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(LION LOGO) DREYFUS CAPITAL VALUE FUND (A PREMIER FUND)
PROSPECTUS FEBRUARY 1, 1996
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DREYFUS CAPITAL VALUE FUND(A PREMIER FUND) (THE "FUND") IS AN
OPEN-END, DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND.
THE FUND'S INVESTMENT OBJECTIVE 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.
BY THIS PROSPECTUS, THE FUND IS OFFERING FOUR CLASSES OF SHARES --
CLASS A, CLASS B, CLASS C AND CLASS R -- WHICH ARE DESCRIBED HEREIN. SEE
"ALTERNATIVE PURCHASE METHODS."
YOU CAN PURCHASE OR REDEEM ALL CLASSES OF SHARES BY TELEPHONE USING
DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION ("DREYFUS") SERVES AS THE FUND'S INVESTMENT
ADVISER.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED FEBRUARY 1, 1996,
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 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Page
Fee Table........................................... 3
Condensed Financial Information..................... 3
Alternative Purchase Methods........................ 6
Description of the Fund............................. 7
Management of the Fund.............................. 10
How to Buy Shares................................... 12
Shareholder Services................................ 17
How to Redeem Shares................................ 21
Distribution Plan and Shareholder Services Plan...... 25
Dividends, Distributions and Taxes.................... 25
Performance Information............................... 27
General Information.................................. 28
Appendix............................................ 29
Page 2
<TABLE>
<CAPTION>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS R
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................... 4.50% None None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)..... None* 4.00% 1.00% None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees....................................... .75% .75% .75% .75%
12b-1 Fees............................................ None .75% .75% None
Other Expenses........................................ .94% .94% .94% .69%
Total Fund Operating Expenses......................... 1.69% 2.44% 2.44% 1.44%
EXAMPLE
You 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:
CLASS A CLASS B CLASS C CLASS R
1 YEAR $ 61 $65/$25** $34/$25** $ 15
3 YEARS $ 96 $106/$76** $ 76 $ 46
5 YEARS $133 $150/$130** $130 $ 79
10 YEARS $236 $242*** $278 $172
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*A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
**Assuming no redemption of shares.
***Ten-year figure assumes conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
</TABLE>
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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%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund and investors, the payment of which
will reduce investors' annual return. Other Expenses for Class C and Class R
are based on applicable amounts for Class A for the Fund's last fiscal year.
Long-term investors in Class B or Class C shares could pay more in 12b-1 fees
than the economic equivalent of paying a front-end sales charge. The
information in the foregoing table does not reflect any fee waivers or
expense reimbursement arrangements that may be in effect. Certain Service
Agents (as defined below) may charge their clients direct fees for effecting
transactions in Fund shares; such fees are not reflected in the foregoing
table. See "Management of the Fund," "How to Buy Shares" and "Distribution
Plan and Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by Ernst &
Young LLP, 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.
Page 3
<TABLE>
<CAPTION>
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 period indicated. This
information has been derived from the Fund's financial statements.
CLASS A SHARES
---------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
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PER SHARE DATA: 1986(1)(2) 1987(1) 1988(1) 1989(1) 1990(1) 1991 1992 1993 1994 1995
--------- ------- ------ ------- ------- ------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $7.25 $9.54 $12.84 $12.68 $14.42 $15.08 $12.97 $12.41 $11.42 $11.88
------ ----- ------ ------ ------ ------ ----- ----- ----- ------
INVESTMENT OPERATIONS:
Investment income_net(4) .03 .07 .58 .90 .89 .73 .40 .24 .24 .36
Net realized and
unrealized gain (loss)
on investments(4) 2.26 3.59 (.18) 1.60 .61 (.89) (.39) (.62) .46 (1.37)
TOTAL FROM
------ ----- ------ ------ ------ ------ ----- ----- ----- ------
INVESTMENT OPERATIONS 2.29 3.66 .40 2.50 1.50 (.16) .01 (.38) .70 (1.01)
------ ----- ------ ------ ------ ------ ----- ----- ----- ------
DISTRIBUTIONS:
Dividends from investment
income--net(4) -- (.03) (.15) (.76) (.84) (.99) (.57) (.61) (.24) (.26)
Dividends from net realized
gain on investments(4) -- (.33) (.41) -- -- (.96) -- -- -- --
------ ----- ------ ------ ------ ------ ----- ----- ----- ------
TOTAL DISTRIBUTIONS -- (.36) (.56) (.76) (.84) (1.95) (.57) (.61) (.24) (.26)
------ ----- ------ ------ ------ ------ ----- ----- ----- ------
Net asset value,
end of period $9.54 $12.84 $12.68 $14.42 $15.08 $12.97 $12.41 $11.42 $11.88 $10.61
===== ====== ====== ====== ====== ====== ====== ===== ====== ======
TOTAL INVESTMENT
RETURN (5) 31.59%(6) 39.72% 3.29% 20.95% 10.53% (.70%) (.02%) (2.70%) 6.14% (8.58%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses
to average net asset 1.47%(6) 1.50% 1.24% 1.22% 1.20% 1.19% 1.19% 1.23% 1.21% 1.24%
Ratio of dividends and interest on
securities sold short
to average net assets -- .15% .13% .03% .26% .49% .39% .45% .39% .45
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% 2.06% 3.61%
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% 45.57% 54.70%
Net Assets, end of period
(000's omitted) $9,444 $139,796 $502,442 $607,192 $741,267 $755,450 $537,392 $412,316 $402,708 $271,052
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(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 load.
(6) Not annualized.
</TABLE>
Page 4
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES CLASS R SHARES
------------------------------ -------------- --------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------ --------------
1993(1) 1994 1995 1995(2) 1995(2)
------- ------ -------- ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $10.58 $11.32 $11.69 $10.64 $10.84
-------- ------ ------ ------- ------
INVESTMENT OPERATIONS:
Investment income-net.............. .03 .23 .31 .02 .04
Net realized and unrealized
gain (loss) on investments........ .71 .38 (1.38) (.25) (.26)
-------- ------ ------ ------- ------
TOTAL FROM INVESTMENT OPERATIONS... .74 .61 (1.07) (.23) (.22)
-------- ------ ------ ------- ------
DISTRIBUTIONS;
Dividends from investment income-net.... -- (.24) (.21) -- --
Dividends from net realized
gain on investments................. -- -- -- -- --
-------- ------ ------ ------- ------
Total Distributions................ -- (.24) (.21) -- --
-------- ------ ------ ------- ------
Net asset value, end of period..... $11.32 $11.69 $10.14 $10.41 $10.62
-------- ------ ------ ------- ------
TOTAL INVESTMENT RETURN(3)........... 6.99%(4) 5.35% (9.27%) (2.26%)(4) (2.03%)(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses
to average net assets.......... 1.49%(4) 1.99% 1.99% .26%(4) .14%(4)
Ratio of dividends and interest on securities
sold short to average net assets... .31%(4) .40% .45% .06%(4) .04%(4)
Ratio of net investment income to
average net assets............. .83%(4) 1.39% 2.86% .23%(4) .38%(4)
Decrease reflected in above expense ratios
due to expense reimbursements...... -- -- -- -- --
Portfolio Turnover Rate............ 41.78% 45.57% 54.70% 54.70% $54.70%
Net Assets, end of period
(000's omitted)................. $30,378 $108,532 $87,847 $1 $1
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(1) From January 15, 1993 (commencement of initial offering) to September 30, 1993.
(2) From August 22, 1995 (commencement of initial offering) to September 30, 1995.
(3) Exclusive of sales load.
(4) Not annualized.
</TABLE>
Further information about the Fund's performance is contained in
the Fund's annual report, which may be obtained without charge by writing to
the address or calling the number set forth on the cover page of this
Prospectus.
<TABLE>
<CAPTION>
DEBT OUTSTANDING
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------
1986(1) 1987 1988 1989 1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amount of debt outstanding
at end of period
(in thousands)....... -- -- -- -- -- -- -- -- -- $10,000
Average amount of debt
outstanding throughout period
(in thousands)(2)..... -- -- -- -- -- -- -- -- -- $859
Average number of shares
outstanding throughout
period (in thousands)(3) -- -- -- -- -- -- -- -- -- 38,750
Average amount of debt per share
throughout period -- -- -- -- -- -- -- -- -- $ .02
(1)From October 10, 1985 (commencement of operations) to September 30, 1986.
(2)Based upon daily outstanding borrowings.
(3)Based upon month-end balances.
</TABLE>
Page 5
ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund shares. Orders
for purchases of Class R shares, however, may be placed only for certain
eligible investors as described below. If you are not eligible to purchase
Class R shares, you may choose from Class A, Class B and Class C 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 Fund 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 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 Shares _
Class B Shares" and "How to Redeem 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 such 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.
Class C 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 C shares are subject to a 1% CDSC,
which is assessed only if you redeem Class C shares within one year of
purchase. See "How to Buy Shares _ Class C Shares" and "How to Redeem Shares
- -- Contingent Deferred Sales Charge -- Class C Shares." These shares also are
subject to an annual service fee at the rate of .25 of 1%, and an annual
distribution fee at the rate of .75 of 1%, of the value of the average daily
net assets of Class C. See "Distribution Plan and Shareholder Services Plan."
The distribution fee paid by Class C will cause such Class to have a higher
expense ratio and to pay lower dividends than Class A.
Class R shares may not be purchased directly by individuals, although
eligible institutions may purchase Class R shares for certain accounts
maintained by individuals. Class R shares are sold at net asset value per
share only to institutional investors acting for themselves or in a
fiduciary, advisory, agency, custodial or similar capacity for qualified or
non-qualified employee benefit plans, including pension, profit-sharing,
SEP-IRAs and other deferred compensation plans, whether established by corpora
tions, partnerships, non-profit entities or state and local governments, but
not including IRAs or IRA "Rollover Accounts." Class R shares are not subject
to an annual service fee or distribution fee.
The decision as to which Class of shares is more beneficial to you
depends on the amount and the intended length of your investment. If you are
not eligible to purchase Class R shares, you should consider whether, during
the anticipated life of your investment in the Fund, the
Page 6
accumulated distribution fee and CDSC, if any, on Class B or Class C shares
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. Additionally, 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 or Class C shares may
exceed the initial sales charge on Class A shares during the life of the
investment. Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than
Class B shares, Class C shares do not have a conversion feature, and,
therefore, are subject to an ongoing distribution fee. Thus, Class B shares
may be more attractive than Class C shares to investors with longer term
investment outlooks. Generally, Class A shares may be more appropriate for
investors who invest $100,000 or more in Fund shares, but will not be
appropriate for investors who invest less than $50,000 in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income. It cannot be changed
without approval by the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) 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 may invest in the
securities of companies whose principal activities are in, or governments of,
emerging markets. The Fund will not invest more than 65% of its assets in
securities of foreign issuers. See "Investment Considerations and Risks _
Foreign Securities" below.
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.
The Fund generally seeks to invest in equity securities determined by
the Advisers to offer above average potential for total return. In making
this determination, factors including price-earnings ratios, cash flow and
the relationship of asset value to market value of the securities will be
taken into account. 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;
Page 7
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. ("Moody's") or Standard & Poor's Rating Group, a
division of The McGraw Hill Companies, Inc. ("S&P") 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 or D by S&P).
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 S&P, 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 and BB
or lower by S&P. See "Investment Considerations and Risks_Lower Rated
Securities" below for a discussion of certain risks and "Appendix" in the
Statement of Additional Information.
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 the bank obligations, including time deposits, exceed 25% of
its assets. See "Appendix-Certain Portfolio Securities."
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 limitati
ons set forth in the 1940 Act.
The Fund's annual portfolio turnover rate is not expected to exceed
100%. Higher portfolio turnover rates usually generate additional brokerage
commissions and expenses and the short-term gains realized from these
transactions are taxable to shareholders as ordinary income. In addition, the
Fund may engage in various investment techniques, such as foreign currency
transactions, options and futures transactions, leveraging, short-selling and
lending portfolio securities. See also "Investment Considerations and Risks"
and "Appendix-Investment Techniques" below and "Investment Objective and
Management Policies - Management Policies" in the Statement of Additional
Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objective and Management
Policies_Management Policies" in the Statement of Additional Information for
a further discussion of certain risks.
EQUITY SECURITIES -- Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the Fund's
investments will result in changes in the value of its shares and thus the
Fund's total return to investors.
Page 8
The securities of the smaller companies in which the Fund may invest
may be subject to more abrupt or erratic market movements than larger, more
established companies, because these securities typically are traded in lower
volume and the issuers typically are subject to a greater degree to changes
in earnings and prospects.
FIXED-INCOME SECURITIES -- Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities generally are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values
of fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuer. Certain securities that may be
purchased by the Fund, such as those rated Baa or lower by Moody's and BBB or
lower by S&P may be subject to such risk with respect to the issuing entity
and to greater market fluctuations than certain lower yielding, higher rated
fixed-income securities. Once the rating of a portfolio security has been
changed, the Fund will consider all circumstances deemed relevant in
determining whether to continue to hold the security. See "Lower Rated
Securities" and "Appendix-Certain Portfolio Securities-Ratings" below, and
"Appendix" in the Statement of Additional Information.
LOWER RATED SECURITIES -- The Fund may invest up to 35% of its net assets in
higher yielding (and, therefore, higher risk) debt securities. These are
securities such as those rated Ba by Moody's or BB by S&P or as low as the
lowest rating assigned by Moody's or S&P (commonly known as junk bonds). 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. The retail secondary market for these securities may be less
liquid than that of higher rated securities; adverse conditions could make it
difficult at times for the Fund to sell certain securities or could result in
lower prices than those used in calculating the Fund's net asset value. See
"Appendix-Certain Portfolio Securities-Ratings."
FOREIGN SECURITIES -- Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Because evidences of ownership of 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.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more
volatile than the markets of more mature economies; however, such markets may
provide higher rates of return to investors. Many developing countries
providing investment opportunities for the Fund have experienced substantial,
and in some periods extremely high, rates of inflation for many years.
Inflation and rapid fluctuations in inflation rates have had and may continue
to have adverse effects on the economies and securities markets of certain of
these countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations.
FOREIGN CURRENCY TRANSACTIONS -- 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
Page 9
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad. See "Appendix - Investment
Techniques _ Foreign Currency Transactions."
USE OF DERIVATIVES -- The Fund may invest in derivatives ("Derivatives").
These are financial instruments which derive their performance, at least in
part, from the performance of an underlying asset, index, currency or
interest rate. The Derivatives the Fund may use include options and futures.
While Derivatives can be used effectively in furtherance of the Fund's
investment objective, under certain market conditions, they can increase the
volatility of the Fund's net asset value, can decrease the liquidity of the
Fund's investments and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix - Investment Techniques - Use of Derivatives" below
and "Investment Objective and Management Policies - Management Policies -
Derivatives" in the Statement of Additional Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of the other investment companies or accounts
advised by Dreyfus or Comstock Partners. If, however, such other investment
companies or accounts desire to invest in, or dispose of, the same securities
as the Fund, available investments or opportunities for sales will be
allocated equitably to each. In some cases, this procedure may adversely
affect the size of the position obtained for or disposed of by the Fund or
the price paid or received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
Dreyfus, located at 200 Park Avenue, New York, New York 10166, was
formed in 1947 and serves as the Fund's investment adviser. Dreyfus is a
wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Bank Corporation ("Mellon"). As of December 31, 1995,
Dreyfus managed or administered approximately 1billion in assets for
approximately 1.7 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 in accordance with Maryland law.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCOCredit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including Dreyfus, Mellon managed more than $209 billion in
assets as of September 30, 1995, including approximately $80 billion in
mutual fund assets. As of September 30, 1995, Mellon, through various
subsidiaries, provided non-investment services, such as custodial and
administration services, for more than $717 billion in assets, including
approximately $55 billion in mutual fund assets.
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>
<CAPTION>
ANNUAL FEE AS A PERCENTAGE OF
AVERAGE NET ASSETS AVERAGE DAILY NET ASSETS
-------------------------------- --------------------------------------
<S> <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>
Page 10
For the fiscal year ended September 30, 1995, 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.
In allocating brokerage transactions for the Fund, the Advisers seek
to obtain the best execution of orders at the most favorable net price.
Subject to this determination, the Advisers may consider, among other things,
the receipt of research services and/or the sale of shares of the Fund or
other funds in the Dreyfus Family of Funds as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. See "Portfolio
Transactions" in the Statement of Additional Information.
Dreyfus may pay the Fund's distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the investment
advisory fee paid by the Fund. The Fund's distributor may use part or all of
such payments to pay Services Agents in respect of these services.
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 December 31,
1995, Comstock Partners managed approximately $696 million 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. 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 securities 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 portfolio managers 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.
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>
<CAPTION>
ANNUAL FEE AS A PERCENTAGE OF
AVERAGE NET ASSETS AVERAGE DAILY NET ASSETS
----------------------------- -----------------------------------
<S> <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, 1995, 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
Page 11
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. 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 or Comstock Partners for any amounts which may be assumed.
DISTRIBUTOR
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, 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, 90
Washington Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY SHARES
GENERAL
Class A shares, Class B shares and Class C shares may be purchased
only by clients of certain financial institutions (which may include banks),
securities dealers ("Selected Dealers") and other industry professionals
(collectively, "Service Agents"), except that 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 may
purchase Class A shares directly through the Distributor. Subsequent
purchases may be sent directly to the Transfer Agent or your Service Agent.
Class R shares are offered only to institutional investors acting for
themselves or in a fiduciary, advisory, agency, custodial or similar
capacity, for qualified or non-qualified employee benefit plans, including
pension, profit-sharing, SEP-IRAs and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). The term "Retirement Plans"
does not include IRAs or IRA "Rollover Accounts." Class R shares may be
purchased for a Retirement Plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such Plan.
Institutions effecting transactions in Class R shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
When purchasing Fund shares, you must specify which Class is being
purchased. 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.
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
Distribution Plan or Shareholder Services Plan. You should consult your Servi
ce Agent in this regard.
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. However, the minimum initial investment for Dreyfus-sponsored Keogh
Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750,
with no minimum for subsequent purchases. Individuals who open an IRA also
may open a non-working spousal IRA with a minimum initial investment of $250.
Subsequent investments in a spousal IRA must be at least $250. 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
Page 12
Dreyfus, including members of the Fund's Board, or the spouse or minor child
of any of the foregoing, the minimum initial investment is $1,000. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment is $50.
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.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
various limitations on the amount that may be contributed to certain
Retirement Plans. These limitations apply with respect to participants at the
plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors
should consult their tax advisers for details.
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, together with the applicable
Class' DDA# as shown below, for purchase of Fund shares in your name:
DDA # 8900119551 Dreyfus Capital Value Fund/Class A shares;
DDA # 8900115181 Dreyfus Capital Value Fund/Class B shares;
DDA # 8900251980 Dreyfus Capital Value Fund/Class C shares; or
DDA # 8900252332 Dreyfus Capital Value Fund/Class R shares.
The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Fund's Account Application and promptly mail the Account
Application to the Fund, as no redemptions will be permitted until the
Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be made in
U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for investment in your
account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through compatible
computer facilities.
Page 13
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
Builder, the Dreyfus Government Direct Deposit Privilege and Dreyfus Payroll
Savings Plan described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.
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 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 Fund's Board. For further information regarding the
methods employed in valuing Fund investments, see "Determination of Net Asset
Value" in the Statement of Additional Information.
If an order is received in proper form 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 the Distributor or its designee 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 the
Distributor or its designee before the close of its business day. For certain
institutions that have entered into agreements with the Distributor, payment
for the purchase of Fund shares may be transmitted, and must be received by
the Transfer Agent, within three business days after the order is placed. If
such payment is not received within three business days after the order is
placed, the order may be canceled and the institution could be held liable
for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds $1,000,000 ("Eligible Benefit Plans"). Plan
sponsors, administrators or trustees, as applicable, are responsible for
notifying the Distributor when the relevant requirement is satisfied. Shares
of funds in the Dreyfus Family of Funds then held by Eligible Benefit Plans
will be
Page 14
aggregated to determine the fee payable. The Distributor reserves the
right to cease paying these fees at any time. The Distributor will pay such
fees from its own funds, other than amounts received from the Fund, including
past profits or any other source available to it.
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").
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>
<CAPTION>
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 or more..... -0- -0- -0-
</TABLE>
A CDSC of 1% will be assessed at the time of redemption of Class A
shares purchased without an initial sales charge as part of an investment of
at least $1,000,000 and redeemed within two years after purchase. The terms
contained in the section of the Fund's Prospectus entitled "How to Redeem
Fund Shares -- Contingent Deferred Sales Charge" (other than the amount of
the CDSC and time periods) are applicable to the Class A shares subject to
a CDSC. Letter of Intent and Right of Accumulation apply to such purchases
of Class A shares.
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 the
Distributor 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 the Distributor 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 and full-time or part-time employees of
Dreyfus or any of its affiliates or subsidiaries, 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 Eligible Benefit Plans. 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) met the
requirements of an Eligible Benefit Plan and all or a portion of such plan's
assets were invested in funds in the Dreyfus Family of
Page 15
Funds or certain other products made available by the Distributor to such
plans, or (b) invested all of its assets in certain funds in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans.
Class A shares may be purchased at net asset value through certain
broker-dealers and other financial institutions which have entered into an
agreement with the Distributor, which includes a requirement that such shares
be sold for the benefit of clients participating in a "wrap account" or a
similar program under which such clients pay a fee to such broker-dealer or
other financial institution.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a registered
open-end management investment company not managed by Dreyfus or its
affiliates. The purchase of Class A shares of the Fund must be made within 60
days of such redemption and the shareholder must have either (i) paid an
initial sales charge or a contingent deferred sales charge or (ii) been obliga
ted to pay at any time during the holding period, but did not actually pay on
redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, by
(i) qualified separate accounts maintained by an insurance company pursuant
to the laws of any State or territory of the United States, (ii) a State,
county or city or instrumentality thereof, (iii) a charitable organization
(as defined in Section 501(c)(3) of the Code) investing $50,000 or more in
Fund shares, and (iv) a charitable remainder trust (as defined in Section
501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will
remain the same for all dealers. The Distributor, 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 Class A shares.
In some instances, these incentives may be offered only to certain dealers
who have sold or may sell significant amounts of shares.
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 Shares." The Distributor compensates
certain Service Agents for selling Class B or Class C shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
CLASS C SHARES
The public offering price for Class C 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 redemptions of Class C shares made
within the first year of purchase. See "Class B Shares" above and "How to
Redeem Shares."
CLASS R SHARES
The public offering price for Class R shares is the net asset value
per share of that Class.
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"), 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
Page 16
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 the Distributor 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 shares (minimum $500, maximum $150,000 per day) by
telephone if you have checked the appropriate box and supplied the necessary
information on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred
between the bank account designated in one of these documents and your Fund
account. Only a bank account maintained in a domestic financial institution
which is an Automated Clearing House member may be so designated. The Fund
may modify or terminate this Privilege at any time or charge a service fee
upon notice to shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
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.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares of the
same Class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
You also may exchange your Fund shares that are subject to a CDSC for shares
of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so purchased
will be held in a special account created solely for this purpose ("Exchange
Account"). Exchanges of shares from an Exchange Account only can be made into
certain other funds managed or administered by Dreyfus. No CDSC is charged
when an investor exchanges into an Exchange Account; however, the applicable
CDSC will be imposed when shares are redeemed from an Exchange Account or
other applicable Fund account. Upon redemption, the applicable CDSC will be
calculated without regard to the time such shares were held in an Exchange
Account. See "How to Redeem Shares." Redemption proceeds for Exchange Account
shares are paid by Federal wire or check only. Exchange Account shares also
are eligible for the Dreyfus Auto-Exchange Privilege, Dreyfus Dividend Sweep
and the Automatic Withdrawal Plan. To use this service, you should consult
your Service Agent or call 1-800-645-6561 to determine if it is available and
whether any conditions are imposed on its use. WITH RESPECT TO CLASS R SHARES
HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S
RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN
ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing or by
telephone. 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 by calling 1-800-645-6561. 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
Page 17
into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all fund shareholders automatically,
unless you check the applicable "No" box on the Account Application,
indicating that you specifically refuse this Privilege. The Telephone Exchange
Privilege may be established for an existing account by written request,
signed by all shareholders on the account or by a separate signed Shareholder
Services Form, also available by calling 1-800-645-6561. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions by calling 1-800-645-6561 or, if you are calling from overseas,
call 516-794-5452. See "How to Redeem Fund Shares-Procedures." Upon an
exchange into a new account, the following shareholder services and privi-
leges, as applicable and where available, will be automatically carried over
to the fund into which the exchange is made: Telephone Exchange Privilege,
Dreyfus TELETRANSFER Privilege and the dividend/capital gain distribution
option (except for Dreyfus Dividend Sweep) 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
or Class C shares at the time of an exchange; however, Class B or Class C
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 or Class C shares will be cal
culated from the date of the initial purchase of the Class B or Class C
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
the Distributor. 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 availability of Fund Exchanges may
be modified or terminated at any time upon notice to shareholders. See
"Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same Class of certain other funds in the Dreyfus
Family of Funds of which you are currently an investor. WITH RESPECT TO CLASS
R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. 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 or Class C shares at the time of an exchange; however, the Class B
or Class C 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 or Class C shares will
be calculated from the date of the initial purchase of the Class B or Class C
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
Page 18
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. See "Dividends, Distributions and Taxes." For more
information concerning this Privilege and the funds in the Dreyfus Family of
Funds eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
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 by calling 1-800-645-6561. 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.
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
by calling 1-800-645-6561. 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 by calling 1-800-645-6561. 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 the
Distributor, 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.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same Class of another fund in the Dreyfus Family of Funds of
which you are a shareholder. Shares of the other fund will
Page 19
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. Dreyfus Dividend ACH permits you
to transfer electronically dividends or dividends and capital gain
distributions, if any, from the Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for this
service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three business
days following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
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. Particular Retirement Plans,
including Dreyfus sponsored retirement plans, may permit certain participants
to establish an automatic withdrawal plan from such Retirement Plans.
Participants should consult their Retirement Plan sponsor and tax adviser for
details. Such a withdrawal plan is different than the Automatic Withdrawal
Plan. An application for the Automatic Withdrawal Plan can be obtained by
calling 1-800-645-6561. 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 Automatic Withdrawal Plan.
Class B or Class C 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.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
LETTER OF INTENT -- CLASS A SHARES
By signing a Letter of Intent form, which can be obtained by calling
1-800-645-6561, 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
Page 20
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 of the Fund
held in escrow to realize the difference. Signing a Letter 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 SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value 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. Service Agents may charge their clients 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.
Distributions from qualified Retirement Plans, IRAs (including IRA
"Rollover Accounts") and certain non-qualified deferred compensation plans,
except distributions representing returns of non-deductible contributions to
the Retirement Plan or IRA, generally are taxable income to the participant.
Distributions from such a Retirement Plan or IRA to a participant prior to
the time the participant reaches age 591\2 or becomes permanently disabled
may subject the participant to an additional 10% penalty tax imposed by the
IRS. Participants should consult their tax advisers concerning the timing and
consequences of distributions from a Retirement Plan or IRA. Participants in
qualified Retirement Plans will receive a disclosure statement describing the
consequences of a distribution from such a Plan from the administrator,
trustee or custodian of the Plan, before receiving the distribution. The Fund
will not report to the IRS redemptions of Fund shares by qualified Retirement
Plans, IRAs or certain non-qualified deferred compensation plans. The
administrator, trustee or custodian of such Retirement Plans and IRAs will be
responsible for reporting distributions from such Plans and IRAs to the IRS.
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
Page 21
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 the Distributor 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.
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:
YEAR SINCE PURCHASE CDSC AS A % OF AMOUNT
PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
-------------------------- -------------------------------
First..................... 4.00
Second.................... 4.00
Third..................... 3.00
Fourth.................... 3.00
Fifth..................... 2.00
Sixth..................... 1.00
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.
Page 22
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.
CLASS C SHARES -- A CDSC of 1% payable to the Distributor is imposed on any
redemption of Class C shares within one year of the date of purchase. The
basis for calculating the payment of any such CDSC
will be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge -- Class B Shares" above.
WAIVER OF CDSC -- The CDSC applicable to Class B and Class C shares may 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 Code, of the
shareholder, (b) redemptions by employees participating in 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 and (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. If the Fund's Board determines 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 the
Distributor. 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 the Dreyfus TELETRANSFER Privilege. If you have
given your Service Agent authority to instruct the Transfer Agent to redeem
shares and to credit the proceeds of such redemptions to a designated account
at your Service Agent, you may redeem shares only in this manner and in accord
ance with the regular redemption procedure described below. If you wish to
use the other redemption methods described below, you must arrange with your
Service Agent for delivery of the required application(s) to the Transfer
Agent. Other redemption procedures may be in effect for investors who effect
transactions in Fund shares through Service Agents. The Fund makes available
to certain large institutions the ability to issue redemption instructions
through compatible computer facilities.
You may redeem shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the Dreyfus TELETRANSFER
Privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), 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
Page 23
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
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 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 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 filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred
between your Fund account and the bank account designated in one of these
documents. Only such an account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
Redemption proceeds will be on deposit in your account at an Automated
Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $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 shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
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.
Page 24
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
(CLASS A, CLASS B AND CLASS C ONLY)
Class B and Class C shares are subject to a Distribution Plan and
Class A, Class B and Class C shares are subject to a Shareholder Services
Plan.
DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1 under the
1940 Act, the Fund pays the Distributor for distributing the Fund's Class B
and Class C shares at an annual rate of .75 of 1% of the value of the average
daily net assets of Class B and Class C.
SHAREHOLDER SERVICES PLAN
Under the Shareholder Services Plan, the Fund pays the Distributor
for the provision of certain services to the holders of Class A, Class B and
Class C shares a fee at the annual rate of .25 of 1% of the value of the
average daily net assets of each such Class. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents in respect of these services. The Distributor determines the
amounts to be paid to Service Agents.
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 1940 Act. 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. Dividends and distributions paid in
cash to Retirement Plans, however, may be subject to additional tax as
described below. 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 a particular Class will be borne
exclusively by such Class. Class B and Class C shares will receive lower per
share dividends than Class A shares which will receive lower per share
dividends than Class R shares because of the higher expenses borne by the
relevant Class. See "Fee Table."
Dividends paid by the Fund to qualified Retirement Plans, IRAs
(including IRA "Rollover Accounts") or certain non-qualified deferred
compensation plans ordinarily will not be subject to taxation until the
proceeds are distributed from the Retirement Plan. The Fund will not report
dividends paid to such Plans and IRAs to the IRS. Generally, distributions
from such Retirement Plans, except those representing returns of
non-deductible contributions thereto, will be taxable as ordinary income and,
if made prior to the time the participant reaches age 59-1/2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a Retirement Plan (other than
certain governmental or church plans) or IRA for any taxable year following
the year in which the participant reaches age 70-1/2 is less than the
"minimum required distribution" for that taxable year, an excise tax equal to
50% of the deficiency may be imposed by the IRS. The administrator, trustee
or custodian of such a Retirement Plan or IRA will be responsible for
reporting distributions from such Plans and IRAs to the IRS. Participants in
qualified Retirement Plans will receive a disclosure statement describing the
consequences of a distribution from such a Plan from the administrator,
trustee or custodian of the Plan prior to receiving the distribution.
Moreover, certain contributions to a qualified Retirement Plan or IRA in
excess of the amounts permitted by law may be subject to an excise tax.
Page 25
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund will be taxable to U.S. shareholders
as ordinary income whether received in cash or reinvested in 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 all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies his
non-U.S. residency status.
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, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
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, in 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.
With respect to individual investors and certain non-qualified
Retirement Plans, 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 share
holder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines 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.
Page 26
Management of the Fund believes that the Fund has qualified for the
fiscal year ended September 30, 1995 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. 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 may
be calculated on the basis of average annual total return and/or 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. These figures also take into account any applicable service and
distribution fees. As a result, at any given time, the performance of Class B
and Class C should be expected to be lower than that of Class A and the
performance of Class A, Class B and Class C should be expected to be lower
than that of Class R. 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 Fund's average annual total return
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 net asset
value (or maximum offering price in the case of Class A) 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 or Class C
shares. Calculations based on the net asset value per share do not reflect
the deduction of the applicable sales charge on Class A shares, 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 management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Standard & Poor's 500 Composite Stock Price Index,
the Dow Jones Industrial Average, Morningstar, Inc. and other industry
publications.
Page 27
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 400 million shares of Common Stock, par value
$.01 per share. The Fund's shares are classified into four classes -- Class
A, Class B, Class C and Class R. Each share has one vote and shareholders
will vote in the aggregate and not by class except as otherwise required by
law. However, only holders of Class B or Class C shares, as the case may be,
will be entitled to vote on matters submitted to shareholders pertaining to
the Distribution Plan.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of 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 Fund's Board 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; outside the U.S. and
Canada, call 516-794-5452.
Page 28
APPENDIX
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS -- Foreign currency transactions may be entered
into for a variety of purposes, including: to fix in U.S. dollars, between
trade and settlement date, the value of a security the Fund has agreed to buy
or sell; or to hedge the U.S. dollar value of securities the Fund already
owns, particularly in which the foreign security is denominated; or to gain
exposure to the foreign currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the value of the
currency sold relative to the currency the Fund contracted to receive in the
exchange. The Fund's success in these transactions will depend principally on
the Advisers' ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar.
SHORT-SELLING -- In these transactions, the Fund sells a security it does not
own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement.
The price at such time may be more or less than the price at which the
security was sold by the Fund, which would result in a loss or a gain,
respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not 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 make a short sale which results in the Fund having sold short in the
aggregate more than 5% of the outstanding securities of any class of an
issuer.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will more than 15% of the value
of the Fund's net assets be in deposits on short sales against the box.
LEVERAGE -- Leveraging will 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 limited to 33-1/3% of the value of the Fund's
total assets. These borrowings will be subject to interest costs which may or
may not be recovered by appreciation of the securities purchased; in certain
cases, interest costs may exceed the return received on the securities
purchased.
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund
of an underlying debt instrument in return for cash proceeds based on a
percentage of the value of the security. The Fund retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Fund repurchases the security at principal plus accrued
interest. Except for these transactions, the Fund's borrowings generally will
be unsecured.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and
Risks -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management
Policies -- Management Policies -- Derivatives" in the Statement of
Additional Information.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
Page 29
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses
if its Derivatives were poorly correlated with its other investments, or if
the Fund were unable to liquidate its position because of an illiquid
secondary market. The market for many Derivatives is, or suddenly can become,
illiquid. Changes in liquidity may result in significant, rapid and
unpredictable changes in the prices for Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain Derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts
and options for other purposes if the sum of the amount of initial margin
deposits and premiums paid for unexpired options with respect to such
contracts, other than for bona fide hedging purposes, exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20% of
the value of its net assets at the time such option contracts are written.
When required by the Securities and Exchange Commission, the Fund will set
aside permissible liquid assets in a segregated account to cover its
obligations relating to its transactions in Derivatives. To maintain this
required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
Derivative position at a reasonable price.
LENDING PORTFOLIO SECURITIES - The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. In connection with such
loans, the Fund continues to be entitled to payments in amounts equal to the
interest, dividends or other distributions payable on the loaned securities.
Loans of portfolio securities afford the Fund an opportunity to earn interest
on the amount of the loan and at the same time to earn income on the loaned
securities' collateral. Loans of portfolio securities may not exceed 33-1/3%
of the value of the Fund's total assets. 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. Such loans are terminable by the Fund at any time upon specified
notice. The Fund might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
FORWARD COMMITMENTS - The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate that will be received on a forward
commitment or when-issued security are fixed when the Fund enters into the
commitment but, the Fund does not make a payment until it receives delivery
from the counterparty. The Fund will commit to purchase such securities only
with the intention of actually acquiring the securities, but the Fund may
sell these securities before the settlement date if it is deemed advisable. A
segregated account of the Fund consisting of cash, cash equivalents or U.S.
Government securities or other high quality debt securities at least equal at
all times to the amount of the commitments will be established and maintained
at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
SECURITIES OF EMERGING MARKETS ISSUERS -- Emerging markets will include any
countries (i) having an "emerging stock market" as defined by the
International Finance Corporation; (ii)
Page 30
with low to middle-income economies according to the World Bank; or (iii)
listed in World Bank publications as developing. Currently, the countries not
included in these categories are Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand,
Norway, Spain, Sweden, Switzerland, the United Kingdom and the United States.
Issuers whose principal activities are in countries with emerging markets
include issuers: (1) organized under the laws of, (2) whose securities have
their primary trading market in, (3) deriving at least 50% of their revenues
or profits from goods sold, investments made, or services performed in, or
(4) having at least 50% of their assets located in, a country with an
emerging market.
In emerging markets, the Fund may purchase debt securities issued or
guaranteed by foreign governments, including participations in loans between
foreign governments and financial institutions, and interests in entities
organized and operated for the purpose of restructuring the investment
characteristics of instruments issued or guaranteed by foreign governments
("Sovereign Debt Obligations"). These include Brady Bonds, Structured
Securities and Loan Participations and Assignments (as defined below).
BRADY BONDS. Brady Bonds are debt obligations created through the
exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructurings under a plan introduced by
former U.S. Secretary of the Treasury, Nicholas F.Brady.
Brady Bonds have been issued only relatively recently, and,
accordingly do not have a long payment history. They may be collateralized or
uncollateralized and issued in various currencies (although most are U.S.
dollar-denominated). They are actively traded in the over-the-counter
secondary market.
STRUCTURED SECURITIES. Structured Securities are interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of Sovereign Debt Obligations. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as commercial bank loans
or Brady Bonds) and the issuance by that entity of one or more classes of
securities ("Structured Securities") backed by, or representing interests in,
the underlying instruments. The cash flow on the underlying instruments may
be apportioned among the newly-issued Structured Securities to create
securities with different investment characteristics such as varying
maturities, payment priorities and interest rate provisions, and the extent
of the payments made with respect to Structured Securities is dependent on
the extent of the cash flow on the underlying instruments. Because Structured
Securities of the type in which the Fund anticipates it will invest typically
involve no credit enhancement, their credit risk generally will be equivalent
to that of the underlying instruments.
The Fund is permitted to invest in a class of Structured Securities
that is either subordinated or unsubordinated to the right of payment of
another class. Subordinated Structured Securities typically have higher
yields and present greater risks than unsubordinated Structured Securities.
Certain issuers of Structured Securities may be deemed to be
"investment companies" as defined in the 1940 Act. As a result, the Fund's
investment in these Structured Securities may be limited by the restrictions
contained in the 1940 Act.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may invest in fixed and
floating rate loans ("Loans") arranged through private negotiations between
an issuer of Sovereign Debt Obligations and one or more financial
institutions ("Lenders"). The Fund's investments in Loans are expected in
most instances to be in the form of participations in Loans ("Participations")
and assignments of all or a portion of Loans ("Assignments") from third
parties. The government that is the borrower on the Loan will be considered
by the Fund to be the issuer of a Participation or Assignment. The Fund's
investment in Participations typically will result in the Fund having a
contractual relationship only with the Lender and not with the borrower.
The Fund will have the right to receive payments of principal, interest and
any fees
Page 31
to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, the Fund
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the Loan, nor any rights of set-off
against the borrower, and the Fund may not directly benefit from any
collateral supporting the Loan in which it has purchased the Participation.
As a result, the Fund may be subject to the credit risk of both the borrower
and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Fund may be treated as
a general creditor of the Lender and may not benefit from any set-off
between the Lender and the borrower. Certain Participations may be structured
in a manner designed to avoid purchasers of Participations being subject to
the credit risk of the Lender with respect to the Participation, but even
under such a structure, in the event of the Lender's insolvency, the Lender's
servicing of the Participation may be delayed and the assignability of the
Participation impaired. The Fund will acquire Participations only if the
Lender interpositioned between the Fund and the borrower is a Lender having
total assets of more than $25 billion and whose senior unsecured debt is rated
investment grade or higher (i.e., Baa/BBB or higher).
CONVERTIBLE SECURITIES -- Convertible securities may be converted at either a
stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, enjoy seniority in right of
payment to all equity securities, and convertible preferred stock is senior
to common stock, of the same issuer. Because of the subordination feature,
however, convertible securities typically have lower ratings than similar
non-convertible securities.
WARRANTS - A warrant is an instrument issued by a corporation which gives the
holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time. The Fund may
invest up to 2% of its net assets in warrants, except that this limitation
does not apply to warrants purchased by the Fund that are sold in units with,
or attached to, other securities.
CLOSED-END INVESTMENT COMPANIES -- The Fund may invest in securities issued
by closed-end investment companies which principally will invest in
securities of foreign issuers. Under the 1940 Act, the Fund's investment in
such securities, with certain exceptions, currently is limited to (i) 3% of
the total voting stock of any one investment company, (ii) 5% of the Fund's
net assets with respect to any one investment company and (iii) 10% of the
Fund's net assets in the aggregate. Investments in the securities of other
investment companies may involve duplication of advisory fees and certain
other expenses.
MONEY MARKET INSTRUMENTS -- The Fund may invest in the following types of
money market instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. 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.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding
Page 32
period, while the seller's obligation to repurchase is secured by the value
of the underlying security. Repurchase agreements could involve risks in the
event of a default or insolvency of the other party to the agreement,
including possible delays or restrictions upon the Fund's ability to dispose
of the underlying securities. The Fund may enter into repurchase agreements
with certain banks or non-bank dealers.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund
may be subject to additional investment risks that are different in some
respects from those incurred by a fund which invests only in debt obligations
of U.S. domestic issuers.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and 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. The commercial
paper purchased by the Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's
or A-1 by S&P, (b) issued by companies having an outstanding unsecured debt
issue currently rated at least A3 by Moody's or A- by S&P, or (c) if unrated,
determined by the Advisers to be of comparable quality to those rated obligati
ons which may be purchased by the Fund.
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 privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
RATINGS -- Securities rated Ba by Moody's 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.
Securities rated BB by S&P 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 payments. Securities rated C by Moody's are regarded as having
extremely poor prospects of ever attaining any real investment standing.
Securities rated D by S&P are in default and the payment of interest and/or
repayment of principal is in arrears. Such securities, though high yielding,
are characterized by great risk. See "Appendix" in the Statement of
Additional Information for a general description of securities ratings.
The ratings of Moody's and S&P represent their opinions as to the
quality of the obligations which they undertake to rate. Ratings are relative
and subjective and, although ratings
Page 33
may be useful in evaluating the safety of interest and principal payments,
they do not evaluate the market value risk of such obligations. Although
these ratings may be an initial criterion for selection of portfolio
investments, the 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 34
107P020196
