DREYFUS PREMIER VALUE FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Premier Value Fund (the "Fund"), dated March 1, 1998. To obtain a
copy of the Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
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-11
Management Agreement B-16
Purchase of Shares B-18
Distribution Plan and Shareholder Services Plan B-20
Redemption of Shares B-21
Shareholder Services B-23
Determination of Net Asset Value B-26
Dividends, Distributions and Taxes B-26
Portfolio Transactions B-29
Performance Information B-29
Information About the Fund B-32
Transfer and Dividend Disbursing Agent, Custodian, Counsel
and Independent Auditors B-32
Financial Statements and Report of Independent Auditors B-33
Appendix B-34
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the
Fund" and "Appendix."
Portfolio Securities
Depositary Receipts. These securities may be purchased through
"sponsored" or "unsponsored" facilities. A sponsored facility is
established jointly by the issuer of the underlying security and a
depositary, whereas a depositary may establish an unsponsored facility
without participation by the issuer of the underlying security and a
depositary, whereas a depositary may establish an unsponsored facility
without participation by the issuer of the deposited security. Holders of
unsponsored depositary receipts generally bear all the costs of such
facilities and the depositary of an unsponsored facility frequently is under
no obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass through voting rights to the
holders of such receipts in respect of the deposited securities.
Repurchase Agreements. The Fund's custodian or sub-custodian will have
custody of, and will hold in a segregated account, securities acquired by a
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 $1 billion, 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.
Commercial Paper and Other Short-Term Corporate Obligations. These
instruments include variable amount master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily changes in the amounts
borrowed. Because these obligations are direct lending arrangements between
the lender and borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary
market for these obligations, although they are redeemable at face value,
plus accrued interest, at any time. Accordingly, where these obligations
are not secured by letters of credit or other credit support arrangements,
the Fund's right to redeem is dependent on the ability of the borrower to
pay principal and interest on demand. Such obligations frequently are not
rated by credit rating agencies, and the Fund may invest in them only if at
the time of an investment the borrower meets the criteria set forth in the
Prospectus for other commercial paper issuers.
Convertible Securities. Although to a lesser extent than with fixed-
income securities, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in
the market value of the underlying common stock. A unique feature of
convertible securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis, and so may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities
generally entail less risk than investments in common stock of the same
issuer.
Convertible securities are investments that provide for a stable stream
of income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible
securities may default on their obligations. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to
benefit from increases in the market price of the underlying common stock.
There can be no assurance of capital appreciation, however, because
securities prices fluctuate. Convertible securities, however, generally
offer lower interest or dividend yields than non-convertible securities of
similar quality because of the potential for capital appreciation.
Foreign Government Obligations; Securities of Supranational Entities.
The Fund may invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Manager to be of comparable
quality to the other obligations in which the Fund may invest. Such
securities also include debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.
Illiquid Securities. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not readily
marketable, the Fund will endeavor, to the extent practicable, to obtain the
right to registration at the expense of the issuer. Generally, there will
be a lapse of time between the Fund's decision to sell any such security and
the registration of the security permitting sale. During any such period,
the price of the securities will be subject to market fluctuations.
However, where a substantial market of qualified institutional buyers has
developed for certain unregistered securities purchased by the Fund pursuant
to Rule 144A under the Securities Act of 1933, as amended, the Fund intends
to treat such securities as liquid securities in accordance with procedures
approved by the Fund's Board. Because it is not possible to predict with
assurance how the market for specific restricted securities sold pursuant to
Rule 144A will develop, the Fund's Board has directed the Manager 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 its investment portfolio during such
period.
Management Policies
Leverage. For borrowings for investment purposes, the Investment
Company Act of 1940, as amended (the "1940 Act"), requires the Fund to
maintain continuous asset coverage (that is, total assets including
borrowings, less liabilities exclusive of borrowings) of 300% of the amount
borrowed. If the 300% asset coverage should decline as a result of market
fluctuations or other reasons, the Fund may be required to sell some of its
portfolio holdings within three days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. 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 borrowings over the stated interest
rate. To the extent the Fund enters into a reverse repurchase agreement,
the Fund will maintain in a segregated account permissible liquid assets at
least equal to the aggregate amount of its reverse repurchase obligations,
plus accrued interest, in certain cases, in accordance with releases
promulgated by the Securities and Exchange Commission. The Securities and
Exchange Commission views reverse repurchase transactions as collateralized
borrowings by the Fund.
Short-Selling. Until the Fund closes its short position or replaces
the borrowed security, it will: (a) maintain a segregated account,
containing permissible liquid assets, at such a level that the amount
deposited in the account plus the amount deposited with the broker as
collateral always equals the current value of the security sold short; or
(b) otherwise cover its short position.
Lending Portfolio Securities. In connection with the Fund's securities
lending transactions, 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.
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 must terminate the loan and regain the
right to vote the securities if a material event adversely affecting the
investment occurs.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated
with Derivatives purchased on an exchange. By contrast, no clearing agency
guarantees over-the-counter Derivatives. Therefore, each party to an over-
the-counter Derivative bears the risk that the counterparty will default.
Accordingly, the Manager will consider the creditworthiness of
counterparties to over-the-counter Derivatives in the same manner as it
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested in
bidding for it.
Futures Transactions--In General. The Fund may enter into futures contracts
in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or 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 opportunities
or arbitrage possibilities not available in the United States. Foreign
markets, however, may have greater risk potential than domestic markets.
For example, some foreign exchanges are principal markets so that no common
clearing facility exists and an investor may look only to the broker for
performance of the contract. In addition, any profits that the Fund might
realize in trading could be eliminated by adverse changes in the 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. Unlike trading on
domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. Although the
Fund intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could
move to the limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant
market and, to the extent the transaction is entered into for hedging
purposes, to ascertain the appropriate correlation between the transaction
being hedged and the price movements of the futures contract. For example,
if the Fund uses futures to hedge against the possibility of a decline in
the market value of securities held in its portfolio and the prices of such
securities instead increase, the Fund will lose part or all of the benefit
of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate permissible
liquid assets 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 otherwise
to invest those assets.
Specific Futures Transactions. The Fund may purchase and sell stock index
futures contracts. A stock index future obligates the Fund to pay or receive
an amount of cash equal to a fixed dollar amount specified in the futures
contract multiplied by the difference between the settlement price of the
contract on the contract's last trading day and the value of the index based
on the stock prices of the securities that comprise it at the opening of
trading in such securities on the next business day.
The Fund may purchase and sell interest rate futures contracts. An
interest rate future obligates the Fund to purchase or sell an amount of a
specific debt security at a future date at a specific price.
The Fund may purchase and sell currency futures. A foreign currency
future obligates the Fund to purchase or sell an amount of a specific
currency at a future date at a specific price.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell,
the underlying security or securities at the exercise price at any time
during the option period, or at a specific date. Conversely, a put option
gives the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at the exercise price
at any time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written
by the Fund is covered when, among other things, cash or liquid securities
having a value equal to or greater than the exercise price of the option are
placed in a segregated account with the Fund's custodian to fulfill the
obligation undertaken. The principal reason for writing covered call and
put options is to realize, through the receipt of premiums, a greater return
than would be realized on the underlying securities alone. The Fund
receives a premium from writing covered call or put options which it retains
whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen events,
at times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, the Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Specific Options Transactions. The Fund may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of
specific securities) or stock indices listed on national securities
exchanges or traded in the over-the-counter market. An option on a stock
index is similar to an option in respect of specific securities, except that
settlement does not occur by delivery of the securities comprising the
index. Instead, the option holder receives an amount of cash if the closing
level of the stock index upon which the option is based is greater than, in
the case of a call, or less than, in the case of a put, the exercise price
of the option. Thus, the effectiveness of purchasing or writing stock index
options will depend upon price movements in the level of the index rather
than the price of a particular stock.
The Fund may purchase and sell call and put options on foreign
currency. These options convey the right to buy or sell the underlying
currency at a price which is expected to be lower or higher than the spot
price of the currency at the time the option is exercised or expires.
The Fund may purchase cash-settlement options on interest rate swaps,
interest rate swaps denominated in foreign currency and equity index swaps
in pursuit of its investment objective. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to
pay or receive interest (for example, an exchange of floating-rate payments
for fixed-rate payments) denominated in U.S. dollars or foreign currency.
Equity index swaps involve the exchange by the Fund with another party of
cash flows based upon the performance of an index or a portion of an index
of securities which usually includes dividends. A cash-settled option on a
swap gives the purchaser the right, but not the obligation, in return for
the premium paid, to receive an amount of cash equal to the value of the
underlying swap as of the exercise date. These options typically are
purchased in privately negotiated transactions from financial institutions,
including securities brokerage firms.
Successful use by the Fund of options will be subject to the ability of
the Manager to predict correctly movements in the prices of individual
stocks or the stock market generally. To the extent such predictions are
incorrect, the Fund may incur losses.
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 Derivatives which are not presently contemplated for use by
the Fund or which are not currently available but which may be developed, to
the extent such opportunities are both consistent with the Fund's investment
objective and legally permissible for the Fund. Before entering into such
transactions or making any such investment, the Fund will provide
appropriate disclosure in its Prospectus or Statement of Additional
Information.
Forward Commitments. Securities purchased on a forward commitment or
when-issued basis are subject to changes in value (generally changing in the
same way, i.e., appreciating when interest rates decline and depreciating
when interest rates rise) based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the
level of interest rates. Securities purchased on a forward commitment or
when-issued basis may expose the Fund to risks because they may experience
such 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. Purchasing securities on a forward
commitment or 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.
Investment Considerations and Risks
Lower Rated Securities. The Fund is permitted to invest in securities
rated Ba by Moody's Investors Service, Inc. ("Moody's") and BB by Standard &
Poor's Ratings Group ("S&P" and with Moody's, the "Rating Agencies") and as
low as Caa by Moody's or CCC by S&P. Such securities, though higher
yielding, are characterized by risk. See "Description of the
Fund--Investment Considerations and Risks" in the Prospectus for a
discussion of certain risks and "Appendix" for a general description of the
Rating Agencies' ratings. Although ratings may be useful in evaluating the
safety of interest and principal payments, they do not evaluate the market
value risk of these securities. The Fund will rely on the Manager's
judgment, analysis and experience in evaluating the creditworthiness of an
issuer.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities and will fluctuate over time. These securities are
considered by the Ratings Agencies to be, on balance, 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 any persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon securities and pay-in-kind bonds in which the
Fund may invest up to 5% of its net assets. Pay-in-kind bonds pay interest
through the issuance of additional securities. Zero coupon securities and
pay-in-kind 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 is sold and,
if the issuer defaults, the Fund may obtain no return at all on its
investment.
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 13 as
fundamental policies, which cannot be changed without approval by the
holders of a majority (as defined in the 1940 Act) of the Fund's outstanding
voting shares. Investment restriction number 14 is not a fundamental policy
and may be changed by a vote of a majority of the Fund's Board members 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 indices, and options on
futures contracts or indices.
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 1940 Act
(which currently limits borrowing to no more than 331 1/3% of the value of
the Fund's total assets). For purposes of this investment restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
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 indices,
and options on futures contracts or indices.
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
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below.
Board Members of the Fund
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is also
a director of Century Business Services, Inc. (formerly International
Alliance Services, Inc.), a provider of various outsourcing functions
for small to medium size businesses, The Noel Group, Inc., a venture
capital company, The Muscular Dystrophy Association, HealthPlan
Services Corporation, a provider of marketing, administrative and risk
management services to health and other benefit programs, Carlyle
Industries, Inc. (formerly, Belding Heminway Company, Inc.), a button
packager and distributor, and Staffing Resources, Inc., a temporary
placement agency. For more than five years prior to January 1995, he
was President, a director and, until August 1994, Chief Operating
Officer of the Manager and Executive Vice President and a director of
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager
and, until August 24, 1994, the Fund's distributor. From August 1994
until December 31, 1994, he was a director of Mellon Bank Corporation.
Mr. DiMartino is 54 years old and his address is 200 Park Avenue, New
York, New York 10166.
DAVID W. BURKE, Board Member. Chairman of the Broadcasting Board of
Governors, an independent board within the United States Information
Agency, since August 1995. From August 1994 through December 31, 1994,
Mr. Burke was a Consultant to the Manager, and from October 1990 to
August 1994, he was 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.
Mr. Burke is 61 years old and his address is Box 654, Eastham,
Massachusetts 02642.
DIANE DUNST, Board Member. 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.
Ms. Dunst is 58 years old and her address is 1172 Park Avenue, New
York, New York 10128.
ROSALIND GERSTEN JACOBS, Board Member. 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. Ms. Jacobs is 72 years old and her address is c/o
Corporate Property Investors, 305 East 47th Street, New York, New York
10017.
JAY I. MELTZER, Board Member. 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. Dr. Meltzer is 69 years old and his address is 903 Park
Avenue, New York, New York 10021.
DANIEL ROSE, Board Member. President and Chief Executive Officer of Rose
Associates, Inc., a New York based real estate development and
management firm. In July 1994, Mr. Rose received a Presidential
appointment to serve as a Director of the Baltic-American Enterprise
Fund, which will make equity investments and loans and provide
technical business assistance to new business concerns in the Baltic
states. He is also Chairman of the Housing Committee of The Real
Estate Board of New York, Inc., and a Board Member of Corporate
Property Investors, a real estate investment company. Mr. Rose is 68
years old and his address is c/o Rose Associates, Inc., 200 Madison
Avenue, New York, New York 10016.
WARREN B. RUDMAN, Board Member. Since January 1993, Partner in the law firm
Paul, Weiss, Rifkind, Wharton & Garrison. Also, Mr. Rudman has served,
since October 1996, as a director of Prime Succession, Inc.; since May
1995, as a director of Collins & Aikman Corporation; since January
1993, as a director of Chubb Corporation and of the Raytheon Company;
and since 1988, Mr. Rudman has served as a trustee of Boston College.
He also serves as Chairman of the President's Foreign Intelligence
Advisory Board (as Vice Chairman, from January 1994 through February
1998); 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. From January 1981 to January 1993, Mr. Rudman served as a
United States Senator from the state of New Hampshire. From January
1993 to December 1994, Mr. Rudman served as Chairman of the Federal
Reserve Bank of Boston. Mr. Rudman is 67 years old and his address is
c/o Paul, Weiss, Rifkind, Wharton & Garrison, 1615 L. Street, N.W.,
Washington, D.C. 20036.
SANDER VANOCUR, Board Member. Since January 1994, Mr. Vanocur has served as
a Visiting Professional Scholar at the Freedom Forum First Amendment
Center at Vanderbilt University. Since January 1992, Mr. Vanocur has
been the President of Old Owl Communications, a full-service
communications firm and, since November 1989, he 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 1977 to December 1991, he was Anchor of the ABC
News program "Business World," a weekly business program on the ABC
television network. Mr. Vanocur is 70 years old and his address is
2928 P Street, N.W., Washington, D.C. 20007.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of
one-half the amount payable to Board members. The aggregate amount of
compensation paid by the Fund to each Board member for the fiscal year ended
October 31, 1997, and by all other funds in the Dreyfus Family of Funds for
which such person is a Board member (the number of which is set forth in
parentheses next to each Board member's total compensation) for the calendar
year ended December 31, 1997 was as follows:
Total Compensation
From Fund and
Aggregate Fund Complex
Name of Board Compensation from Paid to Board
Member the Fund* Member
David W. Burke $5,000 $239,000(51)
Joseph S. DiMartino $6,250 $597,128 (94)
Diane Dunst $5,000 $37,750 (10)
Rosalind Gersten Jacobs $5,000 $95,250 (20)
Jay I. Meltzer $5,000 $37,750 (10)
Daniel Rose $4,500 $76,375 (21)
Warren B. Rudman $5,000 $89,500 (17)
Sander Vanocur $5,000 $87,125 (21)
___________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $1,283 for all Board members as a group.
There ordinarily will be no meetings of shareholders for the purpose of
electing Board members unless and until such time as less than a majority of
the Board members holding office have been elected by shareholders, at which
time the Board members then in office will call a shareholders' meeting for
the election of Board members. Under the 1940 Act, shareholders of record
of not less than two-thirds of the outstanding shares of the Fund may remove
a Board member through a declaration in writing or by vote cast in person or
by proxy at a meeting called for that purpose. The Board is required to
call a meeting of shareholders for the purpose of voting upon the question
of removal of any such Board member 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 Services Plan" remain in effect, the
Board members of the Fund who are not "interested persons" of the Fund, as
defined in the 1940 Act, will be selected and nominated by the Board members
who are not "interested persons" of the Fund.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer, chief compliance officer and a director of the Distributor and
of Funds Distributor Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment
companies advised or administered by the Manager. She is 40 years old.
RICHARD W. INGRAM, Vice President and Assistant Treasurer. Executive Vice
President of the Distributor and Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From March 1994 to November 1995, he was Vice President and
Division Manager for First Data Investor Services Group. From 1989 to
1994, he was Vice President, Assistant Treasurer and Tax Director -
Mutual Funds of The Boston Company. He is 42 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and Funds Distributor, Inc. and an officer of other
investment companies advised or administered by the Manager. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for The Boston Company, Inc. She is 33 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company. From December 1991 to March 1993, he
was employed as a Fund Accountant at The Boston Company, Inc. He is 28
years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., 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. He is 35 years old.
MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer. Senior Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
December, 1989 through November, 1996 he was employed by GE Investments
where he held various financial, business development and compliance
positions. He also served as Treasurer of the GE Funds and as a
Director of GE Investment Services. He is 36 years old.
ELBA VASQUEZ, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc. She has been employed since May
1996 as a Sales Associate in the distribution of World Equity Benchmark
Shares ("WEBS"). From March 1990 to May 1996, she was employed by U.S.
Trust Company of New York. As an officer of U.S. Trust, she held
various positions in the sales and marketing of their proprietary
family of mutual funds. She is 36 years old. Her Address is 200 Park
Avenue, 45th Floor, New York, NY 10166.
KATHLEEN K. MORRISEY, Vice President and Assistant Secretary. Vice President
and Assistant Secretary of Funds Distributor, Inc. Manager of Treasury
Services Administration and an officer of certain investment companies
advised or administered by J.P. Morgan & Co. Incorporated, Montgomery
Asset Management, L.P., and Dresdner RCM Global Investors, Inc. or
their respective affiliates. From July 1994 to November 1995, she was
a Fund Accountant II for Investors Bank & Trust Company. Prior to that
she was a Finance student at Stonehill College in North Easton, MA.
She is 25 years old. Her address is 60 State Street, Boston, MA 02109.
CHRISTOPHER J. KELLEY, Vice President and Assistant Secretary. Vice
President and Senior Associate General counsel of Funds Distributor,
Inc. and Premier Mutual Fund Services, Inc., and an officer of certain
investment companies advised or administered by Harris Trust and
Savings Bank, Waterhouse Asset Management, L.P., or their respective
affiliates. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. He is 33 years old. His address is 60 State Street,
Boston, MA 02109.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares outstanding on February 17, 1998.
As of February 17, 1998, the following entity was known by the Fund to
own 5% or more of the outstanding voting securities of Class A: Boston Safe
Deposit and Trust Company, 1 Cabot Road, Medford MA (9.69%). As of such
date, the following entities were known by the Fund to own 5% or more of the
outstanding voting securities of Class C: Merrill Lynch, Pierce Fenner &
Smith, for the sole benefit of its customers, 4800 Deer Lake Drive,
Jacksonville, FL (34%); First Springfield Securities, for the benefit of
Mary E. Carroll, trustee, 3421 S. Woodland Trail Avenue, Springfield, MO
(7.5%); Donaldson Lufkin Jenrette Securities Corporation, Inc., Jersey City,
NJ (5.03%). Also as of such date, the following entities were known by the
Fund to own 5% or more of the outstanding voting securities of Class R:
Testa & Co. c/o Chase Manhattan Bank, Rochester, NY (78.26%); Trent & Co.
c/o Old Kent Bank, Grand Rapids MI (10.40%); Premier Mutual Fund Services,
Inc., Boston MA (6.15%).
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 or (ii) vote of
a majority (as defined in the 1940 Act) of the outstanding voting securities
of the Fund, provided that in either event the continuance also is approved
by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Manager, by vote cast in person
at a meeting called for the purpose of voting such approval. The Agreement
was approved by shareholders on August 3, 1994, and was last approved by the
Fund's Board, including a majority of the Board members who are not
"interested persons" of any party to the Agreement, at a meeting held on
August 6, 1997. The Agreement is terminable without penalty, on 60 days'
notice, by the Fund's Board 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 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman--Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President--Legal, General Counsel and Secretary; Patrice M. Kozlowski, Vice-
President--Corporate Communications; Mary Beth Leibig, Vice President--Human
Resources; Andrew S. Wasser, Vice President--Information Systems; William V.
Healey, Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank
V. Cahouet and Richard F. Syron, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions, and provides
the Fund with portfolio managers who are authorized by the Board to execute
purchases and sales of securities. The Fund's portfolio managers are
Timothy M. Ghriskey and Richard B. Hoey. The Manager also maintains a
research department with a professional staff of portfolio managers and
securities analysts who provide research services for the Fund and for other
funds advised by the Manager. All purchases and sales are reported for the
Board's review at the meeting subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: taxes, interest, loan commitment fees,
dividends and interest paid on securities sold short, brokerage fees and
commissions, if any, fees of Board members who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
the Manager, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, 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 preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, costs of shareholders' reports and
meetings and any extraordinary expenses. In addition, Class B and Class C
shares are subject to an annual distribution fee and Class A, Class B and
Class C shares are subject to an annual service fee. See "Distribution Plan
and Shareholder Services Plan."
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .75 of 1% of the
value of the Fund's average daily net assets. For the fiscal years ended
October 31, 1995, 1996 and 1997, the management fees paid by the Fund
amounted to $1,953,914, $1,948,566 and $1,996,529, respectively.
The Manager has agreed that if, in any fiscal year, the aggregate
expenses of the Fund, exclusive of taxes, brokerage, interest on borrowings
and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the management fee,
exceed the expense limitation of any state having jurisdiction over the
Fund, the Fund may deduct from the payment to be made to the Manager under
the Agreement, or the Manager will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be estimated
daily, and reconciled and effected or paid, as the case may be, on a monthly
basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor on a
best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Premier Family of Funds, for funds in the Dreyfus Family of Funds and for
certain other investment companies.
For the fiscal years ended October 31, 1995, 1996 and 1997, the
Distributor retained $8,880, $6,137 and $14,319, respectively, from sales
loads on Class A shares.
Sales Loads--Class A. The scale 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 Internal Revenue Code of 1986, as amended
(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.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the current
schedule of sales charges set forth in the Fund's Prospectus at a price
based upon the net asset value of the Fund's Class A shares on October 31,
1997:
Net Asset Value per Share $24.30
Per Share Sales Charge - 5.75%*
of offering price (6.10% of
net asset value per share) $ 1.48
Per share Offering Price to $25.78
the Public
_________________________
* Class A shares purchased by shareholders beneficially owning Class A
shares on November 30, 1996 are subject to a different sales load schedule
as described under "How to Buy Shares--Class A Shares" in the Fund's
Prospectus.
TeleTransfer Privilege. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 p.m., New York time, on any
business day that Dreyfus Transfer, Inc., the Fund's transfer and dividend
disbursing agent (the "Transfer Agent"), and the New York Stock Exchange are
open for business will be credited to the shareholder's Fund account on the
next bank business day following such purchase order. Purchase orders made
after 4:00 p.m., New York time, on any business day the Transfer Agent and
the New York Stock Exchange are open for business, or orders made on
Saturday or any Fund holiday (e.g., when the New York Stock Exchange is not
open for business), will be credited to the shareholder's Fund account on
the second bank business day following such purchase order. To qualify to
use 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 Shares--TeleTransfer Privilege."
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."
Class B and Class C shares are subject to a Distribution Plan and Class
A, Class B and Class C shares are subject to a Shareholder Services Plan.
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the Securities
and Exchange Commission under the 1940 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
has adopted such a plan (the "Distribution Plan") with respect to Class B
and Class C shares, pursuant to which the Fund pays the Distributor for
distributing the Fund's Class B and Class C shares. The Fund's Board
believes that there is a reasonable likelihood that the Distribution Plan
will benefit the Fund and the holders of Class B and Class C shares.
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 Board for its review. In addition, the Distribution Plan provides that
it may not be amended to increase materially the costs which holders of
Class B or Class C shares may bear for distribution pursuant to the
Distribution Plan without the approval of such shares and that other
material amendments of the Distribution Plan must be approved by the Board,
and by the Board members who are not "interested persons" (as defined in the
1940 Act) of the Fund 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 of the Board members 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 of the
Board members cast in person at a meeting called for the purpose of voting
on the Distribution Plan. The Distribution Plan was last so approved by the
Board at a meeting held on August 6, 1997. As to each such Class of shares,
the Distribution Plan may be terminated at any time by vote of a majority of
the Board members who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Distribution Plan or in
any agreements entered into in connection with the Distribution Plan or by
vote of the holders of a majority of such Class of shares.
For the fiscal year ended October 31, 1997, the Fund paid the
Distributor $377,596 with respect to Class B and $1,602 with respect to
Class C 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, Class B and Class C shares. 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 such shareholder accounts. Under the Shareholder Services
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.
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 Board for its review. In addition, the Shareholder
Services Plan provides that material amendments must be approved by the
Fund's Board, and by the Board members who are not "interested persons" (as
defined in the 1940 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 of the Board members cast in person at a
meeting called for the purpose of voting on the Shareholder Services Plan.
The Shareholder Services Plan was last so approved on August 6, 1997. As to
each such Class of shares, the Shareholder Services Plan is terminable at
any time by vote of a majority of the Board members 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 fiscal year ended October 31, 1997, the Fund paid the
Distributor $539,099 with respect to Class A shares, $125,866 with respect
to Class B shares, and $534 with respect to Class C shares pursuant to the
Shareholder Services Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
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. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege on
the next business day after receipt by the Transfer Agent of the redemption
request in proper form. Redemption proceeds ($1,000 minimum) will be
transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder Services
Form, or to a correspondent bank if the investor's bank is not a member of
the Federal Reserve System. Fees ordinarily are imposed by such bank and
borne by the investor. Immediate notification by the correspondent bank to
the investor's bank is necessary to avoid a delay in crediting the funds to
the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive wire
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Share Certificates; Signatures."
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a wire redemption will
be effected as a TeleTransfer transaction through the Automated Clearing
House ("ACH") system unless more prompt transmittal is specifically
requested. Redemption proceeds will be on deposit in the investor's account
in an ACH member bank ordinarily two business days after receipt of the
redemption request. See "Purchase of Shares--TeleTransfer Privilege."
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 holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please contact your Service Agent.
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 Fund's Board reserves the right to make payments in whole or
part in securities (which may include non-marketable securities) or other
assets of the Fund in case of an emergency or any time a cash distribution
would impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of 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. Shares of any Class 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. Exchanges for shares of funds offered without a sales load will be made
without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable sales
load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without a
sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds acquired
by a previous exchange from shares purchased with a sales load, and
additional shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein as
"Purchased Shares") may be exchanged for shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), 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.
E. Shares of funds subject to a contingent deferred sales charge ("CDSC")
that are exchanged for shares of another fund will be subject to the
higher applicable CDSC of the two funds and, for purposes of calculating
CDSC rates and conversion periods, if any, will be deemed to have been
held since the date the shares being exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, the investor's Service Agent acting on the
investor's 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 applicable "No" box on the Account Application,
indicating that the investor specifically refuses this privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephone exchange instructions (including over The Dreyfus Touchr
automated telephone system) 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.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
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 fund into which the exchange is being made.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for shares of the Fund, shares of the same
Class of another fund in the Dreyfus Premier Family of Funds or the Dreyfus
Family of Funds. This Privilege is available only for existing accounts.
With respect to Class R shares held by a Retirement Plan, exchanges may be
made only between the investor's Retirement Plan account in one fund and
such investor's Retirement Plan account in another fund. Shares will be
exchanged on the basis of relative net asset value as described above under
"Fund Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following 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.
Fund Exchanges and the 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 by calling 1-800-554-4611. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or the
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. 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.
Dividend Sweep. Dividend Sweep allows investors to invest
automatically 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 Premier Family of Funds or 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 by a fund may be invested
without imposition of a sales load in shares of other funds
offered without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a
sales load may be invested in 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 by a fund may be invested in
shares of other funds that impose a CDSC 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 IRAs,
spousal IRAs for a non-working spouse, Roth IRAs IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs"), Education IRAs and IRA
"Rollover Accounts") and 403(b)(7) Plans. Plan support services are also
available.
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 acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity 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 $1,000
with no minimum on subsequent purchases. The minimum initial investment is
$750 for Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and rollover
IRAs) and 403(b)(7) Plans with only one participant, and $500 for Dreyfus-
sponsored Education IRAs, with no minimum on subsequent purchases.
Each 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 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. Short-
term investments are carried at amortized cost, which approximates value.
Expenses and fees of the Fund, including the management fee paid by the Fund
and the distribution and shareholder services fees, as applicable, are
accrued daily and taken into account for the purpose of determining the net
asset value of the relevant Class' shares. Because of the differences in
operating expenses incurred by each Class, the per share net asset value of
each Class will differ.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Fund's Board, are valued at fair value as determined
in good faith by the Board. The Fund's Board will review the method of
valuation on a current basis. In making their good faith valuation of
restricted securities, the Board members generally will take the following
factors into consideration: restricted securities which are, or are
convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board if the Board members believe that it no longer
reflects the value of the restricted securities. Restricted securities not
of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will
be based upon considerations deemed relevant by the Fund's Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions
and Taxes."
Management of the Fund believes that the Fund has qualified for the
fiscal year ended October 31, 1997 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. 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. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any
government agency.
Depending upon the composition of the Fund's income, the entire amount
or a portion of the dividends paid by the Fund from net investment income
may qualify for the dividends received deduction allowable to qualifying
U.S. corporate shareholders ("dividends received deduction"). In general,
dividend income of the Fund distributed to qualifying corporate shareholders
will be eligible for the dividends received deduction only to the extent
that the Fund's income consists of dividends paid by U.S. corporations.
However, Section 246(c) of the Code provides that if a qualifying corporate
shareholder has disposed of Fund shares held for less than 46 days, which 46
days generally must be during the 90 day period commencing 45 days before
the shares become ex-dividend, and has received a dividend from net
investment income with respect to such shares, the portion designated by the
Fund as qualifying for the dividends received deduction will not be eligible
for such shareholder's dividends received deduction. In addition, the Code
provides other limitations with respect to the ability of a qualifying
corporate shareholder to claim the dividends received deduction in
connection with holding Fund shares.
The Fund may qualify for and may make an election permitted under
Section 853 of the Code so that shareholders may be eligible to claim a
credit or deduction on their Federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of qualified taxes paid or incurred by the Fund to foreign countries
(which taxes relate primarily to investment income). The Fund may make an
election under Section 853, provided that more than 50% of the value of the
Fund's total assets at the close of the taxable year consists of securities
in foreign corporations, and the Fund satisfies the applicable distribution
provisions of the Code. The foreign tax credit available to shareholders is
subject to certain limitations imposed by the Code.
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 of the Code. Finally, all or
a portion of the gain realized from engaging in "conversion transactions"
may be treated as ordinary income under Section 1258 of the Code.
"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 in the Fund's Prospectus.
Offsetting positions held by the Fund involving certain 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 of the Code. 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." Depending upon which election is made, if
any, the results to the Fund may differ. 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
on straddle positions may be recharacterized as short-term capital gain or
ordinary income.
The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally will apply if the Fund either (1) holds an appreciated
financial position with respect to stock, certain debt obligations, or
partnership interests ("appreciated financial position") and then enters
into a short sale, futures, forward, or offsetting notional principal
contract (collectively, a "Contract") respecting the same or substantially
identical property or (2) holds an appreciated financial position that is a
Contract and then acquires property that is the same as, or substantially
identical to, the underlying property. In each instance, with certain
exceptions, the Fund generally will be taxed as if the appreciated financial
position were sold at its fair market value on the date the Fund enters into
the financial position or acquires the property, respectively. Transactions
that are identified as hedging or straddle transactions under other
provisions of the Code can be subject to the constructive sale provisions.
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. The Fund's portfolio turnover rate for the fiscal years ended October
31, 1996 and 1997 was 147.64% and 123.53%, respectively. 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, 1995, 1996 and 1997, the
Fund paid total brokerage commissions of $1,606,070, $1,099,538 and
$981,266, 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 $1,460,787, $921,004 and $168,718, in fiscal 1995, 1996 and
1997, respectively, none of which was paid to the Distributor.
The aggregate amount of transactions during the fiscal year ended
October 31, 1997 in securities effected on an agency basis through a broker
in consideration of, among other things research services provided was
$37,780,833 and the commissions and concessions related to such transactions
were $46,719.
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 returns for Class A shares for the 1-, 5- and
10-year periods ended October 31, 1997 were 10.72%, 6.33% and 11.93%,
respectively. The average annual total returns for Class B shares for the 1-
year period ended October 31, 1997 and for the period January 15, 1993
(commencement of initial offering of Class B) through October 31, 1997, were
11.05% and 6.72%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value (maximum
offering price in the case of Class A) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 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 or Class C, the maximum applicable CDSC has been
paid upon redemption at the end of the period.
The total return for Class A for the period October 16, 1986
(commencement of operations) through October 31, 1997, based on the maximum
offering price per share, was 209.75%. Based on net asset value per share,
the total return for Class A was 224.32% for this period. The total return
for Class B for the period January 15, 1993 (commencement of initial
offering of Class B) through October 31, 1997, after giving effect to the
maximum applicable CDSC, was 27.98%. Without giving effect to the maximum
applicable CDSC, the total return for Class B was 30.98% for this period.
For Class C shares (after giving effect to the maximum applicable CDSC) and
Class R shares, respectively, for the period September 1, 1995 (commencement
of initial offering of Class C and Class R shares) through October 31, 1997,
total return was 15.47% and 16.17%. Without giving effect to the maximum
applicable CDSC, total return for Class C shares for this period was 15.47%.
Total return is calculated by subtracting the amount of the Fund's net
asset value (maximum offering price in the case of Class A) per share at the
beginning of a stated period from the net asset value (maximum offering
price in the case of Class A) per share at the end of the period (after
giving effect to the reinvestment of dividends and distributions during the
period and any applicable CDSC), and dividing the result by the net asset
value (maximum offering price in the case of Class A) 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 instead of the
maximum offering price per share at the beginning of the period for Class A
shares or without giving effect to any applicable CDSC at the end of the
period for Class B or Class C shares. 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 or Class C shares, which, if
reflected, would reduce the performance quoted.
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., Value Line, Inc., Ibbotson
Associates, 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, retirement planning, college
planning and IRA rollover services. From time to time advertising materials
for the Fund also may refer to Morningstar or Value Line ratings and related
analyses supporting the rating. In addition, advertising material for the
Fund may, from time to time, include biographical information relating to
its portfolio manager and may refer to, or include commentary by the
portfolio manager relating to investment strategy, value investing
generally, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-
of-pocket expenses. For the fiscal year ended October 31, 1997, the Fund
paid the Transfer Agent $144,868. Mellon Bank, N.A., (the "Custodian"), the
Manager's parent, One Mellon Bank Center, Pittsburgh, Pennsylvania 15258,
acts as custodian of the Fund's assets. Under a Custody Agreement with the
Fund, the Custodian holds the Fund's securities and keeps all necessary
accounts and records. For its custody services, the Custodian receives a
monthly fee based on the market value of the Fund's assets held in custody
and receives certain securities transaction charges. For the fiscal year
ended October 31, 1997, the Fund paid the Custodian $58,163.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
The Fund's Annual Report to Shareholders for the fiscal year ended
October 31, 1997 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing therein are incorporated by
reference into this Statement of Additional Information.
APPENDIX
Descriptions of Standard & Poor's Ratings Group ("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.
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