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PROSPECTUS MARCH 1, 1995
DREYFUS STRATEGIC INVESTING
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DREYFUS STRATEGIC INVESTING (THE "FUND") IS AN OPEN-END,
NON-DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. ITS
GOAL IS CAPITAL GROWTH. THE FUND INVESTS PRINCIPALLY IN COMMON STOCKS OF
DOMESTIC ISSUERS, AS WELL AS SECURITIES OF FOREIGN COMPANIES AND FOREIGN
GOVERNMENTS. INVESTMENTS ALSO MAY BE MADE IN CONVERTIBLE SECURITIES,
WARRANTS, PREFERRED STOCKS AND DEBT SECURITIES UNDER CERTAIN MARKET
CONDITIONS. IN ADDITION TO USUAL INVESTMENT PRACTICES, THE FUND MAY USE
SPECULATIVE INVESTMENT TECHNIQUES SUCH AS SHORT-SELLING, LEVERAGING AND
OPTIONS TRANSACTIONS. THE FUND ALSO MAY ENGAGE IN FUTURES TRANSACTIONS.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS TELETRANS
FER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
BY THIS PROSPECTUS, CLASS A AND CLASS B SHARES OF THE FUND ARE BEING
OFFERED. CLASS A SHARES ARE SUBJECT TO A SALES CHARGE IMPOSED AT THE TIME OF
PURCHASE AND CLASS B SHARES ARE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE
IMPOSED ON REDEMPTIONS MADE WITHIN SIX YEARS OF PURCHASE. OTHER DIFFERENCES
BETWEEN THE TWO CLASSES INCLUDE THE SERVICES OFFERED TO AND THE EXPENSES
BORNE BY EACH CLASS AND CERTAIN VOTING RIGHTS, AS DESCRIBED HEREIN. THE FUND
OFFERS THESE ALTERNATIVES SO AN INVESTOR MAY CHOOSE THE METHOD OF PURCHASING
SHARES THAT IS MOST BENEFICIAL GIVEN THE AMOUNT OF THE PURCHASE, THE LENGTH
OF TIME THE INVESTOR EXPECTS TO HOLD THE SHARES AND OTHER CIRCUMSTANCES.
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THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
PART B (ALSO KNOWN AS THE STATEMENT OF ADDITIONAL INFORMATION), DATED
MARCH 1, 1995, 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
11556-1044, OR CALL 1-800-654-6561. WHEN TELEPHONING, ASK FOR OPERATOR 666.
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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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TABLE OF CONTENTS
PAGE
FEE TABLE......................................... 3
CONDENSED FINANCIAL INFORMATION................... 4
ALTERNATIVE PURCHASE METHODS...................... 5
DESCRIPTION OF THE FUND........................... 6
MANAGEMENT OF THE FUND............................ 19
HOW TO BUY FUND SHARES ........................... 20
SHAREHOLDER SERVICES.............................. 24
HOW TO REDEEM FUND SHARES......................... 28
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN... 32
DIVIDENDS, DISTRIBUTIONS AND TAXES................ 32
PERFORMANCE INFORMATION........................... 34
GENERAL INFORMATION............................... 34
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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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[This Page Intentionally Left Blank]
(Page 2)
Fee Table
<TABLE>
<CAPTION>
CLASS A CLASS B
------- --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..................................... 4.50% --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)....................... -- 4.00%
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)
Management Fees......................................................... .75% .75%
12b-1 Fees.............................................................. -- .75%
Other Expenses ......................................................... .79% .58%
Total Fund Operating Expenses........................................... 1.54% 2.88%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE:
An investor would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and
(2) except where noted, redemption
at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS A: $60 $ 91 $125 $220
CLASS B: $61 $ 95 $132 $215
ASSUMING NO REDEMPTION OF
CLASS B SHARES: $21 $ 65 $112 $215
</TABLE>
*Ten-year figures assume conversion of Class B shares to Class A
shares at end of sixth year following the date of purchase.
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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 various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Class B shares could pay more in 12b-1 fees
than the economic equivalent of paying a front-end sales charge. Certain
Service Agents (as defined below) may charge their clients direct fees for
effecting transactions in Fund shares; such fees are not reflected in the
foregoing table. See "Management of the Fund," "How to Buy Fund Shares" and
"Distribution Plan and Shareholder Services Plan."
(Page 3)
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Fund's Statement of Additional Information. Further financial data and
related notes are included in the Fund's Statement of Additional Information,
available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data for each period indicated. The
information has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
------------------------------------------------------------------------------- -----------------
YEAR ENDED OCTOBER 31, YEAR ENDED
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OCTOBER 31,
PER SHARE DATA: 1986(1) 1987 1988 1989 1990 1991 1992 1993 1994 1993(2) 1994
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year................$12.50 $12.51 $15.79 $15.85 $18.73 $18.03 $22.12 $19.90 $23.77 $21.38 $23.62
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income
(loss)--net .06 .13 1.00 .48 .31 .21 .06 .03 .01 (.07) (.04)
Net realized and unrealized
gain (loss) on investment .01 3.15 (.52) 3.70 (.35) 5.77 (.46) 3.89 (1.54) 2.31 (1.62)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... .07 3.28 .48 4.18 (.04) 5.98 (.40) 3.92 (1.53) 2.24 (1.66)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income--net (.06) -- (.20) (1.30) (.21) (.34) (.14) (.05) -- -- --
Dividends from net realized
gain on investments...... -- -- (.22) -- (.45) (1.55) (1.68) -- (2.29) -- (2.29)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS.. (.06) -- (.42) (1.30) (.66) (1.89) (1.82) (.05) (2.41) -- (2.38)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year..............$12.51 $15.79 $15.85 $18.73 $18.03 $22.12 $19.90 $23.77 $19.83 $23.62 $19.58
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN (3): .31%(4) 26.22% 2.88% 28.59% (.31%) 36.50% (2.04%) 19.71% (6.92%) 10.48%(4) (7.58%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses
to average
net assets............... -- 1.59% 1.48% 1.50% 1.50% 1.35% 1.30% 1.27% 1.29% 1.65%(4) 1.84%
Ratio of interest expense,
loan commitment
fees and dividends on
securities sold short to
average net assets....... -- .32% .60% .59% 1.39% .58% .38% .47% .25% .44%(4) .24%
Ratio of net investment income
(loss) to average
net assets............... .50%(4) 1.14% 5.71% 2.63% 1.66% 1.07% .22% .16% .04% (.69%)(4) (.61%)
Decrease reflected in above
expense ratios due to
expense limitation....... 1.04%(4) .10% .19% .29% .08% -- -- -- -- -- --
Portfolio Turnover Rate.... -- 321.23% 167.64% 228.12% 275.33% 207.10% 204.73% 237.14% 199.13% 237.14% 199.13%
Net Assets, end of year
(000's Omitted) $1,145 $111,896 $104,772 $106,180 $102,421 $145,717 $243,148 $276,022 $239,407 $25,833 $40,864
</TABLE>
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(1)From October 1, 1986 (commencement of operations) to October 31, 1986.
(2)From January 15, 1993 (commencement of initial offering) to October 31, 1993.
(3)Exclusive of sales load.
(4)Not annualized.
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.
(Page 4)
<TABLE>
<CAPTION>
DEBT OUTSTANDING
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------------------
1986(1) 1987 1988 1989 1990 1991 1992 1993 1994
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amount of debt outstanding at
end of year (in thousands) __ __ __ $18,350 $ 9,020 $23,994 $23,300 $35,100 --
Average amount of debt
outstanding throughout
year (in thousands)(2). __ $ 2,513 $6,145 $ 4,843 $10,388 $12,882 $ 5,102 $16,419 $11,097
Average number of shares
outstanding throughout
year (in thousands)(3). __ 5,193 7,102 6,161 5,807 6,244 10,058 12,321 14,337
Average amount of debt per share
throughout year........ __ $ .48 $ .87 $ .79 $ 1.79 $ .46 $ .51 $ 1.33 $ .77
</TABLE>
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(1) From October 1, 1986 (commencement of operations) to October 31, 1986.
(2) Based upon daily outstanding borrowings.
(3) Based upon month-end balances.
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.
ALTERNATIVE PURCHASE METHODS
The Fund offers you two methods of purchasing Fund shares; you may
choose the Class of shares that best suits your needs, given the amount of
your purchase, the length of time you expect to hold your shares and any
other relevant circumstances. Each Class A and Class B share represents an
identical pro rata interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a maximum
initial sales charge of 4.50% of the public offering price imposed at the
time of purchase. The initial sales charge may be reduced or waived for
certain purchases. See "How to Buy Fund Shares _ Class A Shares." These
shares are subject to an annual service fee at the rate of .25 of 1% of the
value of the average daily net assets of Class A. See "Distribution Plan and
Shareholder Services Plan _ Shareholder Services Plan."
Class B shares are sold at net asset value per share with no initial
sales charge at the time of purchase; as a result, the entire purchase price
is immediately invested in the Fund. Class B shares are subject to a maximum
4% contingent deferred sales charge ("CDSC"), which is assessed only if you
redeem Class B shares within six years of purchase. See "How to Buy Fund
Shares _ Class B Shares" and "How to Redeem Fund Shares _Contingent Deferred
Sales Charge _ Class B Shares." These shares also are subject to an annual
service fee at the rate of .25 of 1% of the value of the average daily net
assets of Class B. In addition, Class B shares are subject to an annual
distribution fee at the rate of .75 of 1% of the value of the average daily
net assets of Class B. See "Distribution Plan and Shareholder Services Plan."
The distribution fee paid by Class B will cause such class to have a higher
expense ratio and to pay lower dividends than Class A. Approximately six
years after the date of purchase, Class B shares automatically will convert
to Class A shares, based on the relative net asset values for shares of each
class, and will no longer be subject to the distribution fee. Class B shares
that have been acquired through the reinvestment of dividends and
distributions will be converted on a pro rata basis together with other Class
B shares, in the proportion that a shareholder's Class B shares converting to
Class A shares bears to the total Class B shares not acquired through the
reinvestment of dividends and distributions.
The decision as to which Class of shares is more beneficial to you
depends upon the amount and intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee and CDSC on Class B shares prior to
conversion would be less than the initial sales charge on Class A shares
purchased at the same time, and to what extent, if any, such differential
would be offset by the return of Class A. In this regard, investors qualifying
for reduced initial sales charges who expect to maintain their investment
for an extended peri-
(Page 5)
od of time might consider purchasing Class A shares
because the accumulated continuing distribution fees on Class B shares may
exceed the initial sales charge on Class A shares during the life of the
investment. Generally, Class A shares may be more appropriate for investors
who invest $100,000 or more in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE -- The Fund's goal is to provide you with capital
growth. The Fund's investment objective cannot be changed without approval by
the holders of a majority (as defined in the Investment Company Act of 1940)
of the Fund's outstanding voting shares. There can be no assurance that the
Fund's investment objective will be achieved.
MANAGEMENT POLICIES -- The Fund invests principally in publicly issued common
stocks. There are no limitations on the type, size, operating history or
dividend paying record of companies or industries in which the Fund may
invest, the principal criteria for investment being that the securities
provide opportunities for capital growth. The Fund may invest up to 30% of
the value of its assets in the common stocks of foreign companies which are
not publicly traded in the United States and the debt securities of foreign
governments. The Fund may invest in convertible securities, preferred stocks
and debt securities without limitation when management believes that such
securities offer opportunities for capital growth. The debt securities in
which the Fund may invest must be rated at least Caa by Moody's Investors
Service, Inc. ("Moody's") or CCC by Standard & Poor's Corporation ("Standard
& Poor's") or if unrated, deemed to be of comparable quality by The Dreyfus
Corporation. Debt securities rated Caa by Moody's or CCC by Standard & Poor's
are considered to have predominantly speculative characteristics with respect
to capacity to pay interest and repay principal and to be of poor standing.
See "Risk Factors _ Lower Rated Securities" below for a discussion of certain
risks.
The Fund's policy is to purchase marketable securities which are not
restricted as to public sale, subject to the limited exception set forth
under "Certain Portfolio Securities _ Illiquid Securities" below. The Fund
will be alert to favorable arbitrage opportunities resulting from special
situations such as those arising from corporate takeovers. When management
believes it desirable, typically when it believes that common stocks are a
less attractive investment alternative and a temporary defensive position is
advisable, the Fund may invest in higher-rated corporate bonds (i.e., debt
securities of corporate issuers), U.S. Government securities, repurchase
agreements, time deposits, certificates of deposit, bankers' acceptances and
commercial paper.
In an effort to increase its total return, the Fund may engage in
various investment techniques which, if successful, would produce short-term
capital gains. The use of investment techniques and instruments such as
leveraging, short-selling, options and futures transactions, currency
transactions and lending of portfolio securities involves greater risk than
that incurred by many other funds. Using these techniques may produce higher
than normal portfolio turnover which usually generates additional brokerage
commissions and expenses for the Fund. You should purchase Fund shares only
as a supplement to an overall investment program and only if you are willing
to undertake the risks involved.
INVESTMENT TECHNIQUES
The Fund may engage in various investment techniques, such as
leveraging, short-selling, foreign exchange transactions, options and futures
transactions and lending portfolio securities, each of which involves risk.
See "Risk Factors" below. Options and futures transactions involve so-called
"derivative securities."
LEVERAGE THROUGH BORROWING
The Fund may borrow for investment purposes. This borrowing, which is
known as leveraging, generally will be unsecured, except to the extent the
Fund enters into reverse repurchase agreements described below. The
Investment Company Act of 1940 requires the Fund to maintain continuous asset
(Page 6)
coverage (that is, total assets including borrowings, less liabilities
exclusive of borrowings) of 300% of the amount borrowed. If the 300% asset
coverage should decline as a result of market fluctuations or other reasons,
the Fund may be required to sell some of its portfolio holdings within three
days to reduce the debt and restore the 300% asset coverage, even though it
may be disadvantageous from an investment standpoint to sell securities at
that time. Leveraging may exaggerate the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money
borrowed for leveraging will be subject to interest costs which may or may
not be recovered by appreciation of the securities purchased. The Fund also
may be required to maintain minimum average balances in connection with such
borrowing or to pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of borrowing over the sta
ted interest rate.
Among the forms of borrowing in which the Fund may engage is the
entry into reverse repurchase agreements with banks, brokers or dealers.
These transactions involve the transfer by the Fund of an underlying debt
instrument in return for cash proceeds based on a percentage of the value of
the security. The Fund retains the right to receive interest and principal
payments on the security. At an agreed upon future date, the Fund repurchases
the security at principal, plus accrued interest. In certain types of
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based on the prevailing overnight repurchase rate.
The Fund will maintain in a segregated custodial account cash, cash
equivalents or U.S. Government securities or other high quality liquid debt
securities at least equal to the aggregate amount of its reverse repurchase
obligations, plus accrued interest, in certain cases, in accordance with
releases promulgated by the Securities and Exchange Commission. The
Securities and Exchange Commission views reverse repurchase transactions as
collateralized borrowings by the Fund. These agreements, which are treated as
if reestablished each day, are expected to provide the Fund with a flexible
borrowing tool.
SHORT-SELLING
The Fund may make short sales, which are transactions in which the
Fund sells a security it does not own in anticipation of a decline in the
market value of that security. To complete such a transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund then is obligated
to replace the security borrowed by purchasing it at the market price at the
time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to pay to the lender amounts equal to any
dividends or interest which accrue during the period of the loan. To borrow
the security, the Fund also may be required to pay a premium, which would
increase the cost of the security sold. The proceeds of the short sale will
be retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out.
Until the Fund closes its short position or replaces the borrowed
security, the Fund will: (a) maintain a segregated account, containing cash
or U.S. Government securities, at such a level that (i) the amount deposited
in the account plus the amount deposited with the broker as collateral will
equal the current value of the security sold short and (ii) the amount
deposited in the segregated account plus the amount deposited with the broker
as collateral will not be less than the market value of the security at the
time it was sold short; or (b) otherwise cover its short position.
The Fund will incur a loss as a result of the short sale if the price
of the security increases between the date of the short sale and the date on
which the Fund replaces the borrowed security. The Fund will realize a gain
if the security declines in price between those dates. This result is the
opposite of what one would expect from a cash purchase of a long position in
a security. The amount of any gain will be decreased, and the amount of any
loss increased, by the amount of any premium or amounts in lieu of dividends
or interest the Fund may be required to pay in connection with a short sale.
The Fund may purchase call options to provide a hedge against an
increase in the price of a security sold short by the Fund. When the Fund
purchases a call option it has to pay a premium to the person
(Page 7)
writing the
option and a commission to the broker selling the option. If the option is
exercised by the Fund, the premium and the commission paid may be more than
the amount of the brokerage commission charged if the security were to be
purchased directly. See "Call and Put Options on Specific Securities" below.
The Fund anticipates that the frequency of short sales will vary
substantially under different market conditions, and it does not intend that
any specified portion of its assets as a matter of practice will be in short
sales. However, no securities will be sold short if, after effect is given to
any such short sale, the total market value of all securities sold short
would exceed 25% of the value of the Fund's net assets.The Fund may not sell
short the securities of any single issuer listed on a national securities
exchange to the extent of more than 5% of the value of the Fund's net assets.
The Fund may not sell short the securities of any class of an issuer to the
extent, at the time of transaction, of more than 5% of the outstanding
securities of that class.
In addition to the short sales discussed above, the Fund may make
short sales "against the box," a transaction in which the Fund enters into a
short sale of a security which the Fund owns. The proceeds of the short sale
are held by a broker until the settlement date at which time the Fund
delivers the security to close the short position. The Fund receives the net
proceeds from the short sale. The Fund at no time will have more than 15% of
the value of its net assets in deposits on short sales against the box.
CALL AND PUT OPTIONS ON SPECIFIC SECURITIES
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options in respect of specific
securities (or groups or "baskets" of specific securities). The Fund may
write covered call and put option contracts to the extent of 20% of the value
of its net assets at the time such option contracts are written. A call
option gives the purchaser of the option the right to buy, and obligates the
writer to sell, the underlying security or securities at the exercise price
at any time during the option period. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy,
the underlying security or securities at the exercise price at any time
during the option period. A covered call option sold by the Fund, which is a
call option with respect to which the Fund owns the underlying security or
securities, exposes the Fund during the term of the option to possible loss
of opportunity to realize appreciation in the market price of the underlying
security or securities or to possible continued holding of a security or
securities which might otherwise have been sold to protect against
depreciation in the market price thereof. A covered put option sold by the
Fund exposes the Fund during the term of the option to a decline in price of
the underlying security or securities. A put option sold by the Fund is
covered when, among other things, cash or liquid securities are placed in a
segregated account with the Fund's custodian to fulfill the obligation
undertaken.
To close out a position when writing covered options, the Fund may
make a "closing purchase transaction," which involves purchasing an option on
the same security or securities with the same exercise price and expiration
date as the option which it has previously written. To close out a position
as a purchaser of an option, the Fund may make a "closing sale transaction,"
which involves liquidating the Fund's position by selling the option
previously purchased. The Fund will realize a profit or loss from a closing
purchase or sale transaction depending upon the difference between the amount
paid to purchase an option and the amount received from the sale thereof.
The Fund intends to treat options in respect of specific securities
that are not traded on a national securities exchange and the securities
underlying covered call options written by the Fund as illiquid.
The Fund will purchase options only to the extent permitted by the
policies of state securities authorities in states where shares of the Fund
are qualified for offer and sale.
STOCK INDEX OPTIONS
The Fund may purchase and write put and call options on stock indexes
listed on national securities exchanges or traded in the over-the-counter
market as an investment vehicle for the purpose of realizing
(Page 8)
its investment
objective or for the purpose of hedging its portfolio. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in the Fund's portfolio
correlate with price movements of the stock index selected. Because the value
of an index option depends upon movements in the level of the index rather
than the price of a particular stock, whether the Fund will realize a gain or
loss from the purchase or writing of options on an index depends upon
movements in the level of stock prices in the stock market generally or, in
the case of certain indexes, in an industry or market segment, rather than
movements in the price of a particular stock. Accordingly, successful use by
the Fund of options on stock indexes will be subject to The Dreyfus
Corporation's ability to predict correctly movements in the direction of the
stock market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual
stocks.
When the Fund writes an option on a stock index, the Fund will place
in a segregated account with its custodian cash or liquid securities in an
amount at least equal to the market value of the underlying stock index and
will maintain the account while the option is open or will otherwise cover
the transaction.
FUTURES TRANSACTIONS -- IN GENERAL
The Fund is not a commodity pool. However, as a substitute for a
comparable market position in the underlying securities and for hedging
purposes, the Fund may engage in futures and options on futures transactions,
as described below.
The Fund may trade futures contracts and options on futures contracts
in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or, to the
extent permitted under applicable law, on exchanges located outside the
United States, such as the London International Financial Futures Exchange
and the Sydney Futures Exchange Limited. Foreign markets may offer advantages
such as trading in commodities that are not currently traded in the United
States or arbitrage possibilities not available in the United States. Foreign
markets, however, may have greater risk potential than domestic markets. See
"Risk Factors _ Foreign Commodity Transactions" below.
The Fund's commodities transactions must constitute bona fide hedging
or other permissible transactions pursuant to regulations promulgated by the
Commodity Futures Trading Commission (the "CFTC"). In addition, the Fund may
not engage in such transactions if the sum of the amount of initial margin
deposits and premiums paid for unexpired commodity options, other than for
bona fide hedging transactions, would exceed 5% of the liquidation value of
the Fund's assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided, however,
that in the case of an option that is in-the-money at the time of purchase,
the in-the-money amount may be excluded in calculating the 5%. Pursuant to
regulations and or published positions of the Securities and Exchange
Commission, the Fund may be required to segregate cash or high quality money
market instruments in connection with its commodities transactions in an
amount generally equal to the value of the underlying commodity. The
segregation of such assets will have the effect of limiting the Fund's
ability to otherwise invest those assets. To the extent the Fund engages in
the use of futures and options of futures for other than bona fide purposes,
the Fund may be subject to additional risk.
Initially, when purchasing or selling futures contracts the Fund will
be required to deposit with its custodian in the broker's name an amount of
cash or cash equivalents up to approximately 10% of the contract amount. This
amount is subject to change by the exchange or board of trade on which the
contract is traded and members of such exchange or board of trade may impose
their own higher requirements. This amount is known as "initial margin" and
is in the nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures position,
assuming all contractual obligations have been satisfied. Subsequent
payments, known as "variation mar-
(Page 9)
gin," to and from the broker will be made
daily as the price of the index or securities underlying the futures contract
fluctuates, making the long and short positions in the futures contract more
or less valuable, a process known as "marking-to-market." At any time prior
to the expiration of a futures contract, the Fund may elect to close the
position by taking an opposite position at the then prevailing price, which
will operate to terminate the Fund's existing position in the contract.
Although the Fund intends to purchase or sell futures contracts only
if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may
be made that day at a price beyond that limit or trading may be suspended for
specified periods during the day. Futures contract prices could move to the
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially subjecting
the Fund to substantial losses. If it is not possible or the Fund determines
not to close a futures position in anticipation of adverse price movements,
the Fund will be required to make daily cash payments of variation margin. In
such circumstances, an increase in the value of the portion of the portfolio
being hedged, if any, may offset partially or completely losses on the
futures contract. However, no assurance can be given that the price of the
securities being hedged will correlate with the price movements in a futures
contract and thus provide an offset to losses on the futures contract.
In addition, to the extent the Fund is engaging in a futures
transaction as a hedging device, due to the risk of an imperfect correlation
between securities in the Fund's portfolio that are the subject of a hedging
transaction and the futures contract used as a hedging device, it is possible
that the hedge will not be fully effective in that, for example, losses on
the portfolio securities may be in excess of gains on the futures contract or
losses on the futures contract may be in excess of gains on the portfolio
securities that were the subject of the hedge. In futures contracts based on
indexes, the risk of imperfect correlation increases as the composition of
the Fund's portfolio varies from the composition of the index. In an effort
to compensate for the imperfect correlation of movements in the price of the
securities being hedged and movements in the price of futures contracts, the
Fund may buy or sell futures contracts in a greater or lesser dollar amount
than the dollar amount of the securities being hedged if the historical
volatility of the futures contract has been less or greater than that of the
securities. Such "over hedging" or "under hedging" may adversely affect the
Fund's net investment results if market movements are not as anticipated when
the hedge is established.
Successful use of futures by the Fund also is subject to The Dreyfus
Corporation's ability to predict correctly movements in the direction of the
market or interest rates. For example, if the Fund has hedged against the
possibility of a decline in the market adversely affecting the value of
securities held in its portfolio and prices increase instead, the Fund will
lose part or all of the benefit of the increased value of securities which it
has hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices
which reflect the rising market. The Fund may have to sell securities at a
time when it may be disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the option exercise
period. The writer of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a
long position if the option is a put). Upon exercise of the option, the
assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account which represents the amount by which the
market price
(Page 10)
of the futures contract, at exercise, exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
on the futures contract.
Call options sold by the Fund with respect to futures contracts will
be covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the prices of which
are expected to move relatively consistently with the instruments underlying,
the futures contract. Put options sold by the Fund with respect to futures
contracts will be covered in the same manner as put options on specific
securities as described above.
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES -- The Fund may
purchase and sell stock index futures contracts and options on stock index
futures contracts.
A stock index future obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of
the last trading day of the contract and the price at which the agreement is
made. No physical delivery of the underlying stocks in the index is made.
With respect to stock indexes that are permitted investments, the Fund
intends to purchase and sell futures contracts on the stock index for which
it can obtain the best price with consideration also given to liquidity.
The Fund may use stock index futures as a substitute for a comparable
market position in the underlying securities.
There can be no assurance of the Fund's successful use of stock index
futures as a hedging device. In addition to the possibility that there may be
an imperfect correlation, or no correlation at all, between movements in the
stock index future and the portion of the portfolio being hedged, the price
of stock index futures may not correlate perfectly with the movement in the
stock index because of certain market distortions. First, all participants in
the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
would distort the normal relationship between the stock index and futures
markets. Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements
in the securities market. Therefore, increased participation by speculators
in the futures market also may cause temporary price distortions. Because of
the possibility of price distortions in the futures market and the imperfect
correlation between movements in the stock index and movements in the price
of stock index futures, a correct forecast of general market trends by The
Dreyfus Corporation still may not result in a successful hedging transaction.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE FUTURES
CONTRACTS -- The Fund may invest in interest rate futures contracts and
options on interest rate futures contracts as a substitute for a comparable
market position and to hedge against adverse movements in interest rates.
To the extent the Fund has invested in interest rate future contracts
or options on interest rate futures contracts as a substitute for a
comparable market position, the Fund will be subject to the investment risks
of having purchased the securities underlying the contracts.
The Fund may purchase call options on interest rate futures contracts
to hedge against decline in interest rates and may purchase put options on
interest rate futures contracts to hedge its portfolio securities against the
risk of rising interest rates.
The Fund may sell call options on interest rate futures contracts to
partially hedge against declining prices of portfolio securities. If the
futures price at expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the Fund's
portfolio holdings. The Fund may sell put options on interest rate futures
contracts to hedge against increasing prices of the securities which are
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the
(Page 11)
exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Fund intends to
purchase. If a put or call option sold by the Fund is exercised, the Fund
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures
positions, the Fund's losses from existing options on futures may to some
extent be reduced or increased by changes in the value of its portfolio
securities.
The Fund also may sell options on interest rate futures contracts as
part of closing purchase transactions to terminate its options positions. No
assurance can be given that such closing transactions can be effected or that
there will be a correlation between price movements in the options on
interest rate futures and price movements in the Fund's portfolio securities
which are the subject of the hedge. In addition, the Fund's purchase of such
options will be based upon predictions as to anticipated interest rate
trends, which could prove to be inaccurate.
CURRENCY FUTURES
The Fund may purchase and sell currency futures contracts. By selling
foreign currency futures, the Fund can establish the number of U.S. dollars
it will receive in the delivery month for a certain amount of a foreign
currency. In this way, if the Fund anticipates a decline of a foreign
currency against the U.S. dollar, the Fund can attempt to fix the U.S. dollar
value of some or all of the securities held in its portfolio that are
denominated in that currency. By purchasing foreign currency futures, the
Fund can establish the number of dollars it will be required to pay for a
specified amount of a foreign currency in the delivery month. Thus, if the
Fund intends to buy securities in the future and expects the U.S. dollar to
decline against the relevant foreign currency during the period before the
purchase is effected, the Fund can attempt to fix the price in U.S. dollars
of the securities it intends to acquire.
FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in currency exchange transactions either on a
spot (i.e., cash) basis at the rate prevailing in the currency exchange
market, or through entering into forward contracts to purchase or sell
currencies. A forward currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which must be more
than two days from the date of the contract, at a price set at the time of
the contract. These contracts are entered into in the interbank market conduct
ed directly between currency traders (typically commercial banks or other
financial institutions) and their customers.
OPTIONS ON FOREIGN CURRENCY
The Fund may purchase and sell call and put options on foreign
currency for the purpose of hedging against changes in future currency
exchange rates. Call options convey the right to buy the underlying currency
at a price which is expected to be lower than the spot price of the currency
at the time the option expires. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the
spot price of the currency at the time the option expires. The Fund may use
foreign currency options under the same circumstances that it could use
currency forward and futures transactions as described above. See also "Call
and Put Options on Specific Securities" above.
OPTIONS ON SWAPS
The Fund may purchase cash-settled options on interest rate swaps,
interest rate swaps denominated in foreign currency and equity index swaps in
pursuit of its investment objective. Interest rate swaps involve the exchange
by the Fund with another party of their respective commitments to pay or
receive interest (for example, an exchange of floating-rate payments for
fixed-rate payments) denominated in U.S. dollars or foreign currency. Equity
index swaps involve the exchange by the Fund with another party of cash flows
based upon the performance of an index or a portion of an index of securities
which usually include dividends. A cash-settled option on a swap gives the
purchaser the right, but not the obligation, in return for the premium paid,
to receive an amount of cash equal to the value of the under-
(Page 12)
lying swap as of
the exercise date. These options typically are purchased in privately
negotiated transactions from financial institutions, including securities
brokerage firms.
LENDING PORTFOLIO SECURITIES
From time to time, the Fund may lend securities from its portfolio to
brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. Such loans may not exceed 331/3%
of the value of the Fund's total assets. In connection with such loans, the
Fund will receive collateral consisting of cash, U.S. Government securities
or irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. The Fund can increase its income through the investment of such
collateral. The Fund continues to be entitled to payments in amounts equal to
the interest, dividends or other distributions payable on the loaned security
and receives interest on the amount of the loan. Such loans will be
terminable at any time upon specified notice. The Fund might experience risk
of loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Fund.
FUTURE DEVELOPMENTS
The Fund may take advantage of opportunities in the area of options
and futures contracts and options on futures contracts and any other
derivative investment which are not presently contemplated for use by the
Fund or which are not currently available but which may be developed, to the
extent such opportunities are both consistent with the Fund's investment
objective and legally permissible for the Fund. Before entering into such
transactions or making any such investment, the Fund will provide appropriate
disclosure in its prospectus.
CERTAIN PORTFOLIO SECURITIES
CONVERTIBLE SECURITIES
A convertible security is a fixed-income security that may be
converted at either a stated price or stated rate into underlying shares of
common stock. Convertible securities have general characteristics similar to
both fixed-income and equity securities. Although to a lesser extent than
with fixed-income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends
to increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stock, and
therefore, also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in conver
tible securities generally entail less risk than investments in common stock
of the same issuer.
As fixed-income securities, convertible securities are investments
that provide for a stable stream of income with generally higher yields than
common stocks. Of course, like all fixed-income securities, there can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. Convertible securities, however, generally
offer lower interest or dividend yields than non-convertible securities of
similar quality because of the potential for capital appreciation. A
convertible security, in addition to providing fixed income, offers the
potential for capital appreciation through the conversion feature, which
enables the holder to benefit from increases in the market price of the
underlying common stock. There can be no assurance of capital appreciation,
however, because securities prices fluctuate.
Convertible securities generally 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.
(Page 13)
Because of the subordination feature, however,
convertible securities typically have lower ratings than similar
non-convertible securities.
WARRANTS
The Fund may invest up to 2% of its net assets in warrants, except
that this limitation does not apply to warrants acquired in units or attached
to securities. 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.
U.S. GOVERNMENT SECURITIES
Securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities include U.S. Treasury securities, which differ
in their interest rates, maturities and times of issuance. Treasury Bills
have initial maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally have initial
maturities of greater than ten years. Some obligations issued or guaranteed
by U.S. Government agencies and instrumentalities, for example, Government
National Mortgage Association pass-through certificates, are supported by the
full faith and credit of the U.S. Treasury; others, such as those of the
Federal Home Loan Banks, by the right of the issuer to borrow from the
Treasury; others, such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, such as
those issued by the Student Loan Marketing Association, only by the credit of
the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. Principal and interest may fluctuate based on
generally recognized reference rates or the relationship of rates. While the
U.S. Government provides financial support to such U.S. Government-sponsored
agencies and instrumentalities, no assurance can be given that it will always
do so since it is not so obligated by law. The Fund will invest in such
securities only when it is satisfied that the credit risk with respect to the
issuer is minimal.
ZERO COUPON U.S. TREASURY SECURITIES
The Fund may invest in zero coupon U.S. Treasury securities, which
are Treasury Notes and Bonds that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interests in such stripped debt obligations and coupons. The
Fund also may invest in zero coupon securities issued by corporations and
financial institutions which constitute a proportionate ownership of the
issuer's pool of underlying U.S. Treasury securities. A zero coupon security p
ays no interest to its holder during its life and is sold at a discount to
its face value at maturity. The amount of the discount fluctuates with the
market price of the security. The market prices of zero coupon securities
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having similar
maturities and credit qualities.
REPURCHASE AGREEMENTS
Repurchase agreements involve the acquisition by the Fund of an
underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Fund to resell, the instrument at a fixed price, usually
not more than one week after its purchase. Certain costs may be incurred by
the Fund in connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the
securities, realization on the securities by the Fund may be delayed or
limited.
BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate. Time deposits which may be held by the Fund
will not benefit from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation.
(Page 14)
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and of the drawer to pay the face amount of
the instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs. 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-l by Moody's or A-1 by Standard
& Poor's, (b) issued by companies having an outstanding unsecured debt issue
currently rated at least Aa3 by Moody's or AA- by Standard & Poor's, or (c)
if unrated, determined by The Dreyfus Corporation to be of comparable quality
to those rated obligations 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 options traded
in the over-the-counter market and securities used to cover such options. As
to these securities, the Fund is subject to a risk that should the Fund
desire to sell them when a ready buyer is not available for a price the Fund
deems representative of their value, the value of the Fund's net assets could
be adversely affected.
CERTAIN FUNDAMENTAL POLICIES
The Fund may: (i) purchase securities of any company having less than
three years' continuous operation (including operations of any predecessors)
if such purchase does not cause the value of the Fund's investments in all
such companies to exceed 5% of the value of its assets; (ii) borrow money to
the extent permitted under the Investment Company Act of 1940; and (iii)
invest up to 25% of its total assets in securities of issuers in a single
industry, provided that, when the Fund has adopted a temporary defensive
posture, there shall be no limitation on investments in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. This
paragraph describes fundamental policies that cannot be changed without
approval by the holders of a majority (as defined in the Investment Company
Act of 1940) of the Fund's outstanding voting shares.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
The Fund may: (i) invest up to 15% of its net assets in repurchase
agreements providing for settlement in more than seven days after notice and
in other illiquid securities; and (ii) pledge, mortgage, hypothecate or
otherwise encumber to its assets, to the extent necessary to secure permitted
borrowings. See "Investment Objective and Management Policies _ Investment
Restrictions" in the Fund's Statement of Additional Information.
RISK FACTORS
LOWER RATED SECURITIES
You should carefully consider the relative risks of investing in the
higher yielding (and, therefore, higher risk) debt securities in which the
Fund may invest when management believes that such securities offer
opportunities for capital growth. These are securities such as those rated Ba
by Moody's or BB by Standard & Poor's or as low as those rated Caa by Moody's
or CCC by Standard & Poor's. 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. Securities rated Ba by Moody's are judged to
have speculative elements; their future cannot be consid-
(Page 15)
ered as well assured
and often the protection of interest and principal payments may be very
moderate. Securities rated BB by Standard & Poor's are regarded as having
predominantly speculative characteristics and, while such securities 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 Caa by Moody's
are of poor standing and may be in default or there may be present elements
of danger with respect to principal or interest. Standard & Poor's typically
assigns a CCC rating to debt which has a currently identifiable vulnerability
to default and is dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal.
Such obligations, though high yielding, are characterized by great risk. See
"Appendix" in the Fund's Statement of Additional Information for a general
description of Moody's and Standard & Poor's ratings of debt obligations. The
ratings of Moody's and Standard & Poor's represent their opinions as to the
quality of the securities which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and, although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market value risk of these securities.
Therefore, although these ratings may be an initial criterion for selection
of portfolio investments, The Dreyfus Corporation 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 Dreyfus Corporation's credit analysis than might be the
case for a fund that invests in higher rated securities. Once the rating of a
portfolio security has been changed, the Fund will consider all circumstances
deemed relevant in determining whether to continue to hold the security.
The market price and yield of bonds rated Ba or lower by Moody's and
BB or lower by Standard & Poor's are more volatile than those of higher rated
bonds. Factors adversely affecting the market price and yield of these
securities will adversely affect the Fund's net asset value. In addition, the
retail secondary market for these bonds may be less liquid than that of
higher rated bonds; 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.
The market values of certain lower rated debt securities tend to
reflect individual corporate developments to a greater extent than do higher
rated securities, which react primarily to fluctuations in the general level
of interest rates, and tend to be more sensitive to economic conditions than
are higher rated securities. Companies that issue such bonds often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of
such issuers generally is greater than is the case with higher rated
securities.
The Fund may invest in zero coupon securities and pay-in-kind bonds
(bonds which pay interest through the issuance of additional bonds) rated as
low as Caa by Moody's and as low as CCC by Standard & Poor's, which involve
special considerations. These securities may be subject to greater
fluctuations in value due to changes in interest rates than interest-bearing
securities and thus may be considered more speculative than comparably rated
interest-bearing securities. See "Other Investment Considerations" below and
"Investment Objective and Management Policies _ Risk Factors _ Lower Rated
Securities" and "Dividends, Distributions and Taxes" in the Fund's Statement
of Additional Information.
The Fund's ability to engage in certain short-term transactions may
be limited by the requirement that, to qualify as regulated investment
company, it must earn less than 30% of its gross income from the disposition
of securities held for less than three months. This 30% test limits the
extent to which the Fund may sell securities held for less than three months,
write options expiring in less than three months and invest in certain
futures contracts, among other strategies. However, portfolio turnover will
not otherwise be a limiting factor in making investment decisions.
(Page 16)
INVESTING IN FOREIGN SECURITIES
In making foreign investments, the Fund will give appropriate
consideration to the following factors, among others.
Foreign securities markets generally are not as developed or
efficient as those in the United States. Securities of some foreign issuers
are less liquid and more volatile than securities of comparable U.S. issuers.
Similarly, volume and liquidity in most foreign securities markets are less
than in the United States and, at times, volatility of price can be greater
than in the United States. The issuers of some of these securities, such as
foreign bank obligations, may be subject to less stringent or different
regulations than are U.S. issuers. In addition, there may be less publicly
available information about a non-U.S. issuer, and non-U.S. issuers generally
are not subject to uniform accounting and financial reporting standards,
practices and requirements comparable to those applicable to U.S. issuers.
Many 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. In attempt to control
inflation, wage and price controls have been imposed in certain countries.
Because stock certificates and other evidences of ownership of such
securities usually are held outside the United States, the Fund will be
subject to additional risks which include possible adverse political and
economic developments, possible seizure or nationalization of foreign
deposits and possible adoption of governmental restrictions which might
adversely affect the payment of principal and interest on the foreign
securities or might restrict the payment of principal and interest to
investors located outside the country of the issuer, whether from currency
blockage or otherwise. Custodial expenses for a portfolio of non-U.S.
securities generally are higher than for a portfolio of U.S. securities.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. Some currency exchange costs may be
incurred when the Fund changes investments from one country to another.
Furthermore, some of these securities may be subject to brokerage
taxes levied by foreign governments, which have the effect of increasing the
cost of such investment and reducing the realized gain or increasing the
realized loss on such securities at the time of sale. Income received by the
Fund from sources within foreign countries may be reduced by withholding and
other taxes imposed by such countries. Tax conventions between certain
countries and the United States, however, may reduce or eliminate such taxes.
All such taxes paid by the Fund will reduce its net income available for
distribution to investors.
Distributions paid by the Fund to corporate investors do not qualify
for the dividends received deduction to the extent that the distributions are
attributable to amounts received by the Fund as dividends on foreign
securities.
FOREIGN CURRENCY EXCHANGE
Currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention by U.S. or foreign
governments or central banks or the failure to intervene or by currency
controls or political developments in the U.S. or abroad.
The foreign currency market offers less protection against defaults
in the forward trading of currencies than is available when trading in
currencies occurs on an exchange. Since a forward currency contract is not
guaranteed by an exchange or clearinghouse, a default on the contract would
deprive
(Page 17)
the Fund of unrealized profits or force the Fund to cover its
commitments for purchase or resale, if any, at the current market price.
FOREIGN COMMODITY TRANSACTIONS
Unlike trading on domestic commodity exchanges, trading on foreign
commodity exchanges is not regulated by the CFTC and may be subject to
greater risks than trading on domestic exchanges. For example, some foreign
exchanges are principal markets so that no common clearing facility exists
and a trader may look only to the broker for performance of the contract. In
addition, unless the Fund hedges against fluctuations in the exchange rate
between the U.S. dollar and the currencies in which the trading is done on
foreign exchanges, any profits that the Fund might realize in trading could
be eliminated by adverse changes in the exchange rate, or the Fund could
incur losses as a result of those changes. Transactions on foreign exchanges
may include both commodities which are traded on domestic exchanges and those
which are not.
OTHER INVESTMENT CONSIDERATIONS
The Fund's net asset value is not fixed and should be expected to
fluctuate. You should purchase Fund shares only as a supplement to an overall
investment program and only if you are willing to undertake the risks
involved.
For the portion of the Fund's portfolio invested in equity
securities, investors should be aware that equity securities fluctuate in
value, often based on factors unrelated to the value of the issuer of the
securities, and that fluctuations can be pronounced. Changes in the value of
the Fund's portfolio securities, regardless of whether the securities are
equity or debt, will result in changes in the value of a Fund share and thus
the Fund's yield and total return to investors.
For the portion of the Fund's portfolio invested in debt securities,
investors should be aware that even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values
of fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuing entities. See "Lower Rated Securi
ties" above.
Securities purchased by the Fund often are offered on a 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 when-issued security are fixed at
the time the Fund enters into the commitment. The Fund will make commitments
to purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities before the settlement date
if it is deemed advisable. The Fund will not accrue income in respect of a
when-issued security prior to its stated delivery date.
Securities purchased on a when-issued basis and certain other
securities held in the Fund's portfolio are subject to changes in value (both
generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a
when-issued basis may expose the Fund to risks because they may experience suc
h fluctuations prior to their actual delivery. Purchasing securities on a
when-issued basis can involve the additional risk that the yield available in
the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. A segregated account of the Fund
consisting of cash, cash equivalents or U.S. Government securities or other
high quality liquid debt securities at least equal at all times to the amount
of the when-issued commitments will be established and maintained at the
Fund's custodian bank. Purchasing securities on a when-issued basis when the
Fund is fully or almost fully invested may result in greater potential
fluctuation in the value of the Fund's net assets and its net asset value per
share.
(Page 18)
Federal income tax law requires the holder of a zero coupon security
or of certain pay-in-kind bonds to accrue income with respect to these
securities prior to the receipt of cash payments. To maintain its
qualification as a regulated investment company and avoid liability for
Federal income taxes, the Fund may be required to distribute such income
accrued to these securities and may have to dispose of portfolio securities
under disadvantageous circumstances in order to generate cash to satisfy
these distribution requirements.
The Fund's classification as a "non-diversified" investment company
means that the proportion of the Fund's assets that may be invested in the
securities of a single issuer is not limited by the Investment Company Act of
1940. A "diversified investment company" is required by the Investment
Company Act of 1940 generally, with respect to 75% of its total assets, to
invest not more than 5% of such assets in the securities of a single issuer
and to hold not more than 10% of the voting securities of any single issuer.
However, the Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which requires that, at the end of each
quarter of its taxable year, (i) at least 50% of the market value of the
Fund's total assets be invested in cash, U.S. Government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its total assets be invested in the securiti
es of any one issuer (other than U.S. Government securities or the securities
of other regulated investment companies). Since a relatively high percentage
of the Fund's assets may be invested in the obligations of a limited number
of issuers, some of which may be within the same economic sector, the Fund's
portfolio securities may be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities of a
diversified investment company.
Investment decisions for the Fund are made independently from those
of the other investment companies advised by The Dreyfus Corporation.
However, if such other investment companies are prepared to invest in, or
desire to dispose of, securities of the type in which the Fund invests at the
same time as the Fund, available investments or opportunities for sales will
be allocated equitably to each investment company. In some cases, this
procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
The Dreyfus Corporation, 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 a
wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As of November
30, 1994, The Dreyfus Corporation managed or administered approximately $71
billion in assets for approximately 1.9 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the overall authority of the Fund's Trustees in accordance with
Massachusetts law. The Fund's primary portfolio manager is Richard B. Hoey.
Mr. Hoey joined The Dreyfus Corporation in July 1991 and currently serves as
Chief Economist. From 1990 to 1991, he was Chief Economist and a Managing
Director of Barclays de Zoete Wedd, Inc. Prior thereto, he was Chief
Economist and a Managing Director of Drexel Burnham Lambert. The Fund's other
investment officers are identified under "Management of the Fund" in the
Fund's Statement of Additional Information. The Dreyfus Corporation also
provides research services for the Fund as well as for other funds advised by
The Dreyfus Corporation through a professional staff of portfolio managers
and securities analysts.
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 pro-
(Page 19)
vides 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., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including Dreyfus, Mellon managed approximately $201
billion in assets as of September 30, 1994, including $76 billion in mutual
fund assets. As of September 30, 1994, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for approximately $659 billion in assets, including approximately
$108 billion in mutual fund assets.
For the fiscal year ended October 31, 1994, the Fund paid The Dreyfus
Corporation a monthly fee at the annual rate of .75 of 1% of the value of the
Fund's average daily net assets. From time to time, The Dreyfus Corporation
may waive receipt of its fees and/or voluntarily assume certain expenses of
the Fund, which would have the effect of lowering the Fund's overall expense
ratio and increasing yield to investors at the time such amounts are waived
or assumed, as the case may be. The Fund will not pay The Dreyfus Corporation
at a later time for any amounts it may waive, nor will the Fund reimburse The
Dreyfus Corporation for any amounts it may assume. The management fee is
higher than that paid by most other investment companies. The Dreyfus
Corporation may pay the Fund's distributor for shareholder and distribution
services from The Dreyfus Corporation's own assets, including past profits
but not including the management fee paid by the Fund. The Fund's distributor
may pay part or all of these payments to securities dealers or others for
servicing and distribution.
DISTRIBUTOR
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor is a wholly-owned subsidiary of Institutional Administration
Services, Inc., a provider of mutual fund administration services, the parent
company of which is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The
Bank of New York, 110 Washington Street, New York, New York 10286, is the
Fund's Custodian.
HOW TO BUY FUND SHARES
Fund shares can be purchased through the Distributor or certain
financial institutions, securities dealers and other industry professionals
(collectively, "Service Agents") that have entered into agreements with the
Distributor. Service Agents may receive different levels of compensation for
selling different Classes of shares.
Management understands that some Service Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus, and, to the extent permitted by applicable regulatory authority,
may charge their clients direct fees which would be in addition to any
amounts which might be received under the Shareholder Service Plan. Each
Service Agent has agreed to transmit to its clients a schedule of such fees.
You should consult your Service Agent in this regard.
When purchasing Fund shares, you must specify whether the purchase is
for Class A or Class B shares. Share certificates are issued only upon your
written request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which has made an aggregate minimum initial
purchase for its customers of $2,500. Subsequent investments must be at least
$500. The initial investment must be accompanied by the Fund's Account
Application.
(Page 20)
For full-time or part-time employees of The Dreyfus Corporation
or any of its affiliates or subsidiaries, directors of The Dreyfus
Corporation, Board members of a fund advised by The Dreyfus Corporation,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing, the minimum initial investment is $1,000. For full-time or
part-time employees of The Dreyfus Corporation 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. The Fund reserves
the right to offer Fund shares without regard to minimum purchase
requirements to employees participating in certain qualified and non-qualified
employee benefit plans or other programs where contributions or account
information can be transmitted in a manner and form acceptable to the Fund.
The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian." Payments to open new accounts which
are mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application
indicating which Class of shares is being purchased. For subsequent
investments, your Fund account number should appear on the check and an invest
ment 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 initial nor subsequent investments should be made by third party
check. Purchase orders may be delivered in person only to a Dreyfus Financial
Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call one of the telephone numbers listed under "General
Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900119365/Dreyfus
Strategic Investing _ Class A shares, or DDA #8900115165/Dreyfus Strategic
Investing _ Class B shares, as the case may be, for purchase of Fund shares
in your name. The wire must include your Fund account number (for new
accounts 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.
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 New York Stock Exchange
(currently 4:00 p.m., New York time), on each day the New
(Page 21)
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 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 Board of Trustees. For further
information regarding the methods employed in valuing Fund investments, see
"Determination of Net Asset Value" in the Fund's Statement of Additional
Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject you
to a $50 penalty imposed by the Internal Revenue Service ("IRS").
If an order is received by the Transfer Agent or other agent by the
close of trading on the New York Stock Exchange (currently 4:00 p.m., New
York time) on a business day, Fund shares will be purchased at the public
offering price determined as of the close of trading on 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 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 the close of
trading on the floor of the New York Stock Exchange on a business day and
transmitted to the Distributor 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 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 before the close of its business
day.
CLASS A SHARES
The public offering price for Class A shares is the net asset value
per share of that Class plus a sales load as shown below:
<TABLE>
<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 to less than $3,000,000...... 1.00 1.00 1.00
$3,000,000 to less than $5,000,000...... .50 .50 .50
$5,000,000 and over..................... .25 .25 .25
</TABLE>
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 and minor
children at net asset value, provided that they have furnished the
Distributor with such information that 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
(Page 22)
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 or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries, directors of The Dreyfus Corporation, Board
members of a fund advised by The Dreyfus Corporation, including members of
the Fund's Board, or the spouse or minor child of any of the foregoing.
Class A shares will be offered at net asset value without a sales
load to employees participating in qualified or non-qualified employee
benefit plans or other programs where (i) the employers or affiliated
employers maintaining such plans or programs have a minimum of 250 employees
eligible for participation in such plans or programs or (ii) such plan's or
program's aggregate investment in the Dreyfus Family of Funds or certain
other products made available by the Distributor to such plans or programs
exceeds one million dollars ("Eligible Benefit Plans"). Plan sponsors,
administrators or trustees, as applicable, are responsible for notifying the
Distributor when the relevant requirement is satisfied. The Distributor may
pay dealers a fee of up to .5% of the amount invested through such dealers in
Class A shares at net asset value by employees participating in Eligible
Benefit Plans. All present holdings of shares of funds in the Dreyfus Family
of Funds by Eligible Benefit Plans will be aggregated to determine the fee
payable with respect to each such purchase of Class A shares. 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.
Class A shares also may be purchased (including by exchange) at net
asset value without a sales load for Dreyfus-sponsored IRA "Rollover
Accounts" with the distribution proceeds from a qualified retirement plan or
a Dreyfus-sponsored 403(b)(7) plan, provided that, at the time of such
distribution, such qualified retirement plan or Dreyfus-sponsored 403(b)(7)
plan (a) satisfied the requirements set forth under either clause (i) or
clause (ii) in the preceding paragraph and all or a portion of such plan's
assets were invested in funds in the Dreyfus Family of Funds or certain other
products made available by 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.
For the period November 1, 1993 through August 24, 1994, Dreyfus
Service Corporation, a wholly-owned subsidiary of The Dreyfus Corporation and
the Fund's distributor during such period, retained $297,139 from sales loads
on Class A shares. The dealer reallowance may be changed from time to time
but will remain the same for all dealers. The Distributor, at its expense,
may provide additional promotional incentives to dealers that sell shares of
funds advised by The Dreyfus Corporation which are sold with a sales load,
such as the Fund. In some instances, these incentives may be offered only to
certain dealers who have sold or may sell significant amounts of shares.
CLASS B SHARES
The public offering price for Class B shares is the net asset value
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described under "How to Redeem Fund Shares." The Distributor
compensates certain Service Agents for selling Class B 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. For the period
November 1, 1993 through August 24, 1994, Dreyfus Service Corporation, the
Fund's distributor during such period retained $58,543 from CDSC on Class B
shares.
RIGHT OF ACCUMULATION
CLASS A SHARES -- Reduced sales loads may apply to any purchase of Class A
shares, shares of certain other funds advised by The Dreyfus Corporation
which are sold with a sales load and 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
(Page 23)
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 having a current value of
$20,000, the sales load applicable to the subsequent purchase would be
reduced to 4% of the offering price. All present holdings of Eligible Funds
may be combined to determine the current offering price of the aggregate
investment in ascertaining the sales load applicable to each subsequent
purchase.
To qualify for reduced sales loads, at the time of a purchase you or
your Service Agent must notify theDistributor if orders are made by wire, or
the Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
DREYFUS TELETRANSFER PRIVILEGE
You may purchase Fund shares (minimum $500, maximum $150,000 per day)
by telephone if you have checked the appropriate box and supplied the
necessary information on the Fund's Account Application or have filed 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 such a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be so de
signated. The Fund may modify or terminate this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus. You should consult your Service Agent in this
regard.
FUND EXCHANGES -- You may purchase, in exchange for Class A or Class B shares
of the Fund, shares of the same Class in certain other funds managed or
administered by The Dreyfus Corporation, to the extent such shares are
offered for sale in your state of residence. These Funds may have different
investment objectives which may be of interest to you. Fund exchanges may be
exercised two times during the calendar year as described below. If you
desire 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 other
conditions are imposed on its use.
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 case of
Personal Retirement Plans, shares being exchanged must have a current value
of at least $500; furthermore, when establishing a new account by exchange,
the shares being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made. The
ability to issue exchange instructions by telephone is given to all fund
shareholders automatically, unless you check the relevant "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 1-800-221-4060 or, if you are
calling from overseas, call 1-401-455-3306. See "How to Redeem Fund Shares _
Procedures." Upon an exchange into a new account, the
(Page 24)
following shareholder
services and privileges, as applicable and where available, will be
automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Wire Redemption Privilege, Telephone Redemption
Privilege, Dreyfus TELETRANSFER Privilege and the dividend/capital gain
distributions option (except for the 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
shares at the time of an exchange; however, Class B shares acquired through
an exchange will be subject on redemption to the higher CDSC applicable to
the exchanged or acquired shares. The CDSC applicable on redemption of the
acquired Class B shares will be calculated from the date of the initial
purchase of the Class B shares exchanged. If you are exchanging Class A
shares into a fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced sales
load, if the shares of the fund from which you are exchanging were: (a)
purchased with a sales load, (b) acquired by a previous exchange from shares
purchased with a sales load, or (c) acquired through reinvestments of
dividends or distributions paid with respect to the foregoing categories of
shares. To qualify, at the time of your 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 Fund's 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.
With respect to any investor who has exchanged into and out of the
Fund (or the reverse) twice during the calendar year, further purchase orders
(including those pursuant to exchange instructions) relating to any shares of
the Fund will be rejected for the remainder of the calendar year. Management
believes that this policy will enable shareholders to change their investment
program, while protecting the Fund against disruptions in portfolio
management resulting from frequent transactions by those seeking to time
market fluctuations. Exchanges made through omnibus accounts for various
retirement plans are not subject to such limit on exchanges.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege permits you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for Class A or
Class B shares of the Fund, in shares of the same class of certain other
funds in the Dreyfus Family of Funds of which you are currently an investor.
The amount you designate, which can be expressed either in terms of a
specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and or fifteenth of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however, a sales load may be charged with respect to exchanges
of Class A shares into funds sold with a sales load. No CDSC will be imposed
on Class B shares at the time of an exchange; however, Class B shares
acquired through an exchange will be subject on redemption to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B shares will be calculated from the date of
the initial purchase of the Class B shares exchanged. See "Shareholder
Services" in the Statement of Additional Information. This Privilege may be
modified or canceled by the Fund or the Transfer Agent. You may modify or
cancel your exercise of this Privilege at any time by writing to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund
may charge
(Page 25)
a service fee for this Privilege. No such fee currently is
contemplated. The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss. Thus, you may realize a taxable gain or loss.
For more information concerning this Privilege and the funds in the Dreyfus
Family of Funds eligible to participate in this Privilege, or to obtain a
Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-Automatic Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. 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
6527, Providence, Rhode Island 02940-6527, or, if for Dreyfus Retirement Plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained 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 certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
Class B shares withdrawn pursuant to the Automatic Withdrawal Plan
will be subject to any applicable CDSC. Any correspondence with respect to
the Automatic Withdrawal Plan should be addressed to The Dreyfus Family of
Funds, P.O. Box 6527, Providence, Rhode Island 02940-6527, or, if for Dreyfus
retirement plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427.
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 an investor. Shares of the other fund will be purchased at the
then-current net asset value; however, a sales load may be charged with
respect to investments in 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.
(Page 26)
For more information concerning these privileges and the funds in the
Dreyfus Family of Funds eligible to participate in 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 authorization 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 to 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.
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, The Dreyfus Corporation, the Fund, the Transfer Agent or any
other person, to arrange for transactions under Dreyfus Payroll Savings Plan.
The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. 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, available 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 Letter of Intent) in any Eligible Fund that may be used towa
rd "Right of Accumulation" benefits described above may be used as a credit
toward completion of the Letter of Intent. However, the reduced sales load
will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount specified,
you will be requested to remit an amount equal to the difference between the
sales load actually paid and the sales load applicable to the aggregate
purchases actually made. If such remittance is not received within 20 days,
the Transfer Agent, as attorney-in-fact pursuant to the terms of the Letter
of Intent, will redeem an appropriate number of Class A shares held in escrow
to realize the difference. Signing a Letter
(Page 27)
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. Purchases
pursuant to a Letter of Intent will be made at the then-current net asset
value plus the applicable sales load in effect at the time such Letter of
Intent was executed.
HOW TO REDEEM FUND SHARES
GENERAL -- You may request redemption of your Class A or Class B shares at
any time. Redemption requests should be transmitted to the Transfer Agent as
described below. When a request is received in proper form, the Fund will
redeem the shares at the next determined net asset value as described below.
If you hold Fund shares of more than one Class, any request for redemption
must specify the Class of shares being redeemed. If you fail to specify the
Class of shares to be redeemed or if you own fewer shares of the Class than
specified to be redeemed, the redemption request may be delayed until the
Transfer Agent receives further instructions from you or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed directly through the Distributor. Service Agents may
charge a nominal fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted with
the redemption request. The value of the shares redeemed may be more or less
than their original cost, depending on the Fund's then-current net asset
value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
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 30 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 by a
shareholder 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.
(Page 28)
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:
Payment Was Made CDSC as a % of Amount
Year Since Purchase 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.
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 on the second year
after purchase) for a total CDSC of $9.60.
WAIVER OF CDSC
The CDSC will be waived in connection with (a) redemptions made
within one year after the death or disability, as defined in Section 72(m)(7)
of the Code, of the shareholder, (b) redemptions by Eligible Benefit Plans,
(c) redemptions as a result of a combination of any investment company with
the Fund by merger, acquisition of assets or otherwise, (d) a distribution
following retirement under a tax-deferred retirement plan or upon attaining
age 70-1/2 in the case of an IRA or Keogh plan or custodial account pursuant
to Section 403(b) of the Code and (e) redemptions by such shareholders as the
Securities and Exchange Commission or its staff may permit. If the Trustees
of the Fund determine to discontinue the waiver of the CDSC, the disclosure
in the Fund's prospectus will be appropriately revised. 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.
(Page 29)
PROCEDURES
You may redeem Fund shares by using the regular redemption procedure
through the Transfer Agent the Wire Redemption Privilege, the Telephone
Redemption Privilege or Dreyfus TELETRANSFER Privilege. 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.
In addition, the Distributor will accept orders from dealers with
which it has sales agreements for the repurchase of shares held by
shareholders. Repurchase orders received by the dealer prior to the close of
trading on the floor of the New York Stock Exchange on a business day and
transmitted to the Distributor prior to the close of its business day
(normally 5:15 p.m., New York time) are effected at the price determined as
of the close of trading on the floor of the New York Stock Exchange on that da
y. Otherwise, the shares will be redeemed at the next determined net asset
value. It is the responsibility of the dealer to transmit orders on a timely
basis. The dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any
time.
Your redemption request may direct that the redemption proceeds be
used to purchase shares of other funds advised or administered by The Dreyfus
Corporation that are not available through the Exchange Privilege. The
applicable CDSC will be charged upon the redemption of Class B shares. Your
redemption proceeds will be invested in shares of the other fund on the next
business day. Before you make such a request, you must obtain and should
review a copy of the current prospectus of the fund being purchased.
Prospectuses may be obtained by calling 1-800-645-6561. The prospectus will
contain information concerning minimum investment requirements and other
conditions that may apply to your purchase.
You may redeem Fund 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 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 6527,
Providence, Rhode Island 02940-6527. Redemption requests on Dreyfus
Retirement Plan accounts should be sent 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,
(Page 30)
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.
WIRE REDEMPTION PRIVILEGE
You may request by wire or telephone that redemption proceeds
(minimum $1,000) be wired to your account at a bank which is a member of the
Federal Reserve System, or a correspondent bank if your bank is not a member.
To establish the Wire Redemption Privilege, you must check the appropriate
box and supply the necessary information on the Fund's Account Application or
file a Shareholder Services Form with the Transfer Agent. You may direct that
redemption proceeds be paid by check (maximum $150,000 per day)made out to
the owners of record and mailed to your address. Redemption proceeds of less
than $1,000 will be paid automatically by check. Holders of jointly
registered Fund or bank accounts may have redemption proceeds of not more
than $250,000 wired within any 30-day period. You may telephone redemption
requests by calling 1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. The Fund reserves the right to refuse any redemption request,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. This Privilege may be
modified or terminated at any time by the Transfer Agent or the Fund. The
Fund's Statement of Additional Information sets forth instructions for transmi
tting redemption requests by wire. Shares held under Keogh Plans, IRAs or
other retirement plans, and shares for which certificates have been issued,
are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE
You may redeem Fund shares (maximum $150,000 per day) 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. The
redemption proceeds will be paid by check and mailed to your address. You may
telephone redemption instructions by calling 1-800-221-4060 or, if you are
calling from overseas, call
1-401-455-3306. 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 telephone redemption requests.
This Privilege may be modified or terminated at any time by the Transfer
Agent or the Fund. Shares held under Keogh Plans, IRAs or other retirement
plans, and shares for which certificates have been issued, are not eligible
for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE
You may redeem Fund shares (minimum $500 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. Class B shares redeemed through the Dreyfus TELETRANSFER P
rivilege will be subject to the appropriate CDSC. The proceeds will be
transferred between your Fund account and the bank account designated in one
of these documents. Only such a bank 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
(Page 31)
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 Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
Shares held under Keogh Plans, IRAs or other retirement plans, and shares
issued in certificate form, are not eligible for this Privilege.
REINVESTMENT PRIVILEGE -- CLASS A
You may reinvest up to the number of Class A shares you have
redeemed, within 30 days of redemption, at the then-prevailing net asset
value without a sales load, or reinstate your account for the purpose of
exercising the Exchange Privilege. The Reinvestment Privilege may be
exercised only once.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The Class A and Class B shares are subject to a Shareholder Services
Plan and the Class B shares only are subject to a Distribution Plan.
DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor distributing
the Fund's Class B shares at an annual rate of .75 of 1% of the value of the
average daily net assets of Class B.
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 and Class B
shares a fee at the annual rate of .25 of 1% of the value of the average
daily net assets of Class A and Class B. 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.
Under the Shareholder Services Plan, the Distributor may make payments to
Service Agents in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. Each Service Agent is required to
disclose to its clients any compensation payable to it by the Fund pursuant
to the Shareholder Services Plan and any other compensation payable by their
clients in connection with the investment of their assets in Class A or Class
B shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily pays dividends from net investment income and
distributes net realized securities gains, if any, once a year, but it may
make distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the Investment Company Act of 1940. The Fund will not make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose whether
to receive distributions in cash or to reinvest such amounts in additional
Fund shares of the same Class at net asset value without a sales load. All
expenses are accrued daily and deducted before declaration of dividends.
Dividends paid by each Class will be calculated at the same time and in the
same manner and will be of the same amount, except that the expenses
attributable solely to Class A or Class B will be borne exclusively by such
Class. Class B shares will receive lower per share dividends than Class A
shares because of the higher expenses borne by Class B. See "Fee Table."
Dividends derived from net investment income, together with
distributions from any 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
(Page 32)
whether received in cash or reinvested in Fund shares.
Distributions from net realized long-term securities gains of the Fund will
be taxable 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 will not be subject to Federal income tax at a
rate in excess of 28%. Dividends and distributions also 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.
Notice as to the tax status of your dividends and distributions is
mailed to you annually. You also will receive periodic summaries of your
account which will include information as to income dividends and
distributions from securities gains, if any, paid during the year. Depending
upon the composition of the Fund's income, a portion of the dividends from
net investment income may qualify for the dividends received deduction
allowable to certain U.S. corporations.
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 of another fund advised by The Dreyfus Corporation within 91 days of
purchase and such other fund reduces or eliminates its otherwise applicable
sales load charge for the purpose of the exchange. In this case, the amount
of your sales load charge for Class A shares, up to the amount of the
reduction of the sales load charge on the exchange, is not included in the
basis of your 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 on
the exchange.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable 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 such shareholder's Federal income tax
return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund qualified for the
fiscal year ended October 31, 1994 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. Qualification as a regulated
investment company relieves the Fund of any liability for Federal income
taxes to the extent its earnings are distributed in accordance with
applicable provisions of the Code. In addition, the Fund is subject to a non-d
eductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state and local taxes.
(Page 33)
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of shares
will be calculated on the basis of average annual total return.
Advertisements may also include performance calculated on the basis of total
return. These total return figures reflect changes in the price of the shares
and assume that any income dividends and or capital gains distributions made
by the Fund during the measuring period were reinvested in shares of the same
Class. Class A total return figures include the maximum initial sales charge
and Class B total return figures include any applicable CDSC. These figures
also take into account any applicable service and distribution fees. As a
result, at any given time, the performance of Class B should be expected to
be lower than that of Class A. Performance for each Class will be calculated
separately.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the average annual total return of
Class A and Class B for one, five and ten year periods, or for shorter time
periods depending upon the length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the maximum
offering price per share at the beginning of the period. Advertisements may
include the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the application
of the percentage rate of total return. Total return may also be calculated
by using the net asset value per share at the beginning of the period instead
of the maximum offering price per share at the beginning of the period for
Class A shares or without giving effect to any applicable CDSC at the end of
the period for Class B shares. Calculations based on the net asset value per
share do not reflect the deduction of the applicable sales charge which, if
reflected, would reduce the performance quoted.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio 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.
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated July 24, 1985, and
commenced operations on October 1, 1986. The Fund is authorized to issue an
unlimited number of shares of beneficial interest, par value $.001 per share.
The Fund's shares are classified into two classes. Each share has one vote
and shareholders will vote in the aggregate and not by class except as
otherwise required by law or when class voting is permitted by the Board of
Trustees. Holders of Class A and Class B shares, however, will be entitled to
vote on matters submitted to share-
(Page 34)
holders pertaining to the Shareholder
Service Plan and only holders of Class B shares will be entitled to vote on
matters submitted to shareholders pertaining to the Distribution Plan.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Fund or a Trustee. The Trust Agreement provides for indemnification from the
Fund's property for all losses and expenses of any shareholder personally
held liable for the obligations of the Fund. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations, a possibility which management believes is remote. Upon payment
of any liability incurred by the Fund, the shareholder paying such liability
will be entitled to reimbursement from the general assets of the Fund. The
Trustees intend to conduct the operations of the Fund in such a way so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund. As described under "Management of the Fund" in the
Fund's Statement of Additional Information, the Fund ordinarily will not hold
shareholder meetings; however, shareholders under certain circumstances may
have the right to call a meeting of shareholders for the purpose of voting to
remove Trustees.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call
1-718-895-1206; on Long Island, call 794-5452.
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 35)
#
#
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Strategic
Investing
Prospectus
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
037p13030195
DREYFUS STRATEGIC INVESTING
CLASS A AND CLASS B SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Strategic Investing (the "Fund"), dated March 1, 1995, as it
may be revised from time to time. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . B-10
Management Agreement. . . . . . . . . . . . . . . . . . . . . . B-14
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . B-16
Distribution Plan and Shareholder Services Plan . . . . . . . . B-17
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . B-18
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . B-20
Determination of Net Asset Value. . . . . . . . . . . . . . . . B-23
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . B-24
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . B-25
Performance Information . . . . . . . . . . . . . . . . . . . . B-26
Information About the Fund. . . . . . . . . . . . . . . . . . . B-27
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors. . . . . . . . . . . . . . . . . B-27
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
Financial Statements. . . . . . . . . . . . . . . . . . . . . . B-34
Report of Independent Auditors. . . . . . . . . . . . . . . . . B-46
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
Management Policies
- -------------------
The Fund engages in the following practices in furtherance of its
objective.
Leverage Through Borrowing. Each Portfolio may borrow for investment
purposes. The Investment Company Act of 1940 requires each Portfolio to
maintain continuous asset coverage (that is, total assets including
borrowings, less liabilities exclusive of borrowings) of 300% of the
amount borrowed. If the 300% asset coverage should decline as a result of
market fluctuations or other reasons, a Portfolio may be required to sell
some of its portfolio holdings within three days to reduce the debt and
restore the 300% asset coverage, even though it may be disadvantageous
from an investment standpoint to sell securities at that time. Each
Portfolio also may be required to maintain minimum average balances in
connection with such borrowing or to pay a commitment or other fee to
maintain a line of credit; either of these requirements would increase the
cost of borrowings over the stated interest rate. To the extent a
Portfolio enters into a reverse repurchase agreement, Portfolio will
maintain in a segregated custodial account cash or U.S. Government
securities or other high quality liquid debt securities at least equal to
the aggregate amount of its reverse repurchase obligations, plus accrued
interest, in certain cases, in accordance with releases promulgated by the
Securities and Exchange Commission. The Securities and Exchange
Commission views reverse repurchase transactions as collateralized
borrowings by the relevant Portfolio. These agreements, which are treated
as if reestablished each day, are expected to provide the Portfolios with
a flexible borrowing tool.
Short Sales. Until the Portfolio replaces a borrowed security in
connection with a short sale, the Portfolio will: (a) maintain daily a
segregated account, containing cash or U.S. Government Securities, at such
a level that (i) the amount deposited in the account plus the amount
deposited with the broker as collateral will equal the current value of
the security sold short and (ii) the amount deposited in the segregated
account plus the amount deposited with the broker as collateral will not
be less than the market value of the security at the time it was sold
short; or (b) otherwise cover its short position.
Options Transactions. The Fund may engage in options transactions,
such as purchasing or writing covered call or put options. The principal
reason for writing covered call options is to realize, through the receipt
of premiums, a greater return than would be realized on the Fund's
portfolio securities alone. In return for a premium, the writer of a
covered call option forfeits the right to any appreciation in the value of
the underlying security above the strike price for the life of the option
(or until a closing purchase transaction can be effected). Nevertheless,
the call writer retains the risk of a decline in the price of the
underlying security. Similarly, the principal reason for writing covered
put options is to realize income in the form of premiums. The writer of a
covered put option accepts the risk of a decline in the price of the
underlying security. The size of the premiums that the Fund may receive
may be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing
activities.
Options written ordinarily will have expiration dates between one and
nine months from the date written. The exercise price of the options may
be below, equal to or above the market values of the underlying securities
at the times the options are written. In the case of call options, these
exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Fund may write (a) in-the-money
call options when the Manager expects that the price of the underlying
security will remain stable or decline moderately during the option
period, (b) at-the-money call options when the Manager expects that the
price of the underlying security will remain stable or advance moderately
during the option period and (c) out-of-the-money call options when the
Manager expects that the premiums received from writing the call option
plus the appreciation in market price of the underlying security up to the
exercise price will be greater than the appreciation in the price of the
underlying security alone. In these circumstances, if the market price of
the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by
the premium received. Out-of-the-money, at-the-money and in-the-money put
options (the reverse of call options as to the relation of exercise price
to market price) may be utilized in the same market environments that such
call options are used in equivalent transactions.
So long as the Fund's obligation as the writer of an option
continues, the Fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring the Fund to
deliver, in the case of a call, or take delivery of, in the case of a put,
the underlying security against payment of the exercise price. This
obligation terminates when the option expires or the Fund effects a
closing purchase transaction. The Fund can no longer effect a closing
purchase transaction with respect to an option once it has been assigned
an exercise notice.
An option position may be closed out only if a secondary market for
an option of the same series exists on a recognized national securities
exchange or in the over-the-counter market. Because of this fact and
current trading conditions, the Fund expects to purchase only call or put
options issued by the Options Clearing Corporation. The Fund expects to
write options on national securities exchanges and in the over-the-counter
market.
While it may choose to do otherwise, the Fund generally will purchase
or write only those options for which the Manager believes there is an
active secondary market so as to facilitate closing transactions. There
is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary
market may exist. A liquid secondary market in an option may cease to
exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other unforeseen events, at
times have rendered certain clearing facilities inadequate and resulted in
the institution of special procedures, such as trading rotations,
restrictions on certain types of orders or trading halts or suspensions in
one or more options. There can be no assurance that similar events, or
events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be
possible to effect closing transactions in particular options. If as a
covered call option writer the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise or it otherwise covers its position.
Stock Index Options The Fund may purchase and write put and call
options on stock indexes listed on national securities exchanges or traded
in the over-the-counter market as an investment vehicle for the purpose of
realizing its investment objective of capital appreciation or for the
purpose of hedging its portfolio. A stock index fluctuates with changes
in the market values of the stocks included in the index.
Options on stock indexes are similar to options on stock except that
(a) the expiration cycles of stock index options are monthly, while those
of stock options are currently quarterly, and (b) the delivery
requirements are different. Instead of giving the right to take or make
delivery of a stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied
by (ii) a fixed "index multiplier." Receipt of this cash amount will
depend upon the closing level of the stock index upon which the option is
based being greater than, in the case of a call, or less than, in the case
of a put, the exercise price of the option. The amount of cash received
will be equal to such difference between the closing price of the index
and the exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount. The writer may
offset its position in stock index options prior to expiration by entering
into a closing transaction on an exchange or it may let the option expire
unexercised.
Futures Contracts and Options on Futures Contracts. Upon exercise of
an option, the writer of the option delivers to the holder of the option
the futures position and the accumulated balance in the writer's futures
margin account, which represents the amount by which the market price of
the futures contract exceeds, in the case of a call, or is less than, in
the case of a put, the exercise price of the option on the futures
contract. The potential loss related to the purchase of options on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time
of sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change
daily and that change would be reflected in the net asset value of the
Fund.
Interest Rate Futures Contracts and Options on Interest Rate Futures
Contracts. Upon exercise of an option, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's futures
margin account, which represents the amount by which the market price of
the futures contract exceeds, in the case of a call, or is less than, in
the case of a put, the exercise price of the option on the futures
contract. The potential loss related to the purchase of an option on
interest rate futures contracts is limited to the premium paid for the
option (plus transaction costs). Because the value of the option is fixed
at the point of sale, there are no daily cash payments to reflect changes
in the value of the underlying contract; however, the value of the option
does change daily and that change would be reflected in the net asset
value of the Fund.
Foreign Currency Transactions. The Fund may not hedge with respect
to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its
portfolio denominated or quoted in or currently convertible into that
particular currency. If the Fund enters into a hedging transaction, the
Fund will deposit with its custodian cash or readily marketable securities
in a segregated account of the Fund in an amount at least equal to the
value of the Fund's total assets committed to the consummation of the
forward contract. If the value of the securities placed in the segregated
account declines, additional cash or securities will be placed in the
account so that the value of the account will equal the amount of the
Fund's commitment with respect to the contract. Hedging transactions may
be made from any foreign currency into U.S. dollars or into other
appropriate currencies.
At or before the maturity of a forward contract, the Fund either may
sell a portfolio security and make delivery of the currency, or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency which it is
obligated to deliver. If the Fund retains the portfolio security and
engages in an offsetting transaction, the Fund, at the time of execution
of the offsetting transaction, will incur a gain or a loss to the extent
that movement has occurred in forward contract prices. Should forward
prices decline during the period between the Fund's entering into a
forward contract for the sale of a currency and the date it enters into an
offsetting contract for the purchase of the currency, the Fund will
realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
The cost to the Fund of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because transactions in
currency exchange usually are conducted on a principal basis, no fees or
commissions are involved. The use of forward currency exchange contracts
does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved
in the future. If a devaluation generally is anticipated, the Fund may
not be able to contract to sell the currency at a price above the
devaluation level it anticipates. The requirements for qualification as a
regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), may cause the Fund to restrict the degree to which
it engages in currency transactions. See "Dividends, Distributions and
Taxes."
Lending Portfolio Securities. To a limited extent, the Fund may lend
its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value
of the securities loaned. By lending its portfolio securities, the Fund
can increase its income through the investment of the cash collateral.
For purposes of this policy, the Fund considers collateral consisting of
U.S. Government securities or irrevocable letters of credit issued by
banks whose securities meet the standards for investment by the Fund to be
the equivalent of cash. From time to time, the Fund may return to the
borrower or a third party which is unaffiliated with the Fund, and which
is acting as a "placing broker," a part of the interest earned from the
investment of collateral received for securities loaned. Such loans may
not exceed 33-1/3% of the value of the Fund's total assets.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value
of the securities rises above the level of such collateral; (3) the Fund
must be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or
other distributions payable on the loaned securities, and any increase in
market value; (5) the Fund may pay only reasonable custodian fees in
connection with the loan; and (6) while voting rights on the loaned
securities may pass to the borrower, the Fund's Board of Trustees must
terminate the loan and regain the right to vote the securities if a
material event adversely affecting the investment occurs. These
conditions may be subject to future modification.
Repurchase Agreements. The Fund's custodian or sub-custodian will
have custody of, and will hold in a segregated account, securities
acquired by the Fund under a repurchase agreement. Repurchase agreements
are considered by the staff of the Securities and Exchange Commission to
be loans by the Fund. In an attempt to reduce the risk of incurring a
loss on a repurchase agreement, the Fund will enter into repurchase
agreements only with domestic banks with total assets in excess of one
billion dollars, or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities of the type
in which the Fund may invest, and will require that additional securities
be deposited with it if the value of the securities purchased should
decrease below the resale price. The Advisers will monitor on an ongoing
basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. The Fund will consider on an ongoing basis
the creditworthiness of the institutions with which it enters into
repurchase agreements.
Illiquid Securities
- -------------------
If a substantial market of qualified institutional buyers develops
pursuant to Rule 144A under the Securities Act of 1933, as amended, for
certain restricted securities held by the Fund, the Fund intends to treat
such securities as liquid securities in accordance with procedures
approved by the Fund's Board of Directors. Because it is not possible to
predict with assurance how the market for restricted securities pursuant
to Rule 144A will develop, the Fund's Board of Directors has directed the
addresses to monitor carefully the Fund's investments in such securities
with particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that for a
period of time, qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, the Fund's investing in such securities
may have the effect of increasing the level of illiquidity in the Fund's
portfolio during such period.
Portfolio Securities. The Fund invests principally in common stocks
of domestic issuers, as well as securities of foreign companies and
foreign governments. Investments also may be made in convertible
securities, preferred stocks and debt securities without limitation when
management believes that such securities offer opportunities for capital
growth. Investment considerations with respect to lower rated debt
securities are set forth below.
Risk Factors
- -------------
Lower Rated Securities. The Fund is permitted to invest in
securities rated below Baa by Moody's Investors Service, Inc. ("Moody's")
and below BBB by Standard & Poor's Corporation ("S&P") and as low as Caa
by Moody's or CCC by S&P. See "Description of the Fund--Risk
Factors--Lower Rated Securities" in the Prospectus for a discussion of
certain risks and "Appendix" for a general description of Moody's and S&P
ratings. Although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value
risk of these securities. The Fund will rely on the Manager's judgment,
analysis and experience in evaluating the creditworthiness of an issuer.
In this evaluation, the Manager will take into consideration, among other
things, the issuer's financial resources, its sensitivity to economic
conditions and trends, its operating history, the quality of the issuer's
management and regulatory matters. It also is possible that a rating
agency might not timely change the rating on a particular issue to reflect
subsequent events. Once the rating of a security in the Fund's portfolio
has been changed, the Manager will consider all circumstances deemed
relevant in determining whether the Fund should continue to hold the
security.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are
higher rated securities and will fluctuate over time. These securities
are considered by S&P and Moody's, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation and generally will involve
more credit risk than securities in the higher rating categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities
of such issuers generally is greater than is the case with the higher
rated securities. For example, during an economic downturn or a sustained
period of rising interest rates, highly leveraged issuers of these
securities may experience financial stress and may not have sufficient
revenues to meet their interest payment obligations. The issuer's ability
to service its debt obligations also may be affected adversely by specific
corporate developments or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional
financing. The risk of loss because of default by the issuer is
significantly greater for the holders of these securities because such
securities generally are unsecured and often are subordinated to other
creditors of the issuer.
Because there is no established retail secondary market for many of
these securities, the Manager anticipates that such securities could be
sold only to a limited number of dealers or institutional investors. To
the extent a secondary trading market for these bonds does exist, it
generally is not as liquid as the secondary market for higher rated
securities. The lack of a liquid secondary market may have an adverse
impact on market price and yield and the Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the Fund's portfolio
and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease
the values and liquidity of these securities. In such cases, judgment may
play a greater role in valuation because less reliable, objective data may
be available.
The Fund may acquire these securities during an initial offering.
Such securities may involve special risks because they are new issues.
The Fund has no arrangement with the Distributor or any other persons
concerning the acquisition of such securities, and the Manager will review
carefully the credit and other characteristics pertinent to such new
issues.
Zero Coupon Securities. Lower rated zero coupon securities and
pay-in-kind bonds in which the Fund may invest up to 5% of its net assets,
involve special considerations. Zero coupon securities are debt
obligations which do not entitle the holder to any periodic payments of
interest prior to maturity or a specified cash payment date when the
securities begin paying current interest (the "cash payment date") and
therefore are issued and traded at a discount from their face amount or
par value. The discount varies depending on the time remaining until
maturity or cash payment date, prevailing interest rates, liquidity of the
security and perceived credit quality of the issuer. The discount, in the
absence of financial difficulties of the issuer, decreases as the final
maturity or cash payment date of the security approaches.
The market prices of zero coupon securities generally are more
volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a
greater degree than do non-zero coupon securities having similar
maturities and credit quality. The credit risk factors pertaining to
lower rated securities also apply to lower rated zero coupon securities
and pay-in-kind bonds. Such zero coupon securities, pay-in-kind or
delayed interest bonds carry an additional risk in that, unlike bonds
which pay interest throughout the period to maturity, the Fund will
realize no cash until the cash payment date unless a portion of such
securities are sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. See "Dividends, Distributions and
Taxes."
Investment Restrictions
- -----------------------
The Fund has adopted investment restrictions numbered 1 through 13 as
fundamental policies. These restrictions cannot be changed without
approval by the holders of a majority (as defined in the Investment
Company Act of 1940 (the "Act")) of the Fund's outstanding voting shares.
Investment restriction number 14 is not a fundamental policy and may be
changed by a vote of a majority of the Trustees at any time. The Fund may
not:
1. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.
2. Purchase securities of closed-end investment companies except
(a) in the open market where no commission except the ordinary broker's
commission is paid, which purchases are limited to a maximum of (i) 3% of
the total voting stock of any one closed-end investment company, (ii) 5%
of its net assets with respect to any one closed-end investment company
and (iii) 10% of its net assets in the aggregate, or (b) those received as
part of a merger or consolidation. The Fund may not purchase the
securities of open-end investment companies other than itself.
3. Purchase or retain the securities of any issuer if the officers,
Trustees or Directors of the Fund or the Manager individually own
beneficially more than 1/2 of 1% of the securities of such issuer or
together own beneficially more than 5% of the securities of such issuer.
4. Invest in commodities, except that the Fund may purchase and
sell futures contracts, including those relating to indexes, and options
on futures contracts or indexes.
5. Purchase, hold or deal in real estate, or oil and gas interests,
but the Fund may purchase and sell securities that are secured by real
estate and may purchase and sell securities issued by companies that
invest or deal in real estate.
6. Borrow money, except to the extent permitted under the Act. For
purposes of this investment restriction, the entry into options, forward
contracts, futures contracts, including those relating to indexes, and
options on futures contracts or indexes shall not constitute borrowing.
7. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with writing covered put and
call options and the purchase of securities on a when-issued or delayed-
delivery basis and collateral and initial or variation margin arrangements
with respect to options, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.
8. Make loans to others, except through the purchase of debt
obligations. However, the Fund may lend its portfolio securities in an
amount not to exceed 33-1/3% of the value of its total assets. Any loans of
portfolio securities will be made according to guidelines established by
the Securities and Exchange Commission and the Fund's Trustees.
9. Act as an underwriter of securities of other issuers, except to
the extent the Fund may be deemed an underwriter under the Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.
10. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
11. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and Statement of Additional
Information.
12. Invest more than 25% of its assets in investments in any
particular industry or industries (including banking), provided that, when
the Fund has adopted a temporary defensive posture, there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
13. Purchase warrants in excess of 2% of net assets. For purposes
of this restriction, such warrants shall be valued at the lower of cost or
market, except that warrants acquired by the Fund in units or attached to
securities shall not be included within this 2% restriction.
14. Enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which are
illiquid, if, in the aggregate, more than 15% of the value of the Fund's
net assets would be so invested.
If a percentage restriction is adhered to at the time an investment
is made, a later increase in percentage resulting from a change in values
or assets will not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below. Each Trustee who is deemed to be an "interested person"
of the Fund, as defined in the Act, is indicated by an asterisk.
Trustees of the Fund
- --------------------
*DAVID W. BURKE, Trustee. Consultant to the Manager since August 1994.
From October 1990 to August 1994, Vice President and Chief
Administrative Officer of the Manager. From 1977 to 1990, Mr. Burke
was involved in the management of national television news, as Vice
President and Executive Vice President of ABC News, and subsequently
as President of CBS News.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, he was President and a director
and, until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service'
Corporation, a wholly-owned subisidiary of the Manager and, until
August 1994, the Fund's distributor. From August 1994 to December
1994, he was a director of Mellon Bank Corporation. Mr. DiMartino is
a director and former Treasurer of The Muscular Dystrophy
Association; a trustee of Bucknell University; and a director of the
Noel Group, Inc. His Address is 200 Park Avenue, New York, New York
10166.
DIANE DUNST, Trustee. Since January 1992, President of Diane Dunst
Promotion, Inc., a full service promotion agency. From January 1989
to January 1992, Director of Promotion Services, Lear's Magazine.
From 1985 to January 1989, she was Sales Promotion Manager of ELLE
Magazine. Her address is 120 East 87th Street, New York, New York
10128.
*DAVID P. FELDMAN, Trustee. Chairman and Chief Executive Officer at AT&T
Investment Management Corporation. He is also a trustee of Corporate
Property Investors, a real estate investment company. His address is
One Oak Way, Berkeley Heights, New Jersey 07922.
ROSALIND GERSTEN JACOBS, Trustee. Director of Merchandise and Marketing
for Corporate Property Investors, a real estate investment company.
From 1974 to 1976, she was owner and manager of a merchandise and
marketing consulting firm. Prior to 1974, she was Vice President of
Macy's, New York. Her address is c/o Corporate Property Investors,
305 East 47th Street, New York, New York 10017.
JAY I. MELTZER, Trustee. Physician engaged in private practice
specializing in internal medicine. He is also a member of the
Advisory Board of the Section of Society and Medicine, College of
Physicians and Surgeons, Columbia University and Clinical Professor
of Medicine, Department of Medicine, Columbia University College of
Physicians and Surgeons; and Adjunct Clinical Professor of Medicine
at Cornell College of Medicine. His address is 903 Park Avenue, New
York, New York 10021.
DANIEL ROSE, Trustee. President and Chief Executive Officer of Rose
Associates, Inc., a New York based real estate development and
management firm. He is also Chairman of the Housing Committee of The
Real Estate Board of New York, Inc., and a Trustee of Corporate
Property Investors, a real estate investment company. His address is
c/o Rose Associates, Inc., 380 Madison Avenue, New York, New York
10017.
WARREN B. RUDMAN, Trustee. Since January 1993, Partner in the law firm
Paul, Weiss, Rifkind, Wharton & Garrison. From January 1981 to
January 1993, Mr. Rudman served as a United States Senator from the
state of New Hampshire. Also, since January 1993, Mr. Rudman has
served as Vice Chairman of the Federal Reserve Bank of Boston and as
a director of Chubb Corporation. Since 1988, Mr. Rudman has served
as a trustee of Boston College and since 1986 as a member of the
Senior Advisory Board of the Institute of Politics of the Kennedy
School of Government at Harvard University. His address is c/o Paul,
Weiss, Rifkind, Wharton & Garrison 1615 L. Street, N.W., Washington,
D.C. 20036.
SANDER VANOCUR, Trustee. Since January 1992, President of Old Owl
Communications, a full-service communications firm. Since November
1989, Mr. Vanocur has served as a Director of the Damon Runyon-Walter
Winchell Cancer Research Fund. From June 1986 to December 1991, he
was a Senior Correspondent of ABC News and, from October 1986 to
December 31, 1991, he was Anchor of the ABC News program "Business
World," a weekly business program on the ABC television network. His
address is 2928 P Street, N.W., Washington, D.C. 20007.
The Trustees are also trustees of Dreyfus BASIC U.S. Government Money
Market Fund, Dreyfus California Intermediate Municipal Bond Fund, Dreyfus
Connecticut Intermediate Municipal Bond Fund, Dreyfus Massachusetts
Intermediate Municipal Bond Fund and Dreyfus Strategic Income, and
directors of Dreyfus BASIC Money Market Fund, Inc., Dreyfus Strategic
Governments Income, Inc. and FN Network Tax Free Money Market Fund, Inc.
Messrs. Rose and Vanocur are also directors of Dreyfus New Jersey
Municipal Bond Fund, Inc., managing general partners of Dreyfus Strategic
Growth, L.P. and Dreyfus Strategic World Investing, L.P., and trustees of
Dreyfus Florida Intermediate Municipal Bond Fund, Dreyfus Index Fund,
Dreyfus New York Insured Tax Exempt Bond Fund and Dreyfus Investors GNMA
Fund, Dreyfus 100% U.S. Treasury Intermediate Term Fund, Dreyfus 100% U.S.
Treasury Long Term Fund, Dreyfus 100% U.S. Treasury Money Market Fund,
Dreyfus 100% U.S. Treasury Short Term Fund. Mr. Rudman is also a trustee
of Dreyfus Cash Management, Dreyfus Government Cash Management, Dreyfus
Municipal Cash Management, Dreyfus New York Municipal Cash Management,
Dreyfus Tax Exempt Cash Management, Dreyfus Treasury Cash Management and
Dreyfus Treasury Prime Cash Management, and a director or Dreyfus Cash
Management Plus, Inc. Mrs. Jacobs is also a director of Dreyfus A Bonds
Plus, Inc., Dreyfus Balanced Fund, Inc., Dreyfus Capital Growth Fund (A
Premier Fund), Dreyfus Global Bond Fund, Inc., Dreyfus Growth and Income
Fund, Inc., Dreyfus Growth Opportunity Fund Inc., Dreyfus International
Equity Fund, Inc., Dreyfus International Recovery Fund, Inc. and Dreyfus
Money Market Instruments, Inc., and a trustee of Dreyfus Institutional
Money Market Fund and Dreyfus Variable Investment Fund.
There ordinarily will be no meetings of shareholders for the purpose
of electing Trustees unless and until such time as less than a majority of
the Trustees holding office have been elected by shareholders, at which
time the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Under the Act, shareholders of record of not less
than two-thirds of the outstanding shares of the Fund may remove a Trustee
through a declaration in writing or by vote cast in person or by proxy at
a meeting called for that purpose. Under the Fund's Agreement and
Declaration of Trust, the Trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
such Trustee when requested in writing to do so by the shareholders of
record of not less than 10% of the Fund's outstanding shares.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Service Plan" remain in effect, the
Trustees of the Fund who are not "interested persons" of the Fund, as
defined in the Act, will be selected and nominated by the Trustees who are
not "interested persons" of the Fund.
The Fund does not pay any remuneration to its officers and Trustees
other than fees and expenses to Trustees who are not officers, directors,
or employees or holders of 5% or more of the outstanding voting securities
of the Manager, which totalled $27,708 for the fiscal year ended October
31, 1994 for such Trustees as a group.
Officers of the Fund
- --------------------
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991
to July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., a wholly-owned subsidiary of The Boston Company,
Inc. Prior to December 1991, she served as Vice President and
Controller, and later as Senior Vice President, of The Boston Company
Advisors, Inc.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President
and General Counsel of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
February 1992 to July 1994, he served as Counsel for The Boston
Company Advisors, Inc. From August 1990 to February 1992, he was
employed as an Associate at Ropes & Gray, and prior to August 1990,
he was employed as an Associate at Sidley & Austin.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to
August 1994, he was Manager of the High Performance Fabric Division
of Springs Industries Inc.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September
1992 to August 1994, he was an attorney with the Board of Governors
of the Federal Reserve System.
JOSEPH F. TOWER,III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in
the Corporate Finance and Treasury areas.
JOHN J. PYBURN, Assistant Treasurer, Vice President of the Distributor and
an officer of other investment companies advised or administered by
the Manager. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of the Administrator.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts and, prior thereto, was
employed as a Research Assistant for the Bureau of National Affairs.
PAUL FURCINITO, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From January 1992 to July 1994, he was
a Senior Legal Product Manager for The Boston Company Advisors, Inc.,
and, from January 1990 to January 1992, he was a mutual fund
accountant for The Boston Company Advisors, Inc.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Trustees and officers of the Fund, as a group, owned less than 1% of
the Fund's shares of beneficial interest outstanding on December 22, 1994.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994, as amended, with the
Fund which is subject to annual approval by (i) the Fund's Board of
Trustees or (ii) vote of a majority (as defined in the Act) of the
outstanding voting securities of the Fund, provided that in either event
the continuance also is approved by a majority of the Trustees who are not
"interested persons" (as defined in the Act) of the Fund or the Manager,
by vote cast in person at a meeting called for the purpose of voting such
approval. The Agreement was last approved by shareholders at a meeting
held on August 3, 1994, and was last approved by the Board of Trustees,
including a majority of the Trustees who are not "interested persons" of
any party to the Agreement, at a meeting held on May 27, 1994. The
Agreement is terminable without penalty, on 60 days' notice, by the Fund's
Board of Trustees or by vote of the holders of a majority of the Fund's
shares or, upon not less than 90 days' notice, by the Manager. The
Agreement will terminate automatically in the event of its assignment (as
defined in the Act).
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; Julian M.
Smerling, Vice Chairman of the Board of Directors; W. Keith Smith, Chief
Operating Officer and a Director; Paul H. Snyder, Vice President and Chief
Financial Officer; Daniel C. Maclean, Vice President and General Counsel;
Elie M. Genadry, Vice President-Institutional Sales; Henry D. Gottmann,
Vice President-Retail Sales and Service; Jeffrey N. Nachman, Vice
President-Mutual Fund Accounting; Diane M. Coffey, Vice President-
Corporate Communications; Jay R. DeMartine, Vice President-Retail
Marketing; Barbara E. Casey, Vice President-Retirement Services; Lawrence
S. Kash, Vice Chairman-Distribution; Philip L. Toia, Vice Chairman-
Operations and Administration; Katherine C. Wickham, Vice President-Human
Resources; Mark N. Jacobs, Vice President-Fund Legal and Compliance, and
Secretary; Maurice Bendrihem, Controller; and Mandell L. Berman, Frank V.
Cahouet, Alvin E. Friedman, Lawrence M. Greene and David B. Truman,
directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the
Fund's Board of Trustees. The Manager is responsible for investment
decisions, and provides the Fund with portfolio managers who are
authorized by the Board of Trustees to execute purchases and sales of
securities. The Fund's portfolio managers are Richard B. Hoey, Howard
Stein and Wolodymyr Wronskyj. The Manager also maintains a research
department with a professional staff of portfolio managers and securities
analysts who provide research services for the Fund as well as for other
funds advised by the Manager. All purchases and sales are reported for
the Trustees' review at the meeting subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: taxes, interest, loan commitment fees,
dividends and interest paid on securities sold short, brokerage fees and
commissions, if any, fees of certain Board members who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Manager, Securities and Exchange Commission fees, state
Blue Sky qualification fees, advisory fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
maintaining the Fund's existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of shareholders' reports and
meetings and any extraordinary expenses. Class A and Class B shares are
subject to an annual service fee for ongoing personal services relating to
shareholder accounts and services related to the maintenance of
shareholder accounts. In addition, Class B shares are subject to an
annual distribution fee for advertising, marketing and distributing Class
B shares pursuant to distribution plan adopted in accordance with Rule
12b-1 under the Act. See "Distribution Plan and Shareholder Service
Plan."
As compensation for its services, the Fund has agreed to pay the
Manager a monthly management fee at the annual rate of .75 of 1% of the
value of the Fund's average daily net assets. The management fees for the
fiscal years ended October 31, 1992, 1993 and 1994 amounted to $1,547,781,
$2,022,123 and $2,259,762 respectively.
The Manager pays the salaries of all officers and employees employed
by both it and the Fund, maintains office facilities, and furnishes
statistical and research data, clerical help, accounting, data processing,
bookkeeping and internal auditing and certain other required services.
The Manager also may make such advertising and promotional expenditures,
using its own resources, as it from time to time deems appropriate.
The Manager has agreed that if, in any fiscal year, the aggregate
expenses of the Fund, exclusive of taxes, brokerage, interest on
borrowings and (with the prior written consent of the necessary state
securities commissions) extraordinary expenses, but including the
management fee, exceed the expense limitation of any state having
jurisdiction over the Fund, the Fund may deduct from the payment to be
made to the Manager under the Agreement, or the Manager will bear, such
excess expense to the extent required by state law. Such deduction or
payment, if any, will be estimated daily, and reconciled and effected or
paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor
also acts as distributor for the other funds in the Dreyfus Family of
Funds and for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made between the hours of 8:00 A.M. and 4:00 P.M., New York time,
on any business day that The Shareholder Services Group, Inc., the Fund's
transfer and dividend disbursing agent (the "Transfer Agent"), and the New
York Stock Exchange are open. Such purchases will be credited to the
investor's Fund account on the next bank business day. To qualify to use
Dreyfus TeleTransfer, payments for purchase of Fund shares must be drawn
on, and redemption proceeds paid to, the same bank and account as is
designated on the Account Application or Shareholder Services Form on
file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and
signature-guaranteed. See also "Redemption of Fund Shares--Dreyfus
TeleTransfer Privilege."
Sales Loads -- Class A. The schedule of sales loads applies to
purchases of Class A shares made by any "purchaser," which term includes
an individual and/or spouse purchasing securities for his, her or their
own account or for the account of any minor children, or a trustee or
other fiduciary purchasing securities for a single trust estate or a
single fiduciary account trust estate or a single fiduciary account
(including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Code)
although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k), and 457 of the
Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single
dealer, or by other means which result in economy of sales effort or
expense.
Offering Prices
- --------------
Based upon the Fund's net asset value at the close of business on October
31, 1993 the maximum offering price of the Fund's shares would have been
as follows:
Class A shares:
NET ASSET VALUE per share. . . . . . . . . . . . . . . . . . . . $19.83
Sales load for individual sales of shares aggregating less
than $50,000 - 4.5 percent of offering price
(approximately 4.7 percent of net asset value per share) . . . .93
Offering price to public . . . . . . . . . . . . . . . . . . . . $20.76
Class B shares:
NET ASSET VALUE, redemption price and offering
price to public* . . . . . . . . . . . . . . . . . . . . . . . $19.58
___________________
* Class B shares are subject to a contingent deferred sales charge on
certain redemptions. She "How to Redeem Fund Shares" in the Fund's
Prospectus.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan and Shareholder Services Plan."
The Class A and Class B shares are subject to a Shareholder Services
Plan and the Class B shares only are subject to a Distribution Plan.
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the Securities
and Exchange Commission under the Act, provides, among other things, that an
investment company may bear expenses of distributing its shares only pursuant
to a plan adopted in accordance with the Rule. The Fund's Board of Trustees
has adopted such a plan (the "Distribution Plan") with respect to the Class B
shares, pursuant to which the Fund pays the Distributor for advertising,
marketing and distributing Class B shares. Under the Distribution Plan, the
Distributor may make payments to certain financial institutions, securities
dealers, and other financial industry professionals (collectively, "Service
Agents") in respect of these services. The Fund's Board of Trustees believes
that there is a reasonable likelihood that the Distribution Plan will benefit
the Fund and holders of its Class B shares. In some states, certain
financial institutions effecting transactions in Fund shares may be required
to register as dealers pursuant to state law.
A quarterly report of the amounts expended under the Distribution
Plan, and the purposes for which such expenditures were incurred, must be
made to the Trustees for their review. In addition, the Distribution Plan
provides that it may not be amended to increase materially the costs which
holders of Class B shares may bear for distribution pursuant to the
Distribution Plan without such shareholder approval and that other
material amendments of the Distribution Plan must be approved by the Board
of Trustees, and by the Trustees who are not "interested persons" (as
defined in the Act) of the Fund and have no direct or indirect financial
interest in the operation of the Distribution Plan or in any agreements
entered into in connection with the Distribution Plan, by vote cast in
person at a meeting called for the purpose of considering such amendments.
The Distribution Plan is subject to annual approval by such vote cast in
person at a meeting called for the purpose of voting on the Distribution
Plan. The Distribution Plan was last approved by the Board of Trustees at
a meeting held on May 27, 1994. The Distribution Plan may be terminated
at any time by vote of a majority of the Trustees who are not "interested
persons" and have no direct or indirect financial interest in the
operation of the Distribution Plan or in any related agreements entered
into in connection with the Distribution Plan or by vote of the holders of
a majority of the Class B shares.
For the period from August 24, 1994 through October 31, 1994,
$58,353 was charged to the Fund, with respect to Class B shares, under the
Distribution Plan.
Shareholder Services Plan. The Fund has adopted a Shareholder
Services Plan, pursuant to which the Fund pays the Distributor for the
provision of certain services to the holders of Class A and Class B
shares.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Trustees for their review. In addition, the
Shareholder Services Plan provides that it may not be amended without
approval of the Board of Trustees, and by the Trustees who are not
"interested persons" (as defined in the Act) of the Fund and have no
direct or indirect financial interest in the operation of the Shareholder
Services Plan or in any agreements, entered into in connection with the
Shareholder Services Plan, by vote cast in person at a meeting called for
the purpose of considering such amendments. The Shareholder Services Plan
is subject to annual approval by such vote cast in person at a meeting
called for the purpose of voting on the Shareholder Services Plan. The
Shareholder Services Plan was so approved on May 27, 1994. The
Shareholder Services Plan is terminable at any time by vote of a majority
of the Trustees who are not "interested persons" and who have no direct or
indirect financial interest in the operation of the Shareholder Services
Plan or in any agreements entered into in connection with the Shareholder
Services Plan.
For the period from August 24, 1994 through October 31, 1994,
$118,010 was charged to the Fund, with respect to Class A, and $19,451 was
charged to the Fund, with respect to Class B shares, under the Shareholder
Services Plan.
Prior Distribution Plan and Shareholder Services Plan. As of August
24, 1994, the Fund terminated its then existing Class B Distribution Plan,
which provided for payments to be made to Dreyfus Service Corporation for
advertising, marketing and distributing Fund shares at an annual rate of
.75%. For the period from November 1, 1993 through August 23, 1994, the
total amount charged to and paid by the Fund under such plan was $221,693.
As of August 24, 1994, the Fund also terminated its then existing
Shareholder Services Plan, which provided for payments to be made to
Dreyfus Service Corporation for expenses related to providing for
shareholder services. For the period from November 1, 1993 through August
23, 1994, $541,895 was charged to the Fund with respect to Class A, and
$73,898 was charged to the Fund, with respect to Class B, under such plan.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Share Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each owner of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other
suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to signature-
guarantees, please call one of the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system. Redemption proceeds
will be on deposit in the investor's account at an ACH member bank
ordinarily two business days after receipt of the redemption request.
See "Purchase of Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of
the Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Board of Trustees reserves the right to make payments in whole
or part in securities or other assets of the Fund in case of an emergency
or any time a cash distribution would impair the liquidity of the Fund to
the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would be incurred.
In connection with a redemption request where the Fund delivers in-kind
securities instead of cash on settlement date to an Texas investor, the
in-kind securities delivered will be readily marketable securities to the
extent available.
Suspension of Redemption. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities
and Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Fund Exchanges. Class A and Class B shares of the Fund may be
exchanged for shares of the respective Class of certain other funds
advised or administered by the Manager. Shares of the same Class of such
other funds purchased by exchange will be purchased on the basis of
relative net asset value per share as follows:
A. Class A shares of funds purchased without a sales load may be
exchanged for Class A shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
B. Class A shares of funds purchased with or without a sales load
may be exchanged without a sales load for Class A shares of
other funds sold without a sales load.
C. Class A shares of funds purchased with a sales load, Class A
shares of funds acquired by a previous exchange from Class A
shares purchased with a sales load, and additional Class A
shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein
as "Purchased Shares") may be exchanged for Class A shares of
other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at
the time the Purchased Shares were acquired), without giving
effect to any reduced loads, the difference will be deducted.
D. Class B shares of any fund may be exchanged for Class B shares
of other funds without a sales load. Class B shares of any fund
exchanged for Class shares of another fund will be subject to
the higher applicable contingent deferred sales charge ("CDSC")
of the two funds and, for purposes of calculating CDSC rates and
conversion periods, will be deemed to have been held since the
date the Class B shares being exchanged were initially
purchased.
To accomplish an exchange under item C above, shareholders must
notify the Transfer Agent of their prior ownership of such Class A shares
and their account number.
To request an exchange, an investor or the investor's Service Agent
acting on his behalf must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund Shareholders automatically, unless the
investor checks the relevant "NO" box on the Account Application,
indicated that the investor specifically refuses this privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer
Agent to act on telephonic or written exchange instructions from any
person representing himself or herself to be the investor or a
representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for
telephone exchange.
To establish a Personal Retirement Plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for shares of the same class of the fund into which
the exchange is being made. For Dreyfus-sponsored Keogh Plans, IRAs and
IRAs set up under a Simplified Employee Pension Plan ("SEP-IRAs") with
only one participant, the minimum initial investment is $750. To exchange
shares held in Corporate Plans, 403(b)(7) Plans and SEP-IRAs with more
than one participant, the minimum initial investment is $100 if the plan
has at least $2,500 invested among shares of the same Class of the funds
in the Dreyfus Family of Funds. To exchange shares held in Personal
Retirement Plans, the shares exchanged must have a current value of at
least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for Class A or Class B shares
of the Fund, shares of the same Class of another fund in the Dreyfus
Family of Funds. This Privilege is available only for existing accounts.
Shares will be exchanged on the basis of relative net asset value as
described above under "Exchange Privilege." Enrollment in or modification
or cancellation of this Privilege is effective three business days
following such notification by the investor. An investor will be notified
if his account falls below the amount designated under this Privilege. In
this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRA and other retirement
plans are eligible for this Privilege. Exchanges of IRA shares may be
made between IRA accounts and from regular accounts to IRA accounts, but
not from IRA accounts to regular accounts. With respect to all other
retirement accounts, exchanges may be made among those accounts.
The Exchange Privilege and Dreyfus Auto-Exchange Privilege are
available to shareholders resident in any state in which shares of the
fund being acquired may legally be sold. Shares may be exchanged only
between accounts having identical names and other identifying
designations.
Shareholder Services Forms and prospectuses of the other funds may
be obtained from the Distributor, 144 Glenn Curtiss Boulevard, Uniondale,
New York 11556-0144. The Fund reserves the right to reject any exchange
request in whole or in part. The Exchange Privilege or Dreyfus Auto-
Exchange Privilege may be modified or terminated at any time upon notice
to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis. Withdrawal payments are the proceeds from sales of Fund shares,
not the yield on the shares. If withdrawal payments exceed reinvested
dividends and distributions, the investor's shares will be reduced and
eventually may be depleted. An Automatic Withdrawal Plan may be
established by completing the appropriate application available from the
Distributor. There is a service charge of $.50 for each withdrawal check.
Automatic Withdrawal may be terminated at any time by the investor, the
Fund or the Transfer Agent. Shares for which certificates have been
issued may not be redeemed through the Automatic Withdrawal Plan. Class B
shares withdrawn pursuant to the Automatic Withdrawal Plan will be subject
to any applicable CDSC.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gains
distributions, if any, from the Fund in shares of the same Class of
another fund in the Dreyfus Family of Funds of which the investor is a
shareholder. Shares of the same Class of other funds purchased pursuant
to this Privilege will be purchased on the basis of relative net asset
value per share as follows:
A. Dividends and distributions paid with respect to Class A shares
by a fund may be invested without imposition of a sales load in
Class A shares of other funds that are offered without a sales
load.
B. Dividends and distributions paid with respect to Class A shares
by a fund which does not charge a sales load may be invested in
Class A shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Dividends and distributions paid with respect to Class A shares
by a fund which charges a sales load may be invested in Class A
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales
load charged by the fund from which dividends or distributions
are being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and distributions paid with respect to Class B shares
by a fund may be invested without imposition of a sales load in
Class B shares of other funds and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
Corporate Pension/Profit-Sharing and Personal Retirement Plans. The
Fund makes available to corporations a variety of prototype pension and
profit-sharing plans, including a 401(k) Salary Reduction Plan. In
addition, the Fund makes available Keogh Plans, IRAs, including SEP-IRAs
and IRA "Rollover Accounts," and 403(b)(7) Plans. Plan support services
are also available. For details contact Dreyfus Group Retirement Plans, a
division of the Distributor, by calling toll free 1-800-358-5566.
Investors who wish to purchase Fund shares in conjunction with a
Keogh Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request
from the Distributor forms for adoption of such plans.
The entity which acts as custodian may charge a fee for Keogh Plans,
403(b)(7) Plans or IRAs, payment of which could require the liquidation of
shares. All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by
direct remittance to the entity which acts as custodian. Purchases for
these plans may not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans, and SEP-IRAs, with more than one participant, is
$2,500, with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs, and
403(b)(7) Plans with only one participant is normally $750, with no
minimum on subsequent purchases. Individuals who open an IRA also may
open a non-working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details as to
eligibility, service fees and tax implications, and should consult a tax
adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
Valuation of Portfolio Securities. Portfolio securities, including
covered call options written by the Fund, are valued at the last sale
price on the securities exchange or national securities market on which
such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were
no transactions, are valued at the average of the most recent bid and
asked prices, except in the case of open short positions where the asked
price is used for valuation purposes. Bid price is used when no asked
price is available. Market quotations for foreign securities in foreign
currencies are translated into U.S. dollars at the prevailing rates of
exchange. Any securities or other assets for which recent market
quotations are not readily available are valued at fair value as
determined in good faith by the Board of Trustees. Expenses and fees,
including the management fee and fees pursuant to the Shareholder Service
Plan, with respect to the Class A and Class B shares, and fees pursuant to
the Distribution Plan, with respect to the Class B shares only, are
accrued daily and taken into account for the purpose of determining the
net asset value of the relevant Class of shares. Because of the
difference in operating expenses incurred by each Class, the per share net
asset value of each Class will differ.
New York Stock Exchange Closings. The holidays (as observed) on
which the New York Stock Exchange is closed currently are: Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Management believes that the Fund qualified as a "regulated
investment company" under the Code for fiscal year ended October 31, 1994
and the Fund intends to continue to so qualify if such qualification is in
the best interests of its shareholders. As a regulated investment
company, the Fund will pay no Federal income tax on net investment income
and net realized capital gains to the extent that such income and gains
are distributed to shareholders in accordance with the applicable
provisions of the Code. To qualify as a regulated investment company, the
Fund must distribute at least 90% of its net income (consisting of net
investment income and net short-term capital gain) to its shareholders,
must derive less than 30% of its annual gross income from gain on the sale
of securities held for less than three months, and must meet certain asset
diversification and other requirements. Accordingly, the Fund may be
restricted in the selling of securities held for less than three months,
and in the utilization of certain of the investment techniques described
in the Prospectus under "Description of the Fund -- Investment
Techniques." The Code, however, allows the Fund to net certain offsetting
positions making it easier for the Fund to satisfy the 30% test. The term
"regulated investment company" does not imply the supervision of
management or investment practices or policies by any government agency.
Any dividend or distribution paid shortly after an investor's
purchase may have the effect of reducing the aggregate net asset value of
his shares below the cost of his investment. Such a dividend would be a
return on investment in an economic sense, although taxable as stated
above. In addition, the Code provides that if a shareholder holds shares
of the Fund for six months or less and has received a capital gain
distribution with respect to such shares, any loss incurred on the sale of
such shares will be treated as long-term capital loss to the extent of the
capital gain distribution received.
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gains or losses. However, a portion of the
gain or loss realized from the disposition of non-U.S. dollar denominated
securities (including debt instruments, certain financial forwards,
futures and options, and certain preferred stock) may be treated as
ordinary income or loss under Section 988 of the Code. In addition, all
or a portion of the gain realized from the disposition of certain market
discount bonds will be treated as ordinary income under section 1276.
Finally, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain forward,
futures, option and straddle transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by the Fund
from certain financial futures or forward contracts and certain options
transactions (other than those taxed under Section 988 of the Code) will
be treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Gain or loss will arise upon exercise or lapse of
such futures, forwards and options as well as from closing transactions.
In addition, any such futures, forwards or options remaining unexercised
at the end of the Fund's taxable year will be treated as sold for their
then fair market value, resulting in additional gain or loss to the Fund
characterized in the manner described above.
Offsetting positions held by the Fund involving certain financial
forwards or futures contracts or options transactions may be considered,
for tax purposes, to constitute "straddles." "Straddles" are defined to
include "offsetting positions" in actively traded personal property. The
tax treatment of "straddles" is governed by Sections 1092 and 1258 of the
Code, which, in certain circumstances, overrides or modifies the
provisions of Sections 988 and 1256. As such, all or a portion of any
short-or long-term capital gain from certain "straddle" transactions may
be recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of
its engaging in financial forward or futures contracts or options
transactions, such "straddles" would be characterized as "mixed straddles"
if the futures, forwards or options comprising a part of such "straddles"
were governed by Section 1256 of the Code. The Fund may make one or more
elections with respect to "mixed straddles." If no election is made, to
the extent the straddle rules apply to positions established by the Fund,
losses realized by the Fund will be deferred to the extent of unrealized
gain in any offsetting positions. Moreover, as a result of the straddle
and conversion transaction rules, short-term capital loss on straddle
positions may be recharacterized as long-term capital loss, and long-term
capital gain may be recharacterized as short-term capital gain or ordinary
income.
Investment by the Fund in securities issued or acquired at a
discount or providing for deferred interest or for payment of interest in
the form of additional obligations could, under special tax rules, affect
the amount, timing and character of distributions to shareholders. For
example, the Fund could be required to take into account annually a
portion of the discount (or deemed discount) at which such securities were
issued and to distribute such portion in order to maintain its
qualification as a regulated investment company. In such case, the Fund
may have to dispose of securities which it might otherwise have continued
to hold in order to generate cash to satisfy these distribution
requirements.
PORTFOLIO TRANSACTIONS
The Manager supervises the placement of orders on behalf of the Fund
for the purchase or sale of portfolio securities. Allocation of brokerage
transactions, including their frequency, is made in the best judgment of
the Manager and in a manner deemed fair and reasonable to shareholders.
The primary consideration is prompt execution of orders at the most
favorable net price. Subject to this consideration, the brokers selected
include those that supplement the Manager's research facilities with
statistical data, investment information, economic facts and opinions.
Information so received is in addition to and not in lieu of services
required to be performed by the Manager and the fee of the Manager is not
reduced as a consequence of the receipt of such supplemental information.
Such information may be useful to the Manager in serving both the Fund and
other funds which it manages and, conversely, supplemental information
obtained by the placement of business of other clients may be useful to
the Manager in carrying out its obligation to the Fund. Brokers also are
selected because of their ability to handle special executions such as are
involved in large block trades or broad distributions, provided the
primary consideration is met. Large block trades may, in certain cases,
result from two or more funds managed by the Manager being engaged
simultaneously in the purchase or sale of the same security. Certain of
the Fund's transactions in securities of foreign issuers may not benefit
from the negotiated commission rates available to the Fund for
transactions in securities of domestic issuers. Portfolio turnover may
vary from year to year, as well as within a year. High turnover rates are
likely to result in comparatively greater brokerage expenses. The overall
reasonableness of brokerage commissions paid is evaluated by the Manager
based upon its knowledge of available information as to the general level
of commissions paid by other institutional investors for comparable
services.
For the fiscal years ended October 31, 1992, 1993 and 1994 the Fund
paid total brokerage commissions of $1,544,568, $2,720,136 and $2,132,968,
respectively, none of which was paid to the Distributor. The above
figures for brokerage commissions paid do not include gross spreads and
concessions on principal transactions which, where determinable, amounted
to $1,293,013, $1,603,133 and $1,381,585 in fiscal 1992, 1993 and 1994,
respectively, none of which was paid to the Distributor.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Performance Information."
The average annual total return for Class A for the 1, 5 and 8.044
year periods ended October 31, 1994 was -11.11%, 7.24% and 11.36%,
respectively. The average annual total return for Class B for the 1 and
1.795 year periods ended October 31, 1994 was
- -10.89% and -0.87%, respectively. Average annual total return is
calculated by determining the ending redeemable value of an investment
purchased with a hypothetical $1,000 payment made at the beginning of the
period (assuming the reinvestment of dividends and distributions),
dividing by the amount of the initial investment, taking the "n"th root of
the quotient (where "n" is the number of years in the period) and
subtracting one from the result. A Class's average annual total return
figures calculated in accordance with such formula assume that in the case
of Class A the maximum sales load has been deducted from the hypothetical
initial investment at the time of purchase or in the case of Class B the
maximum applicable CDSC has been paid upon redemption at the end of the
period.
Total return is calculated by subtracting the amount of the maximum
offering price per share at the beginning of a stated period from the net
asset value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and
dividing the result by the maximum offering price per share at the
beginning of the period. Total return also may be calculated based on the
net asset value per share at the beginning of the period for Class A
shares or without giving effect to any applicable CDSC at the end of the
period for Class B shares. In such cases, the calculation would not
reflect the deduction of the sales load with respect to Class A shares or
any applicable CDSC with respect to Class B shares, which, if reflected,
would reduce the performance quoted. The total return for Class A for the
period October 16, 1986 to October 31, 1994, based on the maximum offering
price per share, was 137.60%. Based on net asset value per share, the
total return for Class A was 148.78% for this period. The total return
for the period January 15, 1993 through October 31, 1994 for Class B,
after giving effect to the maximum applicable CDSC, was -1.56%. Without
giving effect to the maximum applicable CDSC, the total return for Class B
was 2.11% for this period.
Comparative performance may be used from time to time in advertising
the Fund's shares, including data from Lipper Analytical Services, Inc.,
Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, Money Magazine, Morningstar, Inc. and other industry
publications. From time to time, the Fund may compare its performance
against inflation with the performance of other instruments against
inflation, such as short-term Treasury Bills (which are direct obligations
of the U.S. Government) and FDIC-insured bank money market accounts. In
addition, advertising for the Fund may indicate that investors may
consider diversifying their investment portfolios in order to seek
protection of the value of their assets against inflation.
Advertising materials for the Fund may include reference to the role
played by the Manager or Jack J. Dreyfus, Jr. in popularizing the concept
of mutual funds as an investment vehicle and may refer to the role The
Dreyfus Corporation and the Dreyfus Family of Funds play or have played in
the mutual fund industry, and the fact that the mutual fund industry,
which includes Dreyfus and the Dreyfus funds, has, through the wide
variety of innovative and democratic mutual fund products it has made
available, brought to the public investment opportunities once reserved
for the few. Advertising materials may also refer to various Dreyfus
investor services, including, for example, asset allocation and IRA
rollover services. From time to time advertising materials for the Fund
also may refer to Morningstar ratings and related analyses supporting the
rating.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. Fund shares have no preemptive or subscription rights and
are freely transferable.
The Fund sends annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT AUDITORS
The Bank of New York, 110 Washington Street, New York, New York
10286, acts as custodian of the Fund's assets. The Shareholder Services
Group, Inc., a subsidiary of First Data Corporation, P.O. Box 9671,
Providence, Rhode Island 02904-9671, is the Fund's transfer and dividend
disbursing agent. Neither The Bank of New York nor The Shareholder
Services Group, Inc. has any part in determining the investment policies
of the Fund or which portfolio securities are to be purchased or sold by
the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance
of the shares of beneficial interest being sold pursuant to the Fund's
Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX
Descriptions of Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's") ratings.
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
BB, B, CCC, CC, C
Bonds rated BB, B, CCC, CC and C are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
BB
Bonds rated BB have less near-term vulnerability to default than
other speculative grade debt. However, they face major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments.
B
Bonds rated B have a greater vulnerability to default but presently
have the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal.
CCC
Bonds rated CCC have a current identifiable vulnerability to default,
and are dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal.
In the event of adverse business, financial or economic conditions, they
are not likely to have the capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- rating.
C
The rating C is typically applied to income bonds on which no
interest is being paid.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the
major ratings categories.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no
more than 365 days. Issues assigned an A rating are regarded as having
the greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
A-1
This designation indicates the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign
(+) designation.
A-2
Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated "A-l."
A-3
Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the
higher designations.
Moody's
Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security may appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category
and in the categories below B. The modifier 1 indicates a ranking for the
security in the higher end of a rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower
end of a rating category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins
in earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations.
This ordinarily will be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
Issuers (or related supporting institutions) rated Prime-3 (P-3) have
an acceptable capacity for repayment of short-term promissory obligations.
The effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and the requirements
for relatively high financial leverage. Adequate alternate liquidity is
maintained.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC INVESTING
STATEMENT OF INVESTMENTS OCTOBER 31, 1994
COMMON STOCKS--68.1% SHARES VALUE
-------------- --------------
<S> <C> <C> <C>
BASIC INDUSTRIES--18.9% ASARCO 25,000 $ 784,375
Agnico Eagle Mines............... 100,000 1,287,500
Alcan Aluminium.................. 120,000 3,210,000
Aluminum Co. of America.......... 20,000 1,705,000
Boise Cascade.................... 50,000 1,325,000
Cyprus Amax Minerals............. 60,000 1,597,500
Dow Chemical..................... 40,000 2,940,000
Eastman Chemical................. 65,000 3,510,000
Echo Bay Mines................... 100,000 1,225,000
FMC.............................. 75,000 (a) 4,575,000
Freeport McMoRan Copper & Gold, Cl. A. 50,000 1,137,500
Georgia Gulf..................... 75,000 (a) 2,906,250
Georgia-Pacific.................. 90,000 6,648,750
Huntco, Cl. A.................... 110,000 2,475,000
Imperial Chemical A.D.R.......... 75,000 3,900,000
Inco............................. 100,000 3,012,500
National Gypsum.................. 20,000 (a) 670,000
OM Group......................... 100,000 2,000,000
Placer Dome...................... 100,000 2,162,500
Reliance Steel & Aluminum........ 50,000 731,250
Rohm & Haas...................... 35,000 2,113,125
Union Carbide.................... 95,000 3,146,875
--------------
53,063,125
--------------
CAPITAL GOODS--7.4% Bethlehem Steel 75,000 (a) 1,425,000
Danaher.......................... 35,000 1,719,375
Deere & Co....................... 55,000 3,946,250
Duriron.......................... 55,000 990,000
Foster Wheeler................... 85,000 3,060,000
Parker-Hannifin.................. 75,000 3,506,250
Rohr Industries.................. 150,000 (a) 1,368,750
TRINOVA.......................... 95,000 3,325,000
United Engineers................. 245,000 1,322,511
--------------
20,663,136
--------------
CONGLOMERATES--.7% Hutchinson Whampoa 400,000 1,847,970
Parkway Holdings................. 50,000 123,978
--------------
1,971,948
--------------
CONSUMER CYCLICAL--1.1% Hospitality Franchise System 40,000 (a) 1,090,000
Nordstrom........................ 25,000 1,231,250
Spiegel, Cl. A................... 50,000 743,750
--------------
3,065,000
--------------
CONSUMER GROWTH STAPLES--.3% Immunex 65,000 (a) 877,500
--------------
CONSUMER SERVICES--5.3% Acuson 50,000 (a) 918,750
Caremark International........... 75,000 1,631,250
Columbia/HCA Healthcare.......... 75,000 3,121,875
Coram Healthcare................. 40,000 (a) 660,000
Mattel........................... 135,000 3,948,750
DREYFUS STRATEGIC INVESTING
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
-------------- --------------
CONSUMER SERVICES (CONTINUED) Resorts World Berhad 275,000 $ 1,742,617
Sun Healthcare Group............. 125,000 (a) 2,875,000
--------------
14,898,242
--------------
CONSUMER STAPLES--11.7% Archer-Daniels-Midland 115,000 3,291,875
Avon Products.................... 50,000 3,162,500
Biogen........................... 35,000 (a) 1,715,000
Bristol-Myers Squibb............. 75,000 4,378,125
Canandaigua Wine, Cl. A.......... 55,000 (a) 1,808,125
Coca-Cola........................ 50,000 2,512,500
ConAgra.......................... 90,000 2,801,250
Genting Berhad................... 170,500 1,567,279
Glaxo Holdings PLC A.D.R......... 75,000 1,443,750
Pfizer........................... 50,000 3,706,250
Philip Morris Cos................ 50,000 3,062,500
St. Jude Medical................. 44,400 1,653,900
Upjohn........................... 50,000 1,650,000
--------------
32,753,054
--------------
EMERGING GROWTH--.4% Aramed Callable 76,000 (a) 864,500
Genelabs Technologies............ 111,111 (a,d) 212,500
Genesia (Warrants) 30,000 (a) 18,750
--------------
1,095,750
--------------
ENERGY--3.3% Amoco............................ 45,000 2,851,875
Apache........................... 20,000 562,500
Lyondell Petrochem............... 125,000 3,421,875
NL Industries.................... 25,000 (a) 318,750
Occidental Petroleum............. 50,000 1,093,750
Seagull Energy................... 35,000 (a) 910,000
--------------
9,158,750
--------------
FINANCE--6.6% Chase Manhattan 60,000 2,160,000
Equitable of Iowa................ 75,000 2,653,125
First Chicago.................... 60,000 2,940,000
FirstFed Michigan................ 65,000 1,348,750
First Security................... 75,000 1,968,750
Household International.......... 50,000 1,756,250
Malayan Banking Berhad........... 525,000 3,573,245
Overseas Union Bank.............. 360,000 2,059,945
--------------
18,460,065
--------------
OIL-CRUDE PRODUCERS--.4% Amerada Hess 25,000 1,243,750
--------------
OIL WELL EQUIPMENT & SERVICES--.6% Dresser Industries 75,000 1,584,375
--------------
TECHNOLOGY--10.2% Adobe Systems 25,000 900,000
American Superconductor.......... 20,000 675,000
BMC Software..................... 65,000 (a) 2,941,250
Boeing........................... 50,000 2,193,750
Business Objects S.A. A.D.R...... 65,000 2,136,875
Compaq Computer.................. 100,000 (a) 4,012,500
DREYFUS STRATEGIC INVESTING
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
-------------- --------------
TECHNOLOGY (CONTINUED) Data General 50,000 (a) $ 487,500
Exar............................. 50,000 (a) 1,050,000
International Business Machines.. 70,000 5,215,000
Northern Telecom................. 50,000 1,806,250
Oracle Systems................... 40,000 (a) 1,840,000
PLATINUM Technology.............. 70,000 (a) 1,548,750
Tandem Computers................. 50,000 (a) 881,250
3Com............................. 75,000 (a) 3,018,750
--------------
28,706,875
--------------
TRANSPORTATION--1.2% Landstar System 100,000 3,325,000
--------------
TOTAL COMMON STOCKS
(cost $179,068,216)............ $190,866,570
==============
PRINCIPAL
SHORT-TERM INVESTMENTS--29.0% AMOUNT
--------------
U.S. TREASURY BILLS: 4.81%, 11/10/1994 $ 21,932,000 (c) $ 21,904,828
3.20%, 11/17/1994................ 27,150,000 27,093,205
4.595%, 11/25/1994............... 6,351,000 (b) 6,332,079
4%, 12/1/1994.................... 10,064,000 (c) 10,026,649
4.65%, 12/8/1994................. 12,980,000 (c) 12,918,619
4.545%, 12/22/1994............... 2,920,000 2,900,008
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $81,175,388)............. $ 81,175,388
==============
TOTAL INVESTMENTS(cost $260,243,604)........................................ 97.1% $272,041,958
====== ==============
CASH AND RECEIVABLES (NET).................................................. 2.9% $ 8,229,105
====== ==============
NET ASSETS.................................................................. 100.0% $280,271,063
====== ==============
</TABLE>
<TABLE>
<CAPTION>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Partially held by custodian in a segregated account as collateral
for open futures positions.
(c) Partially held by brokers as collateral for open short positions.
(d) Security restricted as to public resale;
ACQUISITION PURCHASE PERCENTAGE OF
ISSUER DATE PRICE NET ASSETS VALUATION*
- ------ ------------ ---------- --------------- --------------------
<S> <C> <C> <C> <C>
Genelabs Technologies.................... 3/1/91 $9.00 .08% $1.9125 per share
</TABLE>
* The valuation of this security has been determined in good faith under
the direction of the Board of Trustees.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC INVESTING
STATEMENT OF FINANCIAL FUTURES
OCTOBER 31, 1994
MARKET VALUE UNREALIZED
NUMBER OF COVERED (DEPRECIATION)
FINANCIAL FUTURES SOLD SHORT; CONTRACTS BY CONTRACTS EXPIRATION AT 10/31/94
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
Standard & Poor's 500........................ 90 ($21,260,250) December '94 ($711,625)
==============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF SECURITIES SOLD SHORT OCTOBER 31, 1994
COMMON STOCKS SHARES VALUE
- ----------------- ------- -------------
<S> <C> <C>
America Online.............................................................. 20,000 $ 1,415,000
AnnTaylor Stores............................................................ 22,500 933,750
Aura Systems................................................................ 25,000 117,187
Bankers Trust NY............................................................ 35,000 2,336,250
Bell Sports................................................................. 15,000 311,250
Best Buy.................................................................... 25,000 943,750
Cisco Systems............................................................... 25,000 753,125
Compression Labs............................................................ 50,000 425,000
Compuware................................................................... 40,000 1,565,000
CrossComm................................................................... 65,000 682,500
Gap......................................................................... 50,000 1,687,500
General Mills............................................................... 15,000 840,000
Health Images............................................................... 40,064 245,392
Hillenbrand Industries...................................................... 45,000 1,361,250
Intel....................................................................... 45,000 2,795,625
International Game Technology............................................... 40,000 740,000
Magna International, Cl. A.................................................. 35,000 1,242,500
McDonald's.................................................................. 50,000 1,437,500
Medco Research.............................................................. 40,000 480,000
Newbridge Networks.......................................................... 65,000 1,795,625
Novell...................................................................... 35,000 647,500
Oxford Health Plans......................................................... 5,000 410,000
PictureTel.................................................................. 50,000 987,500
Policy Management Systems................................................... 35,000 1,645,000
President Riverboat Casinos................................................. 55,000 450,313
Schwab(Chas)................................................................ 50,000 1,775,000
Seitel...................................................................... 16,000 448,000
Southwest Airlines.......................................................... 25,000 590,625
Starbucks................................................................... 5,000 135,625
Storage Technology.......................................................... 46,100 1,279,275
Texas Instruments........................................................... 15,000 1,123,125
TransTexas Gas.............................................................. 70,000 927,500
UAL......................................................................... 25,000 2,362,500
Wall Data................................................................... 45,000 1,631,250
------------
TOTAL SECURITIES SOLD SHORT (proceeds $35,919,205).......................... $36,521,417
============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC INVESTING
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1994
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $260,243,604)_see statement..................................... $272,041,958
Cash.................................................................... 448,993
Receivable from brokers for proceeds on securities sold short........... 35,919,205
Receivable for investment securities sold............................... 17,698,936
Receivable for futures variation margin_Note 4(a)....................... 168,750
Receivable for shares of Beneficial Interest subscribed................. 148,246
Dividends and interest receivable....................................... 434,326
Prepaid expenses........................................................ 46,272
--------------
326,906,686
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 181,948
Securities sold short, at value
(proceeds $35,919,205)_see statement.................................. 36,521,417
Payable for investment securities purchased............................. 9,418,987
Payable for shares of Beneficial Interest redeemed...................... 189,359
Loan commitment fees and interest payable............................... 6,458
Accrued expenses and other liabilities.................................. 317,454 46,635,623
------------- --------------
NET ASSETS ................................................................ $280,271,063
==============
REPRESENTED BY:
Paid-in capital......................................................... $262,137,778
Accumulated investment (loss) and distributions in excess of
investment income_net_Note 1(c)....................................... (1,374,615)
Accumulated undistributed net realized gain on investments.............. 9,023,383
Accumulated net unrealized appreciation on investments [including
($711,625) net unrealized (depreciation) on financial futures]_Note 4(b) 10,484,517
--------------
NET ASSETS at value......................................................... $280,271,063
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value authorized)...................... 12,070,726
==============
Class B Shares
(unlimited number of $.001 par value authorized)...................... 2,087,518
==============
NET ASSET VALUE per share:
Class A Shares ($239,406,967 / 12,070,726 shares)....................... $19.83
=======
Class B Shares ($40,864,096 / 2,087,518 shares)......................... $19.58
=======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC INVESTING
STATEMENT OF OPERATIONS YEAR ENDED OCTOBER 31, 1994
INVESTMENT INCOME:
<S> <C> <C>
INCOME:
Cash dividends (net of $166,124 foreign taxes withheld at source)..... $2,697,538
Interest.............................................................. 2,022,200
------------
TOTAL INCOME...................................................... $ 4,719,738
EXPENSES:
Management fee_Note 3(a).............................................. 2,259,762
Shareholder servicing costs_Note 3(c)................................. 1,142,247
Interest_Note 2....................................................... 487,446
Distribution fees (Class B shares)_Note 3(b).......................... 280,046
Dividends on securities sold short.................................... 175,857
Custodian fees........................................................ 155,110
Prospectus and shareholders' reports.................................. 82,785
Registration fees..................................................... 80,138
Loan commitment fees_Note 2........................................... 76,042
Professional fees..................................................... 58,980
Trustees' fees and expenses_Note 3(d)................................. 27,708
Miscellaneous......................................................... 8,967
------------
TOTAL EXPENSES.................................................... 4,835,088
--------------
INVESTMENT (LOSS)--NET............................................ (115,350)
--------------
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments_Note 4(a):
Long transactions (including options transactions).................... $7,851,818
Short sale transactions............................................... 1,439,127
Net realized (loss) on financial futures_Note 4(a)...................... (324,547)
------------
NET REALIZED GAIN..................................................... 8,966,398
Net unrealized (depreciation) on investments and securities sold short
[including ($711,625) net unrealized (depreciation) on financial futures] (30,980,097)
--------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (22,013,699)
--------------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $ (22,129,049)
==============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC INVESTING
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31,
--------------------------------
1993 1994
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income (loss)_net............................................ $ 344,576 $ (115,350)
Net realized gain on investments........................................ 31,818,915 8,966,398
Net unrealized appreciation (depreciation) on investments for the year.. 15,782,474 (30,980,097)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... 47,945,965 (22,129,049)
-------------- --------------
DIVIDENDS TO SHAREHOLDERS:
From investment income_net:
Class A shares........................................................ (549,763) ___
Class B shares........................................................ ___ ___
In excess of investment income_net:
Class A shares........................................................ ___ (1,425,741)
Class B shares........................................................ ___ (116,253)
From net realized gain on investments:
Class A shares........................................................ ___ (26,597,901)
Class B shares........................................................ ___ (2,951,918)
-------------- --------------
TOTAL DIVIDENDS................................................... (549,763) (31,091,813)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 52,366,131 49,925,537
Class B shares........................................................ 25,107,551 21,282,593
Dividends reinvested:
Class A shares........................................................ 494,336 25,815,338
Class B shares........................................................ ___ 2,988,881
Cost of shares redeemed:
Class A shares........................................................ (66,014,198) (65,443,064)
Class B shares........................................................ (642,448) (2,932,744)
-------------- --------------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS...... 11,311,372 31,636,541
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 58,707,574 (21,584,321)
NET ASSETS:
Beginning of year....................................................... 243,147,810 301,855,384
-------------- --------------
End of year [including investment (loss) and
distributions in excess of investment income_net of: ($140,172)
in 1993 and ($1,374,615) in 1994]..................................... $301,855,384 $280,271,063
============== ==============
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------------------------------------------------------------------
CLASS A CLASS B
-------------------------------- --------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
-------------------------------- --------------------------------
1993 1994 1993* 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 2,402,790 2,345,076 1,122,136 993,936
Shares issued for dividends reinvested. 24,079 1,240,296 ___ 144,600
Shares redeemed........................ (3,034,139) (3,127,724) (28,591) (144,563)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING.................... (607,270) 457,648 1,093,545 993,973
============== ============== ============= =============
</TABLE>
- ------------------
* From January 15, 1993 (commencement of initial offering) to October 31,
1993.
See notes to financial statements.
DREYFUS STRATEGIC INVESTING
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated March 1, 1995.
See notes to financial statements.
DREYFUS STRATEGIC INVESTING
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a non-diversified open-end management investment company. Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor of the Fund's
shares. Dreyfus Service Corporation is a wholly-owned subsidiary of The
Dreyfus Corporation ("Manager"). Effective August 24, 1994, the Manager
became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of Institutional Administration Services, Inc., a provider of
mutual fund administration services, the parent company of which is Boston
Institutional Group, Inc.
The Fund offers both Class A and Class B shares. Class A shares are
subject to a sales charge imposed at the time of purchase and Class B shares
are subject to a contingent deferred sales charge imposed at the time of
redemption on redemptions made within six years of purchase. Other
differences between the two Classes include the services offered to and the
expenses borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sales
price on the national securities market. Securities not listed on an exchange
or the national securities market, or securities for which there were no
transactions, are valued at the average of the most recent bid and asked
prices, except for open short positions, where the asked price is used for
valuation purposes. Bid price is used when no asked price is available.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the direction of the Board of Trustees.
Short-term investments are carried at amortized cost, which approximates
value. Investments denominated in foreign currencies are translated to U.S.
dollars at the prevailing rates of exchange.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and dividends from net realized
capital gain are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the
policy of the Fund not to distribute such gain.
Dividends in excess of investment income--net for financial statement
purposes result primarily from transactions where tax treatment differs from
book treatment. During the year ended October 31, 1994, the Fund reclassed
$422,901 from undistributed investment income-net to paid-in capital. This
amount represents amortization of organization expenses, certain passive
foreign investment company transactions and certain foreign currency
transactions where book treatment differs from tax treatment.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
DREYFUS STRATEGIC INVESTING
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BANK LINE OF CREDIT:
In accordance with an agreement with a bank, the Fund may borrow up to
$60 million under a short-term unsecured line of credit. In connection
therewith, the Fund has agreed to pay commitment fees at an annual rate of
.125 of 1% on the total line of credit. Interest on borrowings is charged at
rates which are related to the Federal Funds rate in effect from time to
time.
At October 31, 1994 there were no outstanding borrowings under the line
of credit.
The average daily amount of short-term debt outstanding during the year
ended October 31, 1994 was approximately $11.1 million, with a related
weighted average annualized interest rate of 4.39% (based upon actual
interest expense, not including commitment fees, for the year). The maximum
amount of such debt outstanding at any time during the year ended October 31,
1994, was $40.5 million.
NOTE 3--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .75 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, interest on borrowings (which, in the
view of Stroock & Stroock & Lavan, counsel to the Fund, also contemplates
loan commitment fees and dividends on securities sold short), brokerage and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund. The most stringent state expense limitation
applicable to the Fund presently requires reimbursement of expenses in any
full fiscal year that such expenses (exclusive of distribution expenses and
certain expenses as described above) exceed 2 1/2% of the first $30 million,
2% of the next $70 million and 1 1/2% of the excess over $100 million of the
average value of the Fund's net assets in accordance with California "blue
sky" regulations. There was no expense reimbursement for the year ended
October 31, 1994.
Dreyfus Service Corporation retained $297,139 during the year ended
October 31, 1994 from commissions earned on sales of the Fund's Class A
shares.
Prior to August 24, 1994, Dreyfus Service Corporation retained $58,543
from contingent deferred sales charges imposed upon redemptions of the Fund's
Class B shares.
(B) On August 3, 1994, Fund's shareholders approved a revised
Distribution Plan with respect to Class B shares only (the "Class B
Distribution Plan") pursuant to Rule 12b-1 under the Act. Pursuant to the
Class B Distribution Plan, effective August 24, 1994, the Fund pays the
Distributor for distributing the Fund's Class B Shares at an annual rate of
.75 of 1% of the value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior Class B
Distribution Plan") provided that the Fund pay Dreyfus Service Corporation at
an annual rate of .75 of 1% of the value of the Fund's Class B shares average
daily net assets, for the costs and expenses in connection with advertising,
marketing and distributing the Fund's Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on the value of
the Fund's Class B shares owned by clients of the Service Agent.
During the year ended October 31, 1994, $58,353 was charged to the Fund
pursuant to the Class B Distribution Plan and $221,693 was charged to the
Fund pursuant to the prior Class B Distribution Plan.
DREYFUS STRATEGIC INVESTING
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) Under the Shareholder Services Plan, the Fund pays the Distributor,
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A and Class B shares for servicing shareholder accounts. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. From November 1, 1993 through August
23, 1994, $541,895 and $73,898 were charged to Class A and Class B shares,
respectively, by Dreyfus Service Corporation. From August 24, 1994 through
October 31, 1994, $118,010 and $19,451 were charged to Class A and Class B
shares, respectively, by the Distributor pursuant to the Shareholder Services
Plan.
(D) Prior to August 24, 1994 certain officers and trustees of the Fund
were "affiliated persons," as defined in the Act, of the Manager and/or
Dreyfus Service Corporation. Each trustee who is not an "affiliated person"
receives an annual fee of $2,500 and an attendance fee of $250 per meeting.
NOTE 4--SECURITIES TRANSACTIONS:
(A) The following summarizes the aggregate amount of purchases and sales
of investment securities and securities sold short, excluding short-term
securities and options transactions, during the year ended October 31, 1994:
<TABLE>
<CAPTION>
PURCHASES SALES
--------------- ----------------
<S> <C> <C>
Long transactions.............................................. $520,301,502 $612,796,892
Short sale transactions........................................ 61,909,425 83,522,824
--------------- ----------------
TOTAL...................................................... $582,210,927 $696,319,716
============== ================
</TABLE>
The Fund is engaged in short-selling which obligates the Fund to replace
the security borrowed by purchasing the security at
current market value. The Fund would incur a loss if the price of the
security increases between the date of the short sale and the date on which
the Fund replaces the borrowed security. The Fund would realize a gain if the
price of the security declines between those dates. Until the Fund replaces
the borrowed security, the Fund will maintain daily, a segregated account
with a broker and custodian, of cash and/or U.S. Government securities
sufficient to cover its short position. Securities sold short at October 31,
1994 and their related market values and proceeds are set forth in the
Statement of Securities Sold Short.
In addition, the following table summarizes the Fund's put option
transactions for the year ended October 31, 1994:
<TABLE>
<CAPTION>
OPTIONS TERMINATED
----------------------------
NET
NUMBER OF PREMIUMS REALIZED
CONTRACTS RECEIVED COST GAIN
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
OPTIONS WRITTEN:
Contracts outstanding October 31, 1993...... -- $ --
Contracts written........................... 200,000 193,993
----------- -------------
200,000 193,993
----------- -------------
Contracts Terminated;
Closed.................................... 200,000 193,993 $114,000 $79,993
----------- ------------- =========== ===========
Contracts outstanding October 31, 1994...... _ $ _
=========== =============
</TABLE>
DREYFUS STRATEGIC INVESTING
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As a writer of put options, the Fund receives a premium at the outset and
then bears the market risk of unfavorable changes in the price of the
financial instrument underlying the option. Generally, the Fund would incur a
gain, to the extent of the premiums received, if the price of the underlying
financial instrument increases between the date the option is written and the
date on which the option is terminated. Generally, the Fund would realize a
loss if the price of the financial instrument declines between those dates.
The Fund is engaged in trading financial futures contracts. The Fund is
exposed to market risk as a result of changes in the value of the underlying
financial instruments. Investments in financial futures require the Fund to
"mark to market" on a daily basis, which reflects the change in the market
value of the contract at the close of each day's trading. Accordingly,
variation margin payments are made or received to reflect daily unrealized
gains or losses. When the contracts are closed, the Fund recognizes a
realized gain or loss. These investments require initial margin deposits with
a custodian, which consist of cash or cash equivalents, up to approximately
10% of the contract amount. The amount of these deposits is determined by the
exchange or Board of Trade on which the contract is traded and is subject to
change. Contracts open at October 31, 1994 and their related market values
and unrealized (depreciation) are set forth in the Statement of Financial
Futures.
(B) At October 31, 1994, accumulated net unrealized appreciation on
investments was $10,484,517, consisting of $20,222,306 gross unrealized
appreciation and $9,737,789 gross unrealized depreciation.
At October 31, 1994, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS STRATEGIC INVESTING
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS STRATEGIC INVESTING
We have audited the accompanying statement of assets and liabilities of
Dreyfus Strategic Investing, including the statements of investments,
financial futures and securities sold short, as of October 31, 1994, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
financial highlights for each of the years indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1994 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Strategic Investing at October 31, 1994, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
(Ernst & Young LLP Signature Logo)
New York, New York
December 14, 1994
