plan's assets were invested in funds in the Dreyfus Family of Funds or
certain other products made available by Dreyfus Service Corporation to
such plans, or (b) had all of its assets invested in funds in the Dreyfus
Family of Funds or certain other products made available by Dreyfus
Service Corporation to such plans which funds or other products were sold
with a sales load.
In fiscal 1993, Dreyfus Service Corporation retained $394,268
from sales loads on Class A shares. The dealer reallowance may be changed
from time to time but will remain the same for all dealers. Dreyfus
Service Corporation, at its expense, may provide additional promotional
incentives to dealers that sell shares of funds advised by Dreyfus which
are sold with a sales load, such as the Fund. In some instances, these
incentives may be offered only to certain dealers who have sold or may
sell significant amounts of shares. Dealers receive a larger percentage
of the sales load from Dreyfus Service Corporation than they receive for
selling most other funds.
CLASS B SHARES
The public offering price for Class B shares is the net asset
value per share of that Class. No initial sales charge is imposed at the
time of purchase. A CDSC is imposed, however, on certain redemptions of
Class B shares as described under "How to Redeem Fund Shares." Dreyfus
Service Corporation compensates certain Service Agents for selling Class
B shares at the time of purchase from Dreyfus Service Corporation's own
assets. The proceeds of the CDSC and the distribution fee, in part, are
used to defray these expenses. In fiscal 1993, $20,817 was retained by
Dreyfus Service Corporation from the CDSC on Class B shares.
RIGHT OF ACCUMULATION -- CLASS A SHARES
Reduced sales loads apply to any purchase of Class A shares,
shares of certain other funds advised by Dreyfus which are sold with a
sales load or shares acquired by a previous exchange of shares purchased
with a sales load (hereinafter referred to as "Eligible Funds"),
Page 24
by you and any related "purchaser" as defined in the Statement of
Additional Information, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you previously purchased
and still hold Class A shares of the Fund, or of any other Eligible Fund
or combination thereof, with an aggregate current market value of $40,000
and subsequently purchase Class A shares of the Fund or an Eligible Fund
having a current value of $20,000, the sales load applicable to the
subsequent purchase would be reduced to 4% of the offering price. All
present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the
sales load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of a purchase
you or your Service Agent must notify Dreyfus Service Corporation if
orders are made by wire, or the Transfer Agent if orders are made by
mail. The reduced sales load is subject to confirmation of your holdings
through a check of appropriate records.
DREYFUS TELETRANSFER PRIVILEGE
You may purchase Fund shares (minimum $500, maximum $150,000
per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Fund's Account Application or
have filed an Optional Services Form with the Transfer Agent. The
proceeds will be transferred between the bank account designated in one
of these documents and your Fund account. Only a bank account maintained
in a domestic financial institution which is an Automated Clearing House
member may be so designated. The Fund may modify or terminate this
Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you
may request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may
not be available to clients of certain Service Agents and some Service
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus. You should consult your Service
Agent in this regard.
EXCHANGE PRIVILEGE
The Exchange Privilege enables you to purchase, in exchange
for Class A or Class B shares of the Fund, shares of the same Class in
certain other funds managed or administered by Dreyfus, to the extent
such shares are offered for sale in your state of residence. These funds
have different investment objectives which may be of interest to you. If
you desire to use this Privilege, you should consult your Service Agent
or Dreyfus Service Corporation to determine if it is available and
whether any conditions are imposed on its use.
To use this Privilege, you or your Service Agent acting on
your behalf must give exchange instructions to the Transfer Agent in
writing, by wire or by telephone. If you previously have established the
Telephone Exchange Privilege, you may telephone exchange instructions by
calling 1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. See "How to Redeem Fund Shares-Procedures." Before any
exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made.
Prospectuses may be obtained from Dreyfus Service Corporation. Except in
the case of Personal Retirement Plans, the shares being exchanged must
have a current value of at least $500; furthermore, when establishing a
new account by exchange, the shares being exchanged must have a value of
at least the minimum initial investment required for the fund into which
the exchange is being made. Telephone exchanges may be made only if the
appropriate "YES" box has been checked on the Account Application, or a
separate signed Optional Services Form is on file with the Transfer
Agent. Upon an exchange into a new account, the following
Page 25
shareholder services and privileges, as applicable and where available,
will be automatically carried over to the fund into which the exchange
is made: Exchange Privilege, Dreyfus TELETRANSFER Privilege and the
dividend/capital gain distribution option (except for the Dreyfus
Dividend Sweep Privilege) selected by the investor.
Shares will be exchanged at the next determined net asset
value; however, a sales load may be charged with respect to exchanges of
Class A shares into funds sold with a sales load. No CDSC will be imposed
on Class B shares at the time of an exchange; however, Class B shares
acquired through an exchange will be subject on redemption to the higher
CDSC applicable to the exchanged or acquired shares. The CDSC applicable
on redemption of the acquired Class B shares will be calculated from the
date of the initial purchase of the Class B shares exchanged. If you are
exchanging Class A shares into a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which
reflect a reduced sales load, if the shares of the fund from which you
are exchanging were: (a) purchased with a sales load, (b) acquired by a
previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestment of dividends or distributions paid with
respect to the foregoing categories of shares. To qualify, at the time of
an exchange you must notify the Transfer Agent or your Service Agent must
notify Dreyfus Service Corporation. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the Statement of Additional Information. No
fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the Securities and Exchange Commission. The
Fund reserves the right to reject any exchange request in whole or in
part. The Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest
regularly (on a semimonthly, monthly, quarterly or annual basis), in
exchange for Class A or Class B shares of the Fund, in shares of the same
Class of certain other funds in the Dreyfus Family of Funds of which you
are currently an investor. The amount you designate, which can be
expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth
of the month according to the schedule you have selected. Shares will be
exchanged at the then-current net asset value; however, a sales load may
be charged with respect to exchanges of Class A shares into funds sold
with a sales load. No CDSC will be imposed on Class B shares at the time
of an exchange; however, the Class B shares acquired through an exchange
will be subject on redemption to the higher CDSC applicable to the
exchanged shares or acquired shares. The CDSC applicable on redemption of
the acquired Class B shares will be calculated from the date of the
initial purchase of the Class B shares exchanged. See "Shareholder
Services" in the Statement of Additional Information. The right to
exercise this Privilege may be modified or cancelled by the Fund or the
Transfer Agent. You may modify or cancel your exercise of this Privilege
at any time by writing to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. The Fund may charge a service fee
for the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss. For more information concerning this Privilege and
the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form,
please call toll free 1-800-645-6561.
Page 26
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-Automatic Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring
funds from the bank account designated by you. At your option, the bank
account designated by you will be debited in the specified amount, and
Fund shares will be purchased, once a month, on either the first or
fifteenth day, or twice a month, on both days. Only an account maintained
at a domestic financial institution which is an Automated Clearing House
member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form from Dreyfus
Service Corporation. You may cancel your participation in this Privilege
or change the amount of purchase at any time by mailing written
notification to The Dreyfus Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671, or, if for Dreyfus retirement plan accounts, to
The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence, Rhode
Island 02940-6427, and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is
contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request
withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained from
Dreyfus Service Corporation. There is a service charge of 50cents for
each withdrawal check. The Automatic Withdrawal Plan may be ended at any
time by you, the Fund or the Transfer Agent. Shares for which stock
certificates have been issued may not be redeemed through the Plan.
Class B shares withdrawn pursuant to the Automatic Withdrawal
Plan will be subject to any applicable CDSC. Purchases of additional
Class A shares where the sales load is imposed concurrently with
withdrawals of Class A shares generally are undesirable. Any
correspondence with respect to the Automatic Withdrawal Plan should be
addressed to The Dreyfus Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671, or, if for Dreyfus retirement plan accounts, to
The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence, Rhode
Island 02940-6427.
DREYFUS DIVIDEND SWEEP PRIVILEGE
Dreyfus Dividend Sweep Privilege enables you to invest
automatically dividends or dividends and capital gain distributions, if
any, paid by the Fund in shares of the same Class of another fund in the
Dreyfus Family of Funds of which you are a shareholder. Shares of the
other fund will be purchased at the then-current net asset value;
however, a sales load may be charged with respect to investments in Class
A shares of a fund sold with a sales load. If you are investing in a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load. If you are
investing in a fund or class that charges a CDSC, the shares purchased
will be subject on redemption to the CDSC, if any, applicable to the
purchased shares. See "Shareholder Services" in the Statement of
Additional Information. For more information concerning this Privilege
and the funds in The Dreyfus Family of Funds eligible to participate in
this Privilege, or to request a Dividend Sweep Authorization Form, please
call toll free 1-800-645-6561. You may cancel this Privilege by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. To select a new fund after
cancellation, you must submit a new authorization form. Enrollment in or
cancellation of this Privilege is effective three business days following
receipt. This Privilege is available only for existing accounts and may
not be used to open new accounts. Minimum subsequent investments do not
apply. The Fund may modify or terminate this Privilege at any time or
charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for
this Privilege.
Page 27
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to
purchase Fund shares (minimum of $100 and maximum of $50,000 per
transaction) by having Federal salary, Social Security, or certain
veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much
of such payments as you elect. To enroll in Dreyfus Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained from Dreyfus Service
Corporation. Death or legal incapacity will terminate your participation
in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice
to you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund
shares (minimum of $100 per transaction) automatically on a regular
basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the Automated Clearing House system at
each pay period. To establish a Dreyfus Payroll Savings Plan account, you
must file an authorization form with your employer's payroll department.
Your employer must complete the reverse side of the form and return it to
The Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island
02940-9671. You may obtain the necessary authorization form from Dreyfus
Service Corporation. You may change the amount of purchase or cancel the
authorization only by written notification to your employer. It is the
sole responsibility of your employer, not Dreyfus Service Corporation,
Dreyfus, the Fund, the Transfer Agent or any other person, to arrange for
transactions under the Dreyfus Payroll Savings Plan. The Fund may modify
or terminate this Privilege at any time or charge a service fee. No such
fee currently is contemplated.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. For details, please contact Dreyfus Group Retirement
Plans, a division of Dreyfus Service Corporation, by calling toll free
1-800-358-5566.
LETTER OF INTENT -- CLASS A SHARES
By signing a Letter of Intent form, available from Dreyfus
Service Corporation, you become eligible for the reduced sales load
applicable to the total number of Eligible Fund shares purchased in a
13-month period pursuant to the terms and under the conditions set forth
in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering price of
shares you hold (on the date of submission of the Letter of Intent) in
any Eligible Fund that may be used toward "Right of Accumulation"
benefits described above may be used as a credit toward completion of the
Letter of Intent. However, the reduced sales load will be applied only to
new purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales load if
you do not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when you fulfill the terms of the Letter of
Intent by purchasing the specified amount. If your purchases qualify for
a further sales load reduction, the sales load will be adjusted to
reflect your total purchase at the end of 13 months. If total purchases
are less than the amount specified, you will be requested to remit an
amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If
such remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will
redeem an appropriate number of Class A shares held in escrow to realize
the difference. Signing a Letter
Page 28
of Intent does not bind you to purchase, or the Fund to sell, the full
amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales
load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent.
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your Class A or Class B shares
at any time. Redemption requests should be transmitted to the Transfer
Agent as described below. When a request is received in proper form, the
Fund will redeem the shares at the next determined net asset value as
described below. If you hold Fund shares of more than one Class, any
request for redemption must specify the Class of shares being redeemed.
If you fail to specify the Class of shares to be redeemed or if you own
fewer shares of the Class than specified to be redeemed, the redemption
request may be delayed until the Transfer Agent receives further
instructions from you or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC)
when shares are redeemed directly through Dreyfus Service Corporation.
Service Agents may charge a nominal fee for effecting redemptions of Fund
shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed
may be more or less than their original cost, depending on the Fund's
then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption
request in proper form, except as provided by the rules of the Securities
and Exchange Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY
CHECK, BY DREYFUS TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC
ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE
TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU
PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER
PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO
EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS
TO REDEEM SHARES PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE
DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED
BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE
IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY
REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE
PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its
option upon not less than 45 days' written notice if your account's net
asset value is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES
A CDSC payable to Dreyfus Service Corporation is imposed on
any redemption of Class B shares which reduces the current net asset
value of your Class B shares to an amount which is lower than the dollar
amount of all payments by you for the purchase of Class B shares of the
Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the net asset value of the Class B shares redeemed does
not exceed (i) the current net asset value of Class B shares acquired
through reinvestment of dividends or capital gain distributions, plus
(ii) increases in the net asset value of your Class B shares above the
dollar amount of all your payments for the purchase of Class B shares of
the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has
declined below their original cost as a result of the Fund's performance,
a CDSC may be applied to the then-current net asset value rather than the
purchase price.
Page 29
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years from the time you purchased the
Class B shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment
for the purchase of Class B shares, all payments during a month will be
aggregated and deemed to have been made on the first day of the month.
The following table sets forth the rates of the CDSC:
<TABLE>
YEAR SINCE PURCHASE CDSC AS A % OF AMOUNT
PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
----------------------- ---------------------------------------
<S> <C> <C>
First............................... 4.00
Second.............................. 4.00
Third............................... 3.00
Fourth.............................. 3.00
Fifth............................... 2.00
Sixth............................... 1.00
</TABLE>
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that results in the lowest
possible rate. It will be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the reinvestment of
dividends and distributions; then of amounts representing the
increase in net asset value of Class B shares above the total amount of
payments for the purchase of Class B shares made during the preceding six
years; then of amounts representing the cost of shares purchased six
years prior to the redemption; and finally, of amounts representing the
cost of shares held for the longest period of time within the applicable
six-year period.
For example, assume an investor purchased 100 shares at $10
per share for a cost of $1,000. Subsequently, the shareholder acquired 5
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the net asset value
had appreciated to $12 per share, the value of the investor's shares
would be $1,260 (105 shares at $12 per share). The CDSC would not be
applied to the value of the reinvested dividend shares and the amount
which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 4%
(the applicable rate in the second year after purchase) for a total CDSC
of $9.60.
WAIVER OF CDSC
The CDSC will be waived in connection with (a) redemptions
made within one year after the death or disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, as amended (the "Code"),
of the shareholder, (b) redemptions by Eligible Benefit Plans, (c)
redemptions as a result of a combination of any investment company with
the Fund by merger, acquisition of assets or otherwise, (d) a
distribution following retirement under a tax-deferred retirement plan or
attaining age 70 1/2 in the case of an IRA or Keogh plan or custodial
account pursuant to section 403(b) of the Code and (e) redemptions by
such shareholders as the Securities and Exchange Commission or its staff
may permit. If the Directors of the Fund determine to discontinue the
waiver of the CDSC, the disclosure in the Fund's prospectus will be
revised appropriately. Any Fund shares subject to a CDSC which were
purchased prior to the termination of such waiver will have the CDSC
waived as provided in the Fund's prospectus at the time of the purchase
of such shares.
To qualify for a waiver of the CDSC, at the time of redemption
you must notify the Transfer Agent or your Service Agent must notify
Dreyfus Service Corporation. Any such qualification is subject to
confirmation of your entitlement.
PROCEDURES
You may redeem shares by using the regular redemption
procedure through the Transfer Agent or through the Dreyfus TELETRANSFER
Privilege. Other redemption procedures may be in effect for investors who
effect transactions in Fund shares through Service Agents. The Fund
Page 30
makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities.
Your redemption request may direct that the redemption
proceeds be used to purchase shares of other funds advised or
administered by Dreyfus that are not available through the Exchange
Privilege. The applicable CDSC will be charged upon the redemption of
Class B shares. Your redemption proceeds will be invested in shares of
the other fund on the next business day. Before you make such a request,
you must obtain and should review a copy of the current prospectus of the
fund being purchased. Prospectuses may be obtained from Dreyfus Service
Corporation. The prospectus will contain information concerning minimum
investment requirements and other conditions that may apply to your
purchase.
You may redeem or exchange Fund shares by telephone if you
have checked the appropriate box on the Fund's Account Application or
have filed an Optional Services Form with the Transfer Agent. If you
select the Dreyfus TELETRANSFER Privilege or telephone exchange
privilege, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you,
or a representative of your Service Agent, and reasonably believed by the
Transfer Agent to be genuine. The Fund will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does
not follow such procedures, the Fund or the Transfer Agent may be liable
for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a Dreyfus TELETRANSFER redemption or exchange of Fund shares. In
such cases, you should consider using the other redemption procedures
described herein. Use of these other redemption procedures may result in
your redemption request being processed at a later time than it would
have been if Dreyfus TELETRANSFER redemption had been used. During the
delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION
Under the regular redemption procedure, you may redeem your
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement
plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island 02940-6427. Written redemption requests must
specify the Class of shares being redeemed. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT
THEREBY. For the location of the nearest Dreyfus Financial Center, please
call of one of the telephone numbers listed under "General Information."
Redemption requests must be signed by each shareholder, including each
owner of a joint account, and each signature must be guaranteed. The
Transfer Agent has adopted standards and procedures pursuant to which
signature guarantees in proper form generally will be accepted from
domestic banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
If you have any questions with respect to signature-guarantees, please
call one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
DREYFUS TELETRANSFER PRIVILEGE
You may redeem Fund shares (minimum $500) by telephone if you
have checked the appropriate box and supplied the necessary information
on the Fund's Account Application or have
Page 31
filed an Optional Services Form with the Transfer Agent. The proceeds will
be transferred between your Fund account and the bank account designated
in one of these documents. Only such an account maintained in a domestic
financial institution which is an Automated Clearing House member may be
so designated. Redemption proceeds will be on deposit in your account at
an Automated Clearing House member bank ordinarily two days after receipt
of the redemption request or, at your request, paid by check (maximum
$150,000 per day) and mailed to your address. Holders of jointly
registered Fund or bank accounts may redeem through the Dreyfus
TELETRANSFER Privilege for transfer to their bank account only up to
$250,000 within any 30-day period. The Fund reserves the right to refuse
any request made by telephone, including requests made shortly after a
change of address, and may limit the amount involved or the number of
such requests. The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you
may request a Dreyfus TELETRANSFER redemption of Fund shares by
telephoning 1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. Shares of the Fund held under Keogh Plans, IRAs or other
Dreyfus retirement plans, and shares issued in certificate form, are not
eligible for this Privilege.
REINVESTMENT PRIVILEGE -- CLASS A
You may reinvest up to the number of Class A shares you have
redeemed, within 30 days of redemption, at the then-prevailing net asset
value without a sales load, or reinstate your account for the purpose of
exercising the Exchange Privilege. The Reinvestment Privilege may be
exercised only once.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The Class A and Class B shares are subject to a Shareholder
Services Plan and the Class B shares only are subject to a Distribution
Plan.
DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, the Fund pays Dreyfus Service
Corporation for advertising, marketing and distributing Class B shares at
an annual rate of .75 of 1% of the value of the average daily net assets
of Class B. Under the Distribution Plan, Dreyfus Service Corporation may
make payments to Service Agents in respect of these services. Dreyfus
Service Corporation determines the amounts to be paid to Service Agents.
Service Agents receive such fees in respect of the average daily value of
Class B shares owned by their clients. From time to time, Dreyfus Service
Corporation may defer or waive receipt of fees under the Distribution
Plan while retaining the ability to be paid by the Fund under the
Distribution Plan thereafter. The fees payable to Dreyfus Service
Corporation under the Distribution Plan for advertising, marketing and
distributing Class B shares and for payments to Service Agents are
payable without regard to actual expenses incurred.
SHAREHOLDER SERVICES PLAN
Under the Shareholder Services Plan, the Fund pays Dreyfus
Service Corporation for the provision of certain services to the holders
of Class A and Class B shares a fee at an annual rate of up to .25 of 1%
of the value of the average daily net assets of Class A and Class B. The
services provided may include providing personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding
the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts. Dreyfus Service
Corporation may make payments to Service Agents in respect of these
services. Dreyfus Service Corporation determines the amounts to be paid
to Service Agents. Each Service Agent is required to disclose to its
clients any compensation payable to it by the Fund pursuant to the
Shareholder Services Plan and any other compensation payable by their
clients in connection with the investment of their assets in Class A or
Class B shares.
Page 32
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily pays dividends from net investment income
and distributes net realized securities gains, if any, once a year, but
it may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner
consistent with the provisions of the Investment Company Act of 1940. The
Fund will not make distributions from net realized securities gains
unless capital loss carryovers, if any, have been utilized or have
expired. You may choose whether to receive dividends and distributions in
cash or to reinvest in additional shares of the same class at net asset
value without a sales load. All expenses are accrued daily and are
deducted before the declaration of dividends. Dividends paid by each Class
will be calculated at the same time and in the same manner and will be of
the same amount, except that the expenses attributable solely to Class A
or Class B will be borne exclusively by such Class. Class B shares will
receive lower per share dividends than Class A shares because of the
higher expenses borne by Class B. See "Fee Table."
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and gains
from the sale or other disposition of market discount bonds paid by the
Fund, will be taxable to U.S. shareholders as ordinary income whether
received in cash or reinvested in additional Fund shares. Distributions
from net realized long-term securities gains of the Fund will be taxable
to U.S. shareholders as long-term capital gains, regardless of how long
shareholders have held their Fund shares and whether such distributions
are received in cash or reinvested in additional Fund shares. The Code
provides that the net capital gain of an individual generally will not be
subject to Federal income tax at a rate in excess of 28%. Dividends,
together with distributions may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and gains
from the sale or other disposition of market discount bonds, paid by the
Fund to a foreign investor generally are subject to U.S. nonresident
withholding taxes at the rate of 30%, unless the foreign investor claims
the benefit of a lower rate specified in a tax treaty. Distributions from
net realized long-term securities gains paid by the Fund to a foreign
investor as well as the proceeds of any redemptions from a foreign
investor's account, regardless of the extent to which gain or loss may be
realized, generally will not be subject to U.S. nonresident withholding
tax. However, such distributions may be subject to backup withholding, as
described below, unless the foreign investor certifies his non-U.S.
residency status.
Notice as to the tax status of your dividends and
distributions will be mailed to you annually. You also will receive
periodic summaries of your account which will include information as to
dividends and distributions from securities gains, if any, paid during
the year.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares, if you exchange your Class A shares
for shares in another Dreyfus fund within 91 days after purchase and the
other Dreyfus fund reduces or eliminates its otherwise applicable load
charge for the purpose of the exchange. In this case, the amount of sales
load charged the investor for Class A shares, up to the amount of the
reduction of the sales load charged, on the exchange, is not included in
the basis of such investor's Class A shares for purposes of computing
gain or loss on the exchange, and instead is added to the basis of the
fund shares received in the exchange.
Federal regulations generally require the Fund to withhold and
remit to the U.S. Treasury 31%, of dividends, distributions from net
realized securities gains of the Fund and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to
backup withholding as a result of a failure to properly report taxable
Page 33
dividend or interest income on a Federal income tax return. Furthermore,
the IRS may notify the Fund to institute backup withholding if the IRS
determines that a shareholder's TIN is incorrect or if a shareholder has
failed to properly report dividend and interest income on a Federal
income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an
additional tax imposed on the record owner of the account, and may be
claimed as a credit on the record owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified
for the fiscal year ended September 30, 1993 as a "regulated investment
company" under the Code. The Fund intends to continue to so qualify if
such qualification is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal income tax
to the extent its earnings are distributed in accordance with applicable
provisions of the Code. In addition, the Fund is subject to a
non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific
questions as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of
shares is calculated on the basis of average annual total return.
Advertisements also may include performance calculated on the basis of
total return. These total return figures reflect changes in the price of
the shares and assume that any income dividends and/or capital gains
distributions made by the Fund during the measuring period were
reinvested in shares of the same Class. Class A average annual total
return figures include the maximum initial sales charge and Class B
average annual total return figures include any applicable CDSC. These
figures also take into account any applicable service and distribution
fees. As a result, at any given time, the performance of Class B should
be expected to be lower than that of Class A. Performance for each Class
will be calculated separately.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment in the Fund was
purchased with an initial payment of $1,000 and that the investment was
redeemed at the end of a stated period of time, after giving effect to
the reinvestment of dividends and distributions during the period. The
return is expressed as a percentage rate which, if applied on a
compounded annual basis, would result in the redeemable value of the
investment at the end of the period. Advertisements of the Fund's
performance will include the average annual total return of Class A and
Class B for one, five and ten year periods, or for shorter time periods
depending upon the length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the
income and principal changes for a specified period and dividing by the
maximum offering price per share at the beginning of the period.
Advertisements may include the percentage rate of total return or may
include the value of a hypothetical investment at the end of the period
which assumes the application of the percentage rate of total return.
Total return also may be calculated by using the net asset value per
share at the beginning of the period instead of the maximum offering
price per share at the beginning of the period for Class A shares or
without giving effect to any applicable CDSC at the end of the period
for Class B shares. Calculations based on the net asset value per share
do not reflect the deduction of the applicable sales charge which, if
reflected, would reduce the performance quoted.
Performance will vary from time to time and past results are
not necessarily representative of future results. You should remember
that performance is a function of portfolio manage-
Page 34
ment in selecting the type and quality of portfolio securities and is
affected by operating expenses. Performance information, such as that
described above, may not provide a basis for comparison with other
investments or other investment companies using a different method of
calculating performance.
Comparative performance information may be used from time to
time in advertising or marketing the Fund's shares, including data from
Lipper Analytical Services, Inc., Standard & Poor's 500 Composite Stock
Price Index, the Dow Jones Industrial Average, Morningstar, Inc. and
other industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on December 3,
1983, and commenced operations on October 10, 1985. On February 3, 1993,
the Fund, which is incorporated under the name Dreyfus Capital Value
Fund, Inc., began operating under the name Dreyfus Capital Value Fund (A
Premier Fund). The Fund is authorized to issue 200 million shares of
Common Stock, par value $.01 per share. The Fund's shares are classified
into two classes. Each share has one vote and shareholders will vote in
the aggregate and not by class except as otherwise required by law or
when class voting is permitted by the Board of Directors. However,
holders of Class A and Class B shares will be entitled to vote on matters
submitted to shareholders pertaining to the Shareholder Services Plan and
only holders of Class B shares will be entitled to vote on matters
submitted to shareholders pertaining to the Distribution Plan.
Unless otherwise required by the Investment Company Act of
1940, ordinarily it will not be necessary for the Fund to hold annual
meetings of shareholders. As a result, Fund shareholders may not consider
each year the election of Directors or the appointment of auditors.
However, pursuant to the Fund's By-Laws, the holders of at least 10% of
the shares outstanding and entitled to vote may require the Fund to hold
a special meeting of shareholders for purposes of removing a Director
from office and the holders of at least 25% of such shares may require
the Fund to hold a special meeting of shareholders for any other purpose.
Fund shareholders may remove a Director by the affirmative vote of a
majority of the Fund's outstanding voting shares. In addition, the Board
of Directors will call a meeting of shareholders for the purpose of
electing Directors if, at any time, less than a majority of the Directors
then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and
sends you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or by
calling toll free 1-800-645-6561. In New York City, call 1-718-895-1206;
on Long Island, call 794-5200.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
AND IN THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER
OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
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