<PAGE>
As filed with the Securities and Exchange Commission on February 14, 1996.
Registration Nos. 33-40771
811-5502
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /___/
Pre-Effective Amendment No. __ /___/
Post-Effective Amendment No. 8 / X /
--- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 /___/
Amendment No. 14 / X /
---- ---
COMSTOCK PARTNERS FUNDS, INC.
----------------------------------
(formerly named Comstock Partners Strategy Fund, Inc.)
(Exact Name of Registrant as Specified in Charter)
10 Exchange Place
Suite 2010
Jersey City, NJ 07302-3913
--------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (201) 332-4436
ROBERT C. RINGSTAD
COMSTOCK PARTNERS FUNDS, INC.
10 Exchange Place
Suite 2010
Jersey City, NJ 07302-3913
--------------------------------------
(Name and Address of Agent for Service)
Copies to:
Gary S. Schpero, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
<PAGE>
------------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after this
Post-Effective Amendment becomes effective.
------------------------------
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
_____ on _________________ pursuant to Rule 485(b)
_____ 60 days after filing pursuant to Rule 485(a)(i)
_____ on _________________ pursuant to Rule 485(a)(1)
__x__ 75 days after filing pursuant to Rule 485(a)(ii)
_____ on _________________ pursuant to Rule 485(a)(ii)
-------------------------------
If appropriate, check the following box:
_____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has previously registered under the Securities Act of
1933 an indefinite number of its shares of Capital Stock, $.001 par value per
share, of all series then existing or thereafter created pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for
its fiscal year ending April 30, 1995 was filed on June 29, 1995.
<PAGE>
EXPLANATORY NOTE
The Prospectus for the Comstock Partners Strategy Fund is incorporated by
reference to the Registrant's filing of definitive copies under Rule 497(c)
of the Securities Act of 1933, as amended (the "Securities Act") of its
Prospectus dated August 1, 1995, and is not affected by this filing.
The Prospectus Supplement for the Comstock Partners Strategy Fund dated
December 15, 1995 is incorporated by reference to the Registrant's filing of
definitive copies under Rule 497(e) of the Securities Act, on February 1,
1995, and is not affected by this filing.
The Prospectus Supplement for the Comstock Partners Strategy Fund dated
February 8, 1996 is incorporated by reference to the Registrant's filing of
definitive copies under Rule 497(e) of the Securities Act, on February 8,
1996, and is not affected by this filing.
The Statement of Additional Information for the Comstock Partners Strategy
Fund is incorporated by reference to the Registrant's filing of definitive
copies under Rule 497(c) of the Securities Act of 1933, as amended (the
"Securities Act") of its Statement of Additional Information dated August 1,
1995, and is not affected by this filing.
The Supplement to the Statement of Additional Information for the Comstock
Partners Strategy Fund dated December 15, 1995 is incorporated by reference
to the Registrant's filing of definitive copies under Rule 497(e) of the
Securities Act, on February 1, 1995, and is not affected by this filing.
The Supplement to the Statement of Additional Information for the Comstock
Partners Strategy Fund dated February 8, 1996 is incorporated by reference to
the Registrant's filing of definitive copies under Rule 497(e) of the
Securities Act, on February 8, 1996, and is not affected by this filing.
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
N-1A Item No. Location Prospectus Caption
- ------------- -------- ------------------------
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis The Fund's Expenses
Item 3. Condensed Financial
Information Financial Highlights;
Certain Information
Regarding Performance
Item 4. General Description of
Registrant Summary; The Fund;
Investment Objective
and Policies;
Investment
Restrictions; Risk
Factors; Management
Arrangements;
Organization and
Capital Stock
Item 5. Management of the Fund Summary; Management
Arrangements
Item 5A. Management's Discussion of
Performance Not Applicable
Item 6. Capital Stock and Other
Securities Summary; Dividends,
Distributions and
Taxes; Organization
and Capital Stock;
Additional Shareholder
Services
Item 7. Purchase of Securities
Being Offered Summary; Purchase of
Fund Shares;
Additional Shareholder
Services; Service and
Distribution Plans;
<PAGE>
Dividends,
Distributions and
Taxes
Item 8. Redemption or Repurchase Summary; Dividends,
Distributions and
Taxes; Purchase and
Redemption of Shares;
Item 9. Pending Legal Proceedings Not Applicable
Statement of
Additional
Part B Location Information Caption
- ------ -------- --------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and
History Not applicable.
Item 13. Investment Objectives and
Policies Additional Information
Concerning Portfolio
Activities; Investment
Restrictions
Item 14. Management of the Fund Management
Arrangements
Item 15. Control Persons and
Principal Holders
of Securities Management
Arrangements
Item 16. Investment Advisory and
Other Services Management
Arrangements;
Shareholder Services;
Service and
Distribution Plans;
Custodian; Transfer
Agent and Dividend
Disbursing Agent;
Experts
Item 17. Brokerage Allocation and
Other Practices Portfolio Transactions
<PAGE>
Item 18. Capital Stock and Other
Securities Capital Stock; Service
and Distribution Plans
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered Purchase of Fund
Shares; Redemption of
Fund Shares;
Shareholder Services;
Net Asset Value
Item 20. Tax Status Additional Information
Concerning Taxes
Item 21. Underwriters Purchase of Fund
Shares; Shareholder
Services; Service and
Distribution Plans
Item 22. Calculation of Performance
Data Performance
Information
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of this
Registration Statement.
<PAGE>
Part A
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
- -------------------------------------------------------------------------------
Subject to Completion, February 13, 1996
-------------------------------------------------------------------------
COMSTOCK PARTNERS CAPITAL VALUE FUND
PROSPECTUS ___________ ___, 1996
Comstock Partners Capital Value Fund (the "Fund") is a separate,
diversified portfolio of Comstock Partners Funds, Inc., an open-end, management
investment company (the "Company"). The Fund's investment objective is to
maximize total return, consisting of capital appreciation and current income.
The Fund invests in a wide range of equity and debt securities and money market
instruments. There can be no assurance that the Fund will achieve its
investment objective. See "Investment Objective and Policies."
Comstock Partners, Inc. serves as the Fund's Investment Adviser.
Shareholder inquiries with respect to the Fund may be made by calling 1-
800-543-6217.
By this Prospectus, the Fund is offering four classes of shares, Class A,
Class B, Class C and Class R, which are described herein. See "Alternative
Purchase Methods."
You can purchase or redeem all classes of shares by telephone using the
TeleTransfer Privilege. See "Purchase of Shares" and "Redemption of Shares."
_______
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
dated ____________ ___, 1996 (which may be revised from time to time),
containing additional information about the Fund (the "Statement of Additional
Information"), has been filed with the Securities and Exchange Commission and is
hereby incorporated by reference into this Prospectus. It is available without
charge and can be obtained by sending your request in writing to 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling 1-800-645-6561.
When telephoning, ask for Operator 144.
_______
AN INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS, AS DESCRIBED UNDER "RISK
FACTORS" IN THE PROSPECTUS SUMMARY AND UNDER "INVESTMENT OBJECTIVE AND
POLICIES," WHICH INVESTORS SHOULD CONSIDER CAREFULLY BEFORE INVESTING. INVESTORS
ARE ADVISED TO READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE
REFERENCE. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. ALL
MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
________________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
________________________________________________________________________________
<PAGE>
2
PROSPECTUS SUMMARY
THE FUND
Comstock Partners Capital Value Fund (the "Fund") is a separate,
diversified portfolio of Comstock Partners Funds, Inc., an open-end, management
investment company (the "Company"). See "The Fund."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to maximize total return, consisting of
capital appreciation and current income. The Fund's investment objective cannot
be changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund's
outstanding shares. The Fund seeks to achieve its investment objective by
following an asset allocation strategy that contemplates shifts, which may be
frequent, among a wide range of investments and market sectors. Comstock
Partners, Inc., as the Fund's investment adviser (the "Investment Adviser"),
will have broad latitude in selecting the class of investments and market
sectors in which the Fund will invest. The Fund will not be managed as a
balanced portfolio and is not required to maintain a portion of its investments
in each of the Fund's permitted investment types at all times. The Fund will
invest in equity securities of domestic and foreign issuers, including common
stocks, preferred stocks, convertible securities and warrants; debt securities
of domestic and foreign issuers, including bonds, debentures and notes; and
domestic and foreign money market instruments. The Fund may invest up to 65% of
its assets in securities of foreign issuers. There can be no assurance that the
Fund will achieve its investment objective. See "Investment Objective and
Policies."
INVESTMENT ADVISER
Comstock Partners, Inc. is the Fund's Investment Adviser and is responsible
for the management of the Fund's investment portfolio. The Investment Adviser
was formed in October 1986 and has served as sub-investment adviser to the
predecessor to the Fund, Dreyfus Capital Value Fund, Inc., since April 30, 1987
and to Dreyfus Variable Investment Fund -- Managed Assets Portfolio since
May 21, 1990. Both are diversified open-end management investment companies
with net assets of approximately $317 million and $24 million, respectively, as
of December 31, 1995. The Investment Adviser has also served as investment
adviser to the Comstock Partners Strategy Fund, a separate, non-diversified
portfolio of the Company, with assets of approximately $301 million, as of
December 31, 1995. In addition, the Investment Adviser provides investment
advisory services through discretionary accounts. It is the publisher of the
COMSTOCK INVESTMENT STRATEGY REVIEW and the COMSTOCK INVESTMENT STRATEGY
COMMENTARY, investment strategy publications furnished to subscribers. Under the
Investment Advisory Agreement, the Company, on behalf of the Fund, pays the
Investment Adviser an annual fee computed daily and paid monthly at the
following annual rate: .40 of 1% of the first $300 million of the Fund's
average daily net assets, .45 of 1% of the Fund's average daily net assets
between $300 million and $750 million, .50 of 1% of the Fund's average daily net
assets between $750 million and $1 billion and .55 of 1% of the Fund's average
daily net assets in excess of $1 billion. See "Management Arrangements."
SUB-INVESTMENT ADVISER AND ADMINISTRATOR
The Dreyfus Corporation is the Fund's sub-investment adviser and
administrator (the "Sub-Investment Adviser and Administrator"). Under the Sub-
Investment Advisory and Administration Agreement, The Dreyfus Corporation will
manage the short-term cash and cash-equivalent investments of the Fund and
provide investment research and other advice regarding the Fund's portfolio. In
addition, The Dreyfus Corporation will provide general advice regarding economic
factors and trends and provide certain administrative services to the Fund. For
its services, the Sub-Investment Adviser and Administrator receives from the
Company, on behalf of the Fund, an annual fee computed daily and paid monthly at
the following annual rate: .35 of 1% of the first $300 million of the Fund's
average daily net assets, .30 of 1% of the Fund's average daily net assets
between $300 million and $750 million, .25 of 1% of the Fund's average daily net
assets between $750 million and $1 billion and .20 of 1% of the Fund's average
daily net assets in excess of $1 billion. See "Management Arrangements."
<PAGE>
3
PURCHASE OF SHARES
The Fund offers you four methods of purchasing Fund shares. Orders for
purchases of Class R shares, however, may be placed only for certain eligible
investors as described below. If you are not eligible to purchase Class R
shares, you may choose from Class A, Class B and Class C the Class of shares
that best suits your needs, given the amount of your purchase, the length of
time you expect to hold your shares and any other relevant circumstances. Each
Fund share represents an identical pro rata interest in the Fund's investment
portfolio.
Class A shares are sold at net asset value per share plus a maximum initial
sales charge of 4.50% of the public offering price imposed at the time of
purchase (which may be reduced or waived for certain purchases). See "Purchase
of Fund Shares." These shares are subject to an annual service and distribution
fee at the rate of .25 of 1% of the value of the average daily net assets of
Class A. See "Service and Distribution Plans."
Class B and Class C shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire purchase
price is immediately invested in the Fund. Class B shares are subject to a
maximum 4% contingent deferred sales charge ("CDSC"), which is assessed only if
you redeem Class B shares within six years of purchase. Class C shares are
subject to a 1% CDSC, which is assessed only if you redeem Class C shares within
one year of purchase. See "Purchase of Fund Shares" and "Redemption of Shares."
Class B and Class C shares also are subject to an annual service fee at the rate
of .25 of 1% of the value of the average daily net assets of those Classes and
an annual distribution fee at the rate of .75 of 1% of the value of the average
daily net assets of those Classes. See "Service and Distribution Plans." The
distribution and service fees paid by Class B and Class C will cause such
Classes to have a higher expense ratio and to pay lower dividends than Class A.
Approximately six years after the date of purchase, Class B shares automatically
will convert to Class A shares, based on the relative net asset values for
shares of each such Class, and will no longer be subject to the Class B service
and distribution fees, but will be subject to the Class A service and
distribution fee. Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted on a pro rata
basis together with other Class B shares, in the proportion that a shareholder's
Class B shares converting to Class A shares bears to the total Class B shares
not acquired through the reinvestment of dividends and distributions.
Class R shares may not be purchased directly by individuals, although
eligible institutions may purchase Class R shares for certain accounts
maintained by individuals. Class R shares are sold at net asset value per share
only to institutional investors acting for themselves or in a fiduciary,
advisory, agency, custodial or similar capacity for qualified or non-qualified
employee benefit plans, including pension, profit-sharing, SEP-IRAs and other
deferred compensation plans, whether established by corporations, partnerships,
non-profit entities or state and local governments, but not including IRAs or
IRA "Rollover Accounts." Class R shares are not subject to an annual service fee
or distribution fee.
REDEMPTION OF SHARES
The Fund redeems each Class of its shares at its respective next determined
net asset value subject, in the case of Class B and Class C shares, to any
applicable CDSC. The Fund imposes no charges (other than any applicable CDSC)
when shares are redeemed. Service Agents or other institutions may charge their
clients a nominal fee for effecting redemptions of Fund shares. See "Redemption
of Shares" and "Net Asset Value."
DIVIDENDS AND DISTRIBUTIONS
The Fund ordinarily pays dividends from net investment income and
distributes net realized securities gains, if any, once a year, but it may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), in
all events in a manner consistent with the provisions of the 1940 Act. The Fund
will not make distributions from net realized securities gains unless capital
loss carryovers, if any, have been utilized or have expired. Shareholders of
the Fund will receive dividends and distributions on their
<PAGE>
4
shares in additional shares of the same Class (without a sales charge) or may
elect to receive all dividends and distributions in cash. See "Dividends,
Distributions and Taxes."
RISK FACTORS
There is no assurance that the Fund will achieve its investment objective,
and investment in the Fund should not be considered a complete investment
program. Investors should note that the Fund has the ability to invest in a wide
range of securities and instruments, and the Investment Adviser may
substantially change the composition of the Fund's investment portfolio from
time to time.
The Fund is not subject to any limit on the percentage of its assets that
may be invested in debt securities having a certain rating. Thus, it is
possible that a substantial portion of the Fund's assets may be invested in debt
securities that are unrated or rated in the lowest categories of the recognized
rating agency (I.E. securities rated C by Moody's Investors Service, Inc.
("Moody's") or D by Standard & Poor's Ratings Group, a division of The McGraw
Hill Companies, Inc. ("S&P"). Securities that are rated below Baa/BBB and
comparable unrated securities are commonly referred to as "junk bonds." Normally
such securities provide yields superior to those of more highly rated
securities, but involve greater risks (including the possibility of default or
bankruptcy of the issuer) and are regarded as speculative in nature. The market
price and yield of certain lower rated debt securities are more volatile than
those of higher rated securities and tend to be more sensitive than to economic
conditions, including interest rate fluctuations, than are higher rated
securities. The Fund intends to invest less than 35% of its assets in debt
securities rated Ba or lower by Moody's or BB or lower by S&P.
The Fund may invest up to 65% of its assets in foreign securities, including
securities of emerging market issuers. The Fund's investment in foreign and
emerging market securities involves certain other considerations and risks not
typically associated with investing in domestic securities, including greater
price volatility, uncertainties regarding future social, political and economic
developments, the possible imposition of foreign withholding or brokerage taxes
or exchange controls, risks of seizure or expropriation, the availability of
less information than is generally available in the U.S. and a lack of uniform
accounting and auditing standards, higher transaction costs and possible delays
or problems with settlement, limited liquidity and relatively small market
capitalization of securities markets, high rates of inflation and interest, less
government supervision of exchanges, brokers and issuers, difficulty in
enforcing contractual obligations, and the possible adverse effects of changes
in the exchange rates of foreign currencies in which the Fund's investments may
be denominated.
The Fund utilizes certain investment strategies commonly referred to as
derivatives, such as trading in futures, options and foreign currencies, for
speculative purposes (I.E. to seek to generate additional income or gains)
and/or to hedge against either a decline in the value of certain securities
owned by the Fund or an increase in the price of securities which the Fund plans
to purchase. Derivatives often fluctuate in value more than the securities or
other instruments on which they are based, and relatively small changes in the
value of the underlying securities or instruments may have significantly larger
effects on the value of derivatives held by the Fund. Derivatives may entail
the risk of loss of the entire amount invested or, in certain cases, losses in
excess of the amount invested. A derivative utilized for hedging purposes may
limit the amount of potential gain on the related transaction or may result in
greater losses than if the derivative had not been used. See "Investment
Objectives and Policies--Certain Additional Investments and Investment
Strategies."
In addition to the instruments and strategies described above, the Fund may
invest in a wide range of equity and debt securities as well as participations
and assignments, stripped mortgage-backed securities, structured investments,
forward commitments, and illiquid or restricted securities, and may lend or sell
short portfolio securities and enter into repurchase agreements, each of which
involves certain additional risks. For a more complete discussion of the risks
associated with an investment in the Fund, see "Investment Objective and
Policies" and "Risk Factors."
THE FUND'S EXPENSES
<PAGE>
5
The following expense table is provided to assist investors in
understanding the various costs and expenses that an investor will incur either
directly or indirectly as a holder of Class A, Class B, Class C and Class R
shares of the Fund. The amounts listed are estimates of the costs and expenses
to be borne by shareholders of the Fund for its initial fiscal year based
upon average net assets equal to that of its predecessor, the Dreyfus
Capital Value Fund, for its fiscal year ended September 30, 1995.
FEE TABLE
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS R
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)....................... 4.50% None None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)......... None* 4.00% 1.00% None
ANNUAL FUND OPERATING EXPENSES (as a
percentage of average daily net assets)
Management Fees........................................... .75% .75% .75% .75%
12b-1 Fees**................................................... .25% 1.00% 1.00% None
Other Expenses***.............................................. .69% .69% .69% .69%
Total Fund Operating Expenses.................................. 1.69% 2.44% 2.44% 1.44%
<CAPTION>
EXAMPLE
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) except where noted,
redemption at the end of each time period: CLASS A CLASS B CLASS C CLASS R
<S> <C> <C> <C> <C>
1 YEAR......................................................... $61 $65/$25+ $34/$25+ $15
3 YEARS........................................................ $96 $106/$76+ $76 $46
5 YEARS........................................................ $133 $150/$130+ $130 $79
10 YEARS....................................................... $236 $242++ $278 $172
</TABLE>
* A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
** Includes service and distribution fees payable pursuant to the Fund's Class
A, Class B and Class C Service and Distribution Plans. See "Service and
Distribution Plans."
*** "Other Expenses" includes custodial and transfer agency fees, certain
shareholder administrative fees, insurance, legal and accounting fees,
printing and mailing costs, registration fees, interest expense and
dividends on securities sold short, and fees payable to directors
who are not affiliated with the Investment Adviser, the Sub-Investment
Adviser or the Distributor.
+ Assuming no redemption of shares.
++ Ten-year figure assumes conversion of Class B shares to Class A shares at
end of sixth year following the date of purchase.
The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear, whether
directly or indirectly, the payment of which will reduce investors' investment
return on an annual basis. The information in the foregoing table does not
reflect any fee waivers or expensive reimbursement arrangements that may be in
effect. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. MOREOVER,
WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S PERFORMANCE WILL VARY
AND MAY RESULT IN A RETURN GREATER OR LESS THAN 5%. For a more complete
discussion of the Fund's fees and expenses, see "Management Arrangements" and
"Service and Distribution Plans."
Long-term holders of mutual fund shares which bear Rule 12b-1 fees, such as
the Fund's Class A, Class B and Class C shares, may pay more than the economic
equivalent of the maximum front-end sales charge permitted by rules of the
National Association of Securities Dealers, Inc. Certain Service Agents (as
defined below) may charge their clients direct fees for effecting transactions
in Fund shares; such fees are not reflected in the foregoing tables. See
"Management Arrangements," "Purchase of Fund Shares," "Redemption of Shares" and
"Service and Distribution Plans."
The Fund understands that banks, brokers, dealers or other financial
institutions (including Mellon Bank, N.A., the parent company of the
Sub-Investment Adviser, and its affiliates) (collectively, "Service Agents") may
charge fees
<PAGE>
6
to their clients who are owners of Fund shares for various services provided in
connection with a client's account. These fees would be in addition to any
amounts received by a Service Agent under its Selling Agreement ("Agreement")
with the Distributor.
FINANCIAL HIGHLIGHTS
The following per share data and ratios, which should be read in
conjunction with the financial statements contained in the Fund's Statement of
Additional Information, set forth certain information concerning the investment
results for a Class A, Class B, Class C or Class R share of the Dreyfus Capital
Value Fund, Inc. (the "Dreyfus Capital Value Fund"), the predecessor to the
Fund, outstanding throughout the periods presented, as applicable. Past results
are not predictive of future results. The financial information in the following
table has been audited by Ernst & Young LLP. Financial statements for the year
ended September 30, 1995 and the report of Ernst & Young LLP thereon are
included in the Fund's Statement of Additional Information.
<PAGE>
7
<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED SEPTEMBER 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1986(1)(2) 1987(1) 1988(1) 1989(1) 1990(1) 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period.... $ 7.25 $ 9.54 $ 12.84 $ 12.68 $ 14.42 $ 15.08 $ 12.97 $ 12.41 $ 11.42 $ 11.88
INVESTMENT OPERATIONS:
Investment income
net(4)................. .03 .07 .58 .90 .89 .73 .40 .24 .24 .36
Net realized and
unrealized gain (loss)
on investments(4)...... 2.26 3.59 (.18) 1.60 .61 (.89) (.39) (.62) .46 (1.37)
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS............. 2.29 3.66 .40 2.50 1.50 (.16) .01 (.38) .70 (1.01)
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS:
Dividends from
investment income
net(4)................. -- (.03) (.15) (.76) (.84) (.99) (.57) (.61) (.24) (.26)
Dividends from net
realized gain on
investments(4)......... -- (.33) (.41) -- -- (.96) -- -- -- --
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS...... -- (.36) (.56) (.76) (.84) (1.95) (.57) (.61) (.24) (.26)
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period................. $ 9.54 $ 12.84 $ 12.68 $ 14.42 $ 15.08 $ 12.97 $ 12.41 $ 11.42 $ 11.88 $ 10.61
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT
RETURN(5).............. 31.59%(6) 39.72% 3.29% 20.95% 10.53% (.70%) (.02%) (2.70%) 6.14% (8.58%)
RATIOS/ SUPPLEMENTAL DATA:
Ratio of operating
expenses to average
net assets............. 1.47%(6) 1.50% 1.24% 1.22% 1.20% 1.19% 1.19% 1.23% 1.21% 1.24%
Ratio of interest
expense and dividends
on securities
sold short to average
net assets............. -- .15% .13% .03% .26% .49% .39% .45% .39% .45%
Ratio of net investment
income to average net
assets................. .45%(6) 2.25% 6.08% 6.93% 6.64% 5.58% 2.83% 1.94% 2.06% 3.61%
Decrease reflected in
above expense ratios
due to expense
reimbursements......... .84%(6) .29% -- -- -- -- -- -- -- --
Portfolio Turnover Rate.. 140.99% 102.16% 56.31% 19.46% 62.84% 154.07% 344.29% 41.78% 45.57% 54.70%
Net Assets, end of
period (000's Omitted). $ 9,444 $139,796 $502,442 $607,192 $741,267 $755,450 $537,392 $412,316 $402,708 $271,052
<CAPTION>
CLASS B SHARES
YEAR ENDED SEPTEMBER 30,
- --------------------------------------------------------------
1993(3) 1994 1995
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period.... $ 10.58 $ 11.32 $ 11.69
INVESTMENT OPERATIONS:
Investment income net(4). .03 .23 .31
Net realized and
unrealized gain (loss)
on investments(4)...... .71 .38 (1.38)
------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS............. .74 .61 (1.07)
------- -------- --------
DISTRIBUTIONS:
Dividends from
investment income
net(4)................. -- (.24) (.21)
Dividends from net
realized gain on
investments(4)......... -- -- --
------- -------- --------
TOTAL DISTRIBUTIONS...... -- (.24) (.21)
------- -------- --------
Net asset value, end of
period................. $ 11.32 $ 11.69 $ 10.41
------- -------- --------
------- -------- --------
TOTAL INVESTMENT
RETURN(5).............. 6.99%(6) 5.35% (9.27%)
RATIOS/ SUPPLEMENTAL DATA:
Ratio of operating
expenses to average
net assets............. 1.49%(6) 1.99% 1.99%
Ratio of dividends and
interest on securities
sold short to average
net assets............. .31%(6) .40% .45%
Ratio of net investment
income to average net
assets................. .83%(6) 1.39% 2.86%
Decrease reflected in
above expense ratios
due to expense
reimbursements......... -- -- --
Portfolio Turnover Rate.. 41.78% 45.57% 54.70%
Net Assets, end of
period 000's Omitted).. $ 30,378 $108,532 $ 87,847
(1) Per share data restated to reflect a 100% stock dividend at the close
of business on February 16, 1990.
(2) From October 10, 1985 (commencement of operations) to September 30,
1986.
(3) From January 15, 1993 (commencement of initial offering) to September
30, 1993.
(4) Per share data for 1986 and 1987 has been restated for comparative
purposes.
(5) Exclusive of sales load.
(6) Not annualized.
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
Period Ended September 30, 1995(1)
------------------ ---------------
Class C Class R
------------------ ---------------
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $10.64 $10.84
------ ------
INVESTMENT OPERATIONS:
Investment income-net .02 .04
Net realized and unrealized (loss) on
investments (.25) (.26)
------ ------
TOTAL FROM INVESTMENT OPERATIONS (.23) (.22)
------ ------
DISTRIBUTIONS:
Dividends from investment income-net -- --
Dividends from net realized gain on
investments -- --
------ ------
TOTAL DISTRIBUTIONS -- --
------ ------
Net asset value, end of period $10.41 $10.62
------ ------
TOTAL INVESTMENT RETURN(2) (2.26)%(3) (2.03)%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average
net assets .26%(3) .14%(3)
Ratio of interest expense and dividends on
securities sold short to average net assets .06%(3) .04%(3)
Ratio of net investment income to average
net assets .23%(3) .38%(3)
Decrease reflected in above expense ratios
due to expense reimbursements -- --
Portfolio Turnover Rate 54.70% 54.70%
Net Assets, end of period (000's omitted) $1.00 $1.00
- ---------------
(1) From August 28, 1995 (commencement of initial offering) to September 30,
1995.
(2) Exclusive of sales load.
(3) Not annualized.
</TABLE>
Further information about the Fund's performance is contained in the Fund's
annual report which may be obtained without charge by writing to the address or
calling the number set forth on the cover page of this Prospectus.
ALTERNATIVE PURCHASE METHODS
The Fund offers four methods of purchasing Fund shares. Orders for
purchases of Class R shares, however, may be placed only for certain eligible
investors as described below. If you are not eligible to purchase Class R
shares, you may chose from Class A, Class B, or Class C shares the Class of
shares that best suits your needs, given the amount of purchase, the length of
time you expect to hold the shares, and any other relevant circumstances. Each
Fund share represents an interest in the Fund in proportion to its net asset
value.
Class A shares are sold at net asset value per share plus a maximum initial
sales charge of 4.50% of the public offering price imposed at the time of
purchase. The initial sales charge may be reduced or waived for certain
purchases. See "Purchase of Fund Shares." Class A shares are subject to an
annual 12b-1 fee at the rate of .25 of 1% of the value of the average daily net
assets of Class A. See "Service and Distribution Plans."
Class B shares are sold at net asset value per share with no initial sales
charge at the time of purchase; as a result, the entire purchase price is
immediately invested in the Fund. Class B shares are subject to a maximum 4%
CDSC, which is assessed only if you redeem Class B shares within six years of
purchase. See "Purchase of Fund Shares" and "Redemption of Shares." Pursuant to
the Class B Service and Distribution Plan, these shares are subject to an annual
service fee at the rate of .25 of l% of the value of the average daily net
assets of Class B. In addition, Class B shares are subject to an annual
distribution fee at the rate of .75 of 1% of the value of the average daily net
assets of Class B.
<PAGE>
9
See "Service and Distribution Plans." The distribution fee paid by Class B will
cause such Class to have a higher expense ratio and to pay lower dividends than
Class A. Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative net asset
values for shares of each such Class, and will no longer be subject to the Class
B service and distribution fees, but will be subject to the Class A service and
distribution fee. Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted on a pro rata
basis together with other Class B shares, in the proportion that a shareholder's
Class B shares converting to Class A shares bears to the total Class B shares
not acquired through the reinvestment of dividends and distributions.
Class C shares are sold at net asset value per share, and are subject to a
1% CDSC, which is assessed only if Class C shares are redeemed within one year
of purchase. See "Redemption of Shares -- Contingent Deferred Sales Charge --
Class C shares." Class C shares are subject to an annual distribution fee at
the rate of .75 of 1% of the value of the average daily net assets of Class C.
Class C shares are also subject to an annual service fee at the rate of .25 of
1% of the value of the average daily net assets of Class C. Class C shares also
bear additional incremental shareholder administrative expenses resulting from
the deferred sales charge arrangements. See "The Fund's Expenses" and "Service
and Distribution Plans -- Class C shares." The fees and expenses paid by Class C
will cause such Class to have a higher expense ratio and to pay lower dividends
than Class A.
Class R shares may not be purchased directly by individuals, although
eligible institutions may purchase Class R shares for certain accounts
maintained by individuals. Class R shares are sold at net asset value per share
only to institutional investors acting for themselves or in a fiduciary,
advisory, agency, custodial or similar capacity for qualified or non-qualified
employee benefit plans, including pension, profit-sharing, SEP-IRAs and other
deferred compensation plans, whether established by corporations, partnerships,
non-profit entities or state and local governments, but not including IRAs or
IRA "Rollover Accounts." Class R shares are not subject to an annual service fee
or distribution fee.
The decision as to which Class of shares is more beneficial to you depends
on the amount and the intended length of your investment. If you are not
eligible to purchase Class R shares, you should consider whether, during the
anticipated life of your investment in the Fund, the accumulated distribution
fee and CDSC, if any, on Class B or Class C shares would be less than the
initial sales charge on Class A shares purchased at the same time, and to what
extent, if any, such differential would be offset by the return of Class A.
Additionally, investors qualifying for reduced initial sales charges who expect
to maintain their investment for an extended period of time might consider
purchasing Class A shares because the accumulated continuing distribution fees
on Class B or Class C shares may exceed the initial sales charge on Class A
shares during the life of the investment. Finally, you should consider the
effect of the CDSC period and any conversion rights of the Classes in the
context of your own investment time frame. For example, while Class C shares
have a shorter CDSC period than Class B shares, Class C shares do not have a
conversion feature, and, therefore, are subject to an ongoing distribution fee.
Thus, Class B shares may be more attractive than Class C shares to investors
with longer term investment outlooks. Generally, Class A shares may be more
appropriate for investors who invest $100,000 or more in Fund shares, but will
not be appropriate for investors who invest less than $50,000 in Fund shares.
THE FUND
The Fund is a separate, diversified portfolio of the Company, an open-end,
management investment company registered under the 1940 Act. The Company was
incorporated under the laws of the State of Maryland on March 14, 1988 as
Comstock Partners Strategy Fund, Inc., and commenced operations in May of 1988
as a non-diversified, closed-end investment company. The Company converted to an
open-end investment company effective as of August 1, 1991. On February 8,
1996, (i) the Company changed its name to Comstock Partners Funds, Inc., (ii)
Comstock Partners Strategy Fund, the Company's existing portfolio, became a
separate portfolio of the Company and (iii) the Fund was organized as a new
portfolio of the Company. The Company has entered into an agreement pursuant to
which, and subject to certain conditions, the Fund will acquire all of the
assets, subject to the liabilities (whether contingent or otherwise) of the
Dreyfus Capital Value Fund in exchange for shares in the Fund (the
"Reorganization"). The Fund will not commence operations until the consummation
of the Reorganization.
<PAGE>
10
The Fund's principal office is located at 10 Exchange Place, Suite 2010,
Jersey City, New Jersey 07302-3913.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to maximize total return, consisting of
capital appreciation and current income. The Fund's investment objective cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. There can be no assurance that the
Fund's investment objective will be achieved.
The Fund seeks to achieve its investment objective by following an asset
allocation strategy that contemplates shifts, which may be frequent, among a
wide range of investments and market sectors. The Fund will invest in equity
securities of domestic and foreign issuers, including common stocks, preferred
stocks, convertible securities and warrants; debt securities of domestic and
foreign issuers, including bonds, debentures and notes; and domestic and foreign
money market instruments. The Fund may invest up to 65% of its assets in
securities of foreign issuers.
The Investment Adviser has broad latitude in selecting the class of
investments and market sectors in which the Fund will invest. The Fund will not
be managed as a balanced portfolio and is not required to maintain a portion of
its investments in each of the Fund's permitted investment types at all times.
Thus, during the course of a business cycle, for example, the Fund may invest
solely in equity securities, debt securities or money market instruments, or in
a combination of these classes of investments. The asset allocation mix for the
Fund will be determined by the Investment Adviser at any given time in light of
its assessment of current economic conditions and investment opportunities. The
asset allocation mix selected will be a primary determinant of the Fund's
investment performance.
EQUITY AND DEBT SECURITIES
The Fund intends to invest in domestic and foreign equity and debt
securities. The Fund generally seeks to invest in securities that the Investment
Adviser has determined offer above average potential for total return. In making
this determination, the Investment Adviser takes into account factors including
price-earnings ratios, cash flow and the relationship of asset value to market
value of the securities. The Fund will be alert to companies engaged in
restructuring efforts, such as mergers, acquisitions and divestitures of less
profitable units.
The Fund typically purchases a debt security if the Investment Adviser
believes that the yield and potential for capital appreciation of the security
are sufficiently attractive in light of the risks of ownership of the security.
In determining whether the Fund should invest in particular debt securities, the
Investment Adviser considers factors such as: the price, coupon and yield to
maturity; its assessment of the credit quality of the issuer; the issuer's
available cash flow and the related coverage ratios; the property, if any,
securing the obligation; and the terms of the debt securities, including the
subordination, default, sinking fund and early redemption provisions. It also
will review the ratings, if any, assigned to the securities by Moody's or S&P or
other recognized rating agencies. The judgment of the Investment Adviser as to
credit quality of a debt security may differ, however, from that suggested by
the ratings published by a rating service.
The Fund is not subject to any limit on the percentage of its assets that
may be invested in debt securities having a certain rating. Thus, it is possible
that a substantial portion of the Fund's assets may be invested in debt
securities that are unrated or rated in the lowest categories of the recognized
rating services (I.E., securities rated C by Moody's or D by S&P). Low-rated and
unrated securities have special risks relating to the ability of the Fund to
receive timely, or perhaps ultimate, payment of principal and interest. They are
considered to have speculative characteristics and to be of poor quality; some
obligations in which the Fund may invest, such as debt securities rated D by
S&P, may be in default. The Fund intends to invest less than 35% of its assets
in debt securities rated Ba or lower by Moody's and BB or lower by S&P. See
"Risk Factors" for a discussion of certain risks.
<PAGE>
11
The Fund generally invests in United States equity and debt securities,
including convertible securities, that are listed on securities exchanges or
traded in the over-the-counter market. Foreign securities in which the Fund may
invest may be listed on foreign securities exchanges or traded in the over-the
- -counter market. The Fund may invest in companies whose principal activities are
in, or governments of, emerging markets. For further information about certain
portfolio securities, see "Certain Additional Investments and Investment
Strategies" below.
Equity securities include common and preferred stock (including convertible
preferred stock), depositary receipts, equity interests in trusts, partnerships,
joint ventures or similar enterprises and equity warrants and rights. Preferred
stock has a preference over common stock in liquidation and generally in
dividends as well, but is subordinated to the liabilities of the issuer in all
respects. Preferred stock may or may not be convertible into common stock.
Equity warrants and rights are securities permitting, but not obligating, their
holder to subscribe for other equity securities. Warrants and rights do not
carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holder to purchase, and they do not represent
any rights in the assets of the issuer. As a result, an investment in warrants
or rights may be considered speculative.
The Fund also may purchase to a limited extent securities representing the
right to receive the capital appreciation above a certain amount, and other
securities representing the right to receive dividends and all other attributes
of beneficial ownership, in respect of an entity's common stock or other similar
instrument. These securities typically are sold as shares in unit investment
trusts. The percentage of the Fund's assets that may be invested in shares of
unit investment trusts is subject to the limitations set forth in the 1940 Act.
The money market instruments in which the Fund may invest include: U.S.
Government securities; bank obligations, including certificates of deposit, time
deposits and bankers' acceptances and other short-term obligations of domestic
or foreign banks, domestic savings and loan associations and other banking
institutions having total assets in excess of $1 billion; commercial paper of
any rating; and repurchase agreements involving U.S. Government securities. The
Fund may invest up to 100% of its assets in money market instruments, but at no
time will the Fund's investments in bank obligations, including time deposits,
exceed 25% of its assets. See "Certain Additional Investors and Investment
Strategies" below.
FOREIGN SECURITIES
The Fund may invest in both United States and foreign debt and equity
securities, including securities of emerging market issuers. The Fund may invest
up to 65% of its assets in any country when consistent with the Fund's
investment policies, including, where applicable, its credit quality standards.
Investing in foreign and emerging market securities involves considerations and
certain risks not typically associated with investing in United States
securities. See "Risk Factors."
_______
In many instances, the Investment Adviser will rely on ratings of debt
securities and preferred stock in making its investment decisions. See the
Statement of Additional Information for a description of the rating policies of
Moody's and S&P. In analyzing unrated debt securities or preferred stock, the
Investment Adviser may consider the issuer's experience and managerial strength,
changing financial condition, borrowing requirements or debt maturity schedules,
and its responsiveness to changes in business conditions and interest rates. The
Investment Adviser may also consider relative values based on anticipated cash
flow, interest or dividend coverage, asset coverage and earnings prospects.
CERTAIN ADDITIONAL INVESTMENTS AND INVESTMENT STRATEGIES
The Fund may also make certain additional investments and employ certain
other investment strategies and techniques as set forth below:
<PAGE>
12
LEVERAGE THROUGH BORROWING. The Fund may borrow for investment purposes up
to 33 1/3% of the value of its total assets. This borrowing, which is known as
leveraging, generally will be unsecured, except to the extent the Fund enters
into reverse repurchase agreements described below. Leveraging will exaggerate
the effect on net asset value of any increase or decrease in the market value of
the Fund's portfolio. Money borrowed for leveraging will be subject to interest
costs which may or may not be recovered by appreciation of the securities
purchased; in certain cases, interest costs may exceed the return received on
the securities purchased.
Among the forms of borrowing in which the Fund may engage is the entry into
reverse repurchase agreements with banks, brokers or dealers. These transactions
involve the transfer by the Fund of an underlying debt instrument in return for
cash proceeds based on a percentage of the value of the security. The Fund
retains the right to receive interest and principal payments on the security. At
an agreed upon future date, the Fund repurchases the security at principal, plus
accrued interest.
SHORT SELLING. The Fund may make short sales, which are transactions in
which the Fund sells a security it does not own in anticipation of a decline in
the market value of that security. To complete such a transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund then is obligated to
replace the security borrowed by purchasing it at the market price at the time
of replacement. The Fund will incur a loss as a result of the short sale if the
price of the security increases between the date of the short sale and the date
on which the Fund replaces the borrowed security. The Fund will realize a gain
if the security declines in price between those dates.
The Fund may purchase call options to provide a hedge against an increase
in the price of a security sold short by the Fund. When the Fund purchases a
call option it has to pay a premium to the person writing the option and a
commission to the broker selling the option. If the option is exercised by the
Fund, the premium and the commission paid may be more than the amount of the
brokerage commission charged if the security were to be purchased directly. See
"Call and Put Options on Specific Securities" below.
No securities will be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Fund's net assets. The Fund may not sell short the
securities of any single issuer listed on a national securities exchange to the
extent of more than 5% of the value of the Fund's net assets. The Fund may not
sell short the securities of any class of an issuer to the extent, at the time
of the transaction, of more than 5% of the outstanding securities of that class.
In addition to the short sales discussed above, the Fund may make short
sales "against the box," a transaction in which the Fund enters into a short
sale of a security which the Fund owns. The Fund at no time will have more than
15% of the value of its net assets in deposits on short sales against the box.
DERIVATIVES TRANSACTIONS -- OPTIONS, FUTURES AND CURRENCIES. The Fund is
authorized to use certain investment strategies commonly referred to as
derivatives, such as trading in options, futures and foreign currencies. The
Fund may write covered put and call options on securities and stock indices and
purchase put and call options on securities and stock indices for speculative
purposes or for the purpose of hedging its portfolio. In addition, through the
writing of covered options and the purchase of options and the purchase and sale
of stock index futures contracts, interest rate futures contracts and options
thereon, the Fund at times may speculate or seek to hedge against either a
decline in the value of securities owned by it or an increase in the price of
securities which it plans to purchase, PROVIDED that with respect to all futures
contracts traded by the Fund, the Fund will establish a segregated account
consisting of cash or cash equivalents in an amount equal to the total market
value of such futures contracts less the amount of initial margin on deposit for
such contracts. The Fund may also purchase put and call options and write
covered put and call options on foreign currencies and enter into
exchange-traded contracts for the purchase and sale for future delivery of
foreign currencies for speculative purposes or to hedge against declines in the
dollar value of foreign portfolio securities and against increases in the dollar
value of foreign securities to be acquired. The Fund is not a commodity pool
and all futures and related options transactions engaged in by the Fund will
constitute bona fide hedging or other permissible transactions in accordance
with the Commodity Exchange Act, as amended, and the rules and regulations
promulgated
<PAGE>
13
by the Commodity Futures Trading Commission; PROVIDED, HOWEVER, that the Fund
may enter into futures contracts or options thereon for purposes other than bona
fide hedging if, immediately thereafter, the sum of the amount of its initial
margin and premiums on open contracts and option would not exceed 5% of the
liquidation value of the Fund's portfolio; PROVIDED FURTHER, that in case of an
option that is in-the-money at the time of the purchase, the in-the-money amount
may be excluded in calculating the 5% limitation. Because the 5% limitation
applies only at the time the Fund enters into a futures contract or option
thereon, the value of futures contracts and options thereon may be significantly
more or less than 5% of the value of the Fund's portfolio. The Fund may also
enter into forward foreign currency exchange contracts ("forward contracts") for
speculative purposes or to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the United States dollar and foreign
currencies. In addition, the Fund may engage in cross-hedging transactions with
respect to forward contracts whereby, for example, if the Fund believes that a
foreign currency may suffer a substantial decline against the United States
dollar, it may enter into a forward contract to sell an amount of the foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency.
The Fund will not invest more than 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may not write
(I.E., sell) covered call and put option contracts in excess of 20% of the value
of its net assets at the time such option contracts are written.
The value of a derivative instrument depends largely upon price movements
in the securities or other instruments upon which it is based. Therefore, many
of the risks applicable to trading the underlying securities or other
instruments are also applicable to derivatives trading. However, there are a
number of other risks associated with derivatives trading, including the risk
that derivatives often fluctuate in value more than the securities or other
instruments upon which they are based. Relatively small changes in the value of
the underlying securities or instruments may have significantly larger effects
on the value of derivatives held by the Fund. Derivatives may entail the risk of
loss of the entire amount invested or, in certain cases, losses in excess of the
amount invested. A derivative utilized for hedging purposes may limit the amount
of potential gain on the related transaction or may result in greater losses
than if the derivative had not been used. The Fund generally expects that its
options and futures transactions will be conducted on recognized securities and
commodities exchanges. In certain instances, however, the Fund may purchase and
sell stock options in the over-the-counter market. The Fund's ability to
terminate stock option positions established in the over-the-counter market may
be more limited than in the case of exchange-traded options and may also involve
the risk that securities dealers participating in such transactions would fail
to meet their obligations to the Fund. The staff of the Securities and Exchange
Commission generally considers over-the-counter options to be illiquid. There
can be no assurance that the Fund will be able to effect closing transactions at
any particular time or at an acceptable price. The use of options and futures
for hedging purposes involves the risk of imperfect correlation between
movements in options and futures prices and movements in the price of securities
which are the subject of the hedge. Expenses and losses incurred as a result of
derivatives strategies will reduce the Fund's current return. The use of
derivatives for speculative purposes involves a variety of risks, including the
risk of an increased volatility that may potentially increase losses. For a
further discussion of options, futures and currency transactions, including
certain additional risks associated therewith, see "Additional Information
Concerning Portfolio Activities -- Options, Futures and Currency Transactions"
in the Fund's Statement of Additional Information. Certain provisions of the
Code may limit the ability of the Fund to quickly liquidate options, futures and
currency positions in which significant unrealized gains have developed when the
Investment Adviser deems it appropriate to realize the gains. For a discussion
of certain tax implications associated with such investment techniques, see
"Additional Information Concerning Taxes -- General; -- Option and Futures
Transactions; and -- Special Rules for Certain Foreign Currency Transactions" in
the Statement of Additional Information.
FUTURE DEVELOPMENTS. The Fund may take advantage of opportunities in the
area of options and futures contracts and options on futures contracts and any
other derivative investments which are not presently contemplated for use by the
Fund or which are not currently available but which may be developed, to the
extent such opportunities are both consistent with the Fund's investment
objective and legally permissible for the Fund. Before entering into such
transactions or making any such investment, the Fund will provide appropriate
disclosure in its prospectus or statement of additional information.
<PAGE>
14
LENDING PORTFOLIO SECURITIES. From time to time, the Fund may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. Such
loans may not exceed 33 1/3% of the value of the Fund's total assets. In
connection with such loans, the Fund will receive collateral consisting of cash,
U.S. Government securities or irrevocable letters of credit which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The Fund can increase its income through
the investment of such collateral. The Fund continues to be entitled to payments
in amounts equal to the interest, dividends or other distributions payable on
the loaned security and receives interest on the amount of the loan. Such loans
will be terminable at any time upon specified notice. The Fund might experience
risk of loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Fund.
FORWARD COMMITMENTS. The Fund may purchase securities on a when-issued or
forward commitment basis, which means that delivery and payment take place a
number of days after the date of the commitment to purchase. The payment
obligation and the interest rate that will be received on a when-issued security
are fixed at the time the Fund enters into the commitment. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. The Fund will not accrue income in
respect of a security purchased on a when-issued or forward commitment basis
prior to its stated delivery date.
Securities purchased on a when-issued or forward commitment basis and
certain other securities held in the Fund's portfolio are subject to changes in
value (both generally changing in the same way, I.E., appreciating when interest
rates decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a when-
issued or forward commitment basis may expose the Fund to risks because they may
experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued or forward commitment basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself. A
segregated account of the Fund consisting of cash, cash equivalents or U.S.
Government securities or other high quality liquid debt securities at least
equal at all times to the amount of the when-issued or forward commitments will
be established and maintained at the Fund's custodian bank. Purchasing
securities on a when-issued or forward commitment basis when the Fund is fully
or almost fully invested may result in greater potential fluctuations in the
value of the Fund's net assets and its net asset value per share.
SECURITIES OF EMERGING MARKETS ISSUERS. Emerging markets will include any
countries (i) having an "emerging stock market" as defined by the International
Finance Corporation; (ii) with low to middle-income economies according to the
World Bank; or (iii) listed in World Bank publications as developing. Currently,
the countries not included in these categories are Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, the United Kingdom
and the United States. Issuers whose principal activities are in countries with
emerging markets include issuers: (1) organized under the laws of, (2) whose
securities have their primary trading market in, (3) deriving at least 50% of
their revenues or profits from goods sold, investments made, or services
performed in, or (4) having at least 50% of their assets located in, a country
with an emerging market.
In emerging markets, the Fund may purchase debt securities issued or
guaranteed by foreign governments, including participations in loans between
foreign governments and financial institutions, and interests in entities
organized and operated for the purpose of restructuring the investment
characteristics of instruments issued or guaranteed by foreign governments
("Sovereign Debt Obligations"). These include Brady Bonds, Structured Securities
and Loan Participations and Assignments (as defined below).
BRADY BONDS AND EMERGING MARKET GOVERNMENTAL OBLIGATIONS. The Fund may
invest in emerging market governmental debt obligations commonly referred to as
"Brady Bonds." Brady Bonds are debt securities, generally denominated in U.S.
dollars, issued under the framework of the "Brady Plan," an initiative announced
by former U.S.
<PAGE>
15
Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations
to restructure their outstanding external commercial bank indebtedness.
Investors should recognize that Brady Bonds have only been issued relatively
recently, and accordingly do not have a long payment history. Brady Bonds issued
to date have traded at a deep discount from their face value. In addition to
Brady Bonds, the Fund may invest in emerging market governmental obligations
issued as a result of debt restructuring agreements outside of the scope of the
Brady Plan. A substantial portion of the Brady Bonds and other similar
obligations in which the Fund invests are likely to be acquired at a discount,
which involves certain considerations discussed below under "Certain Additional
Investments and Investment Strategies -- Zero Coupon Securities and Discount
Obligations." For a further discussion of Brady Bonds, see "Additional
Information Concerning Portfolio Activities -- Brady Bonds" in the Statement of
Additional Information.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may invest in fixed and
floating rate loans ("Loans") arranged through private negotiations between an
issuer of Sovereign Debt Obligations and one or more financial institutions
("Lenders"). The Fund's investments in Loans are expected in most instances to
be in the form of participations in Loans ("Participations") and assignments of
all or a portion of Loans ("Assignments") from third parties. The government
that is the borrower on the Loan will be considered by the Fund to be the issuer
of a Participations or Assignment. The Fund's investment in Participations
typically will result in the Fund having a contractual relationship only with
the Lender and not with the borrower. The Fund will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participations and only upon receipt by the Lender of the
payments from the borrower. In connection with purchasing Participations, the
Fund generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the Loan, nor any rights of set-off
against the borrower, and the Fund may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participations. As a result,
the Fund may be subject to the credit risk of both the borrower and the Lender
that is selling the Participations. In the event of the insolvency of the Lender
selling a Participation, the Fund may be treated as a general creditor of the
Lender and may not benefit from any set-off between the Lender and the borrower.
Certain Participations may be structured in a manner designed to avoid
purchasers of Participations being subject to the credit risk of the Lender with
respect to the Participations, but even under such a structure, in the event of
the Lender's insolvency, the Lender's servicing of the Participations may be
delayed and the assignability of the Participations impaired. The Fund will
acquire Participations only if the Lender interpositioned between the Fund and
the borrower is a Lender having total assets of more than $25 billion and whose
senior unsecured debt is rated investment grade or higher (I.E., Baa/BBB or
higher).
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association pass-
through certificates, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Federal Home Loan Banks, by the right of
the issuer to borrow from the Treasury; others, such as those issued by the
Federal National Mortgage Association, by discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality; and
others, such as those issued by the Student Loan Marketing Association, only by
the credit of the agency or instrumentality. These securities bear fixed,
floating or variable rates of interest. Principal and interest may fluctuate
based on generally recognized reference rates or the relationship of rates.
While the U.S. Government provides financial support to such U.S. Government-
sponsored agencies and instrumentalities, no assurance can be given that it will
always do so since it is not so obligated by law. The Fund will invest in such
securities only when it is satisfied that the credit risk with respect to the
issuer is minimal.
STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may invest up to 10% of its
total assets in stripped mortgage-backed securities ("SMBS"), all of which will
be issued or guaranteed by the United States Government, its agencies or
instrumentalities. SMBS are derivative multiclass securities that indirectly
represent a participation in, or are secured by and payable from, mortgage loans
secured by real property. SMBS are structured with two or more classes of
securities that receive different proportions of the interest and principal
payments on an underlying pool of mortgage assets. A common type of SMBS will
have one class receiving all of the interest ("IO" or interest-only class) and
the other class receiving all of the principal ("PO" or principal-only class).
SMBS may be highly sensitive to changes in prepayment
<PAGE>
16
and interest rates, and under certain interest rate or prepayment rate scenarios
the Fund may fail to recoup fully its investment in these securities even if the
securities are of the highest credit quality. Furthermore, the yield to maturity
on these securities may be adversely affected.
DEPOSITARY RECEIPTS. American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), European Depositary Receipts ("EDRs") and other
types of depositary receipts (which, together with ADRs, GDRs and EDRs, are
collectively referred to as "Depositary Receipts") evidence ownership of
underlying securities issued by either a non-U.S. or a U.S. corporation that
have been deposited with a depositary or custodian bank. The Fund treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. While Depositary Receipts may not necessarily be
denominated in the same currency as the securities into which they may be
converted, they entail certain of the risks associated with investments in
foreign securities. The Fund will limit its investment in Depositary Receipts
not sponsored by the issuer of the underlying securities to no more than 5% of
the value of its net assets (at the time of the investment). A purchaser of
unsponsored Depositary Receipts may not have unlimited voting rights and may not
receive as much information about the issuer of the underlying security as with
sponsored Depositary Receipts.
STRUCTURED INVESTMENTS. The Fund may invest in Structured Investments,
which are securities issued solely for the purpose of restructuring the
investment characteristics of other securities, such as commercial bank loans or
Brady Bonds. Structured Investment products may involve special risks, including
substantial volatility in their market values and potential illiquidity. The
Fund is permitted to invest in a class of Structured Investments which is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated Structured Investments typically have higher yields and present
greater risks than unsubordinated structured investments. Although the Fund's
purchase of subordinated Structured Investments would have a similar economic
effect to that of borrowing against the underlying securities, the purchase will
not be deemed to be a borrowing by the Fund for purposes of the Fund's
fundamental investment restriction on borrowing.
ZERO COUPON SECURITIES AND DISCOUNT OBLIGATIONS. The Fund may invest in
zero coupon U.S. Treasury securities, which are treasury Notes and Bonds that
have been stripped of their unmatured interest coupons, the coupons themselves
and receipts or certificates representing interests in such stripped debt
obligations and coupons. The Fund also may invest in zero coupon securities
issued by financial institutions which constitute a proportionate ownership of
the issuer's pool of underlying U.S. Treasury securities. Zero coupon securities
are debt securities that pay no cash income but are sold at substantial
discounts from their value at maturity. Certain zero coupon securities also are
sold at substantial discounts from their maturity value and provide for the
commencement of regular interest payments at a deferred date. In addition, as
indicated above, certain of the Fund's emerging market governmental debt
securities may be acquired at a discount ("Discount Obligations"). Zero coupon
securities and Discount Obligations involve special risk considerations and tend
to be subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying debt securities with similar maturities.
Federal income tax law requires the holder of a zero coupon security or of
certain pay-in-kind bonds to accrue income with respect to these securities
prior to the receipt of cash payments. To maintain its qualification as a
regulated investment company and avoid liability for Federal income taxes, the
Fund may be required to distribute such income accrued with respect to these
securities and may have to dispose of portfolio securities under disadvantageous
circumstances in order to generate cash to satisfy these distribution
requirements. For a further discussion of these investments, including certain
additional risks associated therewith, see "Additional Information Concerning
Portfolio Activities -- Zero Coupon Securities and Discount Obligations" in the
Statement of Additional Information.
CONVERTIBLE SECURITIES. A convertible security is a fixed-income security
that may be converted at either a stated price or stated rate into underlying
shares of common stock. Convertible securities have general characteristics
similar to both fixed-income and equity securities. Although to a lesser extent
than with fixed-income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stock, and therefore,
also will react to variations
<PAGE>
17
in the general market for equity securities. A unique feature of convertible
securities is that as the market price of the underlying common stock declines,
convertible securities tend to trade increasingly on a yield basis, and so may
not experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the
prices of the convertible securities tend to rise as a reflection of the value
of the underlying common stock. While no securities investments are without
risk, investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all fixed-income securities, there can be no assurance
of current income because the issuers of the convertible securities may default
on their obligations. Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible securities of similar quality
because of the potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to benefit
from increases in the market price of the underlying common stock. There can be
no assurance of capital appreciation, however, because securities prices
fluctuate.
Convertible securities generally are subordinated to other similar but non-
convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
OTHER INVESTMENT COMPANIES. The Fund may invest in the securities of other
investment funds to the extent permitted by the 1940 Act. Under the 1940 Act,
the Fund may invest up to 10% of its total assets in shares of other investment
funds and up to 5% of its total assets in any one investment fund, provided that
the investment does not represent more than 3% of the voting stock of the
acquired investment fund. By investing in another investment fund, the Fund
bears a ratable share of the investment fund's expenses, as well as continuing
to bear the Fund's advisory and administrative fees with respect to the amount
of the investment.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements only
with member banks of the Federal Reserve System and primary dealers in United
States Government securities and only with respect to obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities.
Repurchase agreements are contracts under which the buyer of a security
simultaneously buys and commits to resell the security to the seller at an
agreed upon price and date. Under a repurchase agreement, the seller is
required to maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price. The Sub-Investment Adviser
will monitor the value of such securities daily to determine that the value
equals or exceeds the repurchase price. Repurchase agreements may involve risks
in the event of default or insolvency of the seller, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying securities.
Repurchase agreements with maturities of more than seven days will be treated as
illiquid securities by the Fund.
BANK OBLIGATIONS. Time deposits are non-negotiable deposits maintained in
a banking institution for a specified period of time (in no event longer than
seven days) at a stated interest rate.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These and other short-term
instruments reflect the obligation both of the bank and of the drawer to pay the
face amount of the instrument upon maturity. The other short-term obligations
may include uninsured, direct obligations bearing fixed, floating or variable
interest rates.
<PAGE>
18
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs.
ILLIQUID OR RESTRICTED SECURITIES. The Fund may purchase securities for
which there is a limited trading market or which are subject to restrictions on
resale to the public. Investments in securities which are "restricted" may
involve added expense to the Fund should the Fund be required to bear
registration costs with respect to such securities and could involve delays in
disposing of such securities which might have an adverse effect upon the price
and timing of sales of such securities and the liquidity of the Fund with
respect to redemptions. The Fund may not enter into repurchase agreements
providing for settlement in more than seven days after notice or purchase
securities which are illiquid (such as "restricted securities" which are
illiquid, and securities that are not readily marketable) if, in the aggregate,
more than 15% of the value of the Fund's net assets would be so invested. As
more fully described in the Fund's Statement of Additional Information, the Fund
may purchase certain restricted securities ("Rule 144A securities") for which
there is a secondary market of qualified institutional buyers as contemplated by
recently adopted Rule 144A under the Securities Act of 1933. The Fund's holdings
of Rule 144A securities which are liquid securities will not be subject to the
15% limitation described above. Rule 144A is a relatively recent development and
there is no assurance that a liquid market in Rule 144A securities will develop
or be maintained. The Directors of the Fund will be responsible for monitoring
the liquidity of Rule 144A securities and the selection by the Investment
Adviser of such securities.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions
which, together with the fundamental investment restrictions described in the
Statement of Additional Information, may not be changed without the affirmative
vote of the holders of a majority of the Fund's outstanding voting securities,
as defined under "Capital Stock" in the Statement of Additional Information.
The Fund may not:
(i) borrow money, except to the extent permitted under the 1940 Act,
which currently limits borrowing to no more than 33 % of the value of the
Fund's total assets. (For purposes of this investment restriction, the
entry into options futures contracts, including those related to indices,
and options on futures contracts or indices shall not constitute
borrowing.);
(ii) pledge, mortgage and hypothecate its assets, other than to secure
permitted borrowings. (The deposit of assets in escrow in connection with
portfolio transactions is not deemed to be a pledge or hypothecation for
this purpose);
(iii) invest more than 5% of its total assets in the obligations of any
issuer, except that up to 25% of the value of the Fund's total assets may
be invested, and obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities may be purchased, without regard to any
such limitation; and
(iv) invest more than 25% of its total assets in any one industry.
(Securities issued or guaranteed by the United States Government, its
agencies or instrumentalities are not considered to represent industries).
If a percentage restriction set forth above is adhered to at the time a
transaction is effected, later changes in percentage resulting from changes in
value or in the number of outstanding securities of an issuer will not be
considered a violation.
RISK FACTORS
There is no assurance that the Fund will achieve its investment objective,
and investment in the Fund should not be considered a complete investment
program. Investors should note that the Fund has the ability to invest in a wide
range of securities and instruments, and the Investment Adviser may
substantially change the composition of the Fund's investment portfolio from
time to time.
<PAGE>
19
CERTAIN INVESTMENT TECHNIQUES. The use of investment techniques such as
short-selling, engaging in financial futures and options and currency
transactions, leverage through borrowing, purchasing securities on a forward
commitment basis and lending portfolio securities and the purchase of foreign
securities involves greater risk than that incurred by many other funds with a
similar objective. These risks are described above under "Investment Techniques"
and "Certain Portfolio Securities." In addition, using these techniques may
produce higher than normal portfolio turnover and may affect the degree to which
the Fund's net asset value fluctuates. Higher portfolio turnover rates are
likely to result in comparatively greater brokerage commissions or transaction
costs. Short-term gains realized from portfolio transactions are taxable to
shareholders as ordinary income. See "Additional Information Concerning Taxes"
in the Statement of Additional Information.
The Fund's ability to engage in certain short-term transactions may be
limited by the requirement that, to qualify as regulated investment company, it
must earn less than 30% if its gross income from the disposition of securities
held for less than three months. This 30% test limits the extent to which the
Fund may sell securities held for less than three months, effect short sales of
securities held for less than three months, write options expiring in less than
three months and invest in certain futures contracts, among other strategies.
However, portfolio turnover will not otherwise be a limiting factor in making
investment decisions.
INVESTING IN FOREIGN SECURITIES. In making foreign investments, the Fund
will give appropriate consideration to the following factors, among others:
Foreign securities markets generally are not as developed or efficient as
those in the United States. Securities of some foreign issuers are less liquid
and more volatile than securities of comparable U.S. issuers. Similarly, volume
and liquidity in most foreign securities markets are less than in the United
States and, at times, volatility of price can be greater than in the United
States. The issuers of some of these securities, such as foreign bank
obligations, may be subject to less stringent or different regulation than are
U.S. issuers. In addition, there may be less publicly available information
about a non-U.S. issuer, and non-U.S. issuers generally are not subject to
uniform accounting and financial reporting standards, practices and requirements
comparable to those applicable to U.S. issuers.
Many countries providing investment opportunities for the Fund have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and
may continue to have adverse effects on the economies and securities markets of
certain of these countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries.
Because stock certificates and other evidences of ownership of such
securities usually are held outside the United States, the Fund will be subject
to additional risks which include possible adverse political and economic
developments, possible seizure or nationalization of foreign deposits and
possible adoption of governmental restrictions which might adversely affect the
payment of principal and interest on the foreign securities or might restrict
the payment of principal and interest to investors located outside the country
of the issuer, whether from currency blockage or otherwise. Custodial expenses
for a portfolio of non-U.S. securities generally are higher than for a portfolio
of U.S. securities.
By investing in foreign securities, the Fund will be exposed to the direct
or indirect consequences of political, social and economic changes in various
countries. Political changes in a country may affect the willingness of a
foreign government to make or provide for timely payments of its obligations.
The country's economic status, as reflected, among other things, in its
inflation rate, the amount of its external debt and its gross domestic product,
will also affect the government's ability to honor its obligations.
No established secondary markets may exist for many of foreign securities
in which the Fund may invest. Reduced secondary market liquidity may have an
adverse effect on the market price and the Fund's ability to dispose of
particular instruments when necessary to meet its liquidity requirements or in
response to specific economic events such as a deterioration in the
creditworthiness of the issuer. Reduced secondary market liquidity for certain
foreign securities also may make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing its portfolio. Market
<PAGE>
20
quotations are generally available on many foreign securities only from a
limited number of dealers and may not necessarily represent firm bids of those
dealers or prices for actual sales.
Since foreign securities often are purchased with and payable in currencies
of foreign countries, the value of these assets as measured in U.S. dollars may
be affected favorably or unfavorably by changes in currency rates and exchange
control regulations. Some currency exchange costs may be incurred when the Fund
changes investments from one country to another.
Furthermore, some of these securities may be subject to brokerage taxes
levied by foreign governments, which have the effect of increasing the cost of
such investment and reducing the realized gain or increasing the realized loss
on such securities at the time of sale. Income received by the Fund from sources
within foreign countries may be reduced by withholding and other taxes imposed
by such countries. Tax conventions between certain countries and the United
States, however, may reduce or eliminate such taxes. All such taxes paid by the
Fund will reduce its net income available for distribution to shareholders.
FOREIGN CURRENCY EXCHANGE. Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by the
forces of supply and demand in the foreign exchange markets and the relative
merits of investments in different countries, actual or perceived changes in
interest rates and other complex factors, as seen from an international
perspective. Currency exchange rates also can be affected unpredictably by
intervention by U.S. or foreign governments or central banks or the failure to
intervene or by currency controls or political developments in the U.S. or
abroad.
The foreign currency market offers less protection against defaults in the
forward trading of currencies than is available when trading in currencies
occurs on an exchange. Since a forward currency contract is not guaranteed by an
exchange or clearinghouse, a default on the contract would deprive the Fund of
unrealized profits or force the Fund to cover its commitments for purchase or
resale, if any, at the current market price.
FOREIGN COMMODITY TRANSACTIONS. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the CFTC
and may be subject to greater risks than trading on domestic exchanges. For
example, some foreign exchanges are principal markets so that no common clearing
facility exists and a trader may look only to the broker for performance of the
contract. In addition, unless the Fund hedges against fluctuations in the
exchange rate between the U.S. dollar and the currencies in which trading is
done on foreign exchanges, any profits that the Fund might realize in trading
could be eliminated by adverse changes in the exchange rate, or the Fund could
incur losses as a result of those changes. Transactions on foreign exchanges may
include both commodities which are traded on domestic exchanges and those which
are not.
LOWER RATED SECURITIES. You should carefully consider the relative risks
of investing in the higher yielding (and, therefore, higher risk) debt
securities in which the Fund may invest without limitation when management
believes that such securities offer opportunities for capital growth.
Management's decision to invest in these securities is not subject to
shareholder approval. These are securities such as those rated Ba by Moody's or
BB by S&P or as low as the lowest rating assigned by Moody's or S&P. They
generally are not meant for short-term investing and may be subject to certain
risks with respect to the issuing entity and to greater market fluctuations than
certain lower yielding, higher rated fixed-income securities. Obligations rated
Ba by Moody's are judged to have speculative elements; their future cannot be
considered as well assured and often the protection of interest and principal
payments may be very moderate. Obligations rated BB by S&P are regarded as
having predominantly speculative characteristics and, while such obligations
have less near-term vulnerability to default than other speculative grade debt,
they face major ongoing uncertainties or exposure to adverse business, financial
or economic conditions which could lead to inadequate capacity to meet timely
interest and principal payment. Obligations rated C by Moody's are regarded as
having extremely poor prospects of ever attaining any real investment standing.
Obligations rated D by S&P are in default and the payment of interest and/or
repayment of principal is in arrears. Such obligations, though high yielding,
are characterized by great risk. See "Description of Bond and Commercial Paper
Ratings" in the Statement of Additional Information for a general description of
Moody's
<PAGE>
21
and S&P securities ratings. The ratings of Moody's and S&P represent their
opinions as to the quality of the securities which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and,
although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these
securities. Therefore, although these ratings may be an initial criterion for
selection of portfolio investments, the Advisers also will evaluate these
securities and the ability of the issuers of such securities to pay interest and
principal. The Fund's ability to achieve its investment objective may be more
dependent on the Advisers' credit analysis than might be the case for a fund
that invested in higher rated securities. Once the rating of a portfolio
security has been changed, the Fund will consider all circumstances deemed
relevant in determining whether to continue to hold the security.
The market price and yield of debt securities rated Ba or lower by Moody's
and BB or lower by S&P are more volatile than those of higher rated securities.
Factors adversely affecting the market price and yield of these securities will
adversely affect the Fund's net asset value. In addition, the retail secondary
market for these securities may be less liquid than that of higher rated
securities; adverse market conditions could make it difficult at times for the
Fund to sell certain securities or could result in lower prices than those used
in calculating the Fund's net asset value.
The market values of certain lower rated debt securities tend to reflect
individual corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates, and tend to be more sensitive to economic conditions than are
higher rated securities. Companies that issue such securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities.
The Fund may invest in lower rated zero coupon securities and pay-in-kind
bonds (bonds which pay interest through the issuance of additional bonds), which
involve special considerations. These securities may be subject to greater
fluctuations in value due to changes in interest rates than interest-bearing
securities and thus may be considered more speculative than comparably rated
interest-bearing securities. See "Investment Objective and Policies."
DERIVATIVES. The Fund utilizes certain investment strategies commonly
referred to as derivatives, such as trading in futures, options and foreign
currencies, for speculative purposes (I.E. to seek to generate additional income
or gains) and/or to hedge against either a decline in the value of certain
securities owned by the Fund or an increase in the price of securities which the
Fund plans to purchase. Derivatives often fluctuate in value more than the
securities or other instruments on which they are based, and relatively small
changes in the value of the underlying securities or instruments may have
significantly larger effects on the value of derivatives held by the Fund.
Derivatives may entail the risk of loss of the entire amount invested or, in
certain cases, losses in excess of the amount invested. A derivative utilized
for hedging purposes may limit the amount of potential gain on the related
transaction or may result in greater losses than if the derivative had not been
used.
In addition to instruments described above, the Fund may invest in a wide
range of equity securities as well as participations and assignments, stripped
mortgage-backed securities, structured investments and illiquid or restricted
securities, and may lend portfolio securities and enter into repurchase
agreements, each of which involves certain additional risks. For a more
complete discussion of the risks associated with an investment in the Fund, see
"Investment Objective and Policies."
OTHER INVESTMENT CONSIDERATIONS. The Fund's net asset value is not fixed
and should be expected to fluctuate. You should purchase Fund shares only as a
supplement to an overall investment program and only if you are willing to
undertake the risks involved.
For the portion of the Fund's portfolio invested in equity securities,
investors should be aware that equity securities fluctuate in value, often based
on factors unrelated to the value of the issuer of the securities, and that
fluctuations can be pronounced. Changes in the value of the Fund's portfolio
securities, regardless of whether the securities are equity or debt, will result
in changes in the value of a Fund share and thus the Fund's yield and total
return to investors.
<PAGE>
22
For the portion of the Fund's portfolio invested in debt securities,
investors should be aware that even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities are inversely affected by changes in interest rates and, therefore,
are subject to the risk of market price fluctuations. The values of fixed-income
securities also may be affected by changes in the credit rating or financial
condition of the issuing entities. See "Equity and Debt Securities" above.
MANAGEMENT ARRANGEMENTS
The Board of Directors is responsible for the overall management and
operation of the Fund. The Fund's officers are responsible for the day-to-day
operations of the Fund under the supervision of the Board of Directors.
INVESTMENT ADVISER
The Fund has engaged Comstock Partners, Inc. (the "Investment Adviser") to
provide professional investment management for the Fund. The principals of the
firm are Stanley D. Salvigsen and Charles L. Minter. The Investment Adviser was
founded in October 1986 and has served as sub-investment adviser to the
predecessor, the Dreyfus Capital Value Fund, since April 30, 1987 and to the
Dreyfus Variable Investment Fund-Managed Assets Portfolio since May 21, 1990.
Both are diversified open-end management companies registered under the 1940 Act
with net assets as of December 31, 1995 of approximately $317 million and $24
million, respectively. In addition, the Investment Adviser has served as
investment adviser to the Comstock Partners Strategy Fund since that fund's
inception in 1988. The Comstock Partners Strategy Fund is a separate portfolio
of the Company with assets of $301 million as of December 31, 1995. The
Investment Adviser also provides investment advisory services through
discretionary accounts having aggregate assets as of December 31, 1995 of
approximately $43 million. It is the publisher of the COMSTOCK INVESTMENT
STRATEGY REVIEW and the COMSTOCK INVESTMENT STRATEGY COMMENTARY, investment
strategy publications furnished to subscribers. The principal address of the
Investment Adviser is 10 Exchange Place, Suite 2010, Jersey City, New Jersey
07302-3913.
Under the terms of an Investment Advisory Agreement between the Company,
with respect to the Fund, and the Investment Adviser (the "Investment Advisory
Agreement"), the Investment Adviser will have responsibility for investment
decisions for, and the day-to-day management of, that portfolio. For its
services under such Investment Advisory Agreement, the Investment Adviser will
receive an annual fee computed daily and paid monthly at the following annual
rate: .40 of 1% of the first $300 million of the Fund's average daily net
assets, .45 of 1% of the Fund's average daily net assets between $300 million
and $750 million, .50 of 1% of the Fund's average daily net assets between $750
million and $1 billion and .55 of 1% of the Fund's average daily net assets in
excess of $1 billion.
Mr. Salvigsen began his investment career in 1964 at the Value Line
Investment Survey. He ultimately became the Managing Editor of the VALUE LINE
SPECIAL SITUATION SERVICE, a publication of the Value Line Investment Survey.
Mr. Salvigsen was an equity analyst at The Dreyfus Corporation and Oppenheimer &
Co., Inc., as well as Cyrus J. Lawrence, Inc., where he served as a vice
president and member of the Investment Policy Committee. From 1983 to 1986, Mr.
Salvigsen was the Chief Investment Strategist at Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") where he had primary responsibility for
formulating the overall investment strategy of the firm. Mr. Minter joined
Merrill Lynch in 1966 and in 1970 became a member of its New York Institutional
Sales office. From 1976 to 1986, Mr. Minter was Vice President -- Institutional
Sales at Merrill Lynch. In that capacity he serviced institutional accounts and
supervised portfolios that included commodity and financial futures, options,
foreign securities and zero coupon bonds. The Fund's investment portfolio is
managed by the Investment Committee of the Investment Adviser, which consists of
Messrs. Salvigsen and Minter.
SUB-INVESTMENT ADVISER AND ADMINISTRATOR
The Investment Adviser has engaged The Dreyfus Corporation to provide
sub-investment advisory and administration services. The Dreyfus Corporation
(the "Sub-Investment Adviser") will act as the sub-investment adviser
<PAGE>
23
to the Fund pursuant to a separate Sub-Investment Advisory and Administration
Agreement between the Company, on behalf of the Fund, and The Dreyfus
Corporation. Under the Sub-Investment Advisory and Administration Agreement,
the Sub-Investment Adviser will manage the short-term cash and cash-equivalent
investments of the Fund and provide investment research and other advice
regarding the Fund's portfolio. In addition, the Sub-Investment Adviser will
provide general advice regarding economic factors and trends and act as
administrator to the fund. For its services under the Sub-Investment Advisory
and Administration Agreement, the Sub-Investment Adviser will be entitled to
receive an annual fee, payable by the Investment Adviser out of its advisory
fee, computed daily and paid monthly at the following annual rate: .35 of 1% of
the first $300 million of the Fund's average daily net assets, .30 of 1% of the
Fund's average daily net assets between $300 million and $750 million, .25 of 1%
of the Fund's average daily net assets between $750 million and $1 billion and
.20 of 1% of the Fund's average daily net assets in excess of $1 billion.
In addition, the Sub-Investment Adviser, pursuant to the Sub-Investment
Advisory and Administration Agreement, has agreed to provide certain
administrative services to the Fund, including, among other responsibilities,
supplying office facilities, statistical and research data, data processing
services, clerical, accounting and bookkeeping services, internal auditing
services, internal executive and administrative services, and stationery and
office supplies; prepare reports to the Fund's shareholders, tax returns,
reports to and filings with the Securities and Exchange Commission and state
Blue Sky authorities; calculating the net asset value of the Fund on a daily
basis; and, subject to the supervision of the Company's Board of Directors,
generally assisting in all aspects of the Fund's operations (except with respect
to investment advisory services provided by the Investment Adviser).
The Sub-Investment Adviser is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
The Sub-Investment Adviser was formed in 1947 and, as of December 31, 1995,
managed or administered approximately $81 billion in assets for approximately
1.7 million investor accounts nationwide. The principal address of the
Sub-Investment Adviser is 200 Park Avenue, New York, New York 10166.
Mellon is a publicly owned multibank holding company incorporated under
Pennsylvania law in 1971 and registered under the Federal Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon is
among the twenty-five largest bank holding companies in the United States based
on total assets. Mellon's principal wholly-owned subsidiaries are Mellon Bank,
N.A., Mellon Bank (DE) National Association, Mellon Bank (MD), The Boston
Company, Inc., AFCO Credit Corporation and a number of companies known as Mellon
Financial Services Corporations. Through its subsidiaries (including the
Sub-Investment Adviser), Mellon managed more than $209 billion in assets as of
September 30, 1995, including approximately $80 billion in proprietary mutual
fund assets. As of September 30, 1995, various subsidiaries of Mellon provided
non-investment services, such as custodial or administration services, for more
than $717 billion in assets including approximately $55 billion in mutual fund
assets.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Sub-Investment
Adviser, is located at P.O. Box 9671, Providence, Rhode Island 02940-9671, and
serves as the Fund's Transfer and Dividend Disbursing Agent (the "Transfer
Agent"). The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's Custodian.
PURCHASE OF FUND SHARES
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109. The
Distributor's ultimate parent is Boston Institutional Group, Inc.
Class A shares, Class B shares and Class C shares may be purchased only by
clients of certain financial institutions (which may include banks), securities
dealers ("Selected Dealers") and other industry professionals (collectively,
"Service Agents"), except that full-time or part-time employees of the
Investment Adviser or Sub-Investment
<PAGE>
24
Adviser or any of its affiliates or subsidiaries, directors of the Investment
Adviser or Sub-Investment Adviser, Board members of a fund advised by the
Investment Adviser or Sub-Investment Adviser, including members of the Company's
Board, or the spouse or minor child of any of the foregoing may purchase Class A
shares directly through the Distributor. Subsequent purchases may be sent
directly to the Transfer Agent or your Service Agent.
Class R shares are offered only to institutional investors acting for
themselves or in a fiduciary, advisory, agency, custodial or similar capacity,
for qualified or non-qualified employee benefit plans, including pension,
profit-sharing, SEP-IRAs and other deferred compensation plans, whether
established by corporations, partnerships, non-profit entities or state and
local governments ("Retirement Plans"). The term "Retirement Plans" does not
include IRAs or IRA "Rollover Accounts." Class R shares may be purchased for a
Retirement Plan only by a custodian, trustee, investment manager or other entity
authorized to act on behalf of such Plan. Institutions effecting transactions in
Class R shares for the accounts of their clients may charge their clients direct
fees in connection with such transactions.
When purchasing Fund shares, you must specify which Class is being
purchased. Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order.
Service Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus, and, to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be in
addition to any amounts which might be received under the Service Distribution
Plan. You should consult your Service Agent in this regard.
The Fund reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a client of
a Service Agent which has made an aggregate minimum initial purchase for its
customers of $2,500. Subsequent investments must be at least $100. However, the
minimum initial investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and
403(b)(7) Plans with only one participant is $750, with no minimum for
subsequent purchases. Individuals who open an IRA also may open a non-working
spousal IRA with a minimum initial investment of $250. Subsequent investments in
a spousal IRA must be at least $250. The initial investment must be accompanied
by the Fund's Account Application. For full-time or part-time employees of the
Sub-Investment Adviser, or any of its affiliates or subsidiaries, directors of
the Investment Adviser or Sub-Investment Adviser, Board members of a fund
advised by the Investment Adviser or Sub-Investment Adviser, including members
of the Fund's Board, or the spouse or minor child of any of the foregoing, the
minimum initial investment is $1,000. For full-time or part-time employees of
the Sub-Investment Adviser or any of its affiliates or subsidiaries who elect to
have a portion of their pay directly deposited into their Fund account, the
minimum initial investment is $50. Full-time employees of the Investment Adviser
may purchase Fund shares without regard to minimum initial investment
requirements. The Fund reserves the right to offer Fund shares without regard to
minimum purchase requirements to employees participating in certain qualified or
non-qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time.
The Code imposes various limitations on the amount that may be contributed
to certain Retirement Plans. These limitations apply with respect to
participants at the plan level and, therefore, do not directly affect the amount
that may be invested in the Fund by a Retirement Plan. Participants and plan
sponsors should consult their tax advisers for details.
You may purchase Fund shares by check or wire, or through the TELETRANSFER
Privilege described below. Checks should be made payable to "Comstock Partners
Capital Value Fund" or, if for Dreyfus retirement plan accounts, to "The Dreyfus
Trust Company, Custodian." Payments to open new accounts which are mailed should
be sent to Comstock Partners Capital Value Fund, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For subsequent
investments, your Fund account number should appear on the check and an
investment slip
<PAGE>
25
should be enclosed and sent to Comstock Partners Capital Value Fund, P.O. Box
105, Newark, New Jersey 07101-0105. For Dreyfus retirement plan accounts, both
initial and subsequent investments should be sent to The Dreyfus Trust Company,
Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427. Neither initial
nor subsequent investments should be made by third party check.
Purchase orders may be delivered in person only to a Dreyfus Financial
Center. THESE ORDERS WILL BE FORWARDED TO THE TRANSFER AGENT AND WILL BE
PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the nearest Dreyfus
Financial Center, please call 1-800-554-4611.
Wire payments may be made if your bank account is in a commercial bank that
is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. You may request your bank to transmit
immediately available funds by wire to The Bank of New York, together with the
applicable Class' DDA# as shown below, for purchase of Fund shares in your name:
DDA# 8900119551 Comstock Partners Capital Value Fund/Class A shares;
DDA# 8900115181 Comstock Partners Capital Value Fund/Class B shares;
DDA# 8900251980 Comstock Partners Capital Value Fund/Class C shares; or
DDA# 8900252332 Comstock Partners Capital Value Fund/Class R shares.
The wire must include your Fund account number (for new accounts, please include
your Taxpayer Identification Number ("TIN") instead), account registration and
dealer number, if applicable. If your initial purchase of Fund shares is by
wire, please call 1-800-554-4611 after completing your wire payment to obtain
your Fund account number. Please include your Fund account number on the Fund's
Account Application and promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is received. Further
information about remitting funds in this manner may be obtained from your bank.
All payments should be in U.S. dollars and, to avoid fees and delays, should be
drawn only on U.S. banks. Payments into the account of a corporation, foundation
or other organization should not be made by third party check. A charge will be
imposed if any check used for investment in your account does not clear. The
Fund makes available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Fund shares also may be purchased through the AUTOMATIC Asset Builder, the
Government Direct Deposit Privilege and the Payroll Savings Plan described under
"Additional Shareholder Services." These services enable you to make regularly
scheduled investments and may provide you with a convenient way to invest for
long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House member. You must direct the institution to
transmit immediately available funds through the Automated Clearing House to The
Bank of New York with instructions to credit your Fund account. The instructions
must specify your Fund account registration and your Fund account number
PRECEDED BY THE DIGITS "1111."
The Distributor may pay dealers a fee of up to .5% of the amount invested
through such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of
250 employees eligible for participation in such plans or programs or (ii) such
plan's or program's aggregate initial investment in the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans or
programs exceeds one million dollars ("Eligible Benefit Plans"). Plan sponsors,
administrators or trustees, as applicable, are responsible for notifying the
Distributor when the relevant requirement is satisfied. Shares of funds in the
Dreyfus Family of Funds then held by such employee benefit plans or programs
will be aggregated to determine the fee payable. The Distributor reserves the
right
<PAGE>
26
to cease paying these fees at any time. The Distributor will pay such fees from
its own funds, other than amounts received from the Fund, including past profits
or any other source available to it.
Federal regulations require that you provide a certified TIN upon opening
or reopening an account. See "Dividends, Distributions and Taxes" and the Fund's
Account Application for further information concerning this requirement. Failure
to furnish a certified TIN to the Fund could subject you to a $50 penalty
imposed by the Internal Revenue Service (the "IRS").
Fund shares are sold on a continuous basis. Net asset value per share is
determined as of 4:15 p.m., New York time, on each business day. Net asset value
per share for each Class of the Fund is computed by dividing the value of the
Fund's net assets attributable to the Class (I.E., the value of the Fund's
assets less liabilities attributable to that Class) by the total number of
shares of that Class outstanding. With the exception of certain fees and
expenses relating to the Class A, Class B and Class C Service and Distribution
Plans and certain other expenses attributable solely to a particular Class, all
Fund expenses will be borne on a pro rata basis by each Class on the basis of
the relative net assets of the respective Classes. See "The Fund's Expenses" and
"Service and Distribution Plans." The Fund's investments are valued based on
market value, or where market quotations are not readily available, based on
fair value as determined in good faith by the Board of Directors.
When an order is received by the Transfer Agent by 4:00 p.m., New York
time, on any business day, Fund shares will be purchased at the price determined
on that day. Otherwise, Fund shares will be purchased at the price determined on
the next business day.
Orders for the purchase of Fund shares received by Service Agents by
4:00 p.m., New York time, on any business day and transmitted to the Transfer
Agent by the close of its business day (normally 5:15 p.m., New York time) will
be based on the public offering price per share determined as of 4:15 p.m.,
New York time, on that day. Otherwise, the orders will be based on the next
day's determined public offering price. It is the responsibility of each Service
Agent to transmit orders so that they will be received by the Transfer Agent
before the close of its business day.
CLASS A SHARES
Class A shares have a public offering price equal to their net asset value
per share (see "Determination of Net Asset Value" and "Statement of Assets and
Liabilities" in the Fund's Statement of Additional Information) plus a sales
load as shown below:
<TABLE>
<CAPTION>
TOTAL SALES LOAD
AS A % OF AS A %* OF DEALERS' REALLOWANCE
OFFERING PRICE NET ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION PER SHARE PER SHARE OFFERING PRICE
- --------------------- ---------- --------- --------------
<S> <C> <C> <C>
Less than $50,000 4.50 4.70 4.25
$50,000 to less than $100,000 4.00 4.20 3.75
$100,000 to less than $250,000 3.00 3.10 2.75
$250,000 to less than $500,000 2.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 or more 0 0
___________
*Rounded to the nearest one-hundredth percent
</TABLE>
<PAGE>
27
A CDSC of 1% will be assessed at the time of redemption of Class A shares
purchased without an initial sales charge as part of an investment of at least
$1,000,000 and redeemed within two years after purchase. The terms contained in
the section of the Fund's Prospectus entitled "Redemption of Shares" (other than
the amount of the CDSC and time periods) are applicable to the Class A shares
subject to a CDSC. Letter of Intent and Right of Accumulation apply to such
purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with the Distributor
pertaining to the sale of Fund shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial
institution with respect to the sale of Fund shares) may purchase Class A shares
for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children at net asset value, provided
that they have furnished the Distributor with such information it may request
from time to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible to
purchase Class A shares at net asset value. In addition, Class A shares are
offered at net asset value to full-time employees of the Investment Adviser and
full-time or part-time employees of the Sub-Investment Adviser or any of its
affiliates or subsidiaries, Board members of a fund advised by the Investment
Adviser or Sub-Investment Adviser, including members of the Fund's Board, or the
spouse or minor child of any of the foregoing. Class A shares may be purchased
at net asset value through certain broker-dealers and other financial
institutions which have entered into an agreement with the Distributor, which
includes a requirement that such shares be sold for the benefit of clients
participating in a "wrap account" or a similar program under which such clients
pay a fee to such broker-dealer or other financial institution.
Class A shares will be offered at net asset value without a sales load to
employees participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at net asset value without a sales load for
Dreyfus-sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided that,
at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible Benefit
Plan and all or a portion of such plan's assets were invested in funds in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans, or (b) invested all of its assets in certain funds in
the Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans.
Class A shares may be purchased at net asset value, subject to appropriate
documentation through a broker-dealer or other financial institution with the
proceeds from the redemption of shares of a registered open-end management
investment company not managed by the Investment Adviser or the Sub-Investment
Adviser or its affiliates. The purchase of Class A shares of the Fund must be
made within 60 days of such redemption and the shareholder must have either (i)
paid an initial sales charge or a contingent deferred sales charge or (ii) been
obligated to pay at any time during the holding period, but did not actually pay
on redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, by (i) qualified separate accounts maintained by an
insurance company pursuant to the laws of any State or territory of the United
States, (ii) a State, county or city or instrumentality thereof, (iii) a
charitable organization (as defined in Section 501(c)(3) of the Code) investing
$50,000 or more in Fund shares, and (iv) a charitable remainder trust (as
defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain the
same for all dealers. The Distributor, at its expense, may provide additional
promotional incentives to dealers that sell shares of funds which retain the
Investment Adviser or the Sub-Investment Adviser as investment adviser or
sub-investment adviser and which are sold with a sales load, such as Class A
shares. In some instances, these incentives may be offered only to certain
dealers who have sold or may sell significant amounts of shares.
CLASS B SHARES
<PAGE>
28
The public offering price for Class B shares is the net asset value per
share of that Class. No initial sales charge is imposed at the time of purchase.
A CDSC is imposed, however, on certain redemptions of Class B shares as
described under "Redemption of Shares." At the time of purchase, the Distributor
compensates certain Service Agents for selling Class B shares and is reimbursed
by the Investment Adviser and/or other parties. The proceeds of the CDSC and
the distribution fee, in part, are used to defray these expenses. The proceeds
of the CDSC and certain payments under the Class B and Class C Service and
Distribution Plans may be assigned to parties which reimburse these expenses.
CLASS C SHARES
Class C shares have a public offering price equal to the net asset value
per share of that Class. No initial sales charge is imposed at the time of
purchase. A 1% CDSC, however, is imposed on redemptions of Class C shares made
within the first year of purchase. See "Redemption of Shares -- Contingent
Deferred Sales Charge -- Class C shares." At the time of purchase, the
Distributor compensates certain Service Agents for selling Class C shares and is
reimbursed by the Investment Adviser and/or other parties. The proceeds of the
CDSC and certain payments under the Class B and Class C Service and Distribution
Plans may be assigned to parties which reimburse these expenses.
CLASS R SHARES
The public offering price for Class R shares is the net asset value per
share of that class.
RIGHT OF ACCUMULATION -- CLASS A SHARES
Reduced sales loads apply to any purchase of Class A shares, shares of
certain other funds advised by the Sub-Investment Adviser which are sold with a
sales load or shares acquired by a previous exchange of shares purchased with a
sales load (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined in the Statement of Additional Information, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you previously purchased and still hold Class A shares of the Fund, or
of any other Eligible Fund or combination thereof, with an aggregate current
market value of $40,000 and subsequently purchase Class A shares of the Fund or
an Eligible Fund having a current value of $20,000, the sales load applicable to
the subsequent purchase would be reduced to 4% of the offering price. All
present holdings of Eligible Funds may be combined to determine the current
offering price of the aggregate investment in ascertaining the sales load
applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of a purchase you or your
Service Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
TELETRANSFER Privilege
You may purchase Fund shares (minimum $500, maximum $150,000 per day) by
telephone if you have checked the appropriate box and supplied the necessary
information on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred between
the bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution which is an
Automated Clearing House member may be so designated. The Fund may modify or
terminate this Privilege at any time or charge a service fee upon notice to
shareholders, although no such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER purchase of Fund shares by telephoning 1-800-645-6561 or, if you
are calling from overseas, call 516-794-5452.
ADDITIONAL SHAREHOLDER SERVICES
<PAGE>
29
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus. You should consult your Service Agent in this
regard. Because separate accounts are maintained for each Class of shares of the
Fund, the services and privileges described under this heading will operate for
a given account only with respect to the Class of shares in that account.
EXCHANGE PRIVILEGE
The Exchange Privilege enables you to purchase, in exchange for Class A,
Class B, Class C or Class R shares of the Fund, shares of the same class of
certain funds managed or administered by the Sub-Investment Adviser, to the
extent such shares are offered for sale in your state of residence. These funds
have different investment objectives which may be of interest to you. The shares
so purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can be
made into certain other funds managed or administered by the Sub-Investment
Adviser. No CDSC is charged when an investor exchanges into an Exchange Account;
however, the applicable CDSC will be imposed when shares are redeemed from an
Exchange Account or other applicable Fund account. Upon redemption, the
applicable CDSC will be calculated without regard to the time such shares were
held in an Exchange Account. See "Redemption of Shares." Redemption proceeds for
Exchange Account shares are paid by Federal wire or check only. Exchange Account
shares also are eligible for the Auto-Exchange Privilege, the Dividend Sweep and
the Automatic Withdrawal Plan. If you desire to use the Exchange Privilege, you
should consult your Service Agent or the Distributor to determine if it is
available and whether any other conditions are imposed on its use. WITH RESPECT
TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE ONLY BETWEEN A
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S
RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To use the Exchange Privilege, you or your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing, by wire
or by telephone. If you previously have established the Telephone Exchange
Privilege, you may telephone exchange instructions by calling 1-800-645-6561 or,
if you are calling from overseas, call 516-794-5452. See "Redemption of Shares
- --Redemption Procedures." Before any exchange, you must obtain and should review
a copy of the current prospectus of the fund into which the exchange is being
made. Prospectuses may be obtained from the Distributor. Except in the case of
Personal Retirement Plans, the shares being exchanged must have a current value
of at least $100; furthermore, in establishing a new account by exchange, the
shares being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
Telephone exchanges may be made only if the appropriate "YES" box has been
checked on the Account Application, or a separate signed Shareholder Services
Form is on file with the Transfer Agent. Upon an exchange into a new account,
the following shareholder services and privileges, as applicable and where
available, will be automatically carried over to the fund into which the
exchange is made: Exchange Privilege, Wire Redemption Privilege, Telephone
Redemption Privilege, TELETRANSFER Privilege, and the dividend/capital gain
distribution option (except for Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value, however, a
sales load may be charged with respect to exchanges of Class A shares into funds
sold with a sales load. No CDSC will be imposed on Class B or Class C shares at
the time of an exchange; however, Class B or Class C shares acquired through an
exchange will be subject on redemption to the higher CDSC applicable to the
exchanged or acquired shares. The CDSC applicable on redemption of the acquired
Class B or Class C shares will be calculated from the date of the initial
purchase of the Class B or Class C shares exchanged. If you are exchanging Class
A shares into a fund that charges a sales load, you may qualify for share prices
which do not include the sales load or which reflect a reduced sales load, if
the shares of the fund from which you are exchanging were: (a) purchased with a
sales load, (b) acquired by a previous exchange from shares purchased with a
sales load, or (c) acquired through reinvestment of dividends or distributions
paid with respect to the foregoing categories of shares. To qualify, at the time
of an exchange you must notify the Transfer Agent or your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation of
your holdings through a check of appropriate records. See "Shareholder Services"
in the Statement of Additional Information. No fees currently are charged
<PAGE>
30
shareholders directly in connection with exchanges, although the Fund reserves
the right, upon not less than 60 days' written notice, to charge shareholders a
nominal fee in accordance with rules promulgated by the Securities and Exchange
Commission. The Fund reserves the right to reject any exchange request in whole
or in part. The availability of Fund Exchanges may be modified or terminated at
any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
AUTOMATIC ASSET BUILDER
AUTOMATIC Asset Builder permits you to purchase Fund shares (minimum of
$100 and maximum of $150,000 per transaction) at regular intervals selected by
you. Fund shares are purchased by transferring funds from the bank account
designated by you. At your option, the bank account designated by you will be
debited in the specified amount, and Fund shares will be purchased, once a
month, on either the first or fifteenth day (or the next business day if such
first or fifteenth day is not a business day), or twice a month, on both days.
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. To establish an AUTOMATIC
Asset Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form from the Distributor. You
may cancel this Privilege or change the amount of purchase at any time by
mailing written notification to Comstock Partners Capital Value Fund,
P.O. Box 6527, Providence, Rhode Island 02940-6527, or, if for Dreyfus
retirement plan accounts, to The Dreyfus Trust Company, Custodian,
P.O. Box 6427, Providence, Rhode Island 02940-6427, and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee, although no such
fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase Fund shares
(minimum of $100 and maximum of $50,000 per transaction) by having Federal
salary, Social Security, or certain veterans', military or other payments from
the Federal government automatically deposited into your Fund account. You may
deposit as much of such payments as you elect. To enroll in the Government
Direct Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained by calling 1-800-645-6561. Death
or legal incapacity will terminate your participation in this Privilege. You may
elect at any time to terminate your participation by notifying in writing the
appropriate Federal agency. Further, the Fund may terminate your participation
upon 30 days' notice to you.
PAYROLL SAVINGS PLANS
The Payroll Savings Plan permits you to purchase Fund shares (minimum of
$100 per transaction) automatically on a regular basis. Depending upon your
employer's direct deposit program, you may have part or all of your paycheck
transferred to your existing Dreyfus account electronically through the
Automated Clearing House system at each pay period. To establish a Payroll
Savings Plan account, you must file an authorization form with your employer's
payroll department. Your employer must complete the reverse side of the form and
return it to Comstock Partners Capital Value Fund, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary authorization
form by calling 1-800-645-6561. You may change the amount of purchase or cancel
the authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, the Investment Adviser,
the Sub-Investment Adviser, the Fund, the Transfer Agent or any other person, to
arrange for transactions under the Payroll Savings Plan. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
DIVIDEND OPTIONS
<PAGE>
31
The Dividend Sweep enables you to invest automatically dividends or
dividends and capital gain distributions, if any, paid by the Fund in shares of
the same Class of another fund advised or administered by the Sub-Investment
Adviser of which you are a shareholder. Shares of the other fund will be
purchased at the then-current net asset value; however, a sales load may be
charged with respect to investments in Class A shares of a fund sold with a
sales load. If you are investing in a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect a
reduced sales load. If you are investing in a fund or class that charges a CDSC,
the shares purchased will be subject on redemption to the CDSC, if any,
applicable to the purchased shares. See "Shareholder Services" in the Statement
of Additional Information. The Dividend ACH permits you to transfer
electronically on the payment date dividends or dividends and capital gain
distributions, if any, from the Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for this
service.
For more information concerning these privileges, or to request a Dividend
Options Form, please call toll free 1-800-645-6561. You may cancel these
privileges by mailing written notification to Comstock Partners Capital Value
Fund, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new fund
after cancellation, you must submit a new Dividend Options Form. Enrollment in
or cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
the Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for the
Dividend Sweep.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly basis
if you have a $5,000 minimum account. Particular Retirement Plans, including
Dreyfus sponsored retirement plans, may permit certain participants to establish
an automatic withdrawal plan from such Retirement Plans. Participants should
consult their Retirement Plan sponsor and tax adviser for details. Such a
withdrawal plan is different than the Automatic Withdrawal Plan. An application
for the Automatic Withdrawal Plan can be obtained by calling 1-800-645-6561.
There is a service charge of 50 cents for each withdrawal check. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer Agent.
Shares for which stock certificates have been issued may not be redeemed through
the Automatic Withdrawal Plan.
Class B or Class C shares withdrawn pursuant to the Automatic Withdrawal
Plan will be subject to any applicable CDSC. Purchases of additional Class A
shares where the sales load is imposed concurrently with withdrawals of Class A
shares generally are undesirable. Any correspondence with respect to the
Automatic Withdrawal Plan should be addressed to Comstock Partners Capital Value
Fund, P.O. Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus
retirement plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans, including
Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k) Salary Reduction
Plans and 403(b)(7) Plans. Plan support services are also available. You can
obtain details on the various plans by calling the following numbers toll free:
for Keogh Plans, please call 1-800-358-5566; for IRAs and IRA "Rollover
Accounts," please call 1-800-645-6561; for SEP-IRAs, 401(k) Salary Reduction
Plans and 403(b)(7) Plans, please call 1-800-322-7880.
LETTER OF INTENT -- CLASS A SHARES
By signing a Letter of Intent form available from the Distributor by
calling 1-800-645-6561, you become eligible for the reduced sales load
applicable to the total number of Eligible Fund shares purchased in a 13-month
period pursuant
<PAGE>
32
to the terms and under the conditions set forth in the Letter of Intent. A
minimum initial purchase of $5,000 is required. To compute the applicable sales
load, the offering price of shares you hold (on the date of submission of the
Letter of Intent) in any Eligible Fund that may be used toward "Right of
Accumulation" benefits described above may be used as a credit toward completion
of the Letter of Intent. However, the reduced sales load will be applied only to
new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or the
Fund to sell, the full amount indicated at the sales load in effect at the time
of signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent.
REDEMPTION OF SHARES
GENERAL
You may request redemption of your Fund shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When a
request is received in proper form, the Fund will redeem the shares at the next
determined net asset value for the Class being redeemed. If you hold shares of
more than one Class, any redemption request must specify the Class of shares
being redeemed. If you fail to specify the Class of shares to be redeemed or if
you own fewer shares of the Class than specified to be redeemed, the redemption
request may be delayed until the Transfer Agent receives further instructions
from you or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC) when shares
are redeemed. Service Agents may charge their clients a nominal fee for
effecting redemptions of Fund shares. It is the responsibility of each Service
Agent to transmit redemption orders to the Transfer Agent. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending on the then-current net asset value of the Class being
redeemed.
Distributions from qualified Retirement Plans IRAs (including IRA "Rollover
Accounts") and certain non-qualified deferred compensation plans, except
distributions representing returns of non-deductible contributions to the
Retirement Plan or IRA, generally are taxable income to the participant.
Distributions from such a Retirement Plan or IRA to a participant prior to the
time the participant reaches age 59-1/2 or becomes permanently disabled may
subject the participant to an additional 10% penalty tax imposed by the IRS.
Participants should consult their tax advisers concerning the timing and
consequences of distributions from a Retirement Plan or IRA. Participants in
qualified Retirement Plans will receive a disclosure statement describing the
consequences of a distribution from such a Plan from the administrator, trustee
or custodian of the Plan, before receiving the distribution. The Fund will not
report to the IRS redemptions of Fund shares by qualified Retirement Plans, IRAs
or certain non-qualified deferred compensation plans. The administrator, trustee
or custodian of such Retirement Plans and IRAs will be responsible for reporting
distributions from such Plans and IRAs to the IRS.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission.
HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER
PRIVILEGE OR THROUGH THE AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A
WRITTEN
<PAGE>
33
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK, THE
TELETRANSFER PURCHASE OR THE AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO
EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS TO
REDEEM SHARES PURSUANT TO THE TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT
BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE
TELETRANSFER PURCHASE OR THE AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH
REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE
PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED
BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY
REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE,
AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP.
Fund shares will not be redeemed until the Transfer Agent has received your
Account Application.
The Fund reserves the right to redeem your account at its option upon not
less than 45 days' written notice if your account's net asset value is $500 or
less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE
- -- CLASS B SHARES
A CDSC payable to the Distributor is imposed on any redemption of Class B
shares which reduces the current net asset value of your Class B shares to an
amount which is lower than the dollar amount of all payments by you for the
purchase of Class B shares of the Fund held by you at the time of redemption. No
CDSC will be imposed to the extent that the net asset value of the Class B
shares redeemed does not exceed (i) the current net asset value of Class B
shares acquired through reinvestment of dividends or capital gain distributions,
plus (ii) increases in the net asset value of your Class B shares above the
dollar amount of all your payments for the purchase of Class B shares of the
Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined below
their original cost as a result of the Fund's performance, a CDSC may be applied
to the then-current net asset value rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge will
depend on the number of years from the time you purchased the Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of Class B
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month. The following table sets forth the rates of
the CDSC:
<TABLE>
<CAPTION>
CDSC AS A % OF
AMOUNT
INVESTED OR
YEAR SINCE PURCHASE REDEMPTION
PAYMENT WAS MADE PROCEEDS
-------------------------- ---------------
<S> <C>
First..................... 4.00
Second.................... 4.00
Third..................... 3.00
Fourth.................... 3.00
Fifth..................... 2.00
Sixth..................... 1.00
</TABLE>
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares
<PAGE>
34
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in net asset value of Class B shares above the
total amount of payments for the purchase of Class B shares made during the
preceding six years; then of amounts representing the cost of shares purchased
six years prior to the redemption; and finally, of amounts representing the cost
of shares held for the longest period of time within the applicable six-year
period.
For example, assume an investor purchased 100 shares at $10 per share for a
cost of $1,000. Subsequently, the shareholder acquired 5 additional shares
through dividend reinvestment. During the second year after the purchase the
investor decided to redeem $500 of his or her investment. Assuming at the time
of the redemption the net asset value had appreciated to $12 per share, the
value of the investor's shares would be $1,260 (105 shares at $12 per share).
The CDSC would not be applied to the value of the reinvested dividend shares and
the amount which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 4% (the
applicable rate in the second year after purchase) for a total CDSC of $9.60.
CONTINGENT DEFERRED SALES CHARGE
- -- CLASS C SHARES
A CDSC of 1% payable to the Distributor is imposed on any redemption of
Class C shares within one year of the date of purchase. The basis for
calculating the payment of any such CDSC will be the method used in calculating
the CDSC for Class B shares. See "Contingent Deferred Sales Charge -- Class B
Shares" above.
WAIVER OF CDSC
The CDSC applicable to Class B and Class C shares may be waived in
connection with (a) redemptions made within one year after the death or
disability, as defined in Section 72(m)(7) of the Code, of the shareholder, (b)
redemptions by employees participating in Eligible Benefit Plans, (c)
redemptions as a result of a combination of any investment company with the Fund
by merger, acquisition of assets or otherwise and (d) a distribution following
retirement under a tax-deferred retirement plan or attaining age 70-1/2 in the
case of an IRA or Keogh plan or custodial account pursuant to section 403(b) of
the Code. If the Fund's Board determines to discontinue the waiver of the CDSC,
the disclosure in the Fund's prospectus will be revised appropriately. Any Fund
shares subject to a CDSC which were purchased prior to the termination of such
waiver will have the CDSC waived as provided in the Fund's prospectus at the
time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Service Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
REDEMPTION PROCEDURES
You may redeem shares by using the regular redemption procedure through the
Transfer Agent, the Wire Redemption Privilege, the Telephone Redemption
Privilege or the TELETRANSFER Privilege. Other redemption procedures may be in
effect for investors who effect transactions in Fund shares through Service
Agents. The Fund makes available to certain large institutions the ability to
issue redemption instructions through compatible computer facilities.
In addition, the Distributor will accept orders from dealers with which it
has sales agreements for the repurchase of shares held by shareholders.
Repurchase orders received by the dealer prior to 4:15 p.m., New York time, on a
business day and transmitted to the Distributor prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of 4:15 p.m., New York time, on that day. Otherwise, the shares
will be redeemed at the next determined net asset value of the Class being
redeemed. It is the responsibility of the dealer to transmit orders on a timely
basis. The dealer may charge the shareholder a fee for executing the order. This
repurchase arrangement is discretionary and may be withdrawn at any time.
<PAGE>
35
You may redeem or exchange Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption or
exchange privilege, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you or a
representative of your Service Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent instructions. Neither the Fund nor the Transfer Agent
will be liable for following telephone instructions reasonably believed to be
genuine.
During time of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or exchange of Fund shares. In such cases, you should consider using the other
redemption procedures described herein. Use of these other redemption procedures
may result in your redemption request being processed at a later time than it
would have been if telephone redemption or telephone exchange had been used.
During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION
Under the regular redemption procedure, you may redeem Fund shares by
written request mailed to Comstock Partners Capital Value Fund, P.O. Box 6527,
Providence Rhode Island 02940-6527. Redemption requests for Dreyfus retirement
plan accounts should be sent to The Dreyfus Trust Company, Custodian,
P.O. Box 6427, Providence, Rhode Island 02940-6427. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the
location of the nearest Dreyfus Financial Center, please call 1-800-645-6561.
Redemption requests must be signed by each shareholder, including each
owner of a joint account, and each signature must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Signature Program ("STAMP")
and the Stock Exchanges Medallion Program. If you have any questions with
respect to signature-guarantees, please call 1-800-645-6561.
Redemption proceeds of at least $1,000 will be wired to any member bank of
the Federal Reserve System in accordance with a written signature-guaranteed
request.
WIRE REDEMPTION PRIVILEGE
You may request by wire or telephone that redemption proceeds (minimum
$1,000) be wired to your account at a bank which is a member of the Federal
Reserve System, or a correspondent bank if your bank is not a member. To
establish the Wire Redemption Privilege, you must check the appropriate box and
supply the necessary information on the Fund's Account Application or file a
Shareholder Services Form with the Transfer Agent. You may direct that
redemption proceeds be paid by check (maximum $150,000 per day) made out to the
owners of record and mailed to your address. Redemption proceeds of less than
$1,000 will be paid automatically by check. Holders of jointly registered Fund
or bank accounts may have redemption proceeds of only up to $250,000 wired
within any 30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The Fund
reserves the right to refuse any redemption request, including requests made
shortly after a change of address, and may limit the amount involved or the
number of such requests. This Privilege may be modified or terminated at any
time by the Transfer Agent or the Fund. The Fund's Statement of Additional
Information sets forth instructions for transmitting redemption requests by
wire. Shares held under Keogh Plans, IRAs or other retirement plans, and shares
for which certificates have been issued, are not eligible for this Privilege.
<PAGE>
36
TELEPHONE REDEMPTION PRIVILEGE
You may redeem Fund shares (maximum $150,000 per day) by telephone if you
have checked the appropriate box on the Fund's Account Application or have filed
a Shareholder Services Form with the Transfer Agent. The redemption proceeds
will be paid by check and mailed to your address. You may telephone redemption
instructions by calling 1-800-645-6561 or, if you are calling from overseas,
call 1-516-794-5452. The Fund reserves the right to refuse any request made by
telephone, including requests made shortly after a change of address, and may
limit the amount involved or the number of telephone redemption requests. This
Privilege may be modified or terminated at any time by the Transfer Agent or the
Fund. Shares held under Keogh Plans, IRAs or other retirement plans, and shares
for which certificates have been issued, are not eligible for this Privilege.
TELETRANSFER PRIVILEGE
You may redeem Fund shares (minimum $500) by telephone if you have checked
the appropriate box and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the Transfer Agent.
The proceeds will be transferred between your Fund account and the bank account
designated in one of these documents. Only such an account maintained in a
domestic financial institution which is an Automated Clearing House member may
be so designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per day)
and mailed to your address. Holders of jointly registered Fund or bank accounts
may redeem through the TELETRANSFER Privilege for transfer to their bank account
only up to $250,000 within any 30-day period. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly after a
change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate this Privilege at any time or charge
a service fee upon notice to shareholders, although no such fee currently is
contemplated.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER redemption by telephoning 1-800-645-6561 or, if you are calling
from overseas, call 516-794-5452. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares issued in certificate form, are not eligible for
this Privilege.
REINSTATEMENT PRIVILEGE
You may reinvest in up to the number of shares you have redeemed, within
30 days of redemption of Class A shares, at their then-prevailing net asset
value without a sales load. The Reinstatement Privilege may be exercised only
once.
Any gain recognized on a redemption is taxable despite reinvestment in the
Fund pursuant to this Privilege. Any loss realized as a result of such a
redemption may not be allowed as a deduction for federal income tax purposes,
but may be applied, depending on the amount reinvested, to adjust the cost basis
of the shares acquired upon reinvestment. In addition, if the shares redeemed
had been acquired within the 90 days preceding the redemption, the amount of any
gain or loss on the redemption may have to be computed without regard to any
sales charges incurred on the original purchase of the redeemed shares (except
to the extent those sales charges exceed the sales charges waived in connection
with the reinvestment). In such a case, the sales charges (or portion thereof)
not taken into account with respect to the original purchase are treated as
having been paid in connection with the reinvestment in the Fund's Class A
shares.
SERVICE AND DISTRIBUTION PLANS
Class A, B and C shares are subject to Class A, B and C Service and
Distribution Plans adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule
12b-1"). Potential investors should read this Prospectus in light of the terms
governing the Agreement between their Service Agents and the Distributor. A
Service Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different levels of compensation with respect to
different Classes of shares.
<PAGE>
37
SERVICE AND DISTRIBUTION PLAN -- CLASS A SHARES
Under the Class A Service and Distribution Plan, the Fund, at the expense
of the Class A shares, (a) reimburses the Distributor for payments to certain
Service Agents for distributing the Fund's Class A shares and servicing
shareholder accounts, and (b) pays the Sub-Investment Adviser, Dreyfus Service
Corporation and any affiliate of either of them (collectively, "Dreyfus") for
advertising and marketing relating to the Class A shares and for shareholder
servicing activities, at an aggregate annual rate of .25 of 1% of the value of
the average daily net assets of Class A. Each of the Distributor and Dreyfus may
pay one or more Service Agents a fee in respect of the Fund's Class A shares
owned by shareholders for whom the Service Agent provides shareholder services
or for whom the Service Agent is the dealer or holder of record. Each of the
Distributor and Dreyfus determine the amounts, if any, to be paid to Service
Agents under the Class A Service and Distribution Plan and the basis on which
such payments are made. The Class A Service and Distribution Plan also provides
that the Investment Adviser and the Sub-Investment Adviser may pay Service
Agents out of their investment advisory fees, their past profits or any other
source available to them. From time to time, the Distributor and/or Dreyfus may
defer or waive receipt of fees under the Class A Service and Distribution Plan
while retaining the ability to be paid under the Class A Service and
Distribution Plan thereafter. The foregoing fees payable under the Class A
Service and Distribution Plan are payable without regard to actual expenses
incurred.
SERVICE AND DISTRIBUTION PLANS -- CLASS B AND CLASS C SHARES
Under the Class B and Class C Service and Distribution Plans, the Fund, at
the expense of the Class B and Class C shares, (a) pays the Distributor for
distributing the Fund's Class B and Class C shares at an annual rate of .75 of
1% of the value of the average daily net assets of Class B and Class C, and
(b) pays the Distributor for the provision of certain services to the holders of
Class B and Class C shares a fee at the annual rate of .25 of 1% of the value of
the average daily net assets of Class B and Class C. 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 providing services related to the maintenance of such
shareholder accounts. The Distributor may pay one or more Service Agents a fee
in respect of distribution and other services for Class B and Class C shares.
The Distributor determines the amounts, if any, to be paid to Service Agents
under the Class B and Class C Service and Distribution Plans and the basis on
which such payments are made. The Class B and Class C Service and Distribution
Plans also provides that the Investment Adviser and the Sub-Investment Adviser
may pay Service Agents out of their investment advisory fees, their past profits
or any other source available to them. From time to time the Distributor and/or
Dreyfus may defer or waive receipt of fees under the Class B and Class C Service
and Distribution Plans while retaining the ability to be paid under the Class B
and Class C Service and Distribution Plans thereafter. The foregoing fees
payable under the Class B and Class C Service and Distribution Plans are payable
without regard to actual expenses incurred.
GENERAL
Banking laws and regulations, including the Glass-Steagall Act as currently
interpreted by the Board of Governors of the Federal Reserve System, prohibit
banks generally from issuing, underwriting, selling or distributing securities.
Accordingly, banks will be engaged to act as Service Agents only to perform
administrative and shareholder servicing functions. The Fund believes that
banks, subject to banking laws and regulations, may perform such administrative
and shareholder servicing functions without violation of such banking laws or
regulations. However, future changes in legal requirements relating to the
permissible activities of banks and their affiliates, as well as future
interpretations of present requirements, could require banks to discontinue
providing such administrative and shareholder servicing functions. If banks were
required to discontinue providing all or a part of such functions, their
customers would be permitted to remain the beneficial owners of Fund shares and
alternative means for continuing the servicing of such customers would be
sought. The Fund does not anticipate that investors would suffer any adverse
financial consequences as a result of these occurrences.
In addition, state securities laws on this issue may differ from
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state laws.
<PAGE>
38
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund ordinarily pays dividends from net investment income and
distributes net realized securities gains, if any, once a year, but it may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. The Fund will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive dividends and
distributions in cash or to reinvest in additional shares of the same class at
net asset value without a sales load. Dividends and distributions paid in cash
to Retirement Plans, however, may be subject to additional tax as described
below. All expenses are accrued daily and are deducted before the declaration of
dividends. Dividends paid by each Class will be calculated at the same time and
in the same manner and will be of the same amount, except that the expenses
attributable solely to a particular Class will be borne exclusively by such
Class. Class B and Class C shares will receive lower per share dividends than
Class A shares which will receive lower per share dividends than Class R shares
because of the higher expenses borne by the relevant Class. See "Fee Table."
Dividends paid by each Class will be calculated at the same time and in the
same manner and will be in the same amount, except that the expenses
attributable solely to a particular Class will be borne exclusively by that
Class. Class C shares will receive lower per share dividends than Class A shares
because of the higher expenses borne by the Class C shares. See "The Fund's
Expenses" and "Service and Distribution Plans."
TAXES -- GENERAL
The Fund intends to qualify to be treated as an investment company under
subchapter M of the Code, and intends to continue to so qualify. If it so
qualifies, the Fund will not be subject to federal income taxes on its net
investment income (I.E., its investment company taxable income, as that term is
defined in the Code, determined without regard for the deduction for dividends
paid) and net capital gain (I.E., the excess of the Fund's net long-term capital
gain over its net short-term capital loss), if any, that it distributes to its
shareholders in each taxable year, provided that it distributes at least 90% of
its net investment income for such taxable year. The Fund will, however, be
subject to a nondeductible 4% excise tax on the excess, if any, of certain
required distributions of ordinary income and net realized capital gains over
amounts distributed or deemed distributed by the Fund by the end of each
calendar year. To the extent possible, the Fund intends to structure its
distributions to avoid liability for this excise tax.
DISTRIBUTIONS
Dividends paid by the Fund from its net investment income will be taxable
to shareholders as ordinary income, whether received in cash or in additional
shares. Distributions of net capital gain that are designated by the Fund as
"capital gain dividends," will be taxable to shareholders as long-term capital
gain, whether received in cash or in additional shares, regardless of the length
of time the shareholder has owned Fund shares. The maximum federal income tax
rate imposed on individuals with respect to long-term capital gains is generally
limited to 28%, whereas the maximum federal income tax rate imposed on
individuals with respect to ordinary income (and on short-term capital gains,
which are taxed at the same rates as ordinary income) is 39.6%. With respect to
corporate taxpayers, long-term capital gains are taxed at the same federal
income tax rates as ordinary income and short-term capital gains. If a
shareholder receives a capital gain dividend with respect to shares held for six
months or less, however, any loss on a subsequent sale or exchange of such
shares will be treated as a long-term capital loss to the extent of such capital
gain dividend.
Investors should note that under H.R. 2491, as passed by Congress and
vetoed by President Clinton, individual taxpayers would have been permitted a 50
percent deduction for any capital gains that they recognized, and corporations
would have been taxed at a 28 percent rate on capital gains, in lieu of the
regular corporate rate. The provisions generally were to have retroactive
effect to January 1, 1995. It is unclear whether similar legislation will be
included as part of the 1996 budget compromise and, if so, what the effective
date will be.
<PAGE>
39
Dividends paid by the Fund to qualified Retirement Plans, IRAs (including
IRA "Rollover Accounts") or certain non-qualified deferred compensation plans
ordinarily will not be subject to taxation until the proceeds are distributed
from the Retirement Plan. The Fund will not report dividends paid to such Plans
and IRAs to the IRS. Generally, distributions from such Retirement Plans, except
those representing returns of non-deductible contributions thereto, will be
taxable as ordinary income and, if made prior to the time the participant
reaches age 59-1/2, generally will be subject to an additional tax equal to 10%
of the taxable portion of the distribution. If the distribution from such a
Retirement Plan (other than certain governmental or church plans) or IRA for any
taxable year following the year in which the participant reaches age 70-1/2 is
less than the "minimum required distribution" for that taxable year, an excise
tax equal to 50% of the deficiency may be imposed by the IRS. The administrator,
trustee or custodian of such a Retirement Plan or IRA will be responsible for
reporting distributions from such Plans and IRAs to the IRS. Participants in
qualified Retirement Plans will receive a disclosure statement describing the
consequences of a distribution from such a Plan from the administrator, trustee
or custodian of the Plan prior to receiving the distribution. Moreover, certain
contributions to a qualified Retirement Plan or IRA in excess of the amounts
permitted by law may be subject to an excise tax.
Shareholders will be notified annually as to the federal tax status of
dividends and distributions from the Fund. Because it is expected that only a
small portion of the Fund's net investment income will arise from dividends on
common or preferred stock of domestic corporations, no significant portion of
distributions by the Fund, whether from net investment income or net capital
gain, is expected to be eligible for the dividends received deduction allowed to
corporations under the Code.
Dividends declared in October, November or December of any year, payable to
shareholders of record as of a specified date in such a month, will be deemed to
have been received by the shareholders and paid by the Fund no later than
December 31, provided such dividends are paid during January of the following
year.
Shareholders should consider the tax implications of buying shares of the
Fund prior to a dividend or distribution by the Fund. The price of shares
purchased at the time may reflect the amount of the forthcoming dividend or
distribution. Such dividend or distribution may have the effect of reducing the
net asset value of shares below a shareholder's cost and thus would be a return
on investment in an economic sense, but nevertheless it will be taxable to the
shareholder.
SALE OF SHARES
A shareholder may realize a taxable gain or loss on the sale of shares in
the Fund depending on his or her basis in the shares for federal income tax
purposes. If the shares are capital assets in the shareholder's hands the gain
or loss will be treated as a capital gain or loss and will be long-term or
short-term, depending on the shareholder's holding period for the shares. As a
general rule, a shareholder's gain or loss will be long-term capital gain or
loss if the shares have been held for more than one year and a short-term
capital gain or loss if the shares have been held for one year or less. If a
shareholder sells or otherwise disposes of a share of the Fund before holding it
for more than six months, any loss on the sale or other disposition of such
share shall be treated as long-term capital loss to the extent of any capital
gain dividends received by the shareholder with respect to such share. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after the shares are disposed of. In such case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss.
FOREIGN SHAREHOLDERS
Dividends paid by the Fund from net investment income to a shareholder who,
as to the United States, is a nonresident alien individual, a foreign trust or
estate, a foreign corporation or a foreign partnership (a "foreign shareholder")
will be subject to United States withholding tax at a rate of 30% unless a
reduced rate of withholding or
<PAGE>
40
a withholding exemption is provided under applicable treaty law. Foreign
shareholders are urged to consult their own tax advisers concerning the
applicability of the United States withholding tax and any foreign taxes.
BACKUP WITHHOLDING
The Fund may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends, distributions from net realized
securities gains, and redemption proceeds paid to non-corporate shareholders.
This tax may be withheld from dividends, distributions from net realized
securities gains and redemption proceeds if (i) the payee fails to furnish the
Fund with the payee's correct taxpayer identification number (E.G., an
individual's social security number), (ii) the IRS notifies the Fund that the
payee has failed to report properly certain interest and dividend income to the
IRS and to respond to notices to that effect, or (iii) when required to do so,
the payee fails to certify that he or she is not subject to backup withholding.
Redemption proceeds may be subject to withholding under the circumstances
described in (i) above. Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from payments made to a shareholder
may be credited against such shareholder's federal income tax liability.
OTHER TAXATION
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the treasury regulations promulgated thereunder. The Code and the treasury
regulations are subject to change by legislative or administrative action either
prospectively or retroactively.
Dividends from net investment income and capital gain dividends may also be
subject to state, local and foreign taxes.
Descriptions of tax consequences set forth in this Prospectus and in the
Statement of Additional Information are intended to be a general guide.
Investors should consult their own tax advisers regarding specific questions as
to the federal, state, local and foreign tax consequences of ownership of shares
of the Fund.
CERTAIN INFORMATION REGARDING PERFORMANCE
Advertisements and communications to shareholders may contain various
measures of the Fund's performance, including various expressions of total
return and current distribution rate. They may occasionally cite statistics to
reflect its volatility or risk. Performance for each Class may be calculated on
the basis of average annual total return and/or total return. These total return
figures reflect changes in the price of the shares and assume that any income
dividends and/or capital gains distributions made by the Fund during the
measuring period were reinvested in shares of the same Class. These figures also
take into account any applicable service and distribution fees. As a result, at
any given time, the performance of Class B and Class C should be expected to be
lower than that of Class A and the performance of Class A, Class B and Class C
should be expected to be lower than that of Class R. Performance for each Class
will be calculated separately.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of a
stated period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a percentage rate
which, if applied on a compounded annual basis, would result in the redeemable
value of the investment at the end of the period. Advertisements of the Fund's
performance will include the Fund's average annual total return for one, five
and ten year periods, or for shorter time periods depending upon the length of
time during which the Fund has operated.
<PAGE>
41
Total return is computed on a per share basis and assumes the reinvestment
of dividends and distributions. Total return generally is expressed as a
percentage rate which is calculated by combining the income and principal
changes for a specified period and dividing by the net asset value (or maximum
offering price in the case of Class A) per share at the beginning of the period.
Advertisements may include the percentage rate of total return or may include
the value of a hypothetical investment at the end of the period which assumes
the application of the percentage rate of total return. Total return also may be
calculated by using the net asset value per share at the beginning of the period
instead of the maximum offering price per share at the beginning of the period
for Class A shares or without giving effect to any applicable CDSC at the end of
the period for Class B or Class C shares. Calculations based on the net asset
value per share do not reflect the deduction of the applicable sales charge on
Class A shares, which, if reflected, would reduce the performance quoted.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance.
NET ASSET VALUE
The net asset value of a share of each Class for the purpose of pricing
purchase orders and redemption orders is determined as of 15 minutes after the
close of business on the New York Stock Exchange (generally 4:00 p.m., New York
time) on each business day by dividing the value of the Fund's assets
attributable to that Class, less the liabilities attributable to that Class, by
the number of shares of that Class outstanding. With the exception of certain
fees and expenses borne pursuant to the Class A, B and C Service and
Distribution Plans and certain other expenses attributable solely to a
particular Class, all Fund expenses will be borne on a pro rata basis by each
Class on the basis of the relative net assets of the respective Classes. See
"The Fund's Expenses" and "Service and Distribution Plans." As used in this
Prospectus, the term "business day" refers to those days when the Investment
Adviser, the Administrator, the Transfer Agent and the New York Stock Exchange
are all open for business, which is Monday through Friday except for holidays.
ORGANIZATION AND CAPITAL STOCK
The Company was incorporated in Maryland on March 14, 1988 under the name
"Comstock Partners Strategy Fund, Inc." The Company originally commenced
operations in May of 1988 as a closed-end investment company. The Company
converted to an open-end investment company effective as of August 1, 1991.
On February 8, 1996, (i) the Company changed its name to Comstock
Partners Funds, Inc., (ii) Comstock Partners Strategy Fund, the Company's
existing portfolio, became a separate portfolio of the Company and (iii) the
Fund was organized as a new portfolio of the Company. The Company has entered
into an agreement with the Dreyfus Capital Value Fund, pursuant to which and
subject to the satisfaction of certain conditions, the Fund will acquire all of
the assets and liabilities (whether contingent or otherwise) of the Dreyfus
Capital Value Fund in exchange for shares in the Fund. The Fund will not
commence operations until the consummation of the Reorganization.
The Company's charter, as amended, authorizes the issuance of separate
series of shares corresponding to shares of multiple investment portfolios of
the Company. As of the date this Prospectus, the Company consists of two
investment portfolios: the Fund and the Comstock Partners Strategy Fund.
The authorized capital stock of the Company consists of 1,000,000,000
shares, par value $.001 per share. The Fund is authorized to issue 125,000,000
Class A shares, 125,000,000 B shares, 125,000,000 Class C shares and 125,000,000
Class R shares. Each Class A, Class B, Class C and Class R share represents an
interest in the Fund in proportion to its net asset value, and has identical
rights except that Class A, B and C shares bear fees and expenses on an ongoing
basis pursuant to the Fund's Class A, Class B and Class C Service and
Distribution Plans, respectively, and
<PAGE>
42
Class B and C shares bear additional incremental shareholder administrative
expenses resulting from deferred sales charge arrangements. In addition, only
the holders of Class A, Class B and Class C shares have voting rights with
respect to matters pertaining to the Class A, Class B and Class C Service and
Distribution Plans, respectively.
The Company's Board of Directors may reclassify unissued shares of the Fund
into additional classes of Common Stock at a future date. The Fund's Board of
Directors may, in the future, authorize the issuance of shares of additional
classes of capital stock representing different investment portfolios.
Except as described above with respect to the Fund's Service and
Distribution Plans, all shares of the Fund have equal voting rights and will be
voted in the aggregate and not by class, except where voting by class is
required by law. Under the corporate law of Maryland, the Fund's state of
incorporation, and the Fund's By-Laws (except as required under the 1940 Act),
the Fund is not required and does not currently intend to hold annual meetings
for the election of directors. Shareholders, however, will have the right to
call for a special meeting of shareholders if such a request is made, in
writing, by shareholders entitled to cast at least 10% of the votes entitled to
be cast at the meeting (or by shareholders entitled to cast at least 10% of the
Class A, Class B or Class C votes entitled to be cast with respect to matters
relating to the Class A, Class B or Class C Service and Distribution Plans,
respectively). In such cases, the Fund will assist in calling the meeting as
required under the 1940 Act. A more complete statement of the voting rights of
shareholders is contained in the Fund's Statement of Additional Information.
All shares of the Fund, when issued, will be fully paid and nonassessable.
REPORTS TO SHAREHOLDERS
The Fund will send unaudited reports at least semi-annually, and annual
reports containing audited financial statements, to all of its shareholders.
________________________________
________________________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND, THE FUND'S INVESTMENT ADVISER, THE FUND'S SUB-INVESTMENT ADVISER OR
THE PRINCIPAL UNDERWRITER. THE PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY STATE OR JURISDICTION OF
THE UNITED STATES OR ANY COUNTRY IN WHICH SUCH OFFER WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY
IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
___________
<PAGE>
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY......................................................... 2
THE FUND'S EXPENSES........................................................ 4
THE FUND................................................................... 9
INVESTMENT OBJECTIVE AND POLICIES.......................................... 10
INVESTMENT RESTRICTIONS.................................................... 18
RISK FACTORS............................................................... 18
MANAGEMENT ARRANGEMENTS.................................................... 22
PURCHASE OF FUND SHARES.................................................... 23
ADDITIONAL SHAREHOLDER SERVICES............................................ 28
REDEMPTION OF SHARES....................................................... 32
SERVICE AND DISTRIBUTION PLANS............................................. 36
DIVIDENDS, DISTRIBUTIONS AND TAXES......................................... 38
CERTAIN INFORMATION REGARDING PERFORMANCE.................................. 40
NET ASSET VALUE............................................................ 41
ORGANIZATION AND CAPITAL STOCK............................................. 41
REPORTS TO SHAREHOLDERS.................................................... 42
<PAGE>
PART B
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Subject to Completion, February 13, 1996
COMSTOCK PARTNERS CAPITAL VALUE FUND
10 Exchange Place, Suite 2010,
Jersey City, New Jersey 07302-3913
(201) 332-4436
----------------------------------
, 1996
STATEMENT OF ADDITIONAL INFORMATION
Comstock Partners Capital Value Fund (the "Fund") is a professionally
managed, diversified portfolio of Comstock Partners Funds, Inc. (the "Company"),
an open-end investment company. The investment objective of the Fund is to
maximize total return, consisting of capital appreciation and current income.
The Fund invests in a wide rage of equity and debt securities and money market
instruments.
The Fund has four classes of shares, Class A, Class B, Class C and Class R
shares.
This Statement of Additional Information is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Fund's
Prospectus dated _____________, 1996 (which may be revised from time to time)
(the "Prospectus"). This Statement of Additional Information contains additional
information to that set forth in the Prospectus and should be read in
conjunction with the Prospectus, additional copies of which may be obtained
without charge by sending your request in writing to 144 Glenn Curtis Boulevard,
Uniondale, New York 11556-0144, or by calling 1-800-645-6561. When telephoning,
ask for Operator 144.
TABLE OF CONTENTS
PAGE
Description of Bond and Commercial Paper Ratings . . . . . . . . . . . . . . 2
Additional Information Concerning Portfolio Activities . . . . . . . . . . . 3
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Management Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Service and Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . 23
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Additional Information Concerning Taxes. . . . . . . . . . . . . . . . . . . 25
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Transfer Agent and Dividend Disbursing Agent . . . . . . . . . . . . . . . . 30
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1
<PAGE>
DESCRIPTION OF BOND AND COMMERCIAL PAPER RATINGS
A rating by a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general and
are not absolute standards of quality or guarantees as to the
creditworthiness
of an issuer. Consequently, Comstock Partners, Inc., the Fund's investment
adviser (the "Investment Adviser") believes that the quality of debt securities
in which the Fund invests should be continuously reviewed and that individual
analysts give different weightings to the various factors involved in credit
analysis. A rating is not a recommendation to purchase, sell or hold a security,
because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons. The Investment Adviser will utilize Moody's Investors
Service, Inc. ("Moody's") and/or Standard & Poor's Ratings Group, a division of
The McGraw Hill Companies, Inc. ("S&P") for determining the applicable ratings.
BONDS
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by
all standards. Together with bonds rated Aaa (Moody's highest rating), they
comprise what are generally known as high-grade bonds. Aa bonds are rated lower
than Aaa bonds because margins of protection may not be as large as those of Aaa
bonds, or fluctuations 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 those applicable to Aaa securities. Bonds which are rated A
by Moody's possess many favorable investment attributes and are considered 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.
Moody's Baa rated bonds are considered medium-grade obligations, I.E., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements because
their future cannot be considered as well assured. Uncertainty of position
characterizes bonds in this class, because the protection of interest and
principal payments may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Bonds rated AA by S&P have a very strong capacity to pay interest and
principal and differ only in a small degree from issues rated AAA (S&P's highest
rating). Bonds rated AAA are considered by S&P to be the highest grade
obligations and have an extremely strong capacity to pay interest and principal.
Bonds rated A by S&P have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
S&P's BBB rated bonds are regarded as having adequate capacity to pay
interest and principal. Although these bonds normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and principal.
Bonds rated-BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and principal
in accordance with the terms of the obligation. BB indicates the lowest degree
of speculation and C the highest degree of speculation. While such bonds may
have some quality and protective
2
<PAGE>
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Bonds rated D are in default, and payment of
interest and/or principal is in arrears.
COMMERCIAL PAPER
Moody's: The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers (or related supporting institutions) rated Prime-1
are considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers (or related supporting institutions) rated
Prime-2 have a strong capacity for repayment of short-term promissory
obligations. Issuers (or related supporting institutions) rated Prime-3 have an
acceptable capacity for repayment of short-term promissory obligations.
S&P: Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelmingly safe characteristics are denoted A-l+.
Capacity for timely payment on issues with an A-2 designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1. Issues carrying an A-3 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.
ADDITIONAL INFORMATION CONCERNING PORTFOLIO ACTIVITIES
OPTIONS, FUTURES AND CURRENCY TRANSACTIONS
The Fund is not a commodity pool and all futures transactions engaged in by
the Fund must constitute bona fide hedging in accordance with the Commodity
Exchange Act, as amended, and the rules and regulations promulgated by the
Commodity Futures Trading Commission ("CFTC"); provided, however, that the Fund
may enter into futures contracts or options thereon for purposes other than bona
fide hedging if, immediately thereafter, the sum of the amount of its initial
margin and premiums on open contracts and options would not exceed 5% of the
liquidation value of the Fund's portfolio; provided further, that in case of an
option that is in-the-money at the time of the purchase, the in-the-money amount
may be excluded in calculating the 5% limitation. Because the 5% limitation
applies only at the time the Fund enters into a futures contract or option
thereon, the value of futures contracts and options thereon may be significantly
more or less than 5% of the value of the Fund's portfolio. The Fund may write
covered call or put options on securities and stock indices and purchase put and
call options on securities and stock indices for speculative purposes. In
addition, through the writing of covered options and the purchase of options and
the purchase and sale of stock index futures contracts, interest rate futures
contracts and related options on such futures contracts, the Investment Adviser
may at times seek to hedge against a decline in the value of securities included
in the Fund's portfolio or an increase in the price of securities which it plans
to purchase for the Fund; PROVIDED, that the value of all futures contracts
sold by the Fund will not exceed the total market value of the Fund's portfolio
securities; and PROVIDED, FURTHER, that with respect to all futures contracts
traded by the Fund, the Fund will establish a segregated account consisting of
cash or cash equivalents in an amount equal to the total market value of such
futures contracts less the amount of initial margin on deposit for such
contracts. Expenses and losses incurred as a result of such hedging strategies
will reduce the Fund's current return.
The ability of the Fund to engage in the options and futures strategies
described below will depend on the availability of liquid markets in such
instruments. It is impossible to predict the amount of trading interest that may
exist in various types of options or futures. In addition, daily limits on price
fluctuations on exchanges on which the Fund conducts its futures and options
transactions may prevent the prompt liquidation of positions at the optimal
time, thus subjecting the Fund to the potential of losses. Therefore no
assurance can be given that the Fund will be able to utilize these instruments
effectively for the purposes stated below. Furthermore, the Fund's ability to
engage in options and futures transactions may be limited by tax considerations.
Options and futures transactions may involve certain risks which are described
below.
In connection with transactions in stock index futures contracts, interest
rate futures contracts and options thereon written by the Fund on such futures
contracts, the Fund will be required to deposit as "initial margin" an amount of
cash
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and short-term United States Government securities equal to 5% to 8% of the
contract amount. Thereafter, subsequent payments (referred to as "variation
margin") are made to and from the broker to reflect changes in the value of the
futures contract.
WRITING COVERED OPTIONS ON SECURITIES. The Fund may write call options and
put options on optionable securities of the types in which it is permitted to
invest from time to time as its Investment Adviser determines is appropriate in
seeking to attain its objectives. Call options written by the Fund give the
holder the right to buy the underlying securities from the Fund at a stated
exercise price; put options give the holder the right to sell the underlying
security to the Fund at a stated price.
The Fund may only write covered options, which means that, so long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the Fund will
maintain in a separate account cash or short-term United States Government
securities with a value equal to or greater than the exercise price of the
underlying securities. The Fund may also write combinations of covered puts and
calls on the same underlying security.
The Fund intends to treat certain options in respect of specific securities
that are not traded on a securities exchange and the securities underlying
covered call options written by the Fund as illiquid securities. See "Certain
Additional Investments and Investment Strategies -- Illiquid Securities" in the
Prospectus.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's return in the event the option expires unexercised or is
closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option and the volatility of the
market price of the underlying security. By writing a call option, the Fund
limits its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, the Fund assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
value, resulting in a potential capital loss if the purchase price exceeds the
market value plus the amount of the premium received, unless the security
subsequently appreciates in value.
The Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. The Fund will realize a
profit or loss from such transaction if the cost of such transaction is less or
more than the premium received from the writing of the option. In the case of a
put option, any loss so incurred may be partially or entirely offset by the
premium received from a simultaneous or subsequent sale of a different put
option. Because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by unrealized appreciation of the underlying security owned by the
Fund.
Options written ordinarily will have expiration dates between one and
nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
time the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. The Fund may write (a) in-the-money call options when the
Investment Adviser expects that the price of the underlying security will remain
stable or decline moderately during the option period, (b) at-the-money call
options when the Investment Adviser expects that the price of the underlying
security will remain stable or advance moderately during the option period and
(c) out-of-the-money call options when the Investment Adviser expects that the
premiums received from writing the call option plus the appreciation in market
price of the underlying security up to the exercise price will be greater than
the appreciation in the price of the underlying security alone. In these
circumstances, if the market price of the underlying security declines and the
security is sold at this lower price, the amount of any realized loss will be
offset wholly or in part by the premium received. Out-of-the-money,
at-the-money and in-the-money put options (the reverse of call options as to the
relation of exercise price to market price) may be utilized in the same market
environments that such call options are used in equivalent transactions.
So long as the Fund's obligation as the writer of an option continues,
the Fund may be assigned an exercise notice by the broker-dealer through which
the option was sold, requiring the Fund to deliver, in the case of a call, or
take delivery of, in the case of a put, the underlying security against payment
of the exercise price. This obligation terminates when the option expires or
the Fund effects a closing purchase transaction. The Fund can no longer effect
a closing purchase transaction with respect to an option once it has been
assigned an exercise notice.
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PUT AND CALL OPTIONS ON SECURITIES. The Fund may purchase put options for
speculative purposes or to protect its portfolio holdings in an underlying
security against a decline in market value. Such hedge protection is provided
during the life of the put option since the Fund, as holder of the put option,
is able to sell the underlying security at the put exercise price regardless of
any decline in the underlying security's market price. In order for a put option
to be profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction
costs. By using put options for hedging purposes, the Fund will reduce any
profit it might otherwise have realized on its underlying security by the
premium paid for the put option and by transaction costs.
The Fund may also purchase call options for speculative purposes or to
hedge against an increase in prices of securities that it wants ultimately to
buy. Such hedge protection is provided during the life of the call option since
the Fund, as holder of the call option, is able to buy the underlying security
at the exercise price regardless of any increase in the underlying security's
market price. In order for a call option to be profitable, the market price of
the underlying security must rise sufficiently above the exercise price to cover
the premium and transaction costs. By using call options for hedging purposes,
the Fund will reduce any profit it might have realized had it bought the
underlying security at the time it purchased the call option by the premium paid
for the call option and by transaction costs.
Alternatively, the Investment Adviser may purchase a call or a put option
on a security in lieu of an actual investment in, or disposition of, a
particular security if it expects an increase or a decrease, as the case may be,
in the price of the security.
The purchase of an option entails a risk of loss of the entire investment
because an option may become worthless upon expiration.
An option position may be closed out only if a secondary market for an
option of the same series exists on a recognized national securities exchange or
in the over-the-counter market. Because of this fact and current trading
conditions, the Fund expects to purchase only call or put options issued by the
Options Clearing Corporation. The Fund expects to write options on national
securities exchanges and in the over-the-counter market.
While it may choose to do otherwise, the Fund generally will purchase or
write only those options for which the Investment Adviser believes there is an
active secondary market so as to facilitate closing transactions. There is no
assurance that sufficient trading interest to create a liquid secondary market
on a securities exchange will exist for any particular option or at any
particular time, and for some options no such secondary market may exist. A
liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, at times have rendered certain clearing
facilities inadequate and resulted in the institution of special procedures,
such as trading rotations, restrictions on certain types of orders or trading
halts or suspensions in one or more options. There can be no assurance that
similar events, or events that may otherwise interfere with the timely execution
of customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise or it
otherwise covers its position.
PURCHASE AND SALE OF OPTIONS AND FUTURES CONTRACTS ON STOCK INDICES. The
Fund may purchase put and call options and write covered put and call options on
stock indices for speculative purposes or as a hedge against movements in the
equity markets. The Fund may also purchase and sell stock index futures
contracts for speculative purposes or as a hedge against movements in the equity
markets.
Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specific price, an option on a stock index ordinarily gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of that stock index is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option. This amount
of cash is equal to such difference between the closing price of the index and
the exercise price of the option expressed in dollars times a specified
multiple. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. Unlike options on specific
securities, all settlements of options on stock indices are in cash and gain or
loss depends on general movements in stock included in the index rather than
price movements in particular stocks. When the Fund writes an option on a stock
index, it will establish a segregated account with the Fund's custodian in which
it will deposit cash or cash equivalents or a combination thereof in an amount
equal to the market value of the option, and it will maintain
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the account while the option is open. As indicated above, the purchase of an
option entails a risk of loss of the entire investment because an option may
become worthless upon expiration.
A stock index futures contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of securities is made.
If the Investment Adviser expects general stock market prices to rise, it
might purchase a call option on a stock index or a futures contract on that
index as a hedge against an increase in prices of particular equity securities
it wants ultimately to buy. If in fact the stock index does rise, the price of
the particular equity securities intended to be purchased may also increase, but
that increase would be offset in part by the increase in the value of the Fund's
index option or futures contract resulting from the increase in the index. If,
on the other hand, the Investment Adviser expects general stock market prices to
decline, it might purchase a put option or sell a futures contract on the index.
If that index does in fact decline, the value of some or all of the equity
securities in the Fund's portfolio may also be expected to decline, but that
decrease would be offset in part by the increase in the value of the Fund's
position in such put option or futures contract.
Alternatively, the Investment Adviser may purchase a call or a put option
(or buy or sell a futures contract) on a stock index in lieu of an actual
investment in, or disposition of, particular equity securities if it expects an
increase or a decrease, as the case may be, in general stock market prices.
PURCHASE AND SALE OF INTEREST RATE FUTURES CONTRACTS. The Fund may purchase
and sell interest rate futures contracts on United States Treasury bills, notes
and bonds for speculative purposes or to hedge its portfolio of fixed income
securities against the adverse effects of anticipated movements in interest
rates.
The Fund may sell interest rate futures contracts in anticipation of an
increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the fixed income securities held by the Fund will
fall, thus reducing the net asset value of the Fund. This interest rate risk can
be reduced without employing futures contracts as a hedge by selling long-term
fixed income securities and either reinvesting the proceeds in securities with
shorter maturities or by holding assets in cash. This strategy, however, entails
increased transaction costs in the form of dealer spreads and brokerage
commissions and would typically reduce the Fund's average yield as a result of
the shortening of maturities.
The sale of interest rate futures contracts provides an alternative means
of hedging against rising interest rates. As rates increase, the value of the
Fund's short position in the futures contracts will also tend to increase, thus
offsetting all or a portion of the depreciation in the market value of the
Fund's investments which are being hedged. While the Fund will incur commission
expenses in selling and closing out futures positions (which is done by taking
an opposite position which operates to terminate the position in the futures
contract), commissions on futures transactions are lower than the transaction
costs incurred in the purchase and sale of portfolio securities.
The Fund may purchase interest rate futures contracts in anticipation of a
decline in interest rates when it is not fully invested in debt securities it
intends to purchase. As such purchases are made, the Fund intends that an
equivalent amount of futures contracts will be closed out.
Alternatively, the Investment Adviser may buy or sell an interest rate
futures contract in lieu of an actual investment in, or disposition of,
particular fixed income securities if it expects an increase or a decrease, as
the case may be, in interest rates.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS AND INTEREST RATE FUTURES
CONTRACTS. The Fund may purchase call and put options and write covered call and
put options on stock index and interest rate futures contracts. The Fund may use
such options on futures contracts for speculative purposes or in connection with
its hedging strategies in lieu of purchasing and writing options directly on the
underlying securities or stock indices or purchasing and selling the underlying
futures. For example, the Fund may purchase put options or write call options on
stock index futures contracts or interest rate futures contracts, rather than
selling futures contracts, in anticipation of a decline in general stock market
prices or rise in interest rates, respectively, or purchase call options or
write covered put options on stock index or interest rate futures contracts,
rather than purchasing such futures contracts, to hedge against possible
increases in the price of equity securities or debt securities, respectively,
which the Fund intends to purchase.
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FOREIGN CURRENCY TRANSACTIONS. The Fund may enter into forward foreign
currency exchange contracts ("forward contracts") for speculative purposes or to
attempt to minimize the risk to the Fund from adverse changes in the
relationship between the United States dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and privately traded by
currency traders and their customers. The Fund may enter into a forward contract
for hedging purposes, for example, when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency in order to
"lock in" the United States dollar price of the security. Likewise, for example,
when the Fund believes that a foreign currency may suffer a substantial decline
against the United States dollar, it may enter into a forward contract to sell
an amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency, or when the
Fund believes that the United States dollar may suffer a substantial decline
against a foreign currency, it may enter into a forward contract to buy that
foreign currency for a fixed dollar amount. This second investment practice is
generally referred to as "cross-hedging." The Fund may enter into a forward
contract for speculative purposes in order to seek to take advantage of changes
in the relative values of two currencies which the Investment Adviser believes
may occur. Because in connection with the Fund's foreign currency forward
transactions an amount of the Fund's assets equal to the amount of the purchase
will be held aside or segregated to be used to pay for the commitment, the Fund
will always have cash, cash equivalents or readily marketable securities
available that are sufficient to cover any commitments under these contracts or
to limit any potential risk. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in the
account so that the value of the account will equal the amount of the Fund's
commitment with respect to the contract. The segregated account will be
maintained with the Fund's custodian or a sub-custodian and marked-to-market on
a daily basis. While these contracts are not currently regulated by the CFTC,
the CFTC may in the future assert authority to regulate forward contracts. In
such event, the Fund's ability to utilize forward contracts in the manner set
forth above may be restricted. Forward contracts may limit potential gain from a
positive change in the relationship between the United States dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not engaged in such contracts.
The Fund may purchase put and call options and write covered call and put
options on foreign currencies for speculative purposes or for the purpose of
protecting against declines in the dollar value of foreign portfolio securities
and against increases in the dollar cost of foreign securities to be acquired.
As is the case with other kinds of options, however, the writing of an option on
foreign currency for hedging purposes will constitute only a partial hedge, up
to the amount of the premium received, and the Fund could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may constitute
an effective hedge against fluctuations in exchange rates although, in the event
of rate movements adverse to the Fund's position, the Fund may forfeit the
entire amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by the Fund will be traded on United
States and foreign exchanges or over-the-counter.
The Fund may enter into exchange-traded contracts for the purchase or sale
for future delivery of foreign currencies ("foreign currency futures
contracts"). This investment technique may be used for speculative purposes or
to hedge against anticipated future changes in exchange rates which otherwise
might adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities that the Fund intends to purchase at a later
date. The successful use of foreign currency futures contracts will depend, in
part, on the Investment Adviser's ability to forecast currency exchange rate
movements correctly. Should exchange rates move in an unexpected manner, the
Fund may not achieve the anticipated benefits of foreign currency futures
contracts or may realize losses. The costs, limitations and risks associated
with transactions in foreign currency futures contracts are similar to those
associated with other types of futures contracts discussed in this Statement of
Additional Information under "Options, Futures and Currency Transactions."
The cost to the Fund of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because transactions in currency exchange are
usually conducted on a principal basis, no fees or commissions are involved. The
use of forward currency exchange contracts does not eliminate fluctuations in
the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future.
If a devaluation is generally anticipated, the Fund may not be able to
contract to sell the currency at a price above the devaluation level it
anticipates. The requirements for qualification as a regulated investment
company under the
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Internal Revenue Code of 1986, as amended (the "Code"), may cause the Fund to
restrict the degree to which it engages in currency transactions. See
"Dividends, Distributions and Taxes."
RISK FACTORS IN DERIVATIVES TRANSACTIONS. Derivatives transactions involve
special risks, including possible default by the other party to the transaction,
illiquidity, increased volatility in the Fund's net asset value and, to the
extent the Investment Adviser's view as to certain market movements is
incorrect, the risk that the use of such instruments could result in
substantially greater losses than if it had not been used. Use of put and call
options could result in losses to the Fund, force the purchase or sale of
portfolio securities at inopportune times or for prices higher or lower than
current market values, or cause the Fund to hold a security it might otherwise
sell. The use of currency transactions could result in the Fund's incurring
losses as a result of the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency in
addition to exchange rate fluctuations. The use of options and futures
transactions entails certain special risks. In particular, in the case of
hedging, the variable degree of correlation between price movements of options
or futures contracts and price movements in the related portfolio position of
the Fund could create the possibility that losses on the instrument will be
greater than gains in the value of the Fund's position. In addition, futures and
options markets could be illiquid in some circumstances and certain
over-the-counter options could have no markets. The Fund might not be able to
close out certain positions without incurring substantial losses. To the extent
the Fund utilizes futures and options transactions for hedging, such
transactions should tend to minimize the risk of loss due to a decline in the
value of the hedged position and, at the same time, limit any potential gain to
the Fund that might result from an increase in value of the position. Finally,
the daily variation margin requirements for futures contracts create a greater
ongoing potential financial risk than would purchases of options, in which case
the exposure is limited to the cost of the initial premium and transaction
costs. Losses resulting from the use of options, futures or currency
transactions will reduce the Fund's net asset value, and possibly income, and
the losses may be greater than if such instruments had not been used.
SHORT-SELLING
The Fund may engage in short-selling. Until the Fund replaces a borrowed
security in connection with a short sale, the Fund will: (a) maintain daily a
segregated account, containing cash or U.S. Government securities, at such a
level that (i) the amount deposited in the account plus the amount deposited
with the broker as collateral will equal the current value of the security sold
short and (ii) the amount deposited in the segregated account plus the amount
deposited with the broker as collateral will not be less than the market value
of the security at the time it was sold short; or (b) otherwise cover its short
position.
BANK OBLIGATIONS
Domestic commercial banks organized under Federal law are supervised and
examined by the Comptroller of the Currency and are required to be members of
the Federal Reserve System and to have their deposits insured by the Federal
Deposit Insurance Corporation (the "FDIC"). Domestic banks organized under state
law are supervised and examined by state banking authorities but are members of
the Federal Reserve System only if they elect to join. In addition, state banks
whose certificates of deposit ("CDs") may be purchased by the Fund are insured
by the FDIC (although such insurance may not be of material benefit to the Fund,
depending upon the principal amount of the CDs of each bank held by the Fund)
and are subject to Federal examination and to a substantial body of Federal law
and regulation. As a result of Federal or state laws and regulations, domestic
branches of domestic banks generally are required, among other things, to
maintain specified levels of reserves, are limited in the amounts which they can
loan to a single borrower and are subject to other regulation designed to
promote financial soundness. However, not all such laws and regulations apply to
foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign subsidiaries of
domestic banks and domestic and foreign branches of foreign banks, such as CDs
and time deposits ("TDs"), may be general obligations of the parent banks in
addition to the issuing branches, or may be limited by the terms of a specific
obligation and governmental regulation. Such obligations are subject to
different risks than are those of domestic banks. These risks include foreign
economic and political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes on interest income.
Foreign branches
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and subsidiaries are not necessarily subject to the same or similar regulatory
requirements that apply to domestic banks, such as mandatory reserve
requirements, loan limitations, and accounting, auditing and financial
recordkeeping requirements. In addition, less information may be publicly
available about a foreign branch of a domestic bank or about a foreign bank than
about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent banks in addition to the issuing branches, or may be
limited by the terms of a specific obligation and by Federal or state regulation
as well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may be subject to reserve requirements imposed by the Federal Reserve
System or by the state in which the branch is located if the branch is licensed
in that state. In addition, Federal branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may be
required to: (1) pledge to the regulator, by depositing assets with a
designated bank within the state, a certain percentage of their assets as fixed
from time to time by the appropriate regulatory authority; and (2) maintain
assets within the state in an amount equal to a specified percentage of the
aggregate amount of liabilities of the foreign bank payable at or through all of
its agencies or branches within the state. The deposits of Federal and State
Branches generally must be insured by the FDIC if such branches take deposits of
less than $100,000.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks, foreign subsidiaries of
domestic banks, foreign branches of foreign banks or domestic branches of
foreign banks, the Investment Adviser carefully evaluate such investments on a
case-by-case basis.
REPURCHASE AGREEMENTS
The Fund's custodian or sub-custodian will have custody of, and will hold
in a segregated account, securities acquired by the Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of the Securities
and Exchange Commission to be loans by the Fund. In an attempt to reduce the
risk of incurring a loss on a repurchase agreement, the Fund will enter into
repurchase agreements only with domestic banks with total assets in excess of
one billion dollars, or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities of the type in
which the Fund may invest, and will require that additional securities be
deposited with it if the value of the securities purchased should decrease below
the resale price. The Sub-Investment Adviser will monitor on an ongoing basis
the value of the collateral to assure that it always equals or exceeds the
repurchase price. The Fund will consider on an ongoing basis the
creditworthiness of the institutions with which it enters into repurchase
agreements.
BRADY BONDS
The Brady Plan framework, as it has developed, contemplates the exchange of
external commercial bank debt for newly issued bonds (Brady Bonds). Brady Bonds
may also be issued in respect of new money being advanced by existing lenders in
connection with the debt restructuring. Brady Bonds issued to date generally
have maturities of between 15 and 30 years from the date of issuance. The
following emerging market countries have issued Brady Bonds: Argentina, Brazil,
Bulgaria, Costa Rica, the Dominican Republic, Ecuador, Jordan, Mexico, Nigeria,
the Philippines, Poland, Uruguay and Venezuela. In addition, other countries may
announce plans to issue Brady Bonds in the future. The Fund may invest in Brady
Bonds of emerging market countries that have been issued to date, as well as
those which may be issued in the future.
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Agreements implemented under the Brady Plan to date are designed to achieve
debt and debt-service reduction through specific options negotiated by a debtor
nation with its creditors. As a result, the financial packages offered by each
country differ. The types of options have included the exchange of outstanding
commercial bank debt for bonds issued at 100% of face value of such debt which
carry a below-market stated rate of interest (generally known as par bonds),
bonds issued at a discount from the face value of such debt (generally known as
discount bonds), bonds bearing an interest rate which increases over time and
bonds issued in exchange for the advancement of new money by existing lenders.
Discount bonds issued to date under the framework of the Brady Plan have
generally borne interest computed semiannually at a rate equal to 13/16 of one
percent above the then current six month LIBOR (London Interbank Offered Rate).
Regardless of the stated face amount and stated interest rate of the various
types of Brady Bonds, the Fund will purchase Brady Bonds in secondary markets,
as described below, in which the price and yield to the investor reflect market
conditions at the time of purchase. Brady Bonds issued to date have traded at a
deep discount from their face value. Certain sovereign bonds are entitled to
"value recovery payments" in certain circumstances, which in effect constitute
supplemental interest payments but generally are not collateralized. Certain
Brady Bonds have been collateralized as to principal due at maturity (typically
15 to 30 years from the date of issuance) by U.S. Treasury zero coupon bonds
with a maturity equal to the final maturity of such Brady Bonds, although the
collateral is not available to investors until the final maturity of the Brady
Bonds. Collateral purchases are financed by the International Monetary Fund, the
World Bank and the debtor nations' reserves. In addition, interest payments on
certain types of Brady Bonds may be collateralized by cash or high-grade
securities in amounts that typically represent between 12 and 18 months of
interest accruals on these instruments with the balance of the interest accruals
being uncollateralized. Brady Bonds are often viewed as having three or four
valuation components: (i) the collateralized repayment of principal at final
maturity; (ii) the collateralized interest payments; (iii) the uncollateralized
interest payments; and (iv) any uncollateralized repayment of principal at
maturity (these uncollateralized amounts constitute the "residual risk"). The
Fund may purchase Brady Bonds with no or limited collateralization, and will be
relying for payment of interest and (except in the case of principal
collateralized Brady Bonds) principal primarily on the willingness and ability
of the foreign government to make payment in accordance with the terms of the
Brady Bonds. Brady Bonds issued to date are purchased and sold in secondary
markets through U.S. securities dealers and other financial institutions and are
generally maintained through European transnational securities depositories.
ZERO COUPON SECURITIES AND DISCOUNT OBLIGATIONS
When a zero coupon security is held to maturity, its entire return, which
consists of the amortization of discount, comes from the difference between its
purchase price and its maturity value. This difference is known at the time of
purchase, so that investors holding zero coupon securities until maturity know
at the time of their investment what the expected return on their investment
will be.
Zero coupon securities and Discount Obligations tend to be subject to
greater price fluctuations in response to changes in interest rates than are
ordinary interest-paying debt securities with similar maturities. The value of
zero coupon securities and Discount Obligations appreciates more during periods
of declining interest rates and depreciates more during periods of rising
interest rates than ordinary interest-paying debt securities with similar
maturities. Under current federal income tax law, the Fund is required to accrue
as income each year a portion of the original issue discount with respect to
zero coupon securities and other securities issued at a discount to the stated
redemption price. Accordingly, the Fund may have to dispose of portfolio
securities under disadvantageous circumstances in order to generate current cash
to satisfy certain distribution requirements. See "Additional Information
Concerning Taxes."
STRUCTURED INVESTMENTS
Issuers of structured investments are typically organized by investment
banking firms which receive fees in connection with establishing each issuing
entity and arranging for the placement of its securities. This type of
restructuring of investment characteristics involves the deposit with or
purchase by an entity, such as a corporation or trust, of specified instruments
(such as Brady Bonds) and the issuance by that entity of one or more classes of
securities backed by, or representing interests in, the underlying instruments.
The cash flow on the underlying instruments may be apportioned among the newly
issued structured investments to create securities with different investment
characteristics such as varying maturities, payment priorities or interest rate
provisions; the extent of the payments made with respect to structured
investments is dependent on the extent of the cash flow on the underlying
instruments. Because structured investments
10
<PAGE>
of the type in which the Fund anticipates investing typically involve no credit
enhancement, their credit risk will generally be equivalent to that of the
underlying instruments.
Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). As a result, the Fund's investment in these structured investments
may be limited by the restrictions contained in the 1940 Act described under
"Investment Objective and Policies" in the Fund's Prospectus. Structured
investments are typically sold in private placement transactions, and there
currently is no active trading market for structured investments.
PREFERRED STOCK
As a general rule, the market value of preferred stock with a fixed
dividend rate and no conversion element varies inversely with interest rates and
perceived credit risk. Because preferred stock is junior to debt securities and
other obligations of the issuer, deterioration in the credit quality of the
issuer will cause greater changes in the value of a preferred stock than in a
debt security with similar stated yield characteristics.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities that may be converted
into or exchanged for, at either a stated price or stated rate, underlying
shares of common stock. Convertible securities have general characteristics
similar to both fixed income and equity securities. Although to a lesser extent
than with fixed income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stocks and therefore
also will react to variations in the general market for equity securities. A
unique feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market value declines
to the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common stock. While no
securities investments are without risk, investments in convertible securities
generally entail less risk than investments in common stock of the same issuer.
As fixed income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. However, like all fixed income securities, there can be no assurance of
current income because the issuers of the convertible securities may default on
their obligations. Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible securities of similar quality
because of the potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to benefit
from increases in the market price of the underlying common stock. There can be
no assurance of capital appreciation, however, because securities prices
fluctuate. Convertible securities generally are subordinated to other similar
but non-convertible securities of the same issuer, although convertible bonds,
as corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
WARRANTS
The value of a warrant does not necessarily change with the value of the
underlying securities and a warrant ceases to have value if it is not exercised
prior to its expiration date. The Fund may invest up to 5% of the value of its
net assets in warrants for equity securities, but will not invest more than 2%
of the value of its net assets in warrants which are not listed on the New York
or American Stock Exchange.
DEPOSITARY RECEIPTS
Depositary Receipts evidence ownership of underlying securities issued by
either a non-U.S. or a U.S. corporation that have been deposited with a
depositary or custodian bank. Depositary Receipts may be issued in connection
with an offering of securities by the issuer of the underlying securities or
issued by a depositary bank as a vehicle to promote
11
<PAGE>
investment and trading in the underlying securities. ADRs are receipts issued by
U.S. banks or trust companies in respect of securities of non-U.S. issuers held
on deposit for use in the U.S. securities markets. GDRs, EDRs and other types of
Depositary Receipts are typically issued by a U.S. bank or trust company and
traded principally in the U.S. and other international markets.
RULE 144A SECURITIES
As indicated in the Prospectus, the Fund may purchase certain restricted
securities ("Rule 144A Securities") for which there is a secondary market of
qualified institutional buyers, as contemplated by Rule 144A under the
Securities Act of 1933. Rule 144A provides an exemption from the registration
requirements of the Securities Act for the resale of certain restricted
securities to qualified institutional buyers.
One effect of Rule 144A is that certain restricted securities may now be
liquid, though there is no assurance that a liquid market for Rule 144A
securities will develop or be maintained. The Board of Directors has adopted
policies and procedures for the purpose of determining whether securities that
are eligible for resale under Rule 144A are liquid or illiquid for purposes of
the Fund's 15% limitation on investment in illiquid securities. Pursuant to
those policies and procedures, the Board of Directors has delegated to the
Investment Adviser the determination as to whether a particular security is
liquid or illiquid, requiring that consideration be given to, among other
things, the frequency of trades and quotes for the security, the number of
dealers willing to sell the security and the number of potential purchasers,
dealer undertakings to make a market in the security, the nature of the security
and the time needed to dispose of the security. The Board of Directors
periodically reviews the Fund's purchases and sales of Rule 144A securities and
the Investment Adviser's compliance with the above procedures.
LOAN PARTICIPATION AND ASSIGNMENTS
When the Fund purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan (as such terms, and other capitalized
terms used in this paragraph, are defined in the Prospectus). Because
Assignments are arranged through private negotiations between potential
assignees and potential assignors, however, the rights and obligations acquired
by the Fund as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender. The assignability of certain
Sovereign Debt Obligations is restricted by the governing documentation as to
the nature of the assignee such that the only way in which the Fund may acquire
an interest in a Loan is through a Participation and not an Assignment. The Fund
may have difficulty disposing of Assignments and Participations because to do so
it will have to assign such securities to a third party. Because there is no
established secondary market for such securities, the Fund anticipates that such
securities could be sold only to a limited number of institutional investors.
The lack of an established secondary market may have an adverse impact on the
value of such securities and the Fund's ability to dispose of particular
Assignments or Participations 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 borrower. The lack of an established secondary market
for Assignments and Participations also may make it more difficult for the Fund
to assign a value to these securities for purposes of valuing the Fund's
portfolio and calculating its net asset value. The Fund will not invest more
than 15% of the value of its net assets in Participations and Assignments that
are illiquid, and in other illiquid securities.
LEVERAGE THROUGH BORROWING
For borrowings for investment purposes; the Investment Company Act of 1940,
as amended (the "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 borrowing over the
stated interest rate. To the extent the Fund enters into a reverse repurchase
agreement, the Fund will maintain in a segregated custodial account cash or U.S.
Government securities or other high quality liquid debt securities at least
equal to the aggregate amount of its reverse repurchase obligations, plus
accrued
12
<PAGE>
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.
LENDING PORTFOLIO SECURITIES
To a limited extent, the Fund may lend its portfolio securities to brokers,
dealers and other financial institutions, provided it receives cash collateral
which at all times is maintained in an amount equal to at least 100% of the
current market value of the securities loaned. By lending its portfolio
securities, the Fund can increase its income through the investment of the cash
collateral. For the purposes of this policy, the Fund considers collateral
consisting of U.S. Government securities or irrevocable letters of credit issued
by banks whose securities meet the standards for investment by the Fund to be
the equivalent of cash. Such loans may not exceed 33 1/3% of the value of the
Fund's total assets. From time to time, the Fund may return to the borrower or a
third party which is unaffiliated with the Fund, and which is acting as a
"placing broker," a part of the interest earned from the investment of
collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (i)
the Fund must receive at least 100% cash collateral from the borrower; (ii) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (iii) the Fund must be able
to terminate the loan at any time; (iv) 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; (v) the Fund
may pay only reasonable custodian fees in connection with the loan; and (vi)
while voting rights on the loaned securities may pass to the borrower, the
Fund's Directors must terminate the loan and regain the right to vote the
securities if a material event adversely affecting the investment occurs. These
conditions may be subject to future modification.
CERTAIN RISK FACTORS
LOWER RATED SECURITIES. The Fund is permitted to invest in securities rated
below Baa by Moody's and below BBB by S&P. Such securities, though higher
yielding, are characterized by risk. See "Description of the Fund--Risk Factors"
in the Prospectus for a discussion of certain risks and "Description of Bond and
Commercial Paper ratings" herein for a general description of Moody's and S&P
ratings. Although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these
securities. The Fund will rely on the Investment Adviser's judgment, analysis
and experience in evaluating the creditworthiness of an issuer. In this
evaluation, the Investment Adviser will take into consideration, among other
things, the issuer's financial resources, its sensitivity to economic conditions
and trends, its operating history, the quality of the issuer's management and
regulatory matters. It also is possible that a rating agency might not timely
change the rating on a particular issue to reflect subsequent events. Once the
rating of a security in the Fund's portfolio has been changed, the Investment
Adviser will consider all circumstances deemed relevant in determining whether
the Fund should continue to hold the security.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities and will fluctuate over time. These securities are considered
by S&P and Moody's, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than securities in the
higher rating categories.
Companies that issue certain of these securities often are highly leveraged
and may not have available to them more traditional methods of financing.
Therefore, the risk associated with acquiring the securities of such issuers
generally is greater than is the case with 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.
During such periods, such issuers 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.
13
<PAGE>
Because there is no established retail secondary market for many of these
securities, the Investment Adviser anticipates that such securities could be
sold only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these securities does exist, it generally
is not as liquid as the secondary market for higher rated securities. The lack
of a liquid secondary market may have an adverse impact on market price and
yield and the Fund's ability to dispose of particular issues when necessary to
meet 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.
These securities may be particularly susceptible to economic downturns. It
is likely that any economic recession could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence for default for such securities.
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 Investment Adviser will review carefully the credit and other
characteristics pertinent to such new issues.
Lower rated zero coupon securities and pay-in-kind bonds, in which the Fund
may invest up to 5% of its total assets, involve special considerations. Such
zero coupon securities, pay-in-kind or delayed interest bonds carry an
additional risk in that, unlike bonds which pay interest throughout the period
to maturity, the Fund will realize no cash until the cash payment date unless a
portion of such securities are sold and, if the issuer defaults, the Fund may
obtain no return at all on its investment. See "Additional Information
Concerning Taxes."
INVESTING IN SOVEREIGN DEBT OBLIGATIONS OF EMERGING MARKET COUNTRIES.
Investing in Sovereign Debt Obligations involves economic and political risks.
The Sovereign Debt Obligations in which the Fund will invest in most cases
pertain to countries that are among the world's largest debtors to commercial
banks, foreign governments, international financial organizations and other
financial institutions. In recent years, the governments of some of these
countries have encountered difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling interest and principal payments by negotiating
new or amended credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds, and obtaining new credit to finance interest payments.
Certain governments have not been able to make payments of interest on or
principal of Sovereign Debt Obligations as those payments have come due.
Obligations arising from past restructuring agreements may affect the economic
performance and political and social stability of those issuers. The ability of
governments to make timely payments on their obligations is likely to be
influenced strongly by the issuer's balance of payments, including export
performance, and its access to international credits and investments. A country
whose exports are concentrated in a few commodities could be vulnerable to a
decline in the international prices of one or more of those commodities.
Increased protectionism on the part of a country's trading partners also could
adversely affect the country's exports and diminish its trade account surplus,
if any. To the extent that a country receives payment for its exports in
currencies other than dollars, its ability to make debt payments denominated in
dollars could be adversely affected.
To the extent that a country develops a trade deficit, it will need to
depend on continuing loans from foreign governments, multilateral organizations
or private commercial banks, aid payments from foreign governments and on
inflows of foreign investment. The access of a country to these forms of
external funding may not be certain, and a withdrawal of external funding could
adversely affect the capacity of a government to make payments on its
obligations. In addition, the cost of servicing debt obligations can be affected
by a change in international interest rates since the majority of these
obligations carry interest rates that are adjusted periodically based upon
international rates.
Central banks and other governmental authorities which control the
servicing of Sovereign Debt Obligations may not be willing or able to permit the
payment of the principal or interest when due in accordance with the terms of
the obligations. As a result, the issuers of Sovereign Debt Obligations may
default on their obligations. Defaults on certain Sovereign Debt Obligations
have occurred in the past. Holders of certain Sovereign Debt Obligations may be
requested to participate in the restructuring and rescheduling of these
obligations and to extend further loans to the issuers. There
14
<PAGE>
interests of holders of Sovereign Debt Obligations could be adversely affected
in the course of restructuring arrangements or by certain other factors referred
to below. Furthermore, some of the participants in the secondary market for
Sovereign Debt Obligations also may be directly involved in negotiating the
terms of these arrangements and, therefore, may have access to information not
available to other market participants.
The Fund is permitted to invest in Sovereign Debt Obligations that are not
current in the payment of interest or principal or are in default, so long as
the Investment Adviser believes it to be consistent with the Fund's investment
objective. The Fund may have limited legal recourse in the event of a default
with respect to certain Sovereign Debt Obligations it holds. Bankruptcy,
moratorium and other similar laws applicable to issuers of Sovereign Debt
Obligations may be substantially different from those applicable to issuers of
private debt obligations. The political context, expressed as the willingness of
an issuer of Sovereign Debt Obligations to meet the terms of the debt
obligation, for example, is of considerable importance. In addition, no
assurance can be given that the holders of commercial bank debt will not contest
payments to the holders of securities issued by foreign governments in the event
of default under commercial bank loan agreements.
Another factor bearing on the ability of a country to repay Sovereign Debt
Obligations is the level of the country's international reserves. Fluctuations
in the level of these reserves can affect the amount of foreign exchange readily
available for external debt payments and, thus, could have a bearing on the
capacity of the country to make payments on its Sovereign Debt Obligations.
Expropriation, confiscatory taxation, nationalization, political, economic
or social instability or other similar developments, such as military coups,
have occurred in the past in countries in which the Fund will invest and could
adversely affect the Fund's assets should these conditions or events recur.
Foreign investment in certain Sovereign Debt Obligations is restricted or
controlled to varying degrees. These restrictions or controls at times may limit
or preclude foreign investment in certain Sovereign Debt Obligations and
increase the costs and expenses of the Fund. Certain countries in which the Fund
will invest require governmental approval prior to investments by foreign
persons, limit the amount of investment by foreign persons in a particular
issuer, limit the investment by foreign persons only to a specific class of
securities of an issuer that may have less advantageous rights than the classes
available for purchase by domiciliaries of the countries and/or impose
additional taxes on foreign investors.
In addition, if a deterioration occurs in a country's balance of payments,
the country could impose temporary restrictions on foreign capital remittances.
The Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation of capital, as well as by the
application to the Fund of any restrictions on investments. Investing in local
markets may require the Fund to adopt special procedures, seek local government
approvals or take other actions, each of which may involve additional costs to
the Fund.
INVESTMENT RESTRICTIONS
In addition to the restrictions described under "Investment Restrictions"
in the Prospectus, the Fund may not:
1. Make loans to others, except through the purchase of debt
obligations or the entry into repurchase agreements. However, the Fund may
lend its portfolio securities in any amount not to exceed 33 1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Board of Directors.
2. Purchase securities on margin, but the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and
sales of securities.
3. Purchase or sell commodities or commodity contracts.
4. 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 or similar arrangement in connection with
portfolio transactions, such as in connection with writing covered options
and the purchase of securities on a when-issued or delayed-delivery basis
15
<PAGE>
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, or in connection with the
purchase of any securities on margin for purposes of Investment
Restriction No. 2 above.
5. Purchase the obligations of any issuer (other than a bank) if
such purchase would cause more than 5% of the value of its total assets to
be invested in securities of such issuer, except that up to 25% of the
value of the Fund's total assets may be invested, and obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities
may be purchased, without regard to such limitations.
The Fund has adopted restriction 3 above in order to comply with certain
state securities laws. In these laws, the term "commodity contract" is
defined as a "contract or option providing for the delivery or receipt at a
future date of a specified amount and grade of a traded commodity at a
specified price and delivery point." None of the transactions described in
the Fund's prospectus under the caption "Certain Additional Investments and
Investment Strategies - Derivaties Transactions - Options, Futures and
Currencies" and in this Statement of Additional Information under the caption
"Additional Information Concerning Portfolio Activities - Options, Futures and
Currency Transactions" (other than certain transactions involving securities
or indices of securities, which the Fund does not consider to be "commodities"
for purposes of this restriction) involves the delivery or receipt of a
commodity; all such transactions are settled by means of cash payments.
Accordingly, such transactions are not subject to restriction 3 above.
The fundamental investment restrictions set forth above, together with
those described in the Prospectus, may not be changed without the affirmative
vote of the holders of a majority of the Fund's outstanding voting securities,
as defined under "Capital Stock" in this Statement of Additional Information.
In addition to the fundamental investment restrictions of the Fund set
forth above, the Fund's Board of Directors has adopted the following investment
restrictions in order to comply with certain legal requirements. The following
restrictions are not fundamental policies of the Fund and may be changed by the
Fund's Board of Directors without the approval of shareholders. The Fund may
not:
1. Purchase the securities of any issuer if such purchase would
cause the Fund to hold more than 10% of the outstanding voting securities
of such issuer. This restriction applies only with respect to 75% of the
Fund's assets.
2. 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.
3. Purchase securities of 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 investment company, (ii) 5% of its net assets with
respect to any one investment company and (iii) 10% of its net assets in
the aggregate, or (b) those received as part of a merger or consolidation.
4. Purchase or retain the securities of any issuer if the officers
or directors of the Fund, its Investment Adviser or Sub-Investment Adviser
who individually own beneficially more than 1/2 of 1% of the securities of
such issuer together own beneficially more than 5% of the securities of
such issuer.
5. 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.
6. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and this Statement of
Additional Information.
7. Invest more than 2% of the value of the Fund's net assets in
warrants which are not listed on the New York Stock Exchange or American
Stock Exchange, or more than 5% of the value of the Fund's net assets in
warrants regardless of whether so listed.
8. Purchase, hold or deal in real estate, but this shall not
prohibit the Fund from investing in securities of companies engaged in
real estate activities or investments.
9. Invest in interests in oil, gas or mineral exploration or
development programs.
10. 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 that 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
16
<PAGE>
its shareholders, the Fund reserves the right to revoke the commitment by
terminating the sale of Fund shares in the state involved.
MANAGEMENT ARRANGEMENTS
DIRECTORS AND OFFICERS
The Board of Directors of the Company is responsible for the overall
management and operation of the Fund. The directors and executive officers of
the Company and their principal occupations during the last five years are set
forth below.
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS, AND AGE POSITION(S) WITH FUND DURING PAST 5 YEARS
- ---------------------- --------------------- -----------------------
*Stanley D. Salvigsen Director, Chairman of Director, Chairman of
10 Exchange Place the Board, Chief the Board and Chief
Suite 2010 Executive Officer and Executive Officer of
Jersey City, NJ 07302-3913 Member of Executive Comstock Partners, Inc.
53 years old Committee since November 1986.
*Charles L. Minter Director, Vice Chairman Director, Vice Chairman
10 Exchange Place of the Board, of the Board and
Suite 2010 President, Secretary Secretary of Comstock
Jersey City, NJ 07302-3913 and Member of Executive Partners, Inc. since
54 years old Committee January 1987, and
President of Comstock
Partners, Inc. since
March 1994.
M. Bruce Adelberg Director, Member of Consultant, MBA Research
33 Channel Lane Audit Committee Group and Director of
Salem, SC 29676 Carrols Corporation
58 years old (food services) and
Carrols Holdings, Inc.
E.W. Kelley Director, Member of Managing General
777 Third Avenue Audit Committee Partner, Kelley &
New York, NY 10017 Partners, Ltd. (consumer
78 years old products and services).
Chairman, Consolidated
Products, Inc. (food
services).
Robert M. Smith Director, Member of President and Director,
Ansbacher (Dublin) Audit Committee Ansbacher (Dublin) Asset
Asset Management Ltd. Management Ltd.
420 Lexington Avenue,
Suite 2531
New York, NY 10170
65 years old
*Troy Hottenstein Secretary Chief Operating Officer
10 Exchange Place and, since 1991,
Suite 2010 Research Analyst at
Jersey City, NJ 07302-3913 Comstock Partners, Inc.
27 years old
*Robert C. Ringstad Vice President, Vice President
10 Exchange Place Treasurer and Chief Operations--Regent
Suite 2010 Financial Officer Investor Services
Jersey City, NJ 07302-3913
65 years old
17
<PAGE>
- ---------------
* Interested person as defined in the 1940 Act, because of affiliations with
Comstock Partners, Inc., the Investment Adviser.
For so long as the Class A or Class C Service and Distribution Plan remains
in effect, the Directors of the Fund who are not "interested persons" of the
Company, as defined in the 1940 Act, will be selected and nominated by the
Directors who are not "interested persons" of the Company.
The Executive Committee of the Board of Directors of the Company exercises
all of the powers and authority of the Board of Directors between meetings of
the Board of Directors.
The Company pays each non-interested director a fee of $20,000 per year
(consisting of $10,000 per portfolio of the Company), and reimburses each such
director for expenses of attendance.
No Director of the Company serves as a director of any other investment
company advised or administered by The Dreyfus Corporation, the Fund's sub-
investment adviser. None of the Company's officers, nor any affiliated persons
of the Company, received aggregate compensation in excess of $60,000 from the
Company during the fiscal year ended April 30, 1995. For the fiscal year ended
April 30, 1995, the aggregate amount of fees and expenses received by each
Director from the Company were as follows:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL
BENEFITS ESTIMATED COMPENSATION
AGGREGATE ACCRUED AS PART ANNUAL BENEFITS FROM COMPANY
COMPENSATION OF COMPANY UPON PAID TO BOARD
NAME OF BOARD MEMBER FROM COMPANY* EXPENSES RETIREMENT MEMBER*
- -------------------- ------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
Stanley D. Salvigsen 0 0 0 0
Charles L. Minter 0 0 0 0
M. Bruce Adelberg** 0 0 0 0
Robert M. Goodyear, Jr. $16,500 0 0 $16,500
E. W. Kelley $16,500 0 0 $16,500
Bruce C. Lueck $16,500 0 0 $16,500
Robert M. Smith $17,000 0 0 $17,000
</TABLE>
- --------------
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $8,980.44 for the Company.
** Mr. Adelberg was not a Director of the Fund during the fiscal year ended
April 30, 1995.
As of January 17, 1996, the following entities were known by the
Dreyfus Capital Value Fund (the predecessor to the Fund) to own, of record
or beneficially, 5% or more of the Dreyfus Capital Value Fund's outstanding
voting securities: Merrill Lynch, Pierce, Fenner & Smith Incorporated was
the record owner of 25.5692% of the outstanding Class A shares, and 30.8266%
of the outstanding Class B shares, of the Dreyfus Capital Value Fund;
Bell Childrens Trust was the record owner of 62.1406% and Everen Clearing
Corporation was the record owner of 28.3089% of the Dreyfus Capital Value
Fund's outstanding Class C shares; and Premier Mutual Fund Services, Inc.
was the beneficial owner of 100% of the Dreyfus Capital Value Fund's
outstanding Class R shares. Each named entity has been deemed to be a "control
person" as defined in the 1940 Act. Upon consummation of the Reorganization,
these shareholders would own similar percentages of the Comstock Capital
Value Fund's outstanding classes of shares. In addition, upon consummation of
the Reorganization, the officers and directors of the Fund will own less than
1% of each Class of the Fund.
INVESTMENT ADVISER
The Company, on behalf of the Fund, has engaged the Investment Adviser to
provide professional investment management for the Fund pursuant to an
Investment Advisory Agreement, to be dated as of the effective date of the
Reorganization (as defined herein), between the Fund and the Investment Adviser
(the "Investment Advisory Agreement"). Unless earlier terminated as described
below, the Investment Advisory Agreement will remain in effect until two years
from the date of its effectiveness and from year to year thereafter if approved
annually (i) by a majority of the non-interested directors of the Fund (as
defined in the 1940 Act) and (ii) by the Board of Directors of the Fund or by a
majority of the outstanding shares of the Fund (as defined in the 1940 Act). The
Investment Advisory Agreement may be terminated without penalty on 60 days'
written notice by either party thereto or by vote of the stockholders of the
Fund, and will terminate automatically on assignment.
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The Company (including the Fund) may, so long as the Investment Advisory
Agreement remains in effect, use "Comstock" as part of its name. The Investment
Adviser may, upon termination of the Investment Advisory Agreement, require the
Company (including the Fund) to refrain from using the name "Comstock" in any
form or combination in its name or in its business.
If expenses borne by the Fund in any fiscal year exceed expense limitations
imposed by applicable state securities regulations, the Investment Adviser will
reimburse the Fund for any such excess to the extent required by such
regulations in an amount not to exceed the Investment Adviser's annual fee.
Certain expenses such as brokerage commissions, taxes, extraordinary expenses
and interest are excluded from such limitations, and the expenses incurred by
Class A, Class B and Class C shares of the Fund pursuant to the Fund's Class A,
Class B and Class C Service and Distribution Plans, respectively, are included
within such expenses only to the extent required by any state in which the
Fund's shares are qualified for sale. California is the only state which
currently imposes such an expense limitation. The limitation is 2.5% of the
first $30 million of average net assets, 2.0% of the next $70 million of average
net assets and 1.5% of the remaining average net assets.
SUB-INVESTMENT ADVISER AND ADMINISTRATOR
The Company, on behalf of the Fund, has engaged The Dreyfus Corporation
(the "Sub-Investment Adviser") to provide sub-investment advisory and
administrative services pursuant to a Sub-Investment Advisory and Administration
Agreement to be dated the effective date of the Reorganization (the
"Sub-Investment Advisory Agreement"). The Sub-Investment Advisory Agreement will
remain in effect until two years from the date of its effectiveness and from
year to year thereafter if approved annually (i) by a majority of the
non-interested directors (as defined in the 1940 Act) of the Fund and (ii) by
the Board of Directors of the Fund or by a majority (as defined in the 1940 Act)
of the outstanding shares of the Fund. The Sub-Investment Advisory Agreement may
be terminated without penalty on 60 days' written notice, by either party
thereto, by the Fund or by vote of the stockholders of the Fund, and will
terminate automatically on assignment (as defined in the 1940 Act).
Under the Sub-Investment Advisory Agreement, the Sub-Investment Adviser is
obligated to waive, reduce or refund its fees received from the Company on
behalf of the Fund if and to the extent that the Investment Adviser has waived,
reduced or refunded all of the fees it was entitled to receive during the period
expense limitations, applicable to the Fund and imposed by state securities
laws, were exceeded and the Fund continues to exceed those limitations.
FUND EXPENSES
Except for the expenses borne by the Investment Adviser, the Sub-Investment
Adviser and the Administrator and the Distributor (as described below) pursuant
to their respective agreements, the Fund will pay all expenses incurred in
connection with its operation, including, among other things, organizational
costs, taxes, interest, loan commitment fees, interest and distributions paid on
securities sold short, brokerage fees and commissions, if any, Securities and
Exchange Commission fees and Blue Sky qualification fees, fees and expenses of
non-interested directors, officers' and employees' fees (other than officers or
employees of the Investment Advisor, the Sub-Investment Advisor or any affiliate
thereof), investment and sub-investment 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 Company's or the Fund's existence, payments to service
organizations, costs of independent pricing services, costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders, costs of shareholder
reports and meetings and any extraordinary expenses. Expenses attributable
solely to a particular Class, including the additional incremental shareholder
administrative expenses resulting from the Class B and Class C deferred sales
charge arrangements, are borne exclusively by that Class. In addition, the
Class A shares of the Fund bear certain servicing expenses in accordance with
the Class A Service and Distribution Plan, and the Class B and Class C shares
of the Fund bear certain servicing and distribution expenses in accordance with
the Class B and Class C Service and Distribution Plans. See "Service and
Distribution Plans."
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PURCHASE OF FUND SHARES
THE DISTRIBUTOR
Premier Mutual Fund Services, Inc. serves as the Fund's distributor on a
best efforts basis (the "Distributor") pursuant to an agreement which is
renewable annually. The Distributor also acts as distributor for the Comstock
Partners Strategy Fund, for funds in the Dreyfus Family of Funds and for
certain other investment companies.
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, Sunday or any Fund holiday
(e.g., when the New York Stock Exchange is not open for business), will be
credited to the shareholder's Fund account on the second bank business day
following such purchase order. To qualify to use the TELETRANSFER Privilege,
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 "Redemption of Fund
Shares--Stock Certificates; Signatures."
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 (including a pension, profit-sharing
or other employee benefit trust created pursuant to a plan qualified under
Section 401 of the Code) although more than one beneficiary is involved; or a
group of accounts established by or on behalf of 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. The term "purchaser" shall
not include an individual and/or spouse purchasing securities for his, her or
their own account or for the account of any minor children and such individual
and/or spouse purchasing securities on behalf of his or her IRA, Keogh Plan, or
403(b)(7) Plan to the extent such 403(b)(7) Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
custodial account or under certain employee benefit plans or other programs due
to concerns that such aggregation might constitute a prohibited transaction
under the Code or ERISA.
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<PAGE>
REDEMPTION OF FUND SHARES
WIRE REDEMPTION PRIVILEGE
By using this Privilege, the investor authorizes the Transfer Agent to act
on wire or telephone 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 if the Transfer Agent receives
the redemption request in proper form. Redemption proceeds 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. Redemption
proceeds, if wired, must be in the amount of $1,000 or more and will be wired to
the investor's account at the bank of record designated in the investor's file
at the Transfer Agent, if the investor's bank is a member of the Federal Reserve
System, or to a correspondent bank if the investor's bank is not a member. Fees
ordinarily are imposed by such bank and usually are 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 TREED 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 "Stock Certificates; Signatures."
REDEMPTIONS IN KIND
The Board of Directors reserves the right to make payments in whole or in
part in securities or other assets of the Fund in case of an emergency or any
time a cash distribution would impair the liquidity of the Fund to the detriment
of the existing shareholders. In such event, the securities would be valued in
the same manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
SUSPENSION OF REDEMPTIONS
The right of redemption may be suspended or the date of payment postponed
(a) during any period when the New York Stock Exchange is closed (other than
customary weekend and holiday closings), (b) when trading in the markets the
Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC 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 SEC by order may permit to protect the Fund's
shareholders.
STOCK CERTIFICATES; SIGNATURES
Any certificates representing Fund shares to be redeemed must be submitted
with the redemption request. Written redemption requests must be signed by each
shareholder, including each holder of a joint account, and each signature must
be guaranteed. Signatures on endorsed certificates submitted for redemption also
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
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<PAGE>
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-Guaranteed"
must appear with the signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators, trustees or
guardians and may accept other suitable verification arrangements from foreign
investors, such as consular verification. For more information with respect to
signature-guarantees, please call 1-800-645-6561.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Shares of other funds purchased by exchange will be purchased on the basis
of relative net asset value per share as follows:
A. Exchanges for shares of funds that are 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 such fund shares and their account
number.
To request an exchange, an investor or 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 telephonic
instructions from any person representing himself or herself to be the investor
or a representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange.
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. For
Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified Employee
Pension Plan ("SEP-IRAs") with only one participant, the minimum initial
investment is $750. To exchange shares held in corporate plans, 403(b)(7) Plans
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<PAGE>
and SEP-IRAs with more than one participant, the minimum initial investment is
$100 if the plan has at least $2,500 invested among shares of the funds in the
Dreyfus Family of Funds. To exchange shares held in personal retirement plans,
the shares exchanged must have a current value of at least $100.
AUTO-EXCHANGE PRIVILEGE
The Auto-Exchange Privilege permits an investor to purchase, in exchange
for shares of the Fund, shares of another fund advised or administered by the
Sub-Investment Adviser. 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 "Exchange
Privilege." Enrollment in or modification or cancellation of this Privilege is
effective three business days following notification by the investor. An
investor will be notified if his account falls below the amount designated to be
exchanged 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 only among those accounts.
The Exchange Privilege 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 other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. 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. An Automatic Withdrawal Plan may be established
by completing the appropriate application available from the Distributor. There
is a service charge of $.50 for each withdrawal check. The Automatic Withdrawal
Plan may be terminated at any time by the investor, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan. Class B or Class C shares withdrawn
pursuant to the Automatic Withdrawal Plan will be subject to any applicable
CDSC.
DIVIDEND SWEEP
The Dividend Sweep privilege allows investors to invest on the payment date
their dividends or dividends and capital gains distributions, if any, from the
Fund in shares of another fund advised or administered by the Sub-Investment
Adviser of which the investor is a shareholder. Shares of other funds purchased
pursuant to the Dividend Sweep 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 that are offered
without 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.
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D. Dividends and distributions paid by a fund may be invested in shares
of other funds that impose a contingent deferred sales charge ("CDSC")
and the applicable CDSC, if any, will be imposed upon redemption of
such shares.
CORPORATE PENSION/PROFIT-SHARING AND PERSONAL RETIREMENT PLANS
The Fund makes available to corporations a variety of prototype pension and
profit sharing plans, including a 401(k) Salary Reduction Plan. In addition, the
Fund makes available Keogh Plans, IRAs, including SEP-IRAs and IRA "Rollover
Accounts," and 403(b)(7) Plans. Plan support services are also available. For
details, please call toll free 1-800-358-5566.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs may
charge a fee, payment of which could require the liquidation of shares. All fees
charged are described in the appropriate form.
SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.
The minimum initial investment for corporate plans, Salary Reduction Plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, is $2,500 with no
minimum on subsequent purchases. The minimum initial investment for Dreyfus-
sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only one
participant, is normally $750 with no minimum on subsequent purchases.
Individuals who open an IRA also may open a non-working spousal IRA with a
minimum investment of $250.
The investor should read the Prototype Retirement Plan and the appropriate
form of Custodial Agreement for further details on eligibility, service fees and
tax implications, and should consult a tax adviser.
SERVICE AND DISTRIBUTION PLANS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "SERVICE AND DISTRIBUTION
PLANS."
SERVICE AND DISTRIBUTION PLAN - CLASS A SHARES
Rule 12b-1 (the "Rule") adopted by the SEC 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. Because
some or all of the fees paid for advertising or marketing the Class A shares of
the Fund and the fees paid to the Distributor and to certain banks, brokers,
dealers or other financial institutions (collectively, "Service Agents") could
be deemed to be payment of distribution expenses, the Company's Board of
Directors has adopted such a plan with respect to the Class A shares of the Fund
(the "Class A Service and Distribution Plan"). The Company's Board of Directors
believes that there is a reasonable likelihood that the Class A Service and
Distribution Plan will benefit the Fund and its Class A shareholders. In some
states, banks or other financial institutions effecting transactions in Class A
shares may be required to register as dealers pursuant to state law.
Under the Class A Service and Distribution Plan, servicing shareholder
accounts with respect to the Class A shares may include, among other things, one
or more of the following: answering client inquiries regarding the Fund;
assisting clients in changing dividend options, account designations and
addresses; performing subaccounting; establishing and maintaining shareholder
accounts and records; processing purchase and redemption transactions; investing
client cash account balances automatically in Fund shares; providing periodic
statements showing a client's account balance and integrating such statements
with those of other transactions and balances in the client's other accounts
serviced by the Service Agent; arranging for bank wires; and such other services
as the Fund may request, to the extent the Service Agent is permitted by
applicable statute, rule or regulation.
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<PAGE>
SERVICE AND DISTRIBUTION PLANS-CLASS B SHARES AND CLASS C SHARES
In addition to the above described Class A Service and Distribution Plan,
the Company's Board of Directors has adopted a Class B Service and Distribution
Plan and a Class C Service and Distribution Plan under the Rule with respect to
the Fund's Class B and Class C shares, pursuant to which the Company, on behalf
of the Fund, pays the Distributor and Dreyfus Service Corporation for
distributing the Fund's Class B and Class C shares, respectively, and for the
provision of certain services to the holders of Class B and Class C shares. The
Company's Board of Directors believes that there is a reasonable likelihood that
the Class B Service and Distribution Plan will benefit the Fund and its Class B
shareholders and that the Class C Service and Distribution Plan will benefit the
Fund and its Class B shareholders.
GENERAL
Quarterly reports of the amounts expended under each of the Class A, Class
B and Class C Service and Distribution Plans, and the purposes for which such
expenditures were incurred, must be made to the Board of Directors for its
review. In addition, the Class A, Class B and Class C Service and Distribution
Plans each provide that it may not be amended to increase materially the cost
which the Class A, Class B or Class C shares of the Fund, respectively, may bear
pursuant to such plan without Class A, Class B or Class C shareholder approval,
respectively, and that other material amendments of the Class A, Class B or
Class C Service and Distribution Plan must be approved by the Board of
Directors, and by the Directors who are neither interested persons of the
Company nor have any direct or indirect financial interest in the operation of
such plans or in any agreements entered into in connection with such plans, by
vote cast in person at a meeting called for the purpose of considering such
amendments. The Class A, Class B and Class C Service and Distribution Plans and
the related service agreements are subject to annual approval by such vote of
the Board of Directors cast in person at a meeting called for the purpose of
voting on the Class A, Class B and Class C Service and Distribution Plans. The
Class A, Class B and Class C Service and Distribution Plans may each be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of such plans or in any agreements entered into in connection with
such plans or by vote of a majority of the Class A, Class B or Class C shares of
the Fund, respectively. Any related service agreement may be terminated without
penalty at any time, by such vote. Each service agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
PORTFOLIO TRANSACTIONS
The Investment Adviser has discretion to select brokers and dealers to
execute portfolio transactions initiated by the Investment Adviser and to select
the markets in which such transactions are to be executed. The Investment
Advisory Agreement provides, in substance, that in executing portfolio
transactions and selecting brokers or dealers, the primary responsibility of the
Investment Adviser is to seek the best combination of net price and execution
for the Fund. It is expected that securities will ordinarily be purchased in the
primary markets, and that in assessing the best net price and execution
available to the Fund, the Investment Adviser will consider all factors it deems
relevant, including the breadth of the market in the security, the size of the
transaction, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of the commission, if
any (for the specific transaction and on a continuing basis). Transactions in
foreign securities markets may involve the payment of fixed brokerage
commissions, which are generally higher than those in the United States. The
purchase by the Fund of participations may be pursuant to privately negotiated
transactions pursuant to which the Fund may be required to pay fees to the
seller or forego a portion of payments in respect of the participation.
In selecting brokers to execute particular transactions and in evaluating
the best net price and execution available, the Investment Adviser is authorized
to consider "brokerage and research services" (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934). The Investment Adviser is
also authorized to cause the Fund to pay to a broker who provides such brokerage
and research services a commission for executing a portfolio transaction which
is in excess of the amount of commission another broker would have charged for
effecting that transaction. The Investment Adviser must determine in good faith,
however, that such commission was reasonable in relation to the value of the
brokerage and research services provided, viewed in terms of that particular
transaction or in terms of all the accounts over which the Investment Adviser
exercises investment discretion. The Investment Adviser may also have
arrangements with brokers pursuant to which such brokers provide research
services to the Investment Adviser in exchange for the placement of transactions
with such brokers. Research services furnished by brokers through whom the
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Fund effects securities transactions may be used by the Investment Adviser in
servicing all of the accounts for which investment discretion is exercised by
the Investment Adviser, and not all such services may be used by the Investment
Adviser in connection with the Fund. The research services provided may include,
among other things, market quotation and news services, portfolio analytic
systems and support, access to economic databases and analyses of macroeconomic
and financial trends.
The Investment Advisory Agreement requires the Investment Adviser to
provide fair and equitable treatment to the Fund in the selection of portfolio
investments and the allocation of investment opportunities as between the Fund
and the Investment Adviser's other investment management clients, but does not
obligate the Investment Adviser to give the Fund exclusive or preferential
treatment. It is likely that from time to time the Investment Adviser may make
similar investment decisions for the Fund and its other clients. In some cases,
the simultaneous purchase or sale of the same security by the Fund and another
client of the Investment Adviser could have a detrimental effect on the price or
volume of the security to be purchased or sold, as far as the Fund is concerned.
In other cases, coordination with transactions for other clients and the ability
to participate in volume transactions could benefit the Fund.
ADDITIONAL INFORMATION CONCERNING TAXES
GENERAL
The Fund intends to qualify to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and intends to continue to so qualify. To so qualify, the Fund must,
among other things, (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock or securities, foreign
currencies, or other income (including gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; (b) derive in each taxable year less than 30% of its
gross income from the sale or other disposition of any of the following held for
less than three months: stock or securities, or options, futures or forward
contracts (other than options, futures or forward contracts on foreign
currencies), or foreign currencies (or options, futures or forward contracts on
foreign currencies) but only if such currencies (or options, futures or forward
contracts) are not directly related to the Fund's principal business of
investing in stock or securities (or options and futures with respect to stocks
or securities (the "30% Limitation"); and (c) diversify its holdings so that, at
the end of each quarter of each taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, cash items, United States
Government securities, securities of other regulated investment companies and
other securities with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the value of the Fund's assets and
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its assets is invested in the securities of any one issuer
(other than United States Government securities). These requirements may
restrict the degree to which the Fund may realize short-term gains and limit the
range of the Fund's investments.
As a regulated investment company, the Fund will not be subject to Federal
income tax on its net investment income (i.e., its investment company taxable
income, as that term is defined in the Code, determined without regard to the
deduction for dividends paid) and "net capital gains" (i.e., the excess of the
Fund's long-term capital gains over net short-term capital losses), if any, that
it distributes in each taxable year to its shareholders, provided that the Fund
distributes at least 90% of its net investment income for such taxable year.
However, the Fund would be subject to corporate income tax (currently at a rate
of 35%) on any undistributed net investment income and net capital gains. Each
Fund expects to designate amounts retained as undistributed net capital gains in
a notice to its shareholders who will be (i) required to include in income for
United States federal income tax purposes, as long-term capital gains, their
proportionate shares of the undistributed amount, (ii) entitled to credit their
proportionate shares of the 35% tax paid by the Fund on the undistributed
amount, against their federal income tax liabilities and to claim refunds to the
extent such credits exceed their liabilities and (iii) entitled to increase
their tax basis, for federal income tax purposes, in their shares by an amount
equal to 65% of the amount of undistributed net capital gains included in the
shareholder's income.
The Fund will be subject to a nondeductible 4% federal excise tax to the
extent that the Fund does not distribute by the end of each calendar at least
98% of its ordinary income for such year, at least 98% of its net capital gain
income (generally the excess, if any, of its capital gains over its capital
losses) for the one-year period ending, as a general rule, on October 31 of that
year, plus any ordinary income and net capital gain income for the preceding
calendar year that
26
<PAGE>
was not distributed during such year. For this purpose, any income or gain
retained by a Fund that is subject to a corporate tax will be considered to have
been distributed by year-end.
ORIGINAL ISSUE DISCOUNT
The Fund may make investments that produce income that is not matched by a
corresponding cash distribution to the Fund, such as investments in obligations
such as certain Brady Bonds or zero coupon securities having original issue
discount (i.e., an amount equal to the excess of the stated redemption price of
the security at maturity over its issue price). In addition, income may
continue to accrue for federal income tax purposes with respect to a non-
performing investment. Any of the foregoing income would be treated as income
earned by the Fund and therefore would be subject to the distribution
requirements of the Code. Because such income may not be matched by a
corresponding cash distribution to the Fund, the Fund may be required to dispose
of other securities to be able to make distributions to its investors. The
extent to which the Fund may liquidate securities at a gain may be limited by
the 30% limitation discussed above.
FOREIGN WITHHOLDING TAXES
Certain dividends and interest received by the Fund may be subject to
foreign withholding taxes. If more than 50% in value of the Fund's total assets
at the close of any taxable year consists of stocks or securities of foreign
corporations, the Fund may elect to treat any foreign income taxes paid by it as
paid by its shareholders. If eligible, the Fund intends to make this election.
If the Fund makes this election, its shareholders will be required to include in
income their respective pro rata portions of foreign income taxes paid by the
Fund and, if they itemize their deductions, will be entitled to deduct such
respective pro rata portions in computing their taxable incomes or,
alternatively, to claim foreign tax credits (subject to the limitations
discussed below). Each year that the Fund makes this election, it will report to
its shareholders the amount per share of foreign income taxes it has elected to
have treated as paid by its shareholders.
Generally, a credit for foreign income taxes is subject to the limitation
that it may not exceed the shareholder's United States tax attributable to his
or her total foreign source taxable income. For this purpose, the source of the
Fund's income flows through to its shareholders. The Fund's gains from the sale
of securities will be treated as derived from United States sources and certain
currency fluctuation gains, including fluctuation gains from foreign currency
denominated debt securities, receivables and payables, will be treated as
ordinary income derived from United States sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income, such
as the portion of dividends received from the Fund that qualifies as foreign
source income. In addition, the foreign tax credit is allowed to offset only 90%
of the revised alternative minimum tax imposed on corporations and individuals.
Because of these limitations, shareholders may be unable to claim a credit for
the full amount of their proportionate share of the foreign taxes paid by the
Fund.
The foregoing is only a general description of the treatment of foreign
withholding or other foreign taxes under the United States federal income tax
laws. Because the availability of a credit or deduction depends on the
particular circumstances of each shareholder, shareholders are advised to
consult their own tax advisers.
OPTION AND FUTURES TRANSACTIONS
Under section 1256 of the Code, gain or loss on certain options, futures
contracts, options on futures contracts and forward contracts ("section 1256
contracts") will be treated as 60% long-term and 40% short-term capital gain or
loss (hereinafter "blended gain or loss"). In addition, section 1256 contracts
held by the Fund at the end of each taxable year will be required to be treated
as sold at market value on the last day of such taxable year for federal income
tax purposes and the resulting gain or loss will be treated as blended gain or
loss. However, all or a portion of any gain realized from engaging in
"conversion transactions" may be recharacterized as ordinary income under
section 1258. "Conversion transactions" are defined to include certain forward,
futures, option, and "straddle" transactions, transactions marketed or sold to
produce capital gains, or transactions described in Treasury regulations to be
issued in the future.
Offsetting positions held by the Fund involving financial futures, forwards
and options transactions may be considered, for tax purposes, to constitute
"straddles," which 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
27
<PAGE>
circumstances, overrides or modifies the provisions of section 1256. As such,
all or a portion of any short- or long-term capital gain from certain "straddle"
and/or conversion transactions may be recharacterized as ordinary income.
If the Fund were treated as entering into straddles by reason of its
futures and options transactions, the straddles would be characterized as "mixed
straddles" if the futures, forward and options transactions comprising a part of
the straddles were governed by section 1256 of the Code. The Fund may make one
or more elections with respect to mixed straddles. Depending on which election,
if any, is made, 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 the
offsetting position. Moreover, as a result of the straddle and conversion
transaction rules, short-term capital losses on straddle positions may be
recharacterized as long-term capital losses, and long-term capital gains may be
treated as short-term capital gains or ordinary income.
The requirements for qualification as a regulated investment company may
limit the Fund's ability to engage in certain transactions in options, futures
contracts, options on futures contracts and forward contracts.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS
Ordinarily, gains and losses realized from portfolio transactions will be
recognized as capital gain and loss. However, all or a portion of any gain or
loss realized from the sale or other disposition of non-U.S. dollar denominated
securities (including debt instruments, certain financial forward, futures and
options contracts, and certain preferred stock) may be recognized as ordinary
income or loss under section 988 of the Code.
Generally, gains from "foreign currencies" (I.E., foreign currency options,
foreign currency futures and forward foreign currency exchange contracts) will
be qualifying income for purposes of determining whether 90% of the Fund's gross
income is from certain qualified sources. While the treatment of income on such
foreign currency instruments has been clarified, it is unclear who will be
treated as the issuer of a foreign currency instrument or how foreign currency
options, futures of forward foreign currency exchange contracts will be valued
for purposes of the regulated investment company diversification requirements
applicable to the Fund.
Under section 988 of the Code, special rules are provided for certain
transactions in a foreign currency other than the taxpayer's functional currency
(I.E., in the Fund's case, currencies other than the United States dollar). In
general, foreign currency gains or losses from certain forward contracts not
traded in the interbank market, from futures contracts that are not "regulated
futures contracts," and from unlisted options will be treated as ordinary income
or loss under section 988. In certain circumstances, the Fund may elect capital
gain or loss treatment for such transactions. The rules under section 988 may
also affect the timing of income recognized by the Fund.
INVESTMENTS IN PASSIVE FOREIGN INVESTMENT COMPANIES
If the Fund purchases shares in a foreign investment company treated for
U.S. federal income tax purposes as a "passive foreign investment company" (a
"PFIC"), the Fund may be subject to U.S. federal income tax on a portion of any
"excess distribution" or gain from the disposition of such shares even if such
income is distributed as a taxable dividend by the Fund to its shareholders.
Additional charges in the nature of interest may be imposed on the Fund in
respect of deferred taxes arising from such distributions or gains. If the Fund
were to invest in a PFIC and elected to treat the PFIC as a "qualified electing
fund" under the Code (a "QEF"), in lieu of the foregoing requirements, the Fund
might be required to include in income each year a portion of the ordinary
earnings and net capital gain of the qualified electing fund, even if not
distributed to the Fund, and such amounts would be subject to the 90% and
calendar year excise tax distribution requirements described in the Prospectus.
In the case of PFIC stock owned by a registered investment company ("RIC"),
H.R. 2491, as passed by Congress and vetoed by President Clinton, contained a
provision that would have permitted a RIC to elect to mark-to-market stock in
the PFIC annually and thereby avoid the need for a RIC to make a QEF election.
It is unclear whether similar legislation will be included as part of the 1996
budget compromise. Moreover, on April 1, 1992 the Internal Revenue Service
proposed regulations providing a mark-to-market election for RICs that would
have effects similar to the proposed legislation. These regulations would be
effective for taxable years ending after promulgation of the regulations as
final regulations.
28
<PAGE>
As indicated in the Prospectus, descriptions of tax consequences set forth
in this Statement of Additional Information and the Prospectus are intended to
be a general guide. Investors should consult their own tax advisers regarding
specific questions as to the federal, state, local and foreign tax consequences
of ownership in the Fund.
PERFORMANCE INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "CERTAIN INFORMATION
REGARDING PERFORMANCE."
For purposes of quoting and comparing the performance of each Class of the
Fund to that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be stated in terms
of total return and yield. Total return and yield quotations are computed
separately for each Class of shares. Under the rules of the SEC ("Commission
Rules"), funds advertising performance must include average annual total return
quotes calculated according to the following formula:
P(1+T)to the nth power = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 5 or 10 year periods at the end of the 1,
5 or 10 year period (or fractional portion
thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication. The Fund
presents performance information for each Class of shares commencing with the
inception of its predecessor, the Dreyfus Capital Value Fund, Inc. (the "Dreyfus
Capital Value Fund"). A Class' average annual total return figures calculated
in accordance with the foregoing 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. Total return or "T"
in the formula above, is computed by finding the average annual compounded rates
of return over the 1, 5 and 10 year periods (or fractional portion thereof)
presented that would equate the initial amount invested to the ending redeemable
value.
Performance information presented by the Fund with respect to Class A,
Class B and C is restated to reflect the maximum front end sales load (with
respect to Class A) or CDSC (with respect to Class B and Class C) payable by
such Class at the time the performance information is presented, but is based
upon the distribution and service fees and other expenses actually paid for the
periods presented, rather than the distribution and service fees and other
expenses payable by the Class at the time the performance information is
presented. Performance information with respect to Class A will reflect annual
12b-1 fees paid by Class A at the rate of .25 of 1% of the value of the average
daily net assets of Class A plus certain additional expenses associated with
preparing, printing and distributing prospectuses. Performance information with
respect to Class B or Class C will reflect an annual distribution fee at the
rate of .75 of 1% of the value of the average daily net assets of Class B or
Class C, as the case may be, an annual service fee at the rate of .25 of 1% of
the value of the average daily net assets of Class B or Class C, as the case may
be, and certain additional incremental shareholder administrative expenses
resulting from the deferred sales charge arrangements. Prior to January 15,
1993, the Dreyfus Capital Value Fund did not offer Class B shares and, prior to
August 24, 1995, the Dreyfus Capital Value Fund did not offer Class C or Class R
shares. Performance information with respect to Class B or C of the Dreyfus
Capital Value Fund for the periods prior to the inception of those Classes does
not reflect any distribution or service fees or additional incremental
shareholder administrative expenses resulting from the deferred sales charge
arrangements because such fees and expenses were not paid during that period.
Class B and C performance information for the period of the Dreyfus Capital
Value Fund's inception to the inception of Class B or Class C, as the case may
be, reflects the annual service and distribution fees paid by Class A, and
therefore does not reflect the higher distribution and service fees and
additional incremental shareholder administrative expenses payable by Class C
because such higher fees and expenses were not paid during that period.
29
<PAGE>
The Fund may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of the Fund with other measures
of investment return. For example, in comparing the Fund's total return with
data published by Lipper Analytical Services, Inc., or similar independent
services or financial publications, the Fund calculates its aggregate total
return for the specified periods of time by assuming the investment of $10,000
in each Class of Fund shares at the Fund's commencement of operations and
assuming the reinvestment of each dividend or other distribution pursuant to the
Fund's Dividend Reinvestment Plan for the period when the Fund was a closed-end
fund and, thereafter, at net asset value on the reinvestment date. Percentage
increases are determined by subtracting the initial value of the investment from
the ending value and by dividing the remainder by the beginning value.
Past performance is not predictive of future performance. All
advertisements containing performance data of any kind will include a legend
disclosing that such performance data represents past performance and that the
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Advertisements and communications may compare the performance of Fund
shares with that of other mutual funds, as reported by Lipper Analytical
Services, Inc. or similar independent services or financial publications, and
may also contrast the Fund's investment policies and portfolio flexibility with
other mutual funds. From time to time, advertisements and other Fund materials
and communications may cite statistics to reflect the performance over time of
Fund shares, utilizing comparisons to indexes such as the Lehman Brothers
Government Bond Index, the Lehman Brothers Corporate Bond Index, the Lehman
Brothers Government/Corporate Bond Index, the Salomon Brothers High Grade
Corporate Bond Index and the S&P 500 Index. From time to time, advertising
materials for the Fund may refer to the Dreyfus Corporation's standing in the
financial community, to the role it plays or has played in the mutual fund
industry, and to statistical or other information concerning trends relating to
investment companies, as compiled by industry associations such as the
Investment Company Institute. The Fund's advertising materials also may refer to
the integration of the world's securities markets, discuss the investment
opportunities available worldwide and mention the increasing importance of an
investment strategy including foreign investments. In addition, advertising
materials for the Fund may include the Investment Adviser's analysis of, or
outlook for, the economy or financial markets, compare the Investment Adviser's
analysis or outlook with the views of others in the financial community, and
refer to the expertise of the Investment Adviser's personnel and their
reputation in the financial community. From time to time advertising materials
for the Fund also may refer to Morningstar ratings and related analyses
supporting the rating.
NET ASSET VALUE
Securities which are traded over-the-counter and on a stock exchange will
be valued according to the broadest and most representative market, and it is
expected that for many debt securities this ordinarily will be the
over-the-counter market. Notwithstanding the above, debt securities may be
valued on the basis of prices provided by an independent pricing service when
such prices are believed to reflect the fair market value of such securities.
The prices provided by a pricing service are determined without regard to bid or
last sale prices but take into account institutional size trading in similar
groups of securities and any developments related to specified securities.
Securities not priced in this manner are valued at the mean of the most recent
bid and asked quotations, or when available, at the latest quoted sale price on
the date of valuation. When the Fund writes a call option, the amount of the
premium received is recorded on the books of the Fund as an asset and an
equivalent liability. The amount of the liability is subsequently valued to
reflect the current market value of the option written, based upon the last
asked price in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the average of the last asked price as
obtained from two or more dealers. Options purchased by the Fund are valued at
the last bid price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the average of the last bid price
as obtained from two or more dealers. Other investments, including futures
contracts and related options, are stated at market value or otherwise at the
fair value at which it is expected they may be resold, as determined in good
faith by the Board of Directors. Any assets or liabilities expressed in terms of
foreign currencies are translated into United States dollars at the prevailing
market rates as obtained from one or more dealers. Short-term debt securities
having a value of 60 days or less from the valuation date are valued on an
amortized cost basis. The values of other assets and securities for which no
current quotations are readily available are determined in good faith at fair
value using methods determined by the Board of Directors.
30
<PAGE>
As stated in the Prospectus, the Fund's net asset value per share for each
Class of the Fund's common stock for the purpose of pricing purchase and
redemption orders is determined as of 15 minutes after the close of business on
the New York Stock Exchange (generally 4:00 p.m., New York time) on each
business day. As used in the Prospectus, "business day" refers to those days
when the Investment Adviser, the Administrator, the Transfer Agent and the New
York Stock Exchange are all open for business, which is Monday through Friday,
except for holidays. As of the date of this Statement of Additional Information,
such holidays are: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
CAPITAL STOCK
Shares of each class of the Fund represent interests in the Fund in
proportion to each share's net asset value. All shares of the Company have
equal voting rights and will be voted in the aggregate, and not by series or
class, except where voting by series or class is required by law or where the
matter involved affects only one series or class (for example, matters
pertaining to the service and distribution plan for Class A shares of the Fund
shall be voted on only by holders of Class A shares of the Fund). Under the
1940 Act, the term "majority," when referring to the approvals to be obtained
from shareholders in connection with general matters affecting the Fund, means
the vote of the lesser of (i) 67% of the Fund's shares represented at a meeting
if the holders of more than 50% of the outstanding shares are present in person
or by proxy or (ii) more than 50% of the Fund's outstanding shares. Shareholders
are entitled to one vote for each full share held and fractional votes for
fractional shares held.
Each share of a portfolio of the Company is entitled to such dividends and
ditributions out of the assets belonging to that portfolio as are declared in
the discretion of the Company's Board of Directors. In determining the Fund's
net asset value, assets belonging to the Fund are credited with a proportionate
share of any general assets of the Company not belonging to the Fund and are
charged with the direct liabilities in respect of that Fund and with a share of
the general liabilities of the Company which are normally allocated in
proportion to the relative net asset values of the respective portfolios of the
Company at the time of distribution.
Shareholders are not entitled to any preemptive rights. All shares, when
issued, will be fully paid, non-assessable, fully transferable and redeemable at
the option of the holder.
Under the Company's Articles of Incorporation and Maryland law, directors
and officers of the Company are not liable to the Fund or its stockholders
except for (i) receipt of an improper personal benefit by a director or officer
or (ii) active and deliberate dishonesty of a director or officer that is
material to a cause of action in which a judgment is entered against such
person. The Company's Articles of Incorporation require that it indemnify its
directors and officers made party to any proceedings by reason of service in
such capacities unless it is proven that (i) the act or omission of a director
or officer was material to the matter giving rise to the proceeding and was
committed in bad faith or with active and deliberate dishonesty, (ii) a director
or officer received an improper personal benefit or (iii) in the case of a
criminal proceeding, a director or officer had reasonable cause to believe that
his act or omission was unlawful. These provisions are subject to the limitation
under the 1940 Act that no director or officer may be protected against
liability to the Company for willful misfeasance, bad faith, gross negligence or
reckless disregard for the duties of his office.
CUSTODIAN
The Bank of New York acts as the U.S. and international custodian for the
Fund. Under its Custodian Agreement with the Fund, The Bank of New York is
authorized to establish accounts for foreign securities owned by the Fund to be
held with foreign branches of United States banks as well as with certain
foreign banks and securities depositaries. The custodian does not determine the
investment policies of the Fund, nor decide which securities the Fund will buy
or sell.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc., a wholly owned subsidiary of the Sub-Investment
Adviser, is located at One American Express Plaza, Providence, Rhode Island
02903, and serves as the Fund's transfer and dividend disbursing agent. Under
a transfer agency agreement with the Fund, the Transfer Agent arranges for
the maintenance of shareholders 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. The Transfer Agent has no part
in determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
31
<PAGE>
EXPERTS
Ernst & Young LLP serves as the independent auditors for the Fund. The
financial statements of the Dreyfus Capital Value Fund (the predecessor to the
Fund) included in this Statement of Additional Information have
been so included in reliance upon the report of Ernst & Young LLP, independent
auditors, given on the authority of that firm as experts in auditing and
accounting.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all the information included in the Company's Registration Statement filed with
the SEC under the Securities Act of 1933 with respect to the securities offered
by the Prospectus. Certain portions of the Registration Statement have been
omitted from the Prospectus and this Statement of Additional Information
pursuant to the rules and regulations of the SEC. The Registration Statement
including the exhibits filed therewith may be examined at the office of the SEC
in Washington, D.C.
Statements contained in the Prospectus or in this Statement of Additional
Information as to the contents of any contract or other document referred to are
not necessarily complete, and, in each instance, reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this Statement of Additional Information
form a part, each such statement being qualified in all respect by such
reference.
32
<PAGE>
<TABLE>
<CAPTION>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1995
COMMON STOCKS-40.1%
SHARES VALUE
------ -----
<S> <C> <C>
BASIC INDUSTRIES-29.4%
Gold Mining-26.4% Amax Gold.............................. (a) 225,500 $ 1,381,188
Ashanti Goldfields, G.D.R. ............ (b) 425,000 8,526,563
Barrick Gold........................... 261,200 6,758,550
Battle Mountain Gold................... 215,000 2,123,125
Cambior................................ 150,000 1,593,128
Driefontein Consolidated, A.D.R. ...... 127,000 1,730,375
East Rand Gold & Uranium, A.D.R. ...... 100,000 290,000
Echo Bay Mines......................... 250,000 2,718,750
Elandsrand Gold Mining, A.D.R. ........ 251,100 1,462,657
Free State Consolidated Gold Mines, A.D.R. 135,000 1,535,625
Goldcorp, Cl. A........................ 237,860 2,348,994
Golden Shamrock Mines.................. (a) 440,000 272,945
Hartebeesfontein Gold Mining, A.D.R. .. 433,000 1,309,825
Hecla Mining........................... (a) 313,500 3,801,188
Homestake Mining....................... 424,800 7,221,600
Kinross Mines, A.D.R. ................. 144,000 1,584,000
Newmont Gold........................... 200,000 8,100,000
Newmont Mining......................... 118,000 5,015,000
Pegasus Gold........................... (a) 363,300 4,949,962
PlacerDome............................. 501,400 13,161,750
Royal Oak Mines........................ (a) 400,000 1,725,000
Santa Fe Pacific Gold.................. (a) 677,082 8,548,160
TVX Gold............................... (a) 467,000 3,269,000
Vaal Reefs Exploration & Mining, A.D.R. 347,500 2,280,469
Western Area Gold Mining, A.D.R. ...... 18,100 313,356
Western Deep Levels, A.D.R. ........... 38,000 1,313,375
Winkelhaak Mines, A.D.R. .............. 175,600 1,569,425
------------
94,904,010
------------
Metals-3.0% Freeport-McMoRan Copper & Gold, Cl. A... 400,000 10,250,000
Impala Platinum Holdings, A.D.R. ...... 15,000 371,816
------------
10,621,816
------------
TOTAL BASIC INDUSTRIES................. 105,525,826
============
RESTRUCTURING-10.7%
Broadcasting-.5% Tele-Communications Liberty Media, Cl. A. 17,500 468,125
Tele-Communications-TCI, Cl. A......... (a) 70,000 1,225,000
------------
1,693,125
------------
Chemicals-.6% P.T. Tri Polyta Indonesia, A.D.R. ...... 102,000 2,193,000
------------
Conglomerates-.6% Teledyne................................ 75,000 2,034,375
------------
Electrical Equipment-.3% Hitachi, A.D.R.......................... 10,000 1,101,250
------------
Energy-.8% Baker Hughes............................ 150,000 3,056,250
------------
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
COMMON STOCKS (CONTINUED)
SHARES VALUE
------- -------
RESTRUCTURING (CONTINUED)
Foods and Beverages-.6% Dole Food............................... 68,200 $ 2,361,425
-----------
Holding Companies-1.7% Horsham................................. 464,200 6,092,625
-----------
Industrial-1.5% Pepgro.................................. 848,700 2,760,425
Pepgro ((N) Shares).................... 848,700 2,557,025
-----------
5,317,450
-----------
Miscellaneous-.7% Fleming Russia Securities Fund.......... 220,765 1,545,355
Lazard Vietnam Fund.................... 87,000 913,500
-----------
2,458,855
-----------
Oil-.9% Amerada Hess............................ 31,000 1,507,375
Total S.A., A.D.R. .................... 54,000 1,626,750
-----------
3,134,125
-----------
Oil and Gas Exploration-.3% Petro-Canada........................... 113,500 1,223,756
-----------
Retail- 1.6% Duty Free International................. 111,200 1,417,800
Hartmarx................................ (a) 260,000 1,560,000
K mart.................................. 187,000 2,711,500
-----------
5,689,300
-----------
Semiconductors-.6% Fujitsu................................ 27,000 338,176
NEC, A.D.R............................ 18,400 1,285,700
OKI Electric Industry................. (a) 32,000 294,349
Toshiba............................... 37,000 268,788
-----------
2,187,013
-----------
TOTAL RESTRUCTURING.................... 38,542,549
============
TOTAL COMMON STOCKS
(cost $124,782,969).................. $144,068,375
============
PREFERRED STOCKS-.1%
Conglomerates; Teledyne, Series E
(cost $11,063)....................... 750 $ 10,406
============
CONTRACTS
SUBJECT
PUT OPTIONS-2.6% TO PUT
-----------
AMEX Security Broker/Dealer Index:
January `96 @ $355................... 33,400 $ 81,413
Brokerage Basket;
November `95 @ $95.................. (n) 224,323 0
Nasdaq 100 Index:
March `96 @ $550..................... 4,000 76,000
June `96 @ $550...................... 3,500 84,438
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
CONTRACTS
SUBJECT
PUT OPTIONS (CONTINUED) TO PUT VALUE
---------- --------
Philadelphia Semi-Conductor Index;
June `96 @ $280...................... 4,200 $152,250
Standard & Poor's 500 Index Flex Options:
December `95 @ $450.................. 122,000 26,688
December `96 @ $525.................. 32,500 365,625
Standard & Poor's 500 Index:
December `95 @ $375.................. 45,500 5,687
December `95 @ $400.................. 45,500 2,844
December `95 @ $450.................. 71,500 20,109
December `95 @ $475.................. 40,100 15,037
December `95 @ $485.................. 30,000 15,000
December `95 @ $550.................. 41,500 140,063
March `96 @ $453..................... (n) 90,930 3,637
March `96 @ $500..................... 113,000 268,375
March `96 @ $525..................... 84,000 351,750
June `96 @ $450...................... 23,500 36,719
June `96 @ $475...................... 113,000 268,375
June `96 @ $500...................... 73,000 310,250
June `96 @ $550...................... 52,000 546,000
September `96 @ $550................. 101,000 1,350,875
December `96 @ $525.................. 32,500 357,500
PRINCIPAL
AMOUNT
SUBJECT
TO PUT
-------
Japanese Government Bond:
4.60%, 9/20/2004:
May `96 @ $1.288................ (c,d,n) $ 27,955,912 2,591,910
June `96 @ $1.343................(c,d,n) 13,271,002 2,248,909
U.S. Treasury Bond;
7.625%, 2/15/2025;
April `96 @ $103.078................(n) 30,000,000 120,000
----------
TOTAL PUT OPTIONS
(cost $25,556,433)................... $9,439,454
==========
PRINCIPAL
BONDS AND NOTES-37.4% AMOUNT
--------
BONDS-36.6%.......... Argentinian Securities;
Republic of Argentina,
5%, 3/31/2023................(e,f,g) $ 2,250,000 $ 1,092,656
Austrian Securities;
Republic of Austria,
4.50%, 2/12/2000................(h) 27,744,166 28,881,677
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------- -------
BONDS (CONTINUED)...... Danish Securities;
Kingdom of Denmark,
4.25%, 9/30/1999................(h) $12,964,564 $ 13,411,841
Dutch Securities;
Netherlands Government,
7.25%, 7/15/1999................(j) 4,062,754 4,308,550
German Securities;
Bundesrepublik Deutschland:
8.50%, 4/22/1996................(i) 42,337,299 43,323,758
9%, 10/20/2000................(i) 16,710,987 18,893,442
8.875%, 12/20/2000............(i) 12,596,221 14,193,422
Venezuelan Securities;
Republic of Venezuela,
6.75%, 3/31/2020.............(e,f) 14,000,000 7,175,000
-----------
131,280,346
-----------
NOTES-.8% Federal National Mortgage Association,
Non-Callable Strips, (collateralized by
FNMA Strip, 10/1/2024) Cl. 267-2,
8.50%, 10/25/2024 (Interest Only Obligation) 11,748,490 (k) 2,915,094
-----------
TOTAL BONDS AND NOTES
(cost $115,829,424).................. $134,195,440
============
LOAN PARTICIPATIONS-2.3%
FOREIGN LOAN PARTICIPATIONS:Vnesheconombank (Bank for Foreign
Economic Affairs of the USSR) 5/3/2025................... (h,n) $19,446,845 $ 6,077,139
5/3/2025................... (i,n) 6,298,111 2,212,211
------------
TOTAL LOAN PARTICIPATIONS
(cost $6,703,509)......................... $ 8,289,350
============
SHORT-TERM INVESTMENTS-21.5%
U.S. TREASURY BILLS:. 5.35%, 10/5/95 ...................(l,m) $44,201,000 $ 44,169,617
5.35%, 10/12/95...................(l,m) 3,453,000 3,447,026
5.36%, 11/9/95......................... 409,000 406,595
5.38%, 11/16/95........................ 16,567,000 16,452,191
5.37%, 11/24/95...................(l,m) 9,429,000 9,352,625
5.24%, 12/7/95......................... 3,377,000 3,343,028
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $77,178,940)................... $ 77,171,082
============
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
VALUE
------------
TOTAL INVESTMENTS (cost $350,062,338) ................................ 104.0% $ 373,174,107
====== =============
LIABILITIES, LESS CASH AND RECEIVABLES ............................... (4.0%) $ (14,273,638)
====== =============
NET ASSETS............................................................ 100.0% $ 358,900,469
====== =============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
September 30, 1995, this security amounted to $8,526,563 or 2.4%
of net assets.
(c) Strike price converted to U.S. Dollars at the prevailing rate of
exchange.
(d) Denominated in Japanese Yen.
(e) Denominated in U.S. Dollars.
(f) Secured by U.S. Treasury securities.
(g) Scheduled variable interest rate.
(h) Denominated in Swiss Francs.
(i) Denominated in German Marks.
(j) Denominated in Dutch Guilder.
(k) Notional face amount.
(l) Partially held by broker as collateral for open short positions.
(m) Partially held by the custodian in a segregated account as
collateral for open financial futures positions.
(n) Securities restricted as to public resale. Investments in restricted
securities, with an aggregate market value of $13,253,806, represents
approximately 3.7% of net assets:
<PAGE>
<TABLE>
<CAPTION>
ACQUISITION PURCHASE PERCENTAGE OF
PUT OPTIONS: DATE PRICE NET ASSETS VALUATION*
- ----------- ----------- -------- -------------- ----------
<S> <C> <C> <C> <C>
Brokerage Basket**
November `95 @ $95........... 11/11/94 $ 5.70 0.00 fair value
Japanese Government Bond:
4.60%, 9/20/2004, May `96
@ $1.288..................... 5/16/95 $ .07 0.72 fair value
4.60%, 9/20/2004, June `96
@ $1.343..................... 6/21/95 $ .08 0.63 fair value
Standard & Poor's 500 Index
March `96 @ $453............. 12/14/94 $21.99 0.00 fair value
U.S. Treasury Bond;
7.625%, 2/15/2025, April `96
@ $103.078................... 4/12/95 $ 4.72 0.03 fair value
LOAN PARTICIPATIONS;
- --------------------
Vnesheconombank
(Bank for Foreign Economic
Affairs of the USSR)
5/3/2025................... 5/2/95 $ .24 2.30 fair value
6/29/95
* The valuation of these securities has been determined in good faith under
the direction of the Board of Directors.
** Consists of Common Stocks of six publicly traded brokerage firms.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF FINANCIAL FUTURES
SEPTEMBER 30, 1995
SEPTEMBER 30, 1995 UNREALIZED
MARKET VALUE APPRECIATION
NUMBER OF COVERED (DEPRECIATION)
CONTRACTS BY CONTRACTS EXPIRATION AT 9/30/95
--------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
FINANCIAL FUTURES PURCHASED;
Nikkei 225........................... 22 $ 1,980,550 December `95 $(23,400)
FINANCIAL FUTURES SOLD SHORT:
Hang Seng............................ 70 (4,371,553) October `95 (3,625)
Japanese Yen......................... 22 (2,823,975) March `96 84,000
---------------
$56,975
---------------
---------------
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF SECURITIES SOLD SHORT
SEPTEMBER 30, 1995
COMMON STOCKS-18.9%
SHARES VALUE
-------- -----------
<S> <C> <C>
AUTO RELATED-.3% Ford Motor.................................................... 40,000 $1,245,000
-----------
COMPUTERS-.4% Compaq Computer............................................... 32,000 1,548,000
-----------
CONSUMERS-6.1% Anheuser-Busch............................................... 5,700 355,537
B.A.T. Industries, A.D.R. ................................... 23,100 392,700
Clorox....................................................... 22,000 1,570,250
Coca-Cola.................................................... 41,000 2,829,000
Disney (Walt)................................................ 10,000 573,750
General Mills................................................ 52,000 2,899,000
Gillette..................................................... 23,000 1,095,375
Heinz (H.J.)................................................. 35,900 1,642,425
Kellogg...................................................... 50,000 3,618,750
Reebok International......................................... 53,900 1,852,813
Rubbermaid................................................... 60,300 1,665,787
Sara Lee..................................................... 81,000 2,409,750
Wrigley, (Wm), Jr............................................ 20,000 1,010,000
-----------
21,915,137
-----------
FINANCE-4.2% ADVANTA, Cl. A............................................... 2,500 112,500
Alex Brown................................................... 19,900 1,161,663
Bear Stearns................................................. 122,587 2,635,620
CMAC Investment.............................................. 15,000 789,375
Conseco...................................................... 22,000 1,152,250
MGIC Investment.............................................. 22,000 1,259,500
Merrill Lynch................................................ 42,000 2,625,000
PMI Group.................................................... 10,000 473,750
Paine Webber Group........................................... 88,000 1,738,000
Schwab (Charles)............................................. 80,000 2,240,000
United Asset Management...................................... 20,000 802,500
-----------
14,990,158
-----------
HEALTH CARE-.3% Healthsource................................................. 23,000 1,106,875
-----------
MACHINERY-CONSTRUCTION &
MATERIAL-.7% Deere & Co................................................... 18,200 1,481,025
Ingersoll-Rand............................................... 26,500 993,750
-----------
2,474,775
-----------
RESTAURANTS-.6% Outback Steakhouse........................................... 74,500 2,290,875
-----------
RETAIL-1.5% Home Depot................................................... 64,233 2,561,291
Sysco........................................................ 25,000 681,250
Wal-Mart Stores.............................................. 81,000 2,014,875
-----------
5,257,416
-----------
TECHNOLOGY-4.2% American Power Conversion.................................... 47,000 575,750
Applied Materials............................................ 16,700 1,707,575
Integrated Device Technology................................. 36,000 900,000
Intel........................................................ 30,600 1,839,825
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF SECURITIES SOLD SHORT (CONTINUED)
SEPTEMBER 30, 1995
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------- -----------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
KLA Instruments.............................................. 19,500 $ 1,564,875
Kulicke & Soffa Industries................................... 38,000 1,387,000
Maxim Integrated Products.................................... 15,000 1,110,000
Micron Technology............................................ 10,000 795,000
Microsoft.................................................... 11,000 995,500
Motorola..................................................... 21,000 1,603,875
Novellus Systems............................................. 14,000 980,000
Texas Instruments............................................ 20,000 1,597,500
-----------
15,056,900
-----------
TELECOMMUNICATIONS-.6%
Hong Kong Telecom, A.D.R. .................................. 114,000 2,080,500
-----------
TOTAL SECURITIES SOLD SHORT
(proceeds $65,428,414).................................. $67,965,636
-----------
-----------
See notes to financial statements.
</TABLE>
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $350,062,338)-see statement...................................... $ 373,174,107
Cash.................................................................... 620,787
Receivable from broker for proceeds on securities sold short............ 65,428,414
Dividends and interest receivable....................................... 5,945,967
Receivable for investment securities sold............................... 1,234,459
Receivable for subscriptions to Common Stock............................ 236,972
Prepaid expenses........................................................ 76,703
____________
446,717,409
LIABILITIES:
Due to investment adviser............................................... $ 132,304
Due to sub-investment adviser........................................... 93,263
Due to Distributor...................................................... 130,083
Securities sold short, at value
(proceeds $65,428,414)-see statement................................... 67,965,636
Bank loans payable-Note 2............................................... 10,000,000
Net unrealized depreciation on forward currency
exchange contracts-Note 4(a)........................................... 5,203,133
Payable for investment securities purchased............................. 2,539,142
Payable for Common Stock redeemed....................................... 1,335,306
Interest payable........................................................ 56,623
Payable for futures variation margin-Note 4(a).......................... 6,806
Accrued expenses........................................................ 354,644 87,816,940
__________ _____________
NET ASSETS.................................................................. $ 358,900,469
=============
REPRESENTED BY:
Paid-in capital......................................................... $ 469,863,103
Accumulated undistributed investment income-net......................... 14,105,924
Accumulated net realized (loss) on investments, securities sold short,
foreign currency transactions and financial futures.................... (140,552,041)
Accumulated net unrealized appreciation on investments, securities
sold short, and foreign currency transactions
(including $56,975 net unrealized appreciation
on financial futures)-Note 4(b)........................................ 15,483,483
_____________
NET ASSETS at value......................................................... $358,900,469
=============
</TABLE>
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Shares of Common Stock outstanding:
Class A Shares
(100 million shares of $.01 par value authorized)..................... 25,543,483
==========
Class B Shares
(100 million shares of $.01 par value authorized)..................... 8,438,630
==========
Class C Shares
(100 million shares of $.01 par value authorized)..................... 94
==========
Class R Shares
(100 million shares of $.01 par value authorized)..................... 92
==========
NET ASSET VALUE per share:
Class A Shares
($271,051,783 / 25,543,483 shares).................................... $10.61
==========
Class B Shares
($87,846,730 / 8,438,630 shares)...................................... $10.41
==========
Class C Shares
($979 / 94 shares).................................................... $10.41
==========
Class R Shares
($977 / 92 shares).................................................... $10.62
=========
</TABLE>
See notes to financial statements.
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest................................................................ $ 20,726,708
Cash dividends (net of $75,753 foreign taxes withheld at source)...... 1,924,318
____________
TOTAL INCOME........................................................ $ 22,651,026
EXPENSES:
Investment advisory fee-Note 3(a)....................................... 1,840,790
Sub-investment advisory fee-Note 3(a)................................... 1,365,789
Dividends on securities sold short.................................... 1,861,794
Shareholder servicing costs-Note 3(c)................................. 1,659,621
Distribution fees-Note 3(b)........................................... 738,585
Prospectus and shareholders' reports.................................. 120,170
Custodian fees........................................................ 106,205
Professional fees..................................................... 73,048
Registration fees..................................................... 72,468
Interest expense-Note 2............................................... 59,145
Directors' fees and expenses-Note 3(d)................................ 49,789
Miscellaneous......................................................... 22,130
____________
TOTAL EXPENSES...................................................... 7,969,534
____________
INVESTMENT INCOME-NET............................................... 14,681,492
____________
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments-Note 4(a):
Long transactions (including options transactions and foreign
currency transactions)................................................. $ 2,696,163
Short sale transactions................................................. (22,403,778)
Net realized gain on forward currency exchange contracts-Note 4(a);
Long transactions...................................................... 118,547
Net realized (loss) on financial futures-Note 4(a);
Short transactions..................................................... (7,893,569)
____________
NET REALIZED (LOSS)................................................... (27,482,637)
Net unrealized (depreciation) on investments, securities sold short
and foreign currency transactions [including ($1,427,125) net
unrealized (depreciation) on financial futures]........................ (28,971,658)
____________
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS..................... (56,454,295)
____________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $(41,772,803)
=============
</TABLE>
See notes to financial statements.
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------
1994 1995
------------- -------------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 9,823,170 $ 14,681,492
Net realized (loss) on investments, securities sold short,
foreign currency transactions and financial futures.................... (9,217,163) (27,482,637)
Net unrealized appreciation (depreciation) on investments, securities
sold short, foreign currency transactions and financial futures
for the year........................................................... 26,168,303 (28,971,658)
_____________ _____________
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... 26,774,310 (41,772,803)
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (8,633,848) (8,406,886)
Class B shares........................................................ (913,770) (1,940,644)
Class C shares........................................................ -- --
Class R shares........................................................ -- --
_____________ _____________
TOTAL DIVIDENDS..................................................... (9,547,618) (10,347,530)
_____________ _____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 116,664,797 39,533,363
Class B shares........................................................ 85,400,651 26,973,391
Class C shares........................................................ -- 1,000
Class R shares........................................................ -- 1,000
Dividends reinvested:
Class A shares........................................................ 4,857,514 5,143,774
Class B shares........................................................ 489,988 990,338
Class C shares........................................................ -- --
Class R shares........................................................ -- --
Cost of shares redeemed:
Class A shares........................................................ (147,154,408) (136,312,596)
Class B shares........................................................ (8,939,968) (36,549,208)
Class C shares........................................................ -- --
Class R shares........................................................ -- --
_____________ _____________
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS... 51,318,574 (100,218,938)
_____________ _____________
TOTAL INCREASE (DECREASE) IN NET ASSETS........................... 68,545,266 (152,339,271)
NET ASSETS:
Beginning of year....................................................... 442,694,474 511,239,740
_____________ _____________
End of year (including undistributed investment income-net:
$9,771,962 in 1994 and $14,105,924 in 1995)........................... $ 511,239,740 $ 358,900,469
============= =============
</TABLE>
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SHARES
CLASS A CLASS B CLASS C CLASS R
-------------------------- -------------------------- ------------- -------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, PERIOD ENDED PERIOD ENDED
-------------------------- -------------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1994 1995 1995* 1995*
------------ ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............... 9,919,385 3,569,389 7,342,835 2,464,126 94 92
Shares issued for
dividends reinvested..... 411,308 466,343 41,951 91,024 -- --
Shares redeemed........... (12,560,968) (12,382,551) (783,960) (3,400,272) -- --
----------- ----------- --------- ---------- ---- ----
(DECREASE) IN
SHARES OUTSTANDING.... (2,230,275) (8,346,819) 6,600,826 (845,122) 94 92
=========== =========== ========= ========== ==== ====
</TABLE>
* From August 22, 1995 (commencement of initial offering)
to September 30, 1995.
See notes to financial statements.
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated February 1, 1996.
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a diversified open-end management investment company. The Dreyfus
Corporation ("Dreyfus") serves as the Fund's investment adviser. Comstock
Partners, Inc. ("Comstock Partners") serves as the Fund's sub-investment
adviser. Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, is a wholly-owned subsidiary of FDI
Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holdings, Inc.,
the parent company of which is Boston Institutional Group, Inc. Dreyfus is a
direct subsidiary of Mellon Bank, N.A.
The Fund offers Class A, Class B, Class C and Class R shares. Class A
shares are subject to a sales charge imposed at the time of purchase, Class B
shares are subject to a contingent deferred sales charge imposed at the time
of redemption on redemptions made within six years of purchase, Class C
shares are subject to a contingent deferred sales charge imposed at the time
of redemption on redemptions made within one year of purchase and Class R
shares are sold at net asset value per share only to institutional investors.
Other differences between the four Classes include the services offered to
and the expenses borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sales
price on the national securities market. Securities not listed on an exchange
or the national securities market, or securities for which there were no
transactions, are valued at the average of the most recent bid and asked
prices, except for open short positions, where the asked price is used for
valuation purposes. Bid price is used when no asked price is available.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the direction of the Board of Directors.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(B) FOREIGN CURRENCY TRANSACTIONS: The Fund does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized on securities transactions, the difference between
the amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise from
changes in the value of assets and liabilities other than investments in
securities, resulting from changes in exchange rates. Such gains and losses
are included with net realized and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and dividends from net realized
capital gain, if any, are normally declared and paid annually, but the Fund
may make distributions on a more frequent basis to comply with the
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
distribution requirements of the Internal Revenue Code. This may result in
distributions that are in excess of investment income-net and net realized
gain on a fiscal year basis. To the extent that net realized capital gain can
be offset by capital loss carryovers, it is the policy of the Fund not to
distribute such gain.
(E) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately
$122,600,000 available for Federal income tax purposes to be applied against
future net securities profits, if any, realized subsequent to September 30,
1995. The carryover does not include net realized securities losses from
November 1, 1994 through September 30, 1995 which are treated, for Federal
income tax purposes, as arising in fiscal 1995. If not applied, $9,100,000 of
the carryover expires in fiscal 1999, $29,800,000 expires in fiscal 2000,
$17,800,000 expires in fiscal 2001, $56,700,000 expires in fiscal 2002, and
$9,200,000 expires in fiscal 2003.
NOTE 2-BANK LINE OF CREDIT:
In accordance with an agreement with a bank, the Fund may borrow up to
$10 million under a short-term unsecured line of credit. Interest on
borrowings is charged at rates which are related to Federal Funds rates in
effect from time to time. Outstanding borrowings on September 30, 1995 under
the line of credit, amounted to $10 million, at an annualized rate of 7.05%.
The average daily amount of short-term debt outstanding during the year
ended September 30, 1995 was approximately $859,000, with a related weighted
average annualized interest rate of 6.89%. The maximum amount borrowed at any
time during the year ended September 30, 1995 was $10 million.
NOTE 3-INVESTMENT ADVISORY FEE, SUB-INVESTMENT ADVISORY FEE AND OTHER
TRANSACTIONS WITH AFFILIATES:
(A) Fees payable by the Fund pursuant to the provisions of an Investment
Advisory Agreement with Dreyfus and a Sub-Investment Advisory Agreement with
Comstock Partners (together "Agreements") are payable monthly, computed on
the average daily value of the Fund's net assets at the following annual
rates:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS DREYFUS COMSTOCK PARTNERS
-------------------- ------- -----------------
<S> <C> <C>
0 up to $25 million................ .60 of 1% .15 of 1%
$25 up to $75 million.............. .50 of 1% .25 of 1%
$75 up to $200 million............. .45 of 1% .30 of 1%
$200 up to $300 million............ .40 of 1% .35 of 1%
In excess of $300 million.......... .375 of 1% .375 of 1%
</TABLE>
The Agreements further provide that the Fund may deduct from the fees to
be paid to Dreyfus and Comstock Partners, or Dreyfus and Comstock Partners
will bear such excess expense, to the extent required by state law, should
the Fund's aggregate expenses, exclusive of taxes, brokerage, interest on
borrowings (which, in the view of Stroock & Stroock & Lavan, counsel to the
Fund, also contemplates dividends and interest accrued on securities sold
short), and extraordinary expenses, exceed the expense limitation of any
state having jurisdiction over the Fund. The most stringent state expense
limitation applicable to the Fund presently requires reimbursement in any
full fiscal year that such expenses (exclusive of distribution expenses and
certain expenses as described above) exceed 21\2% of the first $30
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
million, 2% of the next $70 million and 11\2% of the excess over $100 million
of the average value of the Fund's net assets in accordance with California
"blue sky" regulations. No expense reimbursement was required for the year
ended September 30, 1995.
Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus,
retained $13,897 during the year ended September 30, 1995 from commissions
earned on sales of Fund shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Fund pays the Distributor for distributing the Fund's Class B and
Class C shares at an annual rate of .75 of 1% of the value of the average
daily net assets of Class B and Class C. During the year ended September 30,
1995, $738,584 was charged to the Fund for the Class B shares and $1 was
charged to the Fund for the Class C shares.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor,
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents in respect of these services. The Distributor determines the
amount to be paid to Service Agents. For the year ended September 30, 1995,
$822,664, $246,195 were charged to Class A and B shares, respectively, and no
amounts were charged to the Class C shares, by the Distributor pursuant to
the Shareholder Services Plan.
(D) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $4,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation and each director emeritus receives 50% of such compensation.
NOTE 4-SECURITIES TRANSACTIONS:
(A) The following summarizes the aggregate amount of purchases and sales
of investment securities and securities sold short, excluding short-term
securities, financial futures, forward currency exchange contracts and
options transactions during the year ended September 30, 1995:
<TABLE>
<CAPTION>
PURCHASES SALES
--------------- ---------------
<S> <C> <C>
Long transactions.............. $ 87,407,314 $ 77,568,367
Short sale transactions........ 136,098,892 76,244,500
_______________ _______________
TOTAL........................ $223,506,206 $153,812,867
============== ==============
</TABLE>
The Fund is engaged in short-selling which obligates the Fund to replace
the security borrowed by purchasing the security at current market value. The
Fund would incur a loss if the price of the security increases between the
date of the short sale and the date on which the Fund replaces the borrowed
security. The Fund would realize a gain if the price of the security declines
between those dates. Until the Fund replaces the borrowed security, the Fund
will maintain daily, a segregated account with a broker and custodian, of
cash and/or U.S. Government securities sufficient to cover its short
position. Securities sold short at September 30, 1995 and their related
market values and proceeds are set forth in the Statement of Securities Sold
Short.
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following summarizes open forward currency contracts at September 30,
1995:
<TABLE>
<CAPTION>
U.S.
DOLLAR UNREALIZED
FORWARD CURRENCY CONTRACTS: PROCEEDS VALUE (DEPRECIATION)
----------- ----------- --------------
<S> <C> <C> <C>
SALES:
Dutch Guilders, expiring 11/20/95........... $ 4,072,948 $ 4,203,262 $ (130,314)
German Deutschemarks, expiring 11/17/95..... 73,520,652 75,890,661 (2,370,009)
Swiss Francs, expiring 11/17/95............. 42,549,364 45,252,174 (2,702,810)
COST
-----------
PURCHASES;
Hong Kong Dollars, expiring 10/3/95......... $ 181,174 181,174 --
-----------
TOTAL....................................................... $(5,203,133)
===========
</TABLE>
The Fund enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings. When executing forward currency exchange contracts, the
Fund is obligated to buy or sell a foreign currency at a specified rate on a
certain date in the future. With respect to sales of forward currency
exchange contracts, the Fund would incur a loss if the value of the contract
increases between the date the forward contract is opened and the date the
forward contract is closed. The Fund realizes a gain if the value of the
contract decreases between those dates. With respect to purchases of forward
currency exchange contracts, the Fund would incur a loss if the value of the
contract decreases between the date the forward contract is opened and the
date the forward contract is closed. The Fund realizes a gain if the value of
the contract increases between those dates. The Fund is also exposed to
credit risk associated with counter party nonperformance on these forward
currency exchange contracts which is typically limited to the unrealized
gains on such contracts that are recognized in the statement of assets and
liabilities.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Fund is exposed to
market risk as a result of changes in the value of the underlying financial
instruments (see the Statement of Financial Futures). Investments in
financial futures require the Fund to "mark to market" on a daily basis,
which reflects the change in the market value of the contracts at the close
of each day's trading. Typically, variation margin payments are made or
received to reflect daily unrealized gains or losses. When the contracts are
closed, the Fund recognizes a realized gain or loss. These investments
require initial margin deposits with a custodian, which consist of cash or
cash equivalents, up to approximately 10% of the contract amount. The amount
of these deposits is determined by the exchange or Board of Trade on which
the contract is traded and is subject to change. Contracts open at September
30, 1995 and their related unrealized market appreciation (depreciation) are
set forth in the Statement of Financial Futures.
The Fund may purchase put and call options, including restricted options,
which are not exchange traded in order to gain exposure to or protect against
changes in the market. The Fund's exposure to credit risk associated with
counter party nonperformance on these investments is typically limited to the
market value of such investments that are disclosed in the Statement of
Investments.
The Fund may invest in fixed and floating rate loans arranged through
private negotiations between an issuer of Sovereign Debt Obligations and one
or more financial institutions. The Fund's investments in loans are expected
in most instances to be in the form of participations in loans and
assignments of all or a portion of loans from third parties. As a result the
Fund may be subject to credit risk from the issuer of
<PAGE>
DREYFUS CAPITAL VALUE FUND (A Premier Fund)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Sovereign Debt Obligations and the third party. In addition such loans may be
less liquid and may be subject to greater price volatility.
(B) At September 30, 1995, accumulated net unrealized appreciation on
investments was $20,631,522, consisting of $46,860,961 gross unrealized
appreciation and $26,229,439 gross unrealized depreciation, excluding foreign
currency transactions.
At September 30, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS CAPITAL VALUE FUND (A PREMIER FUND)
We have audited the accompanying statement of assets and liabilities of
Dreyfus Capital Value Fund (A Premier Fund), including the statements of
investments, financial futures and securities sold short, as of September 30,
1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended, and financial highlights for each of the years indicated therein.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 1995 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Capital Value Fund (A Premier Fund) at September 30,
1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
November 13, 1995
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A of the Registration Statement:
Financial Highlights of the Comstock Partners Strategy Fund (the
"Strategy Fund") for the period beginning May 26, 1988
(commencement of operations) and ending April 30, 1989, and for
the years ended April 30, 1990, April 30, 1991, April 30, 1992,
April 30, 1993, April 30, 1994, and April 30, 1995.
Financial Highlights of the Dreyfus Capital Value Fund, Inc. (the
predecessor to the Comstock Partners Capital Value Fund) for the
period beginning October 10, 1985 (commencement of operations)
and ending September 30, 1986, and for the years ended September
30, 1987, September 30, 1988, September 30, 1989, September 30,
1990, September 30, 1991, September 30, 1992, September 30, 1993,
September 30, 1994, and September 30, 1995.
Included in Part B of the Registration Statement:
Schedule of Investments of the Strategy Fund as of April 30, 1995
Statement of Assets and Liabilities of the Strategy Fund as of
April 30, 1995
Statement of Operations of the Strategy Fund for the year ended
April 30, 1995
Statements of Changes in Net Assets of the Strategy Fund for the
two years ended April 30, 1994 and April 30, 1995
Financial Highlights of the Strategy Fund for the years ended
April 30, 1991, April 30, 1992, April 30, 1993, April 30, 1994,
and April 30, 1995
Notes to Financial Statements of the Strategy Fund
Independent Auditors' Report dated May 31, 1995
<PAGE>
Schedules No. I through VII and other Financial Statements relating to
the Comstock Partners Strategy Fund, for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission, are either omitted because they are not required under the
related instructions, they are inapplicable, or the required information
is presented in the financial statements or notes which are included in
Part B of the Registration Statement.
Statement of Investments of the Dreyfus Capital
Value Fund--September 30, 1995
Statement of Financial Futures of the Dreyfus Capital
Value Fund--September 30, 1995
Statement of Securities Sold Short of the Dreyfus
Capital Value Fund--September 30, 1995
Statement of Assets and Liabilities of the Dreyfus
Capital Value Fund--September 30, 1995
Statement of Operations of the Dreyfus Capital
Value Fund--year ended September 30, 1995
Statement of Changes in Net Assets of the Dreyfus
Capital Value Fund--for each of the years ended
September 30, 1994 and 1995
Notes to Financial Statements of the Dreyfus Capital
Value Fund
Report of Ernst & Young, LLP, Independent Auditors,
dated November 13, 1995
All Schedules and other financial statement information
relating to the Dreyfus Capital Value Fund, the predecessor
to the Comstock Partners Capital Value Fund, for which
provision is made in the applicable accounting regulations of
the Securities and Exchange Commission, are either omitted
because they are not required under the related instructions,
they are inapplicable, or the required information is
presented in the financial statements or notes thereto which are
included in Part B of the Registration Statement.
<PAGE>
(b) Exhibits:
Exhibits
Number Description
-------- -----------
1(a) - - Registrant's Articles of Amendment and Restatement.
1(b) - - Form of Registrant's Articles Supplementary.
1(c) - - Form of Registrant's Articles
Supplementary.
1(d) - - Form of Registrant's Articles of Amendment
1(e) - - Form of Registrant's Articles Supplementary
2 - - Registrant's By-Laws.
3 - - None.
4(a) - - Form of Stock Certificate for Comstock Partners
Strategy Fund Class O shares of common stock.*
4(b) - - Form of Stock Certificate for Comstock Partners
Strategy Fund Class A shares of common stock.*
4(c) - - Form of Stock Certificate for Comstock Partners
Strategy Fund Class C shares of common stock.*
4(d) - - Form of Stock Certificate for Comstock Partners Capital
Value Fund Class A, B, C and R shares of common stock.
5(a) - - Form of Amended Investment Advisory Agreement between
Registrant, on behalf
<PAGE>
of the Comstock Partners Strategy Fund, and Comstock
Partners, Inc.
5(b) - - Form of Amended Sub-Investment Advisory Agreement
between Comstock Partners, Inc., on behalf of the
Comstock Partners Strategy Fund, and The Dreyfus
Corporation.
5(c) - - Form of Investment Advisory Agreement between
Registrant, on behalf of the Comstock Partners Capital
Value Fund, and Comstock Partners, Inc.
5(d) - - Form of Sub-Investment Advisory Agreement between
Registrant, on behalf of Comstock Partners Capital
Value Fund, and The Dreyfus Corporation.
6 - - Form of Distribution Agreement between Registrant and
Premier Mutual Fund Services, Inc.*
7 - - None.
8(a) - - Form of Custody Agreement between Registrant and The
Bank of New York.*
8(b) - - Form of Custody Agreement between Registrant and Brown
Brothers Harriman & Co.*
9(a) - - Form of Amended Administration Agreement between
Registrant and Princeton Administrators, Inc.*
9(b) - - Amendment to Amended Administration Agreement between
Registrant and Princeton Administrators, L.P.*
10 - - Opinion and Consent of Venable, Baetjer and Howard.
11 - - Independent Auditors' Consent.
12 - - None.
13 - - None.
14 - - None.
15(a)- - Form of Amended and Restated Class A Service and
Distribution Plan.
<PAGE>
15(b)- - Form of Class B Service and Distribution Plan.
15(c)- - Form of Amended and Restated Class C Service and
Distribution Plan.
16(a)- - Calculation of Total Return with respect to the
Comstock Partners Strategy Fund.*
16(b)-- Calculation of Total Return with respect to the
Comstock Partners Capital Value Fund.**
18 - - Form of Amended and Restated Multiclass Plan.
27 -- Financial Data Schedules for Comstock Partners
Capital Value Fund.
Other Exhibits (a) Powers of Attorney for Messrs. Salvigsen, Minter,
Smith, Kelley, and Adelberg.
-------------------------------
* Previously filed.
** To be filed by amendment.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
Item 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record
Holders at
Title of Class January 30, 1996
-------------- ----------------
Class A shares of Comstock
Partners Strategy Fund,
par value $.001 per share. . . . . . . 1179
Class O shares of Comstock
Partners Strategy Fund,
par value $.001 per share. . . . . . . 8834
<PAGE>
Class C shares of Comstock
Partners Strategy Fund,
par value $.001 per share. . . . . . . 5
Class A shares of Comstock
Partners Capital Value Fund,
par value $.001 per share. . . . . . . 0
Class B shares of Comstock
Partners Capital Value Fund,
par value $.001 per share. . . . . . . 0
<PAGE>
Class C shares of Comstock
Partners Capital Value Fund,
par value $.001 per share. . . . . . . 0
Class R shares of Comstock
Partners Capital Value Fund,
par value $.001 per share. . . . . . . 0
Item 27. INDEMNIFICATION
Reference is made to Article VII of Registrant's Articles of
Incorporation, Article VI of Registrant's By-laws, and subsections 1.10 and 1.11
of the Distribution Agreement between the Registrant and Premier Mutual Fund
Services, Inc.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant understands that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer of controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the Sections entitled "Management Arrangements"
in the Prospectus and the Statement of Additional Information with respect to
the Investment Adviser.
The following information is furnished with respect to the Sub-
Investment Adviser:
The Dreyfus Corporation ("Dreyfus") and subsidiary companies comprise a
financial service organization whose business consists primarily of providing
investment management services as the investment adviser, manager and
distributor for sponsored investment companies registered under the Investment
Company Act of 1940 and as an investment adviser to institutional and individual
accounts. Dreyfus also serves as sub-investment adviser to and/or administrator
of other investment companies.
<PAGE>
Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus, serves
primarily as a registered broker/dealer of shares of investment companies
sponsored by Dreyfus and of other investment companies for which Dreyfus acts as
investment adviser, sub-investment adviser or administrator. Dreyfus
Management, Inc., another wholly-owned subsidiary, provides investment
management services to various pension plans, institutions and individuals.
------------------------------------------------
Officers and Directors of Sub-Investment Adviser
------------------------------------------------
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
MANDRESS L. BERMAN Real estate consultant and private
Director investor
29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees
of Skillman Foundation.
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co.
Director Inc.
535 Madison Avenue
New York, New York 10022;
Director and member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE Director:
Director Dreyfus America Fund
<PAGE>
JULIAN M. SMERLING None
Director
HOWARD STEIN Chairman of the Board:
Chairman of the Board Dreyfus Acquisition Corporation*;
and Chief Executive The Dreyfus Consumer Credit
Officer Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief
Executive Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International
Limited+++++;
World Balanced Fund+++;
Dreyfus Partnership
Management,Inc.*;
Dreyfus Personal Management,
Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization,
Inc.*;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York;
<PAGE>
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the The Boston Company
Board One Boston Place
Boston, Massachusetts 02108
Vice Chairman of the Board:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++
Chief Investment Formerly, Chairman and Chief Executive Officer:
Officer, and a Kleinwort Benson Investment Management
Director Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman- Executive Officer:
Distribution and a The Boston Company Advisors, Inc.
Director 53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization,
Inc.*;
Director:
The Dreyfus Consumer Credit
Corporation*;
The Dreyfus Trust Company++'
Dreyfus Service Corporation*;
President:
The Boston Company
One Boston Place
Boston, Massachusetts 02108;
Laurel Capital Advisors
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Group Holdings, Inc.
Executive Vice President
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Safe Deposit & Trust
One Boston Place
Boston, Massachusetts 02108
<PAGE>
PHILIP L. TOIA Chairman of the Board and Trust
Vice President- Investment Officer:
Operations and The Dreyfus Trust Company+++;
Administration Chairman of the Board and Chief
Executive Officer:
Major Trading Corporation*;
Director:
The Dreyfus Precious Metals, Inc.*
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management,
Inc.*;
Dreyfus Partnership Management,
Inc.+;
Dreyfus Service Organization*;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital
Markets Corporation
One Chase Manhattan Plaza
New York, New York 10081
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President Dreyfus Partnership Management, Inc.*;
and Chief Financial Seven Six Seven Agency, Inc.*;
Officer President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services
Dreyfus Retirement Division;
Services Executive Vice President:
Boston Safe Deposit & Trust Co.
One Boston Place
Boston, Massachusetts 02108;
DIANE M. COFFEY None
Vice President-
Corporate
Communications
<PAGE>
ELIE M. GENADRY President:
Vice President- Institutional Services Division of
Institutional Sales Dreyfus*
Broker-Dealer Division of Dreyfus
Service Corporation*;
Group Retirement Plans Division of
Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization,
Inc.***;
Vice President:
The Dreyfus Trust Company++;
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and Dreyfus Precious Metals, Inc.*;
General Counsel Director and Vice President:
The Dreyfus Consumer Credit
Corporation*;
Director and Secretary:
Dreyfus Acquisition Corporation*;
Dreyfus Partnership Management,
Inc.*;
Major Trading Corporation*;
The Truepenny Corporation+;
Director:
The Dreyfus Trust Company++;
Secretary:
Dreyfus Service Corporation*;
Dreyfus Service Organization***;
Seven Six Seven Agency, Inc.*;
JEFFREY N. NACHMAN None
Vice President-Mutual
Fund Accounting
WILLIAM F. GLAVIN, Senior Vice President:
JR. The Boston Company Advisors, Inc.
Vice President- 53 State Street
Corporate Development Exchange Place
Boston, Massachusetts 02109
Executive Vice President:
Dreyfus Service Corporation*;
ANDREW S. WASSER Vice President:
Vice President- Mellon Bank Corporation
Information Services One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
<PAGE>
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation,
Inc.*;
The Truepenny Corporation*;
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
Dreyfus Service Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit Corporation*;
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
MARK N. JACOBS Vice President, Secretary and Director:
Vice President-Fund Lion Management, Inc.*;
Legal and Compliance, Secretary:
and Secretary The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization,
Inc.*;
Major Trading Corporation*;
The Truepenny Corporation*
* The address of the business so indicated is 200 Park Avenue, New York,
New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road, Great
Neck, New York 11021.
*** The address of the business so indicated is 45 Broadway, New York, New
York 10006.
**** The address of the business so indicated is Five Triad Center, Salt
Lake City, Utah 84180.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza, New
York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
<PAGE>
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. PRINCIPAL UNDERWRITERS
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
1) Dreyfus A Bonds Plus, Inc.
2) Dreyfus Appreciation Fund, Inc.
3) Dreyfus Asset Allocation Fund, Inc.
4) Dreyfus Balanced Fund, Inc.
5) Dreyfus BASIC Money Market Fund, Inc.
6) Dreyfus BASIC Municipal Fund, Inc.
7) Dreyfus BASIC U.S. Government Money Market Fund
8) Dreyfus California Intermediate Municipal Bond Fund
9) Dreyfus California Tax Exempt Bond Fund, Inc.
10) Dreyfus California Tax Exempt Money Market Fund
11) Dreyfus Capital Value Fund, Inc.
12) Dreyfus Cash Management
13) Dreyfus Cash Management Plus, Inc.
14) Dreyfus Connecticut Intermediate Municipal Bond Fund
15) Dreyfus Connecticut Municipal Money Market Fund, Inc.
16) The Dreyfus Convertible Securities Fund, Inc.
17) Dreyfus Edison Electric Index Fund, Inc.
18) Dreyfus Florida Intermediate Municipal Bond Fund
19) Dreyfus Florida Municipal Money Market Fund
20) Dreyfus Focus Funds, Inc.
21) The Dreyfus Fund Incorporated
22) Dreyfus Global Bond Fund, Inc.
23) Dreyfus Global Growth Fund
24) Premier Global Investing, Inc.
25) Dreyfus GNMA Fund, Inc.
26) Dreyfus Government Cash Management
27) Dreyfus Growth and Income Fund, Inc.
28) Dreyfus Growth Opportunity Fund, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
34) Dreyfus Growth and Value Fund, Inc.
35) The Dreyfus/Laurel Funds, Inc.
36) The Dreyfus/Laurel Funds Trust
37) The Dreyfus/Laurel Tax-Free Municipal Funds
38) The Dreyfus/Laurel Investment Series
39) Dreyfus Basic GNMA Fund
40) Dreyfus Life and Annuity Index Fund, Inc.
41) Dreyfus Liquid Assets, Inc.
42) Dreyfus Massachusetts Intermediate Municipal Bond Fund
43) Dreyfus Massachusetts Municipal Money Market Fund
44) Dreyfus Massachusetts Tax Exempt Bond Fund
45) Dreyfus Michigan Municipal Money Market Fund, Inc.
<PAGE>
46) Dreyfus Money Market Instruments, Inc.
47) Dreyfus Municipal Bond Fund, Inc.
48) Dreyfus Municipal Cash Management Plus
49) Dreyfus Municipal Money Market Fund, Inc.
50) Dreyfus New Jersey Intermediate Municipal Bond Fund
51) Dreyfus New Jersey Municipal Bond Fund, Inc.
52) Dreyfus New Jersey Municipal Money Market Fund, Inc.
53) Dreyfus New Leaders Fund, Inc.
54) Dreyfus New York Insured Tax Exempt Bond Fund
55) Dreyfus New York Municipal Cash Management
56) Dreyfus New York Tax Exempt Bond Fund, Inc.
57) Dreyfus New York Tax Exempt Intermediate Bond Fund
58) Dreyfus New York Tax Exempt Money Market Fund
59) Dreyfus Ohio Municipal Money Market Fund, Inc.
60) Dreyfus 100% U.S. Treasury Intermediate Term Fund
61) Dreyfus 100% U.S. Treasury Long Term Fund
62) Dreyfus 100% U.S. Treasury Money Market Fund
63) Dreyfus 100% U.S. Treasury Short Term Fund
64) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
65) Dreyfus Pennsylvania Municipal Money Market Fund
66) Dreyfus Short-Intermediate Government Fund
67) Dreyfus Short-Intermediate Municipal Bond Fund
68) Dreyfus Short-Term Income Fund, Inc.
69) The Dreyfus Socially Responsible Growth Fund, Inc.
70) Dreyfus Strategic Growth, L.P.
71) Dreyfus Strategic Income
72) Dreyfus Strategic Investing
73) Dreyfus Tax Exempt Cash Management
74) Dreyfus Treasury Cash Management
75) Dreyfus Treasury Prime Cash Management
76) Dreyfus Variable Investment Fund
77) Dreyfus-Wilshire Target Funds, Inc.
78) Dreyfus Worldwide Dollar Money Market Fund, Inc.
79) General California Municipal Bond Fund, Inc.
80) General California Municipal Money Market Fund
81) General Government Securities Money Market Fund, Inc.
82) General Money Market Fund, Inc.
83) General Municipal Bond Fund, Inc.
84) General Municipal Money Market Fund, Inc.
85) General New York Municipal Bond Fund, Inc.
86) General New York Municipal Money Market Fund
87) Pacific Funds Trust --
Pacifica Prime Money Market Fund
Pacifica Treasury Money Market Fund
88) Peoples Index Fund, Inc.
89) Peoples S&P MidCap Index Fund, Inc.
90) Premier Insured Municipal Bond Fund
91) Premier California Municipal Bond Fund
92) Premier GNMA Fund
93) Premier Growth Fund, Inc.
94) Premier Municipal Bond Fund
95) Premier New York Municipal Bond Fund
96) Premier State Municipal Bond Fund
97) Premier Capital Growth Fund, Inc.
98) Premier Strategic Growth Fund
<PAGE>
(b)
Positions and offices Positions and
Name and principal with Premier Mutual Fund offices with
business address Services, Inc. Registrant
--------------------- ------------------------ ----------------
Marie E. Connolly* Director, President, None
Chief Operating Officer
and Compliance Officer
Joseph F. Tower, III* Senior Vice President, None
Treasurer and Chief
Financial Officer
John E. Pelletier* Senior Vice President, None
General Counsel,
Secretary and Clerk
Frederick C. Dey** Senior Vice President None
Eric B. Fischman** Vice President and None
Associate General
Counsel
Paul Prescott* Assistant Vice President None
Elizabeth Bachman** Assistant Vice President None
Mary Nelson* Assistant Treasurer None
John J. Pyburn** Assistant Treasurer None
Jean M. O'Leary* Assistant Secretary and None
Assistant Clerk
John W. Gomez* Director None
William J. Nutt* Director None
* Principal business address is One Exchange Place, Boston, Massachusetts
02109.
** Principal business address is 200 Park Avenue, New York, New York 10166.
<PAGE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules thereunder
will be maintained at the offices of:
Comstock Partners Funds, Inc., 10 Exchange Place, Suite 2010, Jersey City,
New Jersey 07302-3913; Princeton Administrators, L.P., 800 Scudders Mill
Road, Plainsboro, New Jersey 08536; The Bank of New York, 101 Barclay
Street, New York, New York 10286; Dreyfus Transfer, Inc., One American
Express Plaza, Providence, Rhode Island 02903.
Item 31. MANAGEMENT SERVICES
Not applicable.
Item 32. UNDERTAKINGS
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment
containing financial statements of the Comstock Partners
Capital Value Fund as of a reasonably current date, which need
not be certified, within four to six months from the date of
commencement of investment operations for the Comstock Partners
Capital Value Fund.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
(d) Registrant hereby undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of one or
more of Registrant's directors when requested in writing to do so
by the holders of at least 10% of Registrant's outstanding shares
of common stock and, in connection with such meeting, to assist
in communications with other shareholders in this regard, as
provided under Section 16(c) of the Investment Company Act of
1940, as amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Jersey City and State of New Jersey
on the 13th day of February, 1996.
COMSTOCK PARTNERS FUNDS, INC.
By /s/ Robert C. Ringstad
---------------------------
Robert C. Ringstad
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
*/s/ Stanley D. Salvigsen Chairman of the February 13, 1996
- --------------------------- Board (principal
Stanley D. Salvigsen executive officer)
and Director
/s/ Robert C. Ringstad Treasurer (principal February 13, 1996
- --------------------------- financial and
Robert C. Ringstad accounting officer)
* /s/ Charles L. Minter Director February 13, 1996
- ---------------------------
Charles L. Minter
* /s/ M. Bruce Adelberg Director February 13, 1996
- ---------------------------
M. Bruce Adelberg
<PAGE>
* /s/ Robert M. Smith Director February 13, 1996
- ---------------------------
Robert M. Smith
Director February 13, 1996
- ---------------------------
E. W. Kelley
*By/ /s/ Robert C. Ringstad February 13, 1996
---------------------------
Robert C. Ringstad
Attorney-in-Fact
<PAGE>
Comstock Partners Funds, Inc.
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
1(a) Registrant's Articles of Amendment and Restatement.
1(b) Form of Registrant's Articles Supplementary.
1(c) Form of Registrant's Articles
Supplementary.
1(d) Form of Registrant's Articles of Amendment
1(e) Form of Registrant's Articles Supplementary
2 Registrant's By-Laws.
4(d) Form of Stock Certificate for Comstock Partners
Capital Value Fund Class A, B, C and R shares of
common stock.
5(a) Form of Amended Investment Advisory Agreement
between Registrant, on behalf of the Comstock
Partners Strategy Fund, and Comstock Partners, Inc.
5(b) Form of Amended Sub-Investment Advisory Agreement
between Comstock Partners, Inc., on behalf of the
Comstock Partners Strategy Fund, and The Dreyfus
Corporation.
5(c) Form of Investment Advisory Agreement between
Registrant, on behalf of the Comstock Partners
Capital Value Fund, and Comstock Partners, Inc.
5(d) Form of Sub-Investment Advisory Agreement between
Registrant, on behalf of Comstock Partners Capital
Value Fund, and The Dreyfus Corporation.
10 Opinion and Consent of Venable, Baetjer and
Howard.
11 Independent Auditors' Consent.
15(a) Form of Amended and Restated Class A Service and
Distribution Plan.
15(b) Form of Class B Service and Distribution Plan.
15(c) Form of Amended and Restated Class C Service and
Distribution Plan.
<PAGE>
18 Form of Amended and Restated Multiclass Plan.
27 Financial Data Schedules for Comstock Partners
Capital Value Fund.
Other Powers of Attorney for Messrs. Salvigsen, Minter,
Smith, and Adelberg.
<PAGE>
COMSTOCK PARTNERS STRATEGY FUND, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
Comstock Partners Strategy Fund, Inc., a Maryland corporation
having its principal office in Baltimore City, Maryland (herein called the
"Corporation"), certifies that:
FIRST: The Charter of the Corporation is hereby amended by striking
out Articles I through X and inserting in lieu thereof new Articles I through
VIII, and as so amended is restated in its entirety as follows:
ARTICLE I
THE UNDERSIGNED, John W. Scheflen, whose post office address is c/o
Venable, Baetjer and Howard, 1800 Mercantile Bank & Trust Building, 2 Hopkins
Plaza, Baltimore, Maryland 21201, being at least eighteen years of age, does
hereby act as an incorporator and form a corporation under and by virtue of the
Maryland General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is Comstock Partners Strategy Fund, Inc.
ARTICLE III
PURPOSE AND POWER
The Corporation is formed for the following purposes:
(1) To conduct and carry on the business of an investment company.
(2) To hold, invest and reinvest its assets in securities,
commodities and other investments or to hold part or all of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts and
on such terms and conditions and for such purposes and for such amount or kind
of consideration as may now or hereafter be permitted by law.
(4) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary,
<PAGE>
2
incidental, appropriate or desirable for the accomplishment of all or any of the
foregoing purposes.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
Maryland General Corporation Law now or hereafter in force, and the enumeration
of the foregoing shall not be deemed to exclude any powers, rights or privileges
so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in the State of Maryland is The Corporation Trust Incorporated, a
Maryland Corporation. The post office address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the Corporation
shall have authority to issue is five hundred million (500,000,000) shares, of
the par value of one mil ($.001) per share and of the aggregate par value of
five hundred thousand dollars ($500,000), all of which five hundred million
(500,000,000) shares are designated Common Stock.
(2) The Corporation may issue fractional shares. Any fractional
share shall carry proportionately the rights of a whole share including, without
limitation, the right to vote and the right to receive dividends. The holder of
a fractional share shall not, however, have the right to receive a certificate
evidencing it.
(3) All persons who shall acquire shares of capital stock in the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation and the By-Laws of the Corporation.
(4) No holder of shares of capital stock of the Corporation by virtue
of being such a holder shall have any right to purchase or subscribe for any
shares of the Corporation's capital stock or any other security that the
Corporation may issue or sell (whether out of the number of shares of capital
stock authorized by these Articles of Incorporation or out of any shares of the
Corporation's capital stock that the Corporation
<PAGE>
3
may acquire) other than a right that the Board of Directors in its discretion
may determine to grant.
(5) The Board of Directors shall have authority by resolution to
classify and reclassify any authorized but unissued shares of capital stock from
time to time by setting or changing in any one or more respects the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of the capital
stock.
(6) The presence in person or by proxy of the holders of one-third of
the shares of stock of the Corporation entitled to vote (without regard to
class) shall constitute a quorum at any meeting of the stockholders, except with
respect to any matter which by law requires the approval of one or more classes
of stock, in which case the presence in person or by proxy of the holders of
one-third of the shares of stock of all classes entitled to vote on the matter
shall constitute a quorum. Notwithstanding any provision of law requiring any
action to be taken or authorized by the affirmative vote of the holders of a
greater proportion of the votes of all classes or of any class of stock of the
Corporation, such action shall be effective and valid if taken or authorized by
the affirmative vote of a majority of the total number of votes entitled to be
cast thereon, except as otherwise provided in these Articles of Incorporation.
(7) (a) The Corporation shall under some circumstances redeem, and
may under other circumstances repurchase or redeem, shares of its capital stock
as follows:
(i) Each holder of shares of its capital stock shall be entitled at
the holder's option to require the Corporation to redeem all or any part of
the shares of its capital stock owned by that holder, upon request to the
Corporation or its designated agent in a form approved by the Corporation,
accompanied by surrender of the certificate or certificates for those
shares, if any, or any other evidence of ownership specified by the
Corporation, at the net asset value of those shares, subject to and in
accordance with the provisions of paragraph (b) of this Section 7.
Notwithstanding the foregoing, the Corporation may suspend the right of the
holders of the capital stock of the Corporation to require the Corporation
to redeem such capital stock when permitted or required to do so by
applicable law.
(ii) The Board of Directors of the Corporation may also, from time to
time in its discretion, authorize the Corporation to require the redemption
of all or any part of the outstanding shares of its capital stock at the
net asset value of those shares, subject to and in accordance with the
provisions of paragraph (b) of this Section 7, upon the
<PAGE>
4
sending of written or telegraphic notice of redemption to each holder whose
shares are so redeemed and upon such terms and conditions as the Board of
Directors of the Corporation shall deem advisable.
(b) With respect to redemptions and repurchases of shares of
capital stock of the Corporation pursuant to paragraph (a) of this
Section 7:
(i) The net asset value applicable to a redemption or repurchase
pursuant to paragraphs (a)(i) and (a)(ii) of this Section 7 shall be
computed as of the specific time or times during the day determined by the
Board of Directors of the Corporation.
(ii) Any certificates for shares of capital stock of this Corporation
to be redeemed or repurchased shall be surrendered in proper form for
transfer, together with any proof of the authenticity of signatures
required by the Corporation or transfer agent of the Corporation.
(iii) Payment of the redemption or repurchase price by the Corporation
or its designated agent shall be made within seven days after the time for
the determination of the redemption or repurchase price, but in no event
prior to delivery to the Corporation or its designated agent of the
certificate or certificates, if any, for the shares of capital stock
redeemed or repurchased or any other evidence of ownership specified by the
Corporation's Board of Directors. Payment of the redemption or repurchase
price may be postponed when permitted or required by applicable law.
Payment of the redemption or repurchase price may be paid by delivery of
portfolio securities.
(iv) The right of a holder of shares of capital stock redeemed or
repurchased by the Corporation as provided in this Article V to receive
dividends thereon and all other rights of that holder with respect to those
shares shall forthwith cease and terminate at the time as of which the
redemption or repurchase price of those shares has been determined, except
the rights of that holder to receive (A) the redemption or repurchase price
of those shares from the Corporation or its designated agent and (B) any
dividend or distribution to which that holder had become entitled as the
record holder of those shares on the record date for that dividend.
ARTICLE VI
BOARD OF DIRECTORS
(1) The number of directors constituting the Board of Directors shall
be eight (8). This number may be changed
<PAGE>
5
pursuant to the By-Laws of the Corporation.
(2) In furtherance, and not in limitation, of the powers conferred by
the laws of the State of Maryland, the Board of Directors is expressly
authorized:
(i) To make, alter or repeal the By-Laws of the Corporation,
except where such power is reserved by the By-Laws to the
stockholders, and except as otherwise required by the Investment
Company Act of 1940, as amended.
(ii) From time to time to determine whether and to what extent
and at what times and places and under what conditions and regulations
the books and accounts of the Corporation, or any of them other than
the stock ledger, shall be open to the inspection of the stockholders.
No stockholder shall have any right to inspect any account or book or
document of the Corporation, except as conferred by law or authorized
by resolution of the Board of Directors or of the stockholders.
(iii) Without the assent or vote of the stockholders, to authorize
the issuance from time to time of shares of the capital stock of any
class of the Corporation, whether now or hereafter authorized, and
securities convertible into shares of capital stock of the Corporation
of any class or classes, whether now or hereafter authorized, for such
consideration as the Board of Directors may deem advisable.
(iv) Without the assent or vote of the stockholders, to authorize
and issue obligations of the Corporation, secured and unsecured, as
the Board of Directors may determine, and to authorize and cause to be
executed mortgages and liens upon the real or personal property of the
Corporation.
(v) To establish the basis or method for determining the value
of the assets and the amount of the liabilities of the Corporation and
the net asset value of each share of the Corporation's capital stock.
(vi) To determine what constitutes net profits, earnings, surplus
or net assets in excess of capital, and to determine what accounting
periods shall be used by the Corporation for any purpose; to set apart
out of any funds of the Corporation reserves for such purposes as it
shall determine and to abolish the same; to declare and pay any
dividends and distributions in cash, securities or other property from
surplus or any funds legally available therefor, at such intervals as
it shall determine; to declare dividends or
<PAGE>
6
distributions by means of a formula or other method of determination,
at meetings held less frequently than the frequency of the
effectiveness of such declarations; and to establish payment dates for
dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations
thereof.
(vii) In addition to the powers and authorities granted in these
Articles of Incorporation and by statute expressly conferred upon it,
the Board of Directors is authorized to exercise all powers and do all
acts that may be exercised or done by the Corporation pursuant to the
provisions of the laws of the State of Maryland, these Articles of
Incorporation and the By-Laws of the Corporation.
(3) Any determination made in good faith, and in accordance with
these Articles of Incorporation, if applicable, by or pursuant to the direction
of the Board of Directors, with respect to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose for
creating reserves or as to the use, alteration or cancellation of any reserves
or charges (whether or not any obligation or liability for which the reserves or
charged have been created has been paid or discharged or is then or thereafter
required to be paid or discharged), as to the value of any security owned by the
Corporation, as to the determination of the net asset value of shares of any
class of the Corporation's capital stock, or as to any other matters relating to
the issuance, sale or other acquisition or disposition of securities or shares
of capital stock of the Corporation, and any reasonable determination made in
good faith by the Board of Directors whether any transaction constitutes a
purchase of securities on "margin," a sale of securities "short," or an
underwriting of the sale of, or a participation in any underwriting or selling
group in connection with the public distribution of, any securities, shall be
final and conclusive, and shall be binding upon the Corporation and all holders
of shares of its capital stock, past, present and future, and shares of the
capital stock of the Corporation are issued and sold on the condition and
understanding evidenced by the purchase of shares of capital stock or accordance
of share certificates, that any and all such determinations shall be binding as
aforesaid. No provision of these Articles of Incorporation shall be effective
to require a waiver of compliance with any provision of the Securities Act of
1933, as amended, or the Investment Company Act of 1940, as amended, or of any
valid rule, regulation or order of the Securities and Exchange Commission under
those Acts.
<PAGE>
7
ARTICLE VII
LIABILITY AND INDEMNIFICATION
(1) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders are damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to
the same extent as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by-law, resolution or agreement
make further provision for indemnification of directors, officers, employees and
agents to the fullest extent permitted by the Maryland General Corporation Law.
(3) No provision of these Articles of Incorporation shall be
effective to protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
(4) References to the Maryland General Corporation Law in this
Article VII are to that law as from time to time amended. No amendment to the
Corporation's Articles of Incorporation shall affect any right of any person
under this Article VII based on any event, omission or proceeding prior to the
amendment.
ARTICLE VIII
AMENDMENTS
The Corporation exercises the right from time to time to make any
amendment to its Articles of Incorporation, now or hereafter authorized by law,
including any amendment that alters the contract rights, as expressly set forth
in these Articles of Incorporation, of any outstanding capital stock of the
Corporation.
<PAGE>
8
SECOND: There has been no change in the total number of shares of
capital stock which the Corporation has authority to issue or in the
classification of those shares of stock.
THIRD: The current address of the principal office of the
Corporation and the name and address of the resident agent of the Corporation
are set forth in the Charter as amended and restated.
FOURTH: The Corporation currently has eight directors. The names of
the directors currently in office are: Michael C. Aronstein, Stanley D.
Salvigsen, Charles L. Minter, Howard Stein, Robert M. Smith, Robert M. Goodyear,
Jr., E.W. Kelley, and Bruce C. Lueck.
FIFTH: The provisions set forth in these Articles of Amendment and
Restatement constitute all of the provisions of the Charter currently in effect.
SIXTH: The amendment and restatement of the charter of the
Corporation as hereinabove set forth has been duly advised by the board of
directors and approved by the stockholders of the Corporation.
The undersigned President who executed these Articles of Amendment and
Restatement on behalf of the Corporation acknowledges them to be the corporate
act of the Corporation and states that to the best of his knowledge, information
and belief the matter and facts set forth herein are true in all material
respects and that this statement is made under the penalties of perjury.
IN WITNESS WHEREOF, Comstock Partners Strategy Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its President and
attested by its Secretary on March 4, 1992.
COMSTOCK PARTNERS STRATEGY FUND, INC.
/s/ Michael C. Aronstein
-------------------------------------
Michael C. Aronstein
President
ATTEST:
/s/ Charles L. Minter
- ---------------------------------
Charles L. Minter
Secretary
<PAGE>
COMSTOCK PARTNERS STRATEGY FUND, INC.
ARTICLES SUPPLEMENTARY
Comstock Partners Strategy Fund, Inc., a Maryland corporation having
its principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), certifies that:
FIRST: The Corporation's Board of Directors has classified Three
Hundred Million (300,000,000) unissued shares of Common Stock, par value $.001
per share, as Three Hundred Million (300,000,000) shares of Class B Common
Stock, par value $.001 per share, by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption thereof as
hereinafter set forth.
SECOND: The shares of Class B Common Stock as so reclassified by the
Corporation's Board of Directors shall have the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption set forth in the
Corporation's Articles of Amendment and Restatement and shall be subject to all
provisions of the Articles of Amendment and Restatement relating to stock of the
Corporation generally, except as set forth as follows, and shall also be subject
to the terms and conditions set forth as follows:
(1) The assets belonging to the Class B Common Stock shall be
invested in the same investment portfolio of the Corporation as the assets
belonging to the Common Stock.
(2) The dividends and distributions of investment income and capital
gains with respect to the Class B Common Stock shall be in such amount as
may be declared from time to time by the Board of Directors, and such
dividends and distributions may vary from dividends and distributions of
investment income and capital gains with respect to the Common Stock to
reflect differing allocations of the expenses of the Corporation between
the holders of the two classes and any resultant differences between the
net asset value per share of the two classes, to such extent and for such
purposes as the Board of Directors may deem appropriate. The allocation of
investment income or capital gains and expenses and liabilities of the
Corporation between the Common Stock and the Class B Common Stock shall be
determined by the Board of Directors in a manner that is consistent with
the order dated July 1, 1992 (Investment Company Act of 1940 Release No.
18828) issued by the Securities and Exchange Commission in connection with
the application for exemption filed by Comstock Partners Strategy Fund,
Inc. and any amendment to such order or any rule or interpretation under
the
<PAGE>
2
Investment Company Act of 1940 that modifies or supersedes such order.
(3) The holders of the Class B Common Stock shall have exclusive
voting rights with respect to provisions of any distribution plan adopted
by the Corporation pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (a "Plan") applicable to the Class B Common Stock.
THIRD: The Class B Common Stock share aforesaid have been duly
reclassified by the Corporation's Board of Directors pursuant to authority and
power contained in the Corporation's Articles of Amendment and Restatement.
The undersigned President who executed these Articles Supplementary on
behalf of the Corporation acknowledges them to be the corporate act of the
Corporation and states that to the best of his knowledge, information and belief
the matter and facts set forth herein relating to authorization and approval
hereof are true in all material respects and that this statement is made under
the penalties of perjury.
IN WITNESS WHEREOF, Comstock Partners Strategy Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its President and
attested by its Secretary on July 6, 1992.
COMSTOCK PARTNERS STRATEGY FUND, INC.
/s/ Michael C. Aronstein
-------------------------------------
Michael C. Aronstein
President
ATTEST:
/s/ Charles L. Minter
- ---------------------------------
Charles L. Minter
Secretary
<PAGE>
COMSTOCK PARTNERS STRATEGY FUND, INC.
ARTICLES SUPPLEMENTARY
Comstock Partners Stragegy Fund, Inc., a Maryland corporation having
its principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), certifies that:
FIRST: The Corporation's Board of Directors has reclassified and
classified One Hundred Fifty Million (150,000,000) authorized but unissued
shares of Class A Common Stock, par value $.001 per share, as One Hundred Fifty
Million (150,000,000) shares of Class C Common Stock, par value $.001 per share,
and Fifty Million (50,000,000) authorized but unissued shares of Common Stock,
par value $.001 per share, as Fifty Million (50,000,000) shares of Class C
Common Stock, par value $.001 per share, by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption thereof as
hereinafter set forth. These Articles Supplementary do not increase the
aggregate number of shares of all classes authorized to be issued by the
Corporation or the aggregate par value thereof.
SECOND: The shares of Class C Common Stock as so reclassified and
classified by the Corporation's Board of Directors shall have the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption set forth in
the Corporation's Article of Amendment and Restatement ("Charter") and shall be
subject to all provisions of the Charter relating to stock of the Corporation
generally, except as set forth as follows, and shall also be subject to the
terms and conditions set forth as follows:
(1) The Class C Common Stock shall represent an interest in the same
investment portfolio as the Class A Common Stock and the Common Stock.
Except as otherwise set forth in these Articles Supplementary, the Class C
Common Stock shall have the same preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption as the Class A Common Stock and the
Common Stock.
(2) The dividends and distributions of investment income and capital
gains with respect to the Class C Common Stock shall be in such amounts as
may be declared from time to time by the Board of Directors, and such
dividends and distribtions may vary from dividends and distributions of
investment income and capital gains with respect to the Class A Common
Stock and the Common Stock to reflect differing allocations of the expenses
of the Corporation between the holders of the classes and any resultant
differences among the net asset value per share of the
<PAGE>
2
classes, to such extent and for such purposes as the Board of Directors may
deem appropriate. Notwithstanding any provision of the Corporation's
Charter to the contrary, the allocation of investment income, capital
gains, expenses and liabilities of the Corporation among the Common Stock,
the Class A Common Stock and the Class C Common Stock and the determination
of their respective net asset values and rights upon liquidation or
dissolution of the Corporation shall be determined by the Board of
Directors in a manner that is consistent with the Investment Company Act of
1940, as amended (the "Investment Company Act") and any order, rule or
interpretation under the Investment Company Act.
(3) Except as otherwise required by law, the holders of the Class C
Common Stock shall have exclusive voting rights with respect to provisions
of any distribution plan adopted by the Corporation pursuant to Rule 12b-1
under the Investment Company Act (a "Plan") applicable to the Class C
Common Stock and no voting rights with respect to the provisions of any
Plan applicable to the Class A Common Stock.
(4) The proceeds of the redemption of the Class C Common Stock shares
shall be reduced by the amount of any contingent deferred sales charge or
other charge payable on such redemption pursuant to the terms of issuance
of such shares, all in accordance with the Investment Company Act and
applicable rules and regulations of the National Association of Securities
Dealers, Inc.
THIRD: The Class C Common Stock shares aforesaid have been duly
reclassified by the Corporation's Board of Directors pursuant to authority and
power contained in the Corporation's Charter.
The undersigned Vice President who executed these Articles
Supplementary on behalf of the Corporation acknowledges them to be the corporate
act of the Corporation and states that to the best of his knowledge, information
and belief the matters and facts set forth herein relating to authorization and
approval hereof are true in all material respects and that this statement is
made under the penalties of perjury.
<PAGE>
3
IN WITNESS WHEREOF, Comstock Partners Strategy Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its Vice President
and attested by its Secretary on July 27, 1995.
COMSTOCK PARTNERS STRATEGY FUND, INC.
/s/ Edward A. Leskowicz, Jr.
-------------------------------------
Edward A. Leskowicz, Jr.
Vice President
ATTEST:
/s/ Charles L. Minter
- ---------------------------------
Charles L. Minter
Secretary
<PAGE>
COMSTOCK PARTNERS STRATEGY FUND, INC.
ARTICLES OF AMENDMENT
Comstock Partners Strategy Fund, Inc., a Maryland corporation having
its principal office in Maryland in Baltimore City, Maryland (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Articles of Amendment and Restatement of the Corporation
are amended by deleting ARTICLE II and inserting in lieu thereof the following:
ARTICLE II
NAME
The name of the Corporation is Comstock Partners Funds, Inc.
SECOND: The Charter of the Corporation, as heretofore amended, is
further amended by redesignating all of the issued and unissued shares of the
Corporation's Class A Common Stock, Class C Common Stock and Common Stock that
has not been further designated, respectively, as Class A Common Stock, Class C
Common Stock and Class O Common Stock, respectively, of the Comstock Partners
Strategy Fund series of the Corporation. Subsequent to such redesignation, the
Common Stock of the Corporation is classified as follows:
Designation Number of Shares
----------- ----------------
Comstock Partners Strategy Fund Class A Common Stock 150,000,000
Comstock Partners Strategy Fund Class C Common Stock 200,000,000
Comstock Partners Strategy Fund Class O Common Stock 150,000,000
<PAGE>
THIRD: The foregoing amendments to the Charter of the Corporation
were approved by a majority of the entire board of directors at a meeting duly
convened and held on January 30, 1996.
FOURTH: The foregoing amendments to the Charter of the Corporation
are limited to changes expressly permitted by Section 2-605 of Subtitle 6 of
Title 2 of the Maryland General Corporation Law to be made without action by
stockholders.
FIFTH: The Corporation is registered as an open-end company under
the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, Comstock Partners Strategy Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its duly authorized
officers who acknowledge that these Articles of Amendment are the act of the
Corporation and that to the best of their knowledge, information and belief, all
matters and facts set forth herein relating to the authorization and
<PAGE>
approval of these Articles are true in all material respects and that this
statement is made under the penalties of perjury.
COMSTOCK PARTNERS STRATEGY
FUND, INC.
WITNESS:
By:
- ------------------------ ---------------------------
Name: Name:
Title: Title:
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
ARTICLES SUPPLEMENTARY
Comstock Partners Funds, Inc., a Maryland corporation having its
principal office in Maryland in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation presently authorizes
500,000,000 shares of capital stock, par value $.001 per share. The number of
shares of capital stock that the Corporation has authority to issue is hereby
increased to 1,000,000,000 shares of capital stock, par value $.001 per share
and the additional shares are hereby classified as follows:
Class Number of Shares
----- ----------------
Comstock Partners Capital Value Fund Class A
Common Stock 125,000,000
Comstock Partners Capital Value Fund Class B
Common Stock 125,000,000
Comstock Partners Capital Value Fund Class C
Common Stock 125,000,000
Comstock Partners Capital Value Fund Class R
Common Stock 125,000,000
SECOND: The shares of Class A, Class B, Class C and Class R Common
Stock of the Comstock Partners Capital Value Fund (the "Fund") classified hereby
shall be subject to all of the provisions of the Corporation's Charter relating
to stock of the Corporation generally, and to the following preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption:
(1) All consideration received by the Corporation for the issuance or
sale of shares of the Fund's Class A, Class B, Class C and Class R Common
Stock, and of any
<PAGE>
other class of stock hereafter created with respect to the Fund, together
with all income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the Fund for all
purposes, subject only to the rights of creditors, and shall be so recorded
upon the books of account of the Corporation. Such consideration, income,
earnings, profits and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds, in whatever form the same
may be, are herein referred to as "assets belonging to" the Fund. The
classes of stock comprising the Fund shall have no interest in assets
belonging to any other fund of the Corporation as determined by the Board
of Directors in accordance with law.
(2) Dividends or distributions on shares of the classes of stock
comprising the Fund, whether payable in stock or cash, shall be paid only
out of earnings, surplus or other assets belonging to the Fund.
(3) In the event of the liquidation or dissolution of the
Corporation, stockholders of the classes of stock comprising the Fund shall
be entitled to receive, as a class, out of the assets of the Corporation
available for distribution to stockholders, the assets belonging to the
Fund and their proportionate interest in any general assets of the
Corporation not belonging to any fund thereof as determined by the Board of
Directors in accordance with law. The assets so distributable to the
stockholders of the Fund shall be distributed among such stockholders in
proportion to the relative net asset values of the classes of stock
comprising the Fund and the number of shares of the particular class of the
Fund held by them and recorded on the books of the Corporation or in such
other
<PAGE>
manner as may be determined by the Board of Directors in accordance with
law.
(4) The assets belonging to the Fund shall be charged with the
liabilities of the Corporation in respect of the Fund and with the Fund's
share of the general liabilities of the Corporation, in the latter case in
the proportion that the respective net asset values of the classes of stock
comprising the Fund bear to the net asset values of the classes of stock of
all funds of the Corporation in such manner as may be determined by the
Board of Directors in accordance with law. The determination of the Board
of Directors shall be conclusive as to the allocation of assets and
liabilities, including accrued expenses and reserves, to a given fund and
the classes therein.
(5) The Class A, Class B, Class C and Class R Common Stock shares of
the Fund classified hereby will be invested in a common investment
portfolio and, if hereafter authorized by the Board of Directors, with one
or more other classes of stock in the same common investment portfolio,
and, as so invested, shall be subject to the following additional
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption:
(a) The liabilities and expenses of the classes of stock
comprising the Fund shall be determined separately from those of each
other, and, accordingly, the net asset values, the dividends and
distributions payable to holders, and the amounts distributable in the
event of liquidation of the Corporation or termination of the Fund to
holders of shares of the Fund may vary within the classes of stock
comprising the Fund. Except for these differences and certain other
differences set forth below in this Article SECOND of these Articles
Supplementary or elsewhere in the Charter of the Corporation, the classes
of stock comprising the Fund shall have the same preferences, conversion
and other
<PAGE>
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption.
(b) The dividends and distributions of investment income and
capital gains with respect to the classes of stock comprising the Fund
shall be in such amounts as may be declared from time to time by the Board
of Directors, and such dividends and distributions may vary among the
classes of stock comprising the Fund to reflect differing allocations of
the expenses and liabilities of the Corporation and the Fund among the
classes of stock and any resultant differences among the net asset values
per share of the classes of stock comprising the Fund, to such extent and
for such purposes as the Board of Directors may deem appropriate. The
allocation of investment income, capital gains, expenses and liabilities of
the Corporation and the Fund among the classes of stock comprising the Fund
shall be determined by the Board of Directors in accordance with law.
(c) The proceeds of the redemption of the shares of any class of
stock comprising the Fund may be reduced by the amount of any contingent
deferred sales charge, liquidation charge, or other charge (which charges
may vary within and among the classes of stock comprising the Fund) payable
on such redemption pursuant to the terms of issuance of such shares, all in
accordance with the Investment Company Act of 1940, as amended (the "1940
Act"), and applicable rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD").
(d) At such times (which may vary between and among the holders
of particular classes of stock comprising the Fund) as may be determined by
the Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) in accordance with the 1940
Act, applicable rules and regulations thereunder,
<PAGE>
and applicable rules and regulations of the NASD and reflected in the
pertinent registration statement of the Corporation, shares of any
particular class of stock of the Fund may be automatically converted into
shares of another class of stock of the Fund based on the relative net
asset values of such classes at the time of conversion, subject, however,
to any conditions of conversion that may be imposed by the Board of
Directors (or with the authorization of the Board of Directors, by the
officers of the Corporation) and reflected in the pertinent registration
statement of the Corporation as aforesaid.
(6) On each matter submitted to a vote of the stockholders of the
Corporation or the Fund, each holder of a share of Class A, Class B, Class
C or Class R Common Stock of the Fund, and of any other class of stock
hereafter created with respect to the Fund, shall be entitled to one vote
for each such share standing in the stockholder's name on the books of the
Corporation irrespective of class thereof. All holders of such shares
shall vote as a single class with the holders of the other shares of the
Corporation; provided, however, that if voting by class or fund is required
by the 1940 Act or Maryland law as to any such matter, those requirements
shall apply, and provided further, however, that, except as otherwise
required by law, only the holders of shares of the class or classes or fund
affected shall be entitled to vote and such holders shall the exclusive
right to vote thereon. Without limiting the foregoing, and subject to the
requirements of law, (i) holders of shares of Class A, Class B, Class C or
Class R Common Stock of the Fund, and of any other class hereafter created
with respect to the Fund, shall have exclusive voting rights with respect
to matters that only affect the Fund and no voting rights with respect to
any matter that does not affect the Fund and (ii) the holders of each of
the classes of stock comprising the Fund shall have exclusive voting rights
with respect to matters that only affect such class
<PAGE>
and no voting rights with respect to any matter that does not affect such
class.
THIRD: Immediately prior to these Articles Supplementary becoming
effective, the Corporation had authority to issue 500,000,000 shares of Common
Stock, $.001 par value per share, with an aggregate par value of $500,000
classified as follows:
Class Number
----- ------
Comstock Partners Strategy Fund Class A Common Stock 150,000,000
Comstock Partners Strategy Fund Class C Common Stock 200,000,000
Comstock Partners Strategy Fund Class O Common Stock 150,000,000
Immediately upon these Articles Supplementary becoming effective, the
Corporation has authority to issue 1,000,000,000 shares of capital stock, $.001
par value per share, with an aggregate par value of $1,000,000 classified as
follows:
<PAGE>
Class Number
----- ------
Comstock Partners Strategy Fund Class A Common Stock 150,000,000
Comstock Partners Strategy Fund Class C Common Stock 200,000,000
Comstock Partners Strategy Fund Class O Common Stock 150,000,000
Comstock Partners Capital Value Fund Class A Common 125,000,000
Stock
Comstock Partners Capital Value Fund Class B Common 125,000,000
Stock
Comstock Partners Capital Value Fund Class C Common 125,000,000
Stock
Comstock Partners Capital Value Fund Class R Common 125,000,000
Stock
FOURTH: The number of shares of capital stock that the Corporation
has authority to issue has been increased by the Board of Directors pursuant to
Section 2-105(c) of the Maryland General Corporation Law. The Corporation is
registered as an open-end investment company under the Investment Company Act of
1940, as amended. The additional shares have been duly classified as aforesaid
by the Board of Directors pursuant to authority and power contained in the
Charter of the Corporation.
IN WITNESS WHEREOF, Comstock Partners Funds, Inc. has caused these presents
to be signed in its name and on its behalf by its duly authorized officers who
acknowledge that these Articles Supplementary are the act of the Corporation,
that to the best of their knowledge, information and belief, all matters and
facts set forth herein relating to the authorization and approval of these
Articles are true in all material respects, and that this statement is made
under the penalties of perjury.
COMSTOCK PARTNERS FUNDS, INC.
ATTEST:
________________________ By:___________________________
Name: Name:
Title: Title:
<PAGE>
BY-LAWS
OF
COMSTOCK PARTNERS STRATEGY FUND, INC.
A Maryland Corporation
(as amended March 6, 1992)
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE IN MARYLAND. Comstock Partners Strategy
Fund, Inc. (the "Corporation") shall have an office in the City of
Baltimore, State of Maryland.
SECTION 2. OTHER OFFICES. The Corporation may have offices also at
such other places within and without the State of Maryland as the Board of
Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. PLACE OF MEETING. Meetings of stockholders shall be held
at such place within or without the State of Maryland as the Board of
Directors may determine.
SECTION 2. ANNUAL MEETINGS. The Corporation shall not be required to
hold an annual meeting of its stockholders in any year in which the election
of directors is not required to be acted upon under the Investment Company
Act of 1940. In the event that the Corporation shall hold an annual meeting
of stockholders, such meeting shall be held at a date and time set by the
Board of Directors, PROVIDED, HOWEVER, that if the purpose of the meeting is
to elect directors or to approve an investment advisory agreement or
distribution agreement, then the date and time of such meeting shall be set
in accordance with the Investment Company Act of 1940. Any stockholders'
meeting held in accordance with the preceding sentence shall constitute the
annual meeting of stockholders for the fiscal year of the Corporation in
which the meeting is held.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute or by
the Corporation's Charter, may be held at any place within the United
States, and may be called at any time by the Board of Directors or by the
Chairman, the Vice-Chairman or the President, and shall be called by the
Secretary at the request in writing of a majority of the Board of Directors
or at the request
<PAGE>
2
in writing of stockholders entitled to cast at least twenty-five (25)
percent of the votes entitled to be cast at the meeting upon payment by such
stockholders to the Corporation of the reasonably estimated cost of
preparing and mailing a notice of the meeting (which estimated cost shall be
provided to such stockholders by the Secretary of the Corporation).
Notwithstanding the foregoing, unless requested by stockholders entitled to
cast a majority of the votes entitled to be cast at the meeting, a special
meeting of the stockholders need not be called at the request of
stockholders to consider any matter that is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding twelve (12) months. A written request shall state the purpose or
purposes of the proposed meeting.
SECTION 4. NOTICE OF MEETINGS. Written or printed notice of the
purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting, by placing the notice
in the mail at least ten (10) days, but not more than ninety (90) days,
prior to the date designated for the meeting addressed to each stockholder
at his address appearing on the books of the Corporation or supplied by the
stockholder to the Corporation for the purpose of notice. The notice of any
meeting of stockholders may be accompanied by a form of proxy approved by
the Board of Directors in favor of the actions or persons as the Board of
Directors may select. Notice of any meeting of stockholders shall be deemed
waived by any stockholder who attends the meeting in person or by proxy, or
who before or after the meeting submits a signed waiver of notice that is
filed with the records of the meeting.
SECTION 5. QUORUM. The presence in person or by proxy of the holders
of one-third of the shares of stock of the Corporation entitled to vote
(without regard to class) shall constitute a quorum at any meeting of the
stockholders, except with respect to any matter which by law requires the
approval of one or more classes of stock, in which case the presence in
person or by proxy of the holders of one-third of the shares of stock of all
classes entitled to vote on the matter shall constitute a quorum. In the
absence of a quorum, the stockholders present in person or by proxy at the
meeting, by majority vote and without notice other than by announcement at
the meeting, may adjourn the meeting from time to time as provided in
Section 6 of this Article II until a quorum shall attend. The stockholders
present at any duly organized meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum. The absence from any meeting in person or by proxy of
holders of the number of shares of stock of the Corporation that may be
required by the laws of the State of Maryland, the Investment Company Act of
1940, as amended, or other applicable statute, the Corporation's Charter or
these By-Laws, for action upon any given matter shall not prevent action at
the meeting on any other matter or matters that may properly come before the
meeting, so long as there are present, in person or by proxy,
<PAGE>
3
holders of the number of shares of stock of the Corporation required for
action upon the other matter or matters.
SECTION 6. ADJOURNMENT. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at
the meeting at which the adjournment is taken. At any adjourned meeting at
which a quorum shall be present any action may be taken that could have been
taken at the meeting originally called. A meeting of the stockholders may
not be adjourned to a date more than one hundred twenty (120) days after the
original record date.
SECTION 7. ORGANIZATION. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the
Vice-Chairman, or in his absence or inability to act, the President, or in
his absence or inability to act, a Vice President, or in the absence or
inability to act of the Chairman of the Board, the Vice-Chairman, the
President and all of the Vice Presidents, a chairman chosen by the
stockholders, shall act as chairman of the meeting. The Secretary, or in
his absence or inability to act, a person appointed by the chairman of the
meeting, shall act as secretary of the meeting and keep the minutes of the
meeting.
SECTION 8. ORDER OF BUSINESS. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. VOTING. Except as otherwise provided by statute or the
Corporation's Charter, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one (1) vote for every share of stock standing in his name
on the records of the Corporation as of the record date determined pursuant
to Section 10 of this Article II. Each stockholder entitled to vote at
any meeting of stockholders may authorize another person or persons to act
for him by a proxy signed by the stockholder or his attorney-in-fact. No
proxy shall be valid after the expiration of eleven (11) months from the
date thereof, unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the stockholder executing it, except in those
cases in which the proxy states that it is irrevocable and in which an
irrevocable proxy is permitted by law.
SECTION 10. FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS
ENTITLED TO VOTE AT MEETING. The Board of Directors may set a record date
for the purpose of determining stockholders entitled to vote at any meeting
of the stockholders. The record date for a particular meeting shall be not
more than ninety (90) nor fewer than ten (10) days before the date of the
meeting. All persons who were holders of record of shares as of the record
date of a meeting, and no others, shall be entitled to vote at such meeting
and any adjournment thereof.
<PAGE>
4
SECTION 11. INSPECTORS. The Board of Directors may, in advance of
any meeting of stockholders, appoint one (1) or more inspectors to act at
the meeting or at any adjournment of the meeting. If the inspectors shall
not be so appointed or if any of them shall fail to appear or act, the
chairman of the meeting may appoint inspectors. Each inspector, before
entering upon the discharge of his duties, shall, if required by the
chairman of the meeting, take and sign an oath to execute faithfully the
duties of inspector at the meeting with strict impartiality and according to
the best of his ability. The inspectors shall determine the number of
shares outstanding, the number of shares represented at the meeting, the
existence of a quorum and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result, and do those acts as
are proper to conduct the election or vote with fairness to all
stockholders. On request of the chairman of the meeting or any stockholder
entitled to vote at the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate
for the office of director shall act as inspector of an election of
directors. Inspectors need not be stockholders of the Corporation.
SECTION 12. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Except as
otherwise provided by statute or the Corporation's Charter, any action
required to be taken at any annual or special meeting of stockholders, or
any action that may be taken at any annual or special meeting of the
stockholders, may be taken without a meeting, without prior notice and
without a vote, if the following are filed with the records of stockholders'
meetings: (a) a unanimous written consent that sets forth the action and is
signed by each stockholder entitled to vote on the matter and (b) a written
waiver of any right to dissent signed by each stockholder entitled to notice
of the meeting but not entitled to vote at the meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. Except as otherwise provided in the
Corporation's Charter, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by law, by the
Corporation's Charter or by these By-Laws.
SECTION 2. NUMBER AND ELECTION OF DIRECTORS. The number of directors
fixed by the Corporation's Charter as the
<PAGE>
5
number which shall constitute the entire Board of Directors may be increased
or decreased by a resolution of the Board of Directors adopted by a majority
of the directors then in office; provided, however, that the number of
directors shall in no event be fewer than that required by law, nor more
than twelve (12). Each director elected shall hold office until his
successor shall have been elected and shall have qualified, or until his
death, or until he shall have resigned or have been removed as provided in
these By-Laws, or as otherwise provided by statute or the Corporation's
Charter. Any vacancy created by an increase in directors may be filled in
accordance with Section 5 of this Article III. No reduction in the number
of directors shall have the effect of removing any director from office
prior to the expiration of his term unless the director is specifically
removed pursuant to Section 4 of this Article III at the time of the
decrease. A director need not be a stockholder of the Corporation, a
citizen of the United States or a resident of the State of Maryland.
SECTION 3. RESIGNATION. A director of the Corporation may resign at
any time by giving written notice of his resignation to the Board of
Directors or the Chairman of the Board or the Vice-Chairman of the Board or
the President or the Secretary of the Corporation. Any resignation shall
take effect at the time specified in it or, should the time when it is to
become effective not be specified in it, immediately upon its receipt.
Acceptance of a resignation shall not be necessary to make it effective
unless the resignation states otherwise.
SECTION 4. REMOVAL OF DIRECTORS. At any meeting of the stockholders,
the stockholders may remove any director, either with or without cause, by
the affirmative vote of a majority of the votes entitled to be cast for the
election of directors and may elect a successor to fill any resulting
vacancy for the unexpired term of the removed director.
SECTION 5. VACANCIES. Subject to the provisions of the Investment
Company Act of 1940, as amended, any vacancies in the Board of Directors,
whether arising from death, resignation, removal or any other cause except
an increase in the number of directors, shall be filled by a vote of the
majority of the Board of Directors then in office even though that majority
is less than a quorum, provided that no vacancy or vacancies shall be filled
by action of the remaining directors if, after the filling of the vacancy or
vacancies, fewer than two-thirds of the directors then holding office shall
have been elected by the stockholders of the Corporation. A majority of the
entire Board may fill a vacancy that results from an increase in the number
of directors. In the event that at any time a vacancy exists in any office
of a director that may not be filled by the remaining directors, a special
meeting of the stockholders shall be held as promptly as possible and in any
event within sixty (60) days, for the purpose of filling the vacancy or
vacancies.
<PAGE>
6
SECTION 6. PLACE OF MEETINGS. Meetings of the Board may be held at
any place that the Board of Directors may from time to time determine or
that is specified in the notice of the meeting.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at the conclusion of each annual meeting of
stockholders and at any other time fixed by the Board of Directors. No
notice of regular meetings shall be required.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by two (2) or more directors of the Corporation or
by the Chairman of the Board, the Vice-Chairman of the Board or the
President.
SECTION 9. NOTICE OF SPECIAL MEETINGS. Notice of each special
meeting of the Board of Directors shall be given by the Secretary as
hereinafter provided. Each notice shall state the time and place of the
meeting and shall be delivered to each director, either personally or by
telephone or other standard form of telecommunication, at least twenty-four
(24) hours before the time at which the meeting is to be held, or by
first-class mail, postage prepaid, addressed to the director at his
residence or usual place of business, and mailed at least three (3) days
before the day on which the meeting is to be held.
SECTION 10. WAIVER OF NOTICE OF MEETINGS. Notice of any special
meeting need not be given to any director who shall, either before or after
the meeting, sign a written waiver of notice that is filed with the records
of the meeting or who shall attend the meeting.
SECTION 11. QUORUM AND VOTING. A majority of the total number of the
members of the entire Board of Directors shall be present in person at any
meeting of the Board so as to constitute a quorum for the transaction of
business at the meeting, provided that a quorum shall be no fewer than two
(2) directors. Except as otherwise expressly required by statute, the
Corporation's Charter, these By-Laws, the Investment Company Act of 1940, as
amended, or any other applicable statute, the act of a majority of the
directors present at any meeting at which a quorum is present shall be the
act of the Board. In the absence of a quorum at any meeting of the Board, a
majority of the directors present may adjourn the meeting to another time
and place until a quorum shall be present. Notice of the time and place of
any adjourned meeting shall be given to the directors who were not present
at the time of the adjournment and, unless the time and place were announced
at the meeting at which the adjournment was taken, to the other directors.
At any adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the meeting as originally
called.
<PAGE>
7
SECTION 12. ORGANIZATION. The Chairman of the Board shall preside at
each meeting of the Board. In the absence or inability of the Chairman of
the Board to act, the Vice-Chairman of the Board, or, in his absence or
inability to act, the President, or, in his absence or inability to act,
another director chosen by a majority of the directors present, shall act as
chairman of the meeting and preside at the meeting. The Secretary (or, in
his absence or inability to act, any person appointed by the chairman) shall
act as secretary of the meeting and keep the minutes of the meeting.
SECTION 13. COMMITTEES. The Board of Directors may designate one (1)
or more committees of the Board of Directors, including an executive
committee, each consisting of two (2) or more directors. To the extent
provided in the resolution, and permitted by law, the committee or
committees shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the Corporation. Any
committee or committees shall have the name or names determined from time to
time by resolution adopted by the Board of Directors. Each committee shall
keep regular minutes of its meetings and provide those minutes to the Board
of Directors when required. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a director to
act in the place of an absent member.
SECTION 14. WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING.
Subject to the provisions of the Investment Company Act of 1940, as amended,
any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee of the Board may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee.
SECTION 15. TELEPHONE CONFERENCE. Members of the Board of Directors
or any committee of the Board may participate in any Board or committee
meeting by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other at the same time. Participation by such means shall
constitute presence in person at the meeting, provided, however, that such
participation shall not constitute presence in person with respect to
matters which pursuant to the Investment Company Act of 1940, as amended,
and the rules thereunder require the approval of directors by vote cast in
person at a meeting.
SECTION 16. COMPENSATION. Each director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed
by the Corporation for all reasonable expenses incurred in traveling to and
from the place of a Board or committee meeting.
<PAGE>
8
ARTICLE IV
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the
Corporation shall be a Chairman of the Board of Directors, a Vice-Chairman
of the Board of Directors, a President, a Secretary and a Treasurer, each of
whom shall be elected by the Board of Directors. The Board of Directors may
elect or appoint one (1) or more Vice Presidents and may also appoint any
other officers, assistant officers, agents and employees it deems necessary
or proper. Any two (2) or more offices may be held by the same person,
except the offices of President and Vice President, but no officer shall
execute, acknowledge or verify in more than one (1) capacity any instrument
required by law to be executed, acknowledged or verified in more than one
capacity. All officers shall hold office at the pleasure of the Board of
Directors, and any officer may be removed from office at any time with or
without cause by the Board of Directors whenever, in the judgment of the
Board of Directors, the best interests of the Corporation will be served
thereby. The Board of Directors may from time to time elect such officers
(including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries) and may appoint, or
delegate to the Chairman of the Board, the Vice-Chairman of the Board or the
President the power to appoint, such agents as may be necessary or desirable
for the business of the Corporation. Such other officers and agents shall
have such duties and shall hold their offices for such terms as may be
prescribed by the Board or by the appointing authority.
SECTION 2. RESIGNATIONS. Any officer of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the Board, the Vice-Chairman of the Board, the
President or the Secretary. Any resignation shall take effect at the time
specified therein or, if the time when it shall become effective is not
specified therein, immediately upon its receipt. The acceptance of a
resignation shall not be necessary to make it effective unless otherwise
stated in the resignation.
SECTION 3. REMOVAL OF OFFICER, AGENT OR EMPLOYEE. Any officer, agent
or employee of the Corporation may be removed by the Board of Directors with
or without cause at any time, and the Board may delegate the power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Removal shall be without prejudice to the person's contract
rights, if any, but the appointment of any person as an officer, agent or
employee of the Corporation shall not of itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office, whether arising from
death, resignation, removal or any other
<PAGE>
9
cause, may be filled for the unexpired portion of the term of the office
that shall be vacant, in the manner prescribed in these By-Laws for the
regular election or appointment to the office.
SECTION 5. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.
SECTION 6. BONDS OR OTHER SECURITY. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with
any surety or sureties as the Board may require.
SECTION 7. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors shall be the chief executive officer of the Corporation
and shall have, subject to the control of the Board of Directors, general
and active management and supervision of the business, affairs, and property
of the Corporation and its several officers and may employ and discharge
employees and agents of the Corporation, except those elected or appointed
by the Board, and he may delegate these powers. The Chairman shall preside
at all meetings of the stockholders and of the Board of Directors. He shall
execute on behalf of the Corporation, and may affix the seal or cause the
seal to be affixed to, all instruments requiring such execution except to
the extent that signing and execution thereof shall be required to be signed
and executed by the President of the Corporation or shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation.
SECTION 8. VICE-CHAIRMAN OF THE BOARD OF THE DIRECTORS. The
Vice-Chairman of the Board of Directors shall, in the absence of the
Chairman of the Board, preside at all meetings of the stockholders and
directors. He shall have and exercise all the powers and authority of the
Chairman of the Board in the event of the Chairman's absence or inability to
act or during a vacancy in the office of Chairman of the Board. He shall
also have such other duties and responsibilities as shall be assigned to him
by the Chairman or the Board of Directors.
SECTION 9. PRESIDENT. The President shall, in the absence of the
Chairman and Vice-Chairman of the Board of Directors, preside at all
meetings of the stockholders and directors. He shall have and exercise all
the powers and authority of the Chairman of the Board in the event of the
Chairman's and Vice-Chairman's absence or inability to act or during a
vacancy in the offices of Chairman and Vice-Chairman of the Board. He shall
sign and execute all instruments required to be signed and executed by the
President of the Corporation. He shall also have such other duties and
responsibilities as shall be assigned to him by the Chairman or the Board of
Directors.
<PAGE>
10
SECTION 10. VICE PRESIDENT. Each Vice President shall have the
powers and perform the duties that the Board of Directors or the Chairman of
the Board may from time to time prescribe.
SECTION 11. TREASURER. Subject to the provisions of any contract
that may be entered into with any custodian pursuant to authority granted by
the Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody
of the Corporation's funds and securities; he shall have full authority to
receive and give receipts for all money due and payable to the Corporation,
and to endorse checks, drafts, and warrants, in its name and on its behalf
and to give full discharge for the same; he shall deposit all funds of the
Corporation, except those that may be required for current use, in such
banks or other places of deposit as the Board of Directors may from time to
time designate; and, in general, he shall perform all duties incident to the
office of Treasurer and such other duties as may from time to time be
assigned to him by the Board of Directors or the Chairman of the Board.
SECTION 12. ASSISTANT TREASURERS. The Assistant Treasurers in the
order of their seniority, unless otherwise determined by the Chairman of the
Board or the Board of Directors, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer.
They shall perform such other duties and have such other powers as the
Chairman or the Board of Directors may from time to time prescribe.
SECTION 13. SECRETARY. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
<PAGE>
11
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to
him by the Board of Directors or the Chairman of the Board.
SECTION 14. ASSISTANT SECRETARIES. The Assistant Secretaries in the
order of their seniority, unless otherwise determined by the Chairman of the
Board or the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary.
They shall perform such other duties and have such other powers as the
Chairman of the Board or the Board of Directors may from time to time
prescribe.
SECTION 15. DELEGATION OF DUTIES. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or
upon any director.
ARTICLE V
STOCK
SECTION 1. STOCK CERTIFICATES. Unless otherwise provided by the
Board of Directors and permitted by law, each holder of stock of the
Corporation shall be entitled upon specific written request to such person
as may be designated by the Corporation to have a certificate or
certificates, in a form approved by the Board, representing the number of
shares of stock of the Corporation owned by him; provided, however, that
certificates for fractional shares will not be delivered in any case. The
certificates representing shares of stock shall be signed by or in the name
of the Corporation by the Chairman of the Board, the President or a Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer and sealed with the seal of the Corporation. Any or
all of the signatures or the seal on the certificate may be facsimiles. In
case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent or registrar before the certificate is
issued, it may be issued by the Corporation with the same effect as if the
officer, transfer agent or registrar was still in office at the date of
issue.
SECTION 2. STOCK LEDGER. There shall be maintained a stock ledger
containing the name and address of each stockholder and the number of shares
of stock of each class the shareholder holds. The stock ledger may be in
written form or any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate
of the stock
<PAGE>
12
ledger shall be kept at the principal office of the Corporation or at any
other office or agency specified by the Board of Directors.
SECTION 3. TRANSFERS OF SHARES. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by
the registered holder of the shares, or by his attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary or with a
transfer agent or transfer clerk, and on surrender of the certificate or
certificates, if issued, for the shares properly endorsed or accompanied by
a duly executed stock transfer power and the payment of all taxes thereon.
Except as otherwise provided by law, the Corporation shall be entitled to
recognize the exclusive right of a person in whose name any share or shares
stand on the record of stockholders as the owner of the share or shares for
all purposes, including, without limitation, the rights to receive dividends
or other distributions and to vote as the owner, and the Corporation shall
not be bound to recognize any equitable or legal claim to or interest in any
such share or shares on the part of any other person.
SECTION 4. REGULATIONS. The Board of Directors may authorize the
issuance of uncertificated securities if permitted by law. If stock
certificates are issued, the Board of Directors may make any additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates
for shares of stock of the Corporation. The Board may appoint, or authorize
any officer or officers to appoint, one or more transfer agents or one or
more transfer clerks and one or more registrars and may require all
certificates for shares of stock to bear the signature or signatures of any
of them.
SECTION 5. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of
any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of its loss, destruction or mutilation
and the Corporation may issue a new certificate of stock in the place of any
certificate issued by it that has been alleged to have been lost or
destroyed or that shall have been mutilated. The Board may, in its
discretion, require the owner (or his legal representative) of a lost,
destroyed or mutilated certificate to give to the Corporation a bond in a
sum, limited or unlimited, and in a form and with any surety or sureties, as
the Board in its absolute discretion shall determine, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss or destruction of any such certificate, or issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Board of
Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under the laws of the
State of Maryland.
<PAGE>
13
SECTION 6. FIXING OF RECORD DATE FOR DIVIDENDS, DISTRIBUTIONS, ETC.
The Board may fix, in advance, a date not more than ninety (90) days
preceding the date fixed for the payment of any dividend or the making of
any distribution or the allotment of rights to subscribe for securities of
the Corporation, or for the delivery of evidences of rights or evidences of
interests arising out of any change, conversion or exchange of common stock
or other securities, as the record date for the determination of the
stockholders entitled to receive any such dividend, distribution, allotment,
rights or interests, and in such case only the stockholders of record at the
time so fixed shall be entitled to receive such dividend, distribution,
allotment, rights or interests.
SECTION 7. INFORMATION TO STOCKHOLDERS AND OTHERS. Any stockholder
of the Corporation or his agent may inspect and copy during the
Corporation's usual business hours the Corporation's By-Laws, minutes of the
proceedings of its stockholders, annual statements of its affairs and voting
trust agreements on file at its principal office.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any person who
was or is a party or is threatened to be made a party in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is a
current or former director or officer of the Corporation, or is or was
serving while a director or officer of the Corporation at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust,
enterprise or employee benefit plan, shall be indemnified by the Corporation
against judgments, penalties, fines, excise taxes, settlements and
reasonable expenses (including attorneys' fees) actually incurred by such
person in connection with such action, suit or proceeding to the full extent
permissible under the Maryland General Corporation Law, the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, as
those statutes are now or hereafter in force, except that such indemnity
shall not protect any such person against any liability to the Corporation
or any stockholder thereof to which such person would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office ("disabling
conduct").
SECTION 2. ADVANCES. Any current or former director or officer of
the Corporation claiming indemnification within the scope of this Article VI
shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by
<PAGE>
14
him in connection with proceedings to which he is a party in the manner and
to the full extent permissible under the Maryland General Corporation Law,
the Securities Act of 1933, as amended, and the Investment Company Act of
1940, as amended, as those statutes are now or hereafter in force; provided,
however, that the person seeking indemnification shall provide to the
Corporation a written affirmation of his good faith belief that the standard
of conduct necessary for indemnification by the Corporation has been met and
a written undertaking to repay any such advance, if it should ultimately be
determined that the standard of conduct has not been met, and provided
further that at least one of the following additional conditions is met:
(a) the person seeking indemnification shall provide a security in form and
amount acceptable to the Corporation for his undertaking; (b) the
Corporation is insured against losses arising by reason of the advance; or
(c) a majority of a quorum of directors of the Corporation who are neither
"interested persons" as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall determine, based on a review of facts readily
available to the Corporation at the time the advance is proposed to be made,
that there is reason to believe that the person seeking indemnification will
ultimately be found to be entitled to indemnification.
SECTION 3. PROCEDURE. At the request of any current or former
director or officer, or any employee or agent whom the Corporation proposes
to indemnify, the Board of Directors shall determine, or cause to be
determined, in a manner consistent with the Maryland General Corporation
Law, the Securities Act of 1933, as amended, and the Investment Company Act
of 1940, as amended, as those statutes are now or hereafter in force,
whether the standards required by this Article VI have been met; provided,
however, that indemnification shall be made only following: (a) a final
decision on the merits by a court or other body before whom the proceeding
was brought that the person to be indemnified was not liable by reason of
disabling conduct or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person to be
indemnified was not liable by reason of disabling conduct, by (i) the vote
of a majority of a quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
SECTION 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and
agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, in accordance with the procedures set forth in this Article VI to
the extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, as those statutes are now or hereafter in force, and to such
further extent, consistent with the foregoing, as may be provided by action
of the Board of Directors or by contract.
<PAGE>
15
SECTION 5. OTHER RIGHTS. The Board of Directors may make further
provision consistent with law for indemnification and advance of expenses to
directors, officers, employees and agents by resolution, agreement or
otherwise. The indemnification provided by this Article VI shall not be
deemed exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking such indemnification may be entitled under
any insurance or other agreement, vote of stockholders or disinterested
directors or otherwise, both as to action by a director or officer of the
Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue
as to a person who has ceased to be a director or officer and shall inure to
the benefit of the heirs, executors and administrators of such a person.
SECTION 6. INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or who, while a
director, officer, employee or agent of the Corporation, is or was serving
at the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust, enterprise or employee benefit plan, against any liability
asserted against and incurred by him in any such capacity, or arising out of
his status as such, provided that no insurance may be obtained by the
Corporation for liabilities against which it would not have the power to
indemnify him under this Article VI or applicable law.
ARTICLE VII
SEAL
The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation, the year of its incorporation, the words
"Corporate Seal" and "Maryland" and any emblem or device approved by the
Board of Directors. The seal may be used by causing it or a facsimile to be
impressed or affixed or in any other manner reproduced, or by placing the
word "(seal)" adjacent to the signature of the authorized officer of the
Corporation.
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended or repealed by the affirmative vote of a
majority of the entire Board of Directors at any regular or special meeting
of the Board of Directors, subject to the requirements of the Investment
Company Act of 1940, as amended, provided, however, that no amendment of
these
<PAGE>
16
By-Laws shall affect any right of any person under Article VI hereof based
on any event, omission or proceeding prior to the amendment.
<PAGE>
NUMBER [Logo] SHARES
COMSTOCK PARTNERS FUNDS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
COMSTOCK PARTNERS CAPITAL VALUE FUND
CLASS __ COMMON STOCK CUSIP_____________
Par Value $.001 SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMSTOCK PARTNERS
CAPITAL VALUE FUND CLASS __ COMMON STOCK OF
COMSTOCK PARTNERS FUNDS, INC. transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney upon surrender of
this Certificate properly endorsed. This Certificate and the shares of Comstock
Partners Capital Value Fund Class __ Common Stock represented hereby are issued
under and shall be subject to all of the provisions of the Charter and By-Laws
of the Corporation, each as from time to time amended (copies of which are on
file with the Transfer Agent), to all of which the holder by acceptance hereof
assents. This Certificate is not valid until countersigned by the Transfer
Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
[Seal]
Treasurer Chairman of the Board of Directors
COUNTERSIGNED
DREYFUS TRANSFER, INC.
A Subsidiary of The Dreyfus Corporation
TRANSFER AGENT
Authorized Signature
<PAGE>
AMENDED INVESTMENT ADVISORY AGREEMENT
Agreement, dated as of August 1, 1991, amended as of _______ __, 1996 by
and between COMSTOCK PARTNERS FUNDS, INC., a Maryland corporation (the
"Company"), on behalf of COMSTOCK PARTNERS STRATEGY FUND (the "Fund"), and
COMSTOCK PARTNERS, INC., a Delaware corporation (the "Adviser").
The Company, on behalf of the Fund, and the Adviser hereby agree as
follows:
1. INVESTMENT DESCRIPTION. The Company is an open-end investment
company which, as of the date hereof, consists of two series: the Fund and the
Comstock Partners Capital Value Fund. The Company desires to employ the Fund's
capital by investing and reinvesting in investments of the kind, and in
accordance with the limitations, specified in the Company's Articles of
Incorporation, as amended from time to time (the "Articles of Incorporation"),
and in the Fund's Prospectus and Statement of Additional Information contained
in the Company's Registration Statement on Form N-1A, as in effect from time to
time (the "Registration Statement"), filed by the Company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the Securities Act of
1933, as amended, and in such manner and to such extant as may from time to time
be approved by the Company's Board of Directors. Copies of the Articles of
Incorporation and the Registration Statement currently in effect have been
submitted to the Adviser. Any amendments to these documents shall be furnished
to the Adviser promptly.
2. APPOINTMENT. The Company, on behalf of the Fund, desires to
employ and hereby appoints the Adviser to act as the Fund's investment adviser.
The Adviser accepts the appointment and agrees to furnish the services set forth
below for the compensation set forth below.
3. DUTIES OF THE ADVISER. Subject to the supervision and direction
of the Company's Board of Directors, the Adviser shall (a) act in strict
conformity with the Articles of Incorporation, the 1940 Act and the Investment
Advisers Act of 1940, as amended, (b) manage the Fund's assets in accordance
with the Fund's investment objective and policies as stated in the Registration
Statement and in accordance with the provisions of the Internal Revenue Code of
1986, as amended, relating to regulated investment companies, (c) make all
investment decisions for the Fund and (d) place purchase and sale orders on
behalf of the Fund. In rendering such services, the Adviser will provide
investment research and supervision of the Fund's investments and conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. In addition, the Adviser will furnish the
Fund with whatever statistical information the Fund may reasonably request with
respect to the securities that the Fund may hold or contemplate purchasing.
<PAGE>
2
4. EXPENSES PAYABLE BY THE FUND. Except as otherwise provided in
Paragraphs 3 and 5 hereof, the Company, on behalf of the Fund, will pay all
expenses incurred in connection with its operation, including, among other
things, expenses for legal, accounting and auditing services, taxes, costs of
printing and distributing shareholder reports, proxy materials, prospectuses and
stock certificates, charges of the custodian, the registrar, the transfer agent,
the dividend disbursing agent and the dividend reinvestment plan agent,
Securities and Exchange Commission fees, listing fees, fees and expenses of non-
interested directors, salaries of shareholder relations personnel, insurance,
interest, brokerage costs, litigation and other extraordinary or non-recurring
expenses.
5. EXPENSES PAYABLE BY THE ADVISER. The Adviser shall, at its
expense, (a) provide the Fund with office space, equipment and personnel
reasonably necessary for the operation of the Fund, (b) employ or associate
with itself such persons as it believes appropriate to assist it in performing
its obligations under this Agreement and (c) provide the Company with persons
satisfactory to the Company's Board of Directors to serve as directors, officers
and employees of the Company or the Fund, including a Chairman, Vice Chairman,
President, Secretary and Treasurer. The Adviser shall also pay all expenses
which it may incur in performing its duties under Paragraph 3 hereof.
6. COMPENSATION OF THE ADVISER. As compensation for the services
provided by the Adviser pursuant to this Agreement, the Company, on behalf of
the Fund, shall pay to the Adviser on the first business day of each calendar
month a fee for the previous month at an annual rate equal to .60% of the
average daily net assets of the Fund. For the purpose of determining fees
payable to the Adviser, the value of the Fund's net assets shall be computed at
the times and in the manner specified in the Registration Statement. Upon
termination of this Agreement before the end of a month, the fee for such part
of that month shall be pro-rated according to the proportion that such period
bears to the full monthly period and shall be payable within seven (7) days
after the date of termination of this Agreement.
7. EXPENSE LIMITATIONS. If the aggregate expenses incurred by, or
allocated to, the Fund in any fiscal year shall exceed the expense limitations
applicable to the Fund imposed by state securities laws or regulation
thereunder, as such limitations may be raised or lowered from time to time, the
Adviser and Princeton Administrators, Inc., the Fund's Administrator, shall
reimburse the Fund for such excess in proportion to the respective fees payable
by the Fund to the Adviser and the Administrator. The Adviser's and the
Administrator's reimbursement obligation will be limited to the amount of fees
they receive from the Fund during the period in which such expense limitations
were exceeded, unless otherwise required by applicable laws or regulations.
With respect to
<PAGE>
3
portions of a fiscal year in which this contract shall be in effect, the
foregoing limitations shall be prorated according to the proportion which that
portion of the fiscal year bears to the full fiscal year. Any payments required
to be made by this Paragraph 7 shall be made once a year promptly after the end
of the Fund's fiscal year.
8. BROKERAGE. In executing transactions for the Fund and selecting
brokers or dealers, the Adviser will use its best efforts to seek the best
combination of net price and execution for the Fund. In assessing the best
combination of net price and execution for any transaction on behalf of the
Fund, the Adviser will consider all factors it deems relevant including, but not
limited to, the breadth of the market in the security, the size of the
transaction, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission (for
the specific transaction and on a continuing basis). In selecting brokers to
execute a particular transaction and in evaluating the best combination of net
price and execution available, the Adviser may consider "brokerage and research
services" (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended), statistical quotations, specifically the
quotations necessary to determine the Fund's net asset value, and other
information provided to the Fund and/or to the Adviser (or their affiliates).
The Adviser is authorized, to the fullest extent now or hereafter permitted by
law, to cause the Fund to pay to a broker who provides such brokerage and
research services a commission for executing a portfolio transaction in excess
of the amount of commission another broker would have charged for effecting that
transaction, if the Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of that particular transaction or in
terms of all other accounts over which the Adviser exercises investment
discretion. It is understood that certain of the services provided by such
broker may benefit one or more other accounts for which investment discretion is
exercised by the Adviser.
9. INFORMATION PROVIDED TO THE COMPANY. The Adviser will keep
the Company informed of developments materially affecting the Fund, and will,
on its own initiative, furnish the Company from time to time with whatever
information the Adviser believes is appropriate for this purpose.
10. LIMITATIONS ON THE EMPLOYMENT OF THE ADVISER. The services of
the Adviser to the Company on behalf of the Fund shall not be deemed exclusive,
and the Adviser may engage in any other business or render similar or different
services to others so long as its services to the Company on behalf of the Fund
hereunder are not impaired thereby, and provided that the Adviser shall provide
fair and equitable treatment to the Fund in the selection of portfolio
investments and the allocation of investment opportunities as between the Fund
and other investment
<PAGE>
4
management clients of the Adviser. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the Adviser to engage
in any other business or to devote his time and attention in part to any other
business, whether of a similar or dissimilar nature.
11. STANDARD OF CARE; PROTECTION OF THE ADVISER. The Advisor shall
exercise its best judgment in rendering the services described in paragraphs 3
and 7 above. The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company (including the Fund) in
connection with the matters to which this Agreement relates, provided that
nothing in this paragraph shall be deemed to protect or purport to protect the
Adviser against any liability to the Company (including the Fund) or to its
shareholders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Adviser's reckless disregard of
its obligations and duties under this Agreement.
12. EFFECTIVENESS, DURATION AND TERMINATION OF AGREEMENT. This
Agreement shall remain in effect until September 20, 1991 and thereafter shall
continue automatically for successive annual periods ending on September 30 of
each year, provided such continuance is specifically approved at least annually
by (a) the vote of the holders of a "majority" (as defined in the 1940 Act) of
the Fund's outstanding voting securities or by the Board of Directors of the
Company and (b) the vote of a majority of the Company's directors who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such party, cast in person at a meeting called for the purpose of voting
on such approval. This Agreement may be terminated at any time, without the
payment of any penalty, on sixty (60) days written notice by the vote of the
holders of a majority of the outstanding voting securities of the Fund, by the
vote of the Company's Board of Directors or by the Adviser. This Agreement will
also terminate automatically in the event of its assignment (as defined in the
1940 Act and the rules thereunder).
13. NAME. The Company (including the Fund) may, so long as this
Agreement remains in effect, use "Comstock" as part of its name. The Adviser
may, upon termination of this Agreement, require the Company (including the
Fund) to refrain from using the name "Comstock" in any form or combination in
its name or in its business, and the Company (including the Fund) shall, as soon
as practicable following its receipt of any such request from the Adviser, so
refrain from using such name.
14. NOTICES. Any notice under this Agreement shall be given in
writing, delivered against receipt or mailed, first class certified or
registered mail, return receipt requested, postage prepaid, addressed to the
other party at its then principal office.
<PAGE>
5
15. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York applicable to contracts made and wholly to be performed in
such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed the day and year first above written.
COMSTOCK PARTNERS FUNDS, INC.,
on behalf of
COMSTOCK PARTNERS STRATEGY FUND
By:
----------------------------
Name:
Title:
COMSTOCK PARTNERS, INC.
By:
---------------------------
Name:
Title:
<PAGE>
AMENDED SUB-INVESTMENT ADVISORY AGREEMENT
COMSTOCK PARTNERS, INC.
10 Exchange Place
Suite 2010
Jersey City, New Jersey 07302-3913
August 24, 1994,
as amended
________ ___, 1996
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Dear Sirs:
Comstock Partners, Inc., a Delaware corporation ("Comstock"), serves
as the investment adviser to Comstock Partners Strategy Fund (the "Fund"), a
series of Comstock Partners Funds, Inc., an open-end registered investment
company (the "Company"), pursuant to an amended investment advisory agreement
dated as of August 1, 1991 and amended as of ___________ ___, 1996 (as amended,
the "Comstock Advisory Agreement"). Comstock herewith confirms its Agreement
with you ("Dreyfus") as follows:
The Company desires to employ the Fund's capital by investing and
reinvesting the same in investments of the type, and in accordance with the
limitations, specified in the Fund's Prospectus and Statement of Additional
Information contained in the Company's Registration Statement on Form N-1A from
time to time in effect, copies of which have been or will be submitted to
Dreyfus, and in such manner and to such extent as may from time to time be
approved by the Company's Board of Directors. Comstock intends to employ
Dreyfus as sub-investment adviser with regard to providing investment advice to
the Fund.
1. Sub-Investment Adviser Services
Dreyfus will manage the short term cash and cash equivalent
investments of the Fund and will provide investment research, statistical
information and advice regarding the Fund's portfolio. Dreyfus will furnish to
Comstock or the Fund such general advice regarding economic factors and trends,
including statistical and other factual information, and such statistical
information with respect to the investments which the Fund may hold or
contemplate purchasing, as Comstock or the Fund may reasonably request.
Comstock and the Fund wish to be informed of important developments materially
affecting the Fund's portfolio and shall expect Dreyfus, on its own initiative,
to furnish to
<PAGE>
Comstock and the Fund from time to time such information as Dreyfus may believe
appropriate for this purpose. Dreyfus shall exercise its best judgment in
rendering these services.
Comstock and the Company, on behalf of the Fund, understand that
Dreyfus now acts and will continue to act as investment adviser or sub-
investment adviser to various investment companies and fiduciary or other
managed accounts, and Comstock and the Company have no objection to Dreyfus' so
acting. In addition, it is understood that the persons employed by Dreyfus to
assist in the performance of its duties hereunder will not devote their full
time to such service and nothing herein contained shall be deemed to limit or
restrict the right of Dreyfus or any affiliate of Dreyfus to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
2. Fees and Expenses
In consideration of the sub-investment advisory services rendered
pursuant to this Agreement, Comstock will pay Dreyfus a monthly fee at an annual
rate of .15% of the value of the Fund's average daily net assets.
Each such payment shall be made promptly after payment to Comstock of
its monthly fee from the Company, on behalf of the Fund, and, if Comstock's then
agreed-upon fee is not paid in full when due for any reason, then Comstock may
withhold from the fees payable to Dreyfus for the same period, an amount equal
to the same proportion of Dreyfus' fee that the amount withheld from Comstock
bears to Comstock's fee, with restitution to Dreyfus if, as and when the amount
withheld from Comstock's fee is paid to Comstock by the Company on behalf of the
Fund.
In the event that the agreed amount or rate of the investment advisory
fee that Comstock is entitled to receive from the Company on behalf of the Fund
is reduced for any reason based upon the services agreed to be provided to the
Fund pursuant to the Comstock Advisory Agreement or as a result of the expenses
payable by the Company on behalf of the Fund exceeding any applicable
limitations imposed by state law, then the monthly fee for Dreyfus'
sub-investment advisory services described in paragraph 2 hereof, if and when
payable, shall be reduced by one-third of the percentage that Comstock's
investment advisory fee from the Company on behalf of the Fund is reduced.
The fee for the period from the date of this Agreement to the end of
such month shall be pro-rated according to the proportion which such period
bears to the full monthly period, and upon any termination of this Agreement
other than at the end of any month, the fee for the month during which
termination shall occur shall be pro-rated according to the proportion which the
period thereof prior to termination bears to the full monthly
<PAGE>
period and shall be payable within seven (7) days after the date of termination
of this Agreement.
For the purpose of determining fees payable to Dreyfus, the value of
the Fund's net assets shall be computed in the same manner as computed for the
purpose of determining Comstock's fee from the Company, on behalf of the Fund.
Dreyfus will from time to time employ or associate with itself such
person or persons as Dreyfus may believe to be particularly fitted to assist it
in the performance of this Agreement. Such person or persons may be officers
and employees who are employed by both Dreyfus and the Company. The
compensation of such person or persons shall be paid by Dreyfus and no
obligation may be incurred on behalf of the Company in such respect.
Dreyfus will bear all expenses in connection with the performance of
its services under this Agreement.
The Company, on behalf of the Fund, and Comstock shall bear such
expenses as are described in the Comstock Advisory Agreement.
3. Limitation of Liability
Dreyfus shall not be liable for any error of judgment or mistake of
law or for any loss suffered by Comstock or the Company (including the Fund) in
connection with the matters to which this Agreement relates, except for a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though also an
officer, director, employee or agent of Dreyfus who may be or become an officer,
director, employee or agent of the Company (including the Fund) shall be deemed,
when rendering services to the Company (including the Fund) or acting on any
business of the Company (including the Fund), to be rendering such services to
or acting solely for the Company (including the Fund) and not as an officer,
director, employee or agent or one under the control or direction of Dreyfus
even though paid by it.
4. Term
This Agreement shall continue until September 30, 1994 and thereafter
shall continue automatically for successive annual periods ending on September
30 of each year, provided such continuance is specifically approved at least
annually by (i) the Company's Board of Directors or (ii) by a vote of a majority
(as defined in the Investment Company Act of 1940) of the Fund's outstanding
voting securities, provided that in either such event the continuance is also
approved by a majority of the noninterested Directors of the Company (as defined
in said Act) by
<PAGE>
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable without penalty, on not less than 60
days' notice, by either party hereto, by the Company's Board of Directors or by
vote of holders of a majority of the Fund's shares and this Agreement will also
terminate automatically in the event of its assignment (as defined in said Act).
5. Successors and Assigns
Successors and assigns of Dreyfus and Comstock will be bound by this
Agreement. For this purpose, any investment adviser registered under the
Investment Advisers Act of 1940 controlled by Stanley Salvigsen and Charles
Minter, as a group, as the term "control" is used in the Investment Company Act
of 1940, will be deemed to be a successor to Comstock.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
COMSTOCK PARTNERS, INC.
By:_________________________
Accepted:
THE DREYFUS CORPORATION
By: _________________________
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Agreement, dated as of ___________ ___, 1996 by and between COMSTOCK
PARTNERS FUNDS, INC., a Maryland corporation (the "Company"), on behalf of
COMSTOCK PARTNERS CAPITAL VALUE FUND (the "Fund"), and COMSTOCK PARTNERS, INC.,
a Delaware corporation (the "Adviser").
The Fund and the Adviser hereby agree as follows:
1. INVESTMENT DESCRIPTION. The Company is an open-end investment
company which, as of the date hereof, consists of two series: the Comstock
Partners Strategy Fund and the Fund. The Company desires to employ the Fund's
capital by investing and reinvesting in investments of the kind, and in
accordance with the limitations, specified in the Company's Articles of
Incorporation, as amended from time to time (the "Articles of Incorporation"),
and in the Fund's Prospectus and Statement of Additional Information contained
in the Company's Registration Statement on Form N-1A, as in effect from time to
time (the "Registration Statement"), filed by the Company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the Securities Act of
1933, as amended, and in such manner and to such extent as may from time to time
be approved by the Company's Board of Directors. Copies of the Articles of
Incorporation and the Registration Statement currently in effect have been
submitted to the Adviser. Any amendments to these documents shall be furnished
to the Adviser promptly.
2. APPOINTMENT. The Company, on behalf of the Fund, desires to
employ and hereby appoints the Adviser to act as the Fund's investment adviser.
The Adviser accepts the appointment and agrees to furnish the services set forth
below for the compensation set forth below.
3. DUTIES OF THE ADVISER. Subject to the supervision and direction
of the Company's Board of Directors, the Adviser shall (a) act in strict
conformity with the Articles of Incorporation, the 1940 Act and the Investment
Advisers Act of 1940, as amended, (b) manage the Fund's assets in accordance
with the Fund's investment objective and policies as stated in the Registration
Statement and in accordance with the provisions of the Internal Revenue Code of
1986, as amended, relating to regulated investment companies, (c) make all
investment decisions for the Fund and (d) place purchase and sale orders on
behalf of the Fund. In rendering such services, the Adviser will provide
investment research and supervision of the Fund's investments and conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. In addition, the Adviser will furnish the
Fund with whatever statistical information the Fund may reasonably request with
respect to the securities that the Fund may hold or contemplate purchasing.
<PAGE>
4. EXPENSES PAYABLE BY THE FUND. Except as otherwise provided in
Paragraphs 3 and 5 hereof, the Company, on behalf of the Fund, will pay all
expenses incurred in connection with its operation, including, among other
things, organizational costs, taxes, interest, loan commitment fees, interest
and distributions paid on securities sold short, brokerage fees and commissions,
if any, Securities and Exchange Commission fees and Blue Sky qualification fees,
fees and expenses of non-interested directors, officers' and employees' fees
(other than officers or employees of The Dreyfus Corporation, Comstock Partners
or any affiliate thereof), investment and sub-investment 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 Company's or the Fund's existence, payments to service
organizations, costs of independent pricing services, costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders, costs of shareholder
reports and meetings and any extraordinary expenses.
5. EXPENSES PAYABLE BY THE ADVISER. The Adviser shall, at its
expense, (a) provide the Fund with office space, equipment and personnel
reasonably necessary for the operation of the Fund, (b) employ or associate
itself with such persons as it believes appropriate to assist it in performing
its obligations under this Agreement and (c) provide the Company with persons
satisfactory to the Company's Board of Directors to serve as directors, officers
and employees of the Company or the Fund, including a Chairman, Vice Chairman,
President, Secretary and Treasurer. The Adviser shall also pay all expenses
which it may incur in performing its duties under Paragraph 3 hereof.
6. COMPENSATION OF THE ADVISER. As compensation for the services
provided by the Adviser pursuant to this Agreement, the Company, on behalf of
the Fund, shall pay to the Adviser on the first business day of each calendar
month a fee for the previous month at the following annual rate: .40 of 1% of
the first $300 million of the Fund's average daily net assets, .45 of 1% of the
Fund's average daily net assets between $300 million and $750 million, .50 of 1%
of the Fund's average daily net assets between $750 million and $1 billion and
.55 of 1% of the Fund's average daily net assets in excess of $1 billion. For
the purpose of determining fees payable to the Adviser, the value of the Fund's
net assets shall be computed at the times and in the manner specified in the
Registration Statement. Upon termination of this Agreement before the end of a
month, the fee for such part of that month shall be pro-rated according to the
proportion that such period bears to the full monthly period and shall be
payable within seven (7) days after the date of termination of this Agreement.
7. EXPENSE LIMITATIONS. If the aggregate expenses incurred by, or
allocated to, the Fund in any fiscal year shall
<PAGE>
exceed the expense limitations applicable to the Fund imposed by state
securities laws or regulations thereunder, as such limitations may be raised or
lowered from time to time, the Company, on behalf of the Fund, may deduct from
the fees payable to the Adviser, or the Adviser shall bear, such excess expense;
provided, that, the Adviser's obligation hereunder will be limited to the amount
of fees it receives from the Company, on behalf of the Fund, during the period
in which such expense limitations were exceeded, unless otherwise required by
applicable laws or regulations. With respect to portions of a fiscal year in
which this contract shall be in effect, the foregoing limitations shall be
prorated according to the proportion which that portion of the fiscal year bears
to the full fiscal year.
8. BROKERAGE. In executing transactions for the Fund and selecting
brokers or dealers, the Adviser will use its best efforts to seek the best
combination of net price and execution for the Fund. In assessing the best
combination of net price and execution for any transaction on behalf of the
Fund, the Adviser will consider all factors it deems relevant including, but not
limited to, the breadth of the market in the security, the size of the
transaction, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission (for
the specific transaction and on a continuing basis). In selecting brokers to
execute a particular transaction and in evaluating the best combination of net
price and execution available, the Adviser may consider "brokerage and research
services" (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended), statistical quotations, specifically the
quotations necessary to determine the Fund's net asset value, and other
information provided to the Fund and/or to the Adviser (or their affiliates).
The Adviser is authorized, to the fullest extent now or hereafter permitted by
law, to cause the Fund to pay to a broker who provides such brokerage and
research services a commission for executing a portfolio transaction in excess
of the amount of commission another broker would have charged for effecting that
transaction, if the Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of that particular transaction or in
terms of all other accounts over which the Adviser exercises investment
discretion. It is understood that certain of the services provided by such
broker may benefit one or more other accounts for which investment discretion is
exercised by the Adviser.
9. INFORMATION PROVIDED TO THE COMPANY. The Adviser will keep the
Company informed of developments materially affecting the Company, and will, on
its own initiative, furnish the Fund from time to time with whatever information
the Adviser believes is appropriate for this purpose.
<PAGE>
10. LIMITATIONS ON THE EMPLOYMENT OF THE ADVISER. The services of
the Adviser to the Company, on behalf of the Fund, shall not be deemed
exclusive, and the Adviser may engage in any other business or render similar or
different services to others so long as its services to the Company, on behalf
of the Fund, hereunder are not impaired thereby, and provided that the Adviser
shall provide fair and equitable treatment to the Fund in the selection of
portfolio investments and the allocation of investment opportunities as between
the Fund and other investment management clients of the Adviser. Nothing in
this Agreement shall limit or restrict the right of any director, officer or
employee of the Adviser to engage in any other business or to devote his time
and attention in part to any other business, whether of a similar or dissimilar
nature.
11. STANDARD OF CARE; PROTECTION OF THE ADVISER. The Adviser shall
exercise its best judgment in rendering the services described in paragraphs 3,
8 and 9 above. The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this paragraph
shall be deemed to protect or purport to protect the Adviser against any
liability to the Company (including the Fund) or to its shareholders to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or by
reason of the Adviser's reckless disregard of its obligations and duties under
this Agreement.
12. EFFECTIVENESS, DURATION AND TERMINATION OF AGREEMENT. This
Agreement shall remain in effect until __________ ___, 199__ and thereafter
shall continue automatically for successive annual periods ending on
____________ of each year, provided such continuance is specifically approved at
least annually by (a) the vote of the holders of a "majority" (as defined in the
1940 Act) of the Fund's outstanding voting securities or by the Board of
Directors of the Company and (b) the vote of a majority of the Company's
directors who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such approval. This Agreement may be terminated at
any time, without the payment of any penalty, on sixty (60) days written notice
by the vote of the holders of a majority of the outstanding voting securities of
the Fund, by the vote of the Company's Board of Directors or by the Adviser.
This Agreement will also terminate automatically in the event of its assignment
(as defined in the 1940 Act and the rules thereunder).
13. NAME. The Company (including the Fund) may, so long as this
Agreement remains in effect, use "Comstock" as part of its name. The Adviser
may, upon termination of this Agreement, require the Company (including the
Fund) to refrain from using the name "Comstock" in any form or combination in
its
<PAGE>
name or in its business, and the Company (including the Fund) shall, as soon as
practicable following its receipt of any such request from the Adviser, so
refrain from using such name.
14. NOTICES. Any notice under this Agreement shall be given in
writing, delivered against receipt or mailed, first class certified or
registered mail, return receipt requested, postage prepaid, addressed to the
other party at its then principal office.
15. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York applicable to contracts made and wholly to be performed in
such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed the day and year first above written.
COMSTOCK PARTNERS FUNDS, INC.,
on behalf of Comstock Capital
Value Fund
By:
-------------------------
Name:
Title:
COMSTOCK PARTNERS, INC.
By
-------------------------
Name:
Title:
<PAGE>
SUB-INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
COMSTOCK PARTNERS FUNDS, INC.
10 Exchange Place
Suite 2010
Jersey City, New Jersey 07302-3913
April __, 1996
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Dear Sirs:
Comstock Partners Funds, Inc. is an open-end, registered investment
company (the "Company") currently consisting of two separate portfolios, the
Comstock Partners Capital Value Fund (the "Portfolio") and the Comstock Partners
Strategy Fund (the "Strategy Portfolio"). The Company hereby confirms its
agreement, on behalf of the Portfolio, with The Dreyfus Corporation ("Dreyfus")
as follows:
The Company has entered or will enter an investment advisory agreement
with Comstock Partners, Inc., a Delaware corporation ("Comstock"), pursuant to
which it will employ Comstock as investment adviser to the Portfolio in
accordance with the limitations specified for the Portfolio in the Company's
Registration Statement on Form N-1A from time to time in effect, copies of which
have been or will be submitted to Dreyfus, and in such manner and to such extent
as may from time to time be approved by the Company's Board of Directors. The
Company proposes to employ Dreyfus as sub-investment adviser and administrator
to the Portfolio as specified herein.
1. Sub-Investment Advisory Services
Subject to the supervision and approval of the Company's Board of
Directors, Dreyfus will provide sub-investment advisory services specified
herein in accordance with the Portfolio's investment objective and policies as
stated in its Prospectus and Statement of Additional Information as from time to
time in effect. Dreyfus will manage the short-term cash and cash equivalent
investments of the Portfolio and will provide investment research, statistical
information and advice regarding the Portfolio. Dreyfus will furnish to
Comstock or the Portfolio such general advice regarding economic factors and
trends, including statistical information and other factual information, and
such statistical information with respect to the investments that the Portfolio
may hold or contemplate purchasing, as the Company, on behalf of the Portfolio,
may reasonably request. Dreyfus shall exercise its best judgment in rendering
these services.
<PAGE>
2. Administrative Services
Subject to the supervision and approval of the Company's Board of
Directors, Dreyfus will supervise certain aspects of the Portfolio's operations
and provide certain administrative services, as specified herein. Except as
otherwise specified in this Agreement, Dreyfus shall not act and shall not be
required to act as an investment advisor or manager to the Portfolio, or have
any authority to supervise the investment or reinvestment of the securities or
other property comprising the Portfolio's assets or to determine which
securities or other property may be purchased or sold by a Portfolio.
With respect to the Portfolio, Dreyfus will supply office facilities
(which may be in Dreyfus' own offices), statistical and research data, data
processing services, clerical, accounting and bookkeeping services, internal
auditing services, legal services, internal executive and administrative
services, and stationery and office supplies; prepare reports to the Portfolio's
shareholders, tax return, reports to the filings with the Securities and
Exchange Commission and state Blue Sky authorities; calculate the net asset
value of the Portfolio on a daily basis; and, subject to the supervision of the
Company's Board of Directors, generally assist in all aspects of the Portfolio's
operations (except with respect to investment advisory services provided by
Comstock). Net asset value shall be computed on such days and at such time or
times as described in the Portfolio's then current Prospectus and Statement of
Additional Information.
Dreyfus shall have the right at its expense to engage Princeton
Administrators, L.P. to assist it in performing certain of the obligations set
forth in this paragraph, provided that the Company, on behalf of the Portfolio,
is a party to such agreement.
3. Fees and Expenses
In consideration of the sub-investment advisory and administration
services rendered pursuant to this Agreement, the Company will pay Dreyfus, in
arrears, a monthly fee at an annual rate based on the Portfolio's average daily
net assets as follows:
Average Fee as a Percentage
Total Assets of Average Daily Net Assets
- ------------ ---------------------------
0 up to $300 million .35 of 1%
$300 million to $750 million .30 of 1%
$750 million to $1 billion .25 of 1%
More than $1 billion .20 of 1%
Such fee shall be computed daily and paid no later than the seventh (7th)
business day of each month
-2-
<PAGE>
The fee for the period from the date of this Agreement to the end of
the month shall be pro-rated according to the proportion that such period bears
to the full monthly period, and upon any termination of this Agreement other
than at the end of any month, the fee for the month during which termination
shall occur shall be pro-rated according to the proportion that the period
thereof prior to termination bears to the full monthly period and shall be
payable within seven (7) days after the date of termination of this Agreement.
For purposes of determining the fees payable to Dreyfus, the value of
the Portfolio's net assets shall be computed in the same manner as computed for
the purpose of determining Comstock's fee from the Company for serving as
investment adviser to the Portfolio.
Dreyfus will bear all expenses in connection with the performance of
its services under this Agreement. All other expenses to be incurred in the
operation of the Portfolio will be borne by the Company, except to the extent
assumed by Dreyfus, Comstock or the Company's other service providers. The
expenses to be borne by the Company include, without limitation, the following:
organizational costs; taxes; interest; loan commitment fees, interest and
distributions paid on securities sold short; brokerage fees and commissions, if
any; Securities and Exchange Commission fees and state Blue Sky qualification
fees; Directors' fees and expenses (other than those Directors who are holders
of 5% or more of the outstanding voting securities of Dreyfus or Comstock, or of
any affiliate of Dreyfus or Comstock); officers' and employees' fees and
expenses (other than officers or employees of Dreyfus, Comstock or any
affiliate thereof); advisory and administration 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 Company's existence; payments to service organizations; costs of
independent pricing services; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholder reports and
meetings; and any extraordinary expenses.
If the aggregate expenses incurred by, or allocated to, the Portfolio
in any fiscal year shall exceed the expense limitations applicable to the
Portfolio imposed by state securities laws or regulations thereunder, as such
limitations may be revised from time to time, Comstock, in its capacity as
investment adviser to the Portfolio, shall have waived, refunded or reduced (in
compliance with Section 7 of the Investment Advisory Agreement between the
Company, on behalf of the Portfolio, and Comstock) some or all of such fees
Comstock was entitled to receive during the period in which such expense
limitations were exceeded so as to cause the Portfolio to comply with such
expense limitations. If,
-3-
<PAGE>
after giving effect to such waiver, refund or reduction by Comstock, aggregate
expenses of the Portfolio continue to exceed such expense limitations, then
Dreyfus agrees to waive, refund or reduce the fees it was entitled to receive
pursuant to this Agreement if and to the extent required by applicable state
securities laws or regulations thereunder.
3. Limitation of Liability
Dreyfus shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Company in connection with the matters to
which this Agreement relates, except for a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or from reckless disregard by it of its obligations and duties under
this Agreement. Any person, even though also an officer, director, employee or
agent of Dreyfus who may be or become an officer, director, employee or agent
of the Company shall be deemed, when rendering services to the Company or
acting on any business of the Company, to be rendering such services to or
acting solely for the Company and not as an officer, director, employee or
agent or one under the control or direction of Dreyfus even though paid by it.
4. Term
This Agreement shall continue until April __, 1998 and thereafter
shall continue automatically for successive annual periods ending on April 30
of each year, provided such continuance is specifically approved at least
annually by (i) the Company's Board of Directors or (ii) by a vote of a majority
(as defined in the Investment Company Act of 1940) of the Portfolio's
outstanding voting securities, provided that, in either event, the continuance
also is approved by a majority of the Directors who are not interested persons
of the Company (as defined in the Investment Company Act of 1940) by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable without penalty, on not less than 60 days' notice, by
either party hereto, by the Company's Board of Directors or by vote of the
holders of a majority of the Portfolio's shares and this Agreement will also
terminate automatically in the event of its assignment (as defined in the
Investment Company Act of 1940).
5. Miscellaneous
The Company understands that Dreyfus now acts and will continue to act
as investment adviser, sub-investment adviser and/or administrator to various
investment companies and fiduciary or other managed accounts, and the Company
has no objection to Dreyfus' so acting. In addition, it is understood that the
persons employed by Dreyfus to assist in the performance of its duties hereunder
will not devote their full time to such service and nothing herein contained
shall be deemed to limit or restrict the
-4-
<PAGE>
right of Dreyfus or any affiliate of Dreyfus to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
Dreyfus will treat confidentially and as proprietary information of
the Company all records and other information relative to the Company and prior
or present shareholders or those persons or entities who respond to Dreyfus'
inquiries concerning investment in the Company, and will not use such records
and information for any purpose other than (i) in the performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld when Dreyfus may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities; (ii) to the extent that other
entities have been engaged by Dreyfus to assist in performing its obligations
hereunder, and have executed an agreement to this effect that includes
provisions relating to the confidentiality of Company proprietary information
and that is otherwise suitable to the Company overall; or (iii) when so
requested by the Company. Nothing contained herein, however, shall prohibit
Dreyfus from advertising to or soliciting the public generally with respect to
other mutual funds, products or services, including but not limited to any
advertising or marketing via radio, television, newspapers, magazines or direct
mail solicitation, regardless of whether such advertisement or solicitation may
coincidentally include prior or present Fund shareholders or those persons or
entities who have responded to Dreyfus' inquiries concerning investment in the
Portfolio.
In compliance with the requirements of Rule 31a-3 under the Investment
Company Act of 1940, Dreyfus hereby agrees that all records that it maintains
for the Company are the property of the Company, that it will surrender promptly
to the Company any of such records upon the Company's request, and that it will
preserve such records for the periods prescribed by Rule 31a-2 under the
Investment Company Act of 1940.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
COMSTOCK PARTNERS FUNDS, INC.
on behalf of its Comstock Partners
Capital Value Fund
By:
------------------------------
Accepted:
THE DREYFUS CORPORATION
By:
-------------------------
-5-
<PAGE>
[Venable, Baetjer and Howard, LLP]
February 12, 1996
Comstock Partners Funds, Inc.
10 Exchange Place, Suite 2010
Jersey City, New Jersey 07302-3913
Re: COMSTOCK PARTNERS CAPITAL VALUE FUND
Ladies and Gentlemen:
We have acted as special Maryland counsel for Comstock Partners Funds,
Inc., a Maryland corporation (the "Company"), in connection with the issuance
of Class A Common Stock, Class B Common Stock, Class C Common Stock and
Class R Common Stock, par value $.001 per share (collectively, the
"Shares"), of the Comstock Partners Capital Value Fund (the "Fund"), a
portfolio of the Company.
As special Maryland counsel for the Company, we are familiar with its
Charter and Bylaws. We have examined the prospectus included in its
Post-Effective Amendment No. 8 to the Company's Registration Statement on
Form N-1A, File Nos. 33-40771; 811-5502 (the "Registration Statement"),
substantially in the form in which it is to become effective (the
"Prospectus"). We have further examined and relied upon a certificate of the
Maryland State Department of Assessments and Taxation to the effect that the
Company is duly incorporated and existing under the laws of the State of
Maryland and is in good standing and duly authorized to transact business in
the State of Maryland.
We have also examined and relied upon such corporate records of the
Company and other documents and certificates with respect to factual matters
as we have deemed necessary to render the opinion expressed herein. We have
assumed, without independent verification, the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with originals of all documents submitted to us as copies.
<PAGE>
Comstock Partners Funds, Inc.
February 12, 1996
Page 2
Based on such examination, we are of the opinion and so advise you that:
1. The Company is duly organized and validly existing as a corporation
in good standing under the laws of the State of Maryland.
2. The Shares of the Fund to be offered for sale pursuant to the
Prospectus are, to the extent of the respective number of Shares of
each class of the Fund authorized to be issued by the Company in
its Charter, duly authorized and, when sold, issued and paid for as
contemplated by the Prospectus and authorized by the Board of
Directors of the Company, will have been validly and legally
issued and will be fully paid and nonassessable under the laws of
the State of Maryland.
This letter expresses our opinion with respect to the Maryland General
Corporation Law governing matters such as due organization and the
authorization and issuance of stock. It does not extend to the securities or
"blue sky" laws of Maryland, to federal securities laws or to other laws.
We consent to the filing of this opinion as an exhibit to the Registration
Statement. This opinion may not be relied upon by any other person or for any
other purpose without our written consent.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP
------------------------------------
Venable, Baetjer and Howard, LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial
Highlights" and to the use of our report on the financial
statements of Dreyfus Capital Value Fund, Inc. dated November 13, 1995,
included in this Registration Statement Form N-1A of Comstock Partners Funds,
Inc.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
February 9, 1996
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
AMENDED AND RESTATED CLASS A SERVICE AND DISTRIBUTION PLAN
Introduction: It has been proposed that the above-captioned
investment company (the "Company") amend and restate its Class A Service and
Distribution Plan (as amended, the "Plan") relating to the Class A shares of the
Comstock Partners Strategy Fund (the "Strategy Fund") and the Comstock Partners
Capital Value Fund (the "Capital Value Fund" and, together with the Strategy
Fund, the "Funds"). The Plan is being adopted in accordance with Rule 12b-1,
promulgated under the Investment Company Act of 1940, as amended (the "Act").
Under the Plan, the Company, on behalf of each Fund, would pay for the costs and
expenses of preparing, printing and distributing its prospectuses and statements
of additional information relating to such Fund, subject to certain limitations,
and, on behalf of each Fund, would (a) reimburse such Fund's distributor (the
"Distributor") for payments to third parties for distributing such Fund's Class
A shares and servicing such Fund's Class A shareholder accounts ("Servicing")
(the payments in this clause (a) being referred to as the "Distributor
Payments") and (b) pay The Dreyfus Corporation, Dreyfus Service Corporation and
any affiliate of either of them (collectively, "Dreyfus") for advertising and
marketing relating to such Fund's Class A shares and for Servicing (the payments
in this clause (b) being referred to as "Dreyfus Payments"). If this proposal
is to be implemented, the Act and said Rule 12b-1 require that a written plan
describing all material aspects of the proposed financing be adopted by the
Company.
The Company's Board, in considering whether the Company should
implement a written plan, has requested and evaluated such information as it
deemed necessary to make an informed determination as to whether a written plan
should be implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets attributable to each
Fund's Class A shares for such purposes.
In voting to approve the implementation of such a plan, the Board
members have concluded, in the exercise of their reasonable business judgment
and in light of their respective fiduciary duties, that there is a reasonable
likelihood that the plan set forth below will benefit each Fund and the holders
of such Fund's Class A shares.
The Plan: The material aspects of this Plan are as follows:
1. The Company, on behalf of each Fund, shall pay all costs of
preparing and printing prospectuses and statements of additional information
relating to such Fund for regulatory purposes and for distribution to existing
holders of Class O (in the case of the Strategy Fund only) and Class A shares of
such Fund. The Company, on behalf of the Strategy Fund only, also shall pay, at
the expense of the Class A shares of the Strategy Fund, an amount of the costs
and expenses in connection with (a) preparing, printing and distributing the
Strategy Fund's prospectuses and statements of additional
<PAGE>
2
information used for other purposes with respect to the Class A shares of the
Strategy Fund and (b) implementing and operating this Plan with respect to the
Strategy Fund, such aggregate amount not to exceed in any fiscal year of the
Strategy Fund the greater of $100,000 or .005 of 1% of the average daily value
of the Strategy Fund's net assets attributable to the Class A shares of the
Strategy Fund for such fiscal year.
2. (a) With respect to each Fund, the aggregate annual fee the
Company may pay under this Plan for Distributor Payments and Dreyfus Payments is
.25 of 1% of the value of such Fund's average daily net assets attributable to
the Class A shares of such Fund for such year (the "Aggregate Amount").
(b) The Company, with respect to each Fund, shall reimburse the
Distributor in respect of Distributor Payments an amount not to exceed an annual
rate of .25 of 1% of the value of such Fund's average daily net assets
attributable to the Class A shares of such Fund for such year (the "Distributor
Amount").
(c) The Company, with respect to each Fund, shall pay Dreyfus in
respect of Dreyfus Payments an annual fee equal to the difference between the
Aggregate Amount and the Distributor Amount for such Fund, incurred in such
year.
(d) Each of the Distributor and Dreyfus may pay one or more
securities dealers, financial institutions (which may include banks) or other
industry professionals, such as investment advisers, accountants and estate
planning firms (severally, a "Service Agent"), a fee in respect of each Fund's
Class A shares owned by investors with whom the Service Agent has a Servicing
relationship or for whom the Service Agent is the dealer or holder of record.
Each of the Distributor and Dreyfus shall determine the amounts to be paid to
the Service Agents to which it will make payments under this Plan and the basis
on which such payments will be made. Payments to a Service Agent are subject to
compliance by the Service Agent with the terms of any related Plan agreement
between the Service Agent and the Distributor or Dreyfus, as the case may be.
3. For purposes of determining the fees payable under this Plan, the
value of the net assets attributable to Class A shares of each Fund shall be
computed in the manner specified in the Company's charter documents, and each
Fund's prospectus and statement of additional information, as then in effect for
the computation of the value of the net assets attributable to Class A shares of
such Fund.
4. The Company's Board shall be provided, at least quarterly, with a
written report of all amounts expended pursuant to this Plan. The report shall
state the purpose for which the amounts were expended.
5. This Plan will become effective, with respect to each Fund, upon
approval by (a) holders of a majority of such Fund's outstanding Class A shares,
and (b) a majority of the Board members, including a majority of the Board
members who are not "interested persons" (as defined in the Act) of the Company
and have no direct or indirect financial interest in the operation of this Plan
or in any agreements entered into
<PAGE>
3
in connection with this Plan, pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of this Plan.
6. This Plan shall continue for a period of one year from its
effective date, unless earlier terminated in accordance with its terms, and
thereafter shall continue automatically for successive annual periods, provided
such continuance is approved at least annually in the manner provided in
paragraph 5(b) hereof.
7. This Plan may be amended at any time by the Company's Board,
provided that (a) any amendment to increase materially the costs which a Fund's
Class A shares may bear pursuant to this Plan shall be effective only upon
approval by a vote of the holders of a majority of such Fund's outstanding Class
A shares, (b) no amendment shall impose any costs on any class of the Company's
capital stock other than the Class A shares of each Fund and (c) any material
amendments of the terms of this Plan shall become effective only upon approval
as provided in paragraph 5(b) hereof.
8. This Plan is terminable, with respect to a Fund, without penalty
at any time by (a) vote of a majority of the Board members who are not
"interested persons" (as defined in the Act) of the Company and have no direct
or indirect financial interest in the operation of this Plan or in any
agreements entered into in connection with this Plan, or (b) vote of the holders
of a majority of such Fund's outstanding Class A shares.
Dated: ________ __, 1996
Effective Date: ________ __, 1996
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
CLASS B SERVICE AND DISTRIBUTION PLAN
Introduction: It has been proposed that the above-captioned investment
company (the "Company") adopt a Service and Distribution Plan (the "Plan")
relating to the Class B shares of the Comstock Partners Capital Value Fund (the
"Capital Value Fund") in accordance with Rule 12b-1, promulgated under the
Investment Company Act of 1940, as amended (the "Act"). Under the Plan, the
Company, on behalf of the Capital Value Fund would pay the Capital Value Fund's
distributor (the "Distributor") (1) a fee for distributing the Capital Value
Fund's Class B shares (the "Distribution Fee"), and (2) a fee for providing
services to the Class B shareholders of the Capital Value Fund (the "Service
Fee"). If this proposal is to be implemented with respect to the Distribution
Fee, the Act and said Rule 12b-1 require that a written plan describing all
material aspects of the proposed Distribution Fee be adopted by the Company.
The Service Fee under the Plan is intended to be a "service fee" as defined in
Article III, Section 26, of the NASD Rules of Fair Practice, and not a cost
which is primarily intended to result in the sale of Class B shares and which
would require approval pursuant to Rule 12b-1.
The Company's Board, in considering whether the Company should implement a
written plan with respect to the Service Fee and the Distribution Fee, has
requested and evaluated such information as it deemed necessary to make an
informed determination as to whether a written plan should be implemented and
has considered such pertinent factors as it deemed necessary to form the basis
for a decision to use assets attributable to the Capital Value Fund's Class B
shares for such purposes.
In voting to approve the implementation of such a plan, the Board members
have concluded, in the exercise of their reasonable business judgment and in
light of their respective fiduciary duties, that there is a reasonable
likelihood that the plan set forth below will benefit the Capital Value Fund and
holders of the Capital Value Fund's Class B shares.
The Plan: The material aspects of the Plan are as follows:
1. The Company, on behalf of the Capital Value Fund, shall pay to the
Distributor for distribution the Distribution Fee at an annual rate of .75 of 1%
of the value of the average daily net assets attributable to the Capital Value
Fund Class B.
2. The Company, on behalf of the Capital Value Fund, shall pay to the
Distributor the Service Fee at an annual rate of .25 of 1% of the value of the
average daily net assets attributable to the Capital Value Fund Class B, in
respect of the provision of personal services to Class B shareholders of the
Capital Value Fund and/or the maintenance of the Capital Value Fund Class B
shareholder accounts. The Distributor shall determine the amounts to be paid to
one or more securities dealers, financial institutions (which may include banks)
or other industry professionals, such
<PAGE>
2
as investment advisers, accountants and estate planning firms (severally, a
"Service Agent") and the basis on which such payments will be made. Payments to
a Service Agent are subject to compliance by the Service Agent with the terms of
any related Plan agreement between the Service Agent and the Distributor.
3. For the purposes of determining the fees payable under this Plan, the
value of the net assets attributable to Capital Value Fund Class B shall be
computed in the manner specified in the Company's charter documents, and the
Capital Value Fund's prospectus and statement of additional information, as then
in effect for the computation of the value of the Company's net assets
attributable to such Class of the Capital Value Fund.
4. The Company's Board shall be provided, at least quarterly, with a
written report of all amounts expended pursuant to this Plan. The report shall
state the purpose for which the amounts were expended.
5. This Plan will become effective upon approval by (a) with respect to
the Distribution Fee, holders of a majority of the Capital Value Fund's
outstanding Class B shares and (b) a majority of the Board members, including a
majority of the Board members who are not "interested persons" (as defined in
the Act) of the Company and have no direct or indirect financial interest in the
operation of this Plan or in any agreements entered into in connection with this
Plan, pursuant to a vote cast in person at a meeting called for the purpose of
voting on the approval of this Plan.
6. This Plan shall continue for a period of one year from its effective
date, unless earlier terminated in accordance with its terms, and thereafter
shall continue automatically for successive annual periods, provided such
continuance is approved at least annually in the manner provided in paragraph
5(b) hereof.
7. This Plan may be amended at any time by the Company's Board, provided
that (a) any amendment to increase materially the Distribution Fee or other
costs which are primarily intended to result in the sale of Capital Value Fund
Class B shares which such Class B shares may bear pursuant to this Plan shall be
effective only upon approval by a vote of the holders of a majority of the
Capital Value Fund's outstanding Class B shares and (b) any material amendments
of the terms of this Plan shall become effective only upon approval as provided
in paragraph 5(b) hereof.
8. This Plan is terminable without penalty at any time (a) by vote of a
majority of the Board members who are not "interested persons" (as defined in
the Act) of the Company and have no direct or indirect financial interest in the
operation of this Plan or in any agreements entered into in connection with this
Plan, or (b) with respect to the Distribution Fee or other costs which are
primarily intended to
<PAGE>
3
result in the sale of Capital Value Fund Class B shares, by vote of the holders
of a majority of the Capital Value Fund's outstanding Class B shares.
Dated: ___________ ___, 1996
Effective Date: ___________ ___, 1996
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
AMENDED AND RESTATED CLASS C SERVICE AND DISTRIBUTION PLAN
INTRODUCTION: This is an amendment and restatement of the Class C Service
and Distribution Plan (the "Plan") for the above-captioned investment company
(the "Company"). The Plan relates to the Class C shares of the Comstock Partners
Strategy Fund (the "Strategy Fund") and the Comstock Partners Capital Value Fund
(the "Capital Value Fund" and, together with the Strategy Fund, the "Funds") and
is being adopted in accordance with Rule 12b-1, promulgated under the Investment
Company Act of 1940, as amended (the "Act"). Under the Plan, the Company, on
behalf of each Fund, would pay the Company's distributor (the "Distributor")
(1) a fee for distributing such Fund's Class C shares (the "Distribution Fee"),
and (2) a fee for providing services to the Class C shareholders of such Fund
(the "Service Fee"). If this proposal is to be implemented with respect to the
Distribution Fee, the Act and said Rule 12b-1 require that a written plan
describing all material aspects of the proposed Distribution Fee be adopted by
the Company. The Service Fee under the Plan is intended to be a "service fee"
as defined in Article III, Section 26, of the NASD Rules of Fair Practice, and
not a cost which is primarily intended to result in the sale of Class C shares
and which would require approval pursuant to Rule 12b-1.
The Company's Board, in considering whether the Company should implement a
written plan with respect to the Service Fee and the Distribution Fee, has
requested and evaluated such information as it deemed necessary to make an
informed determination as to whether a written plan should be implemented and
has considered such pertinent factors as it deemed necessary to form the basis
for a decision to use assets attributable to each Fund's Class C shares for such
purposes.
In voting to approve the implementation of such a plan, the Board members
have concluded, in the exercise of their reasonable business judgment and in
light of their respective fiduciary duties, that there is a reasonable
likelihood that the plan set forth below will benefit each Fund and holders of
each Fund's Class C shares.
THE PLAN: The material aspects of the Plan are as follows:
1. The Company, on behalf of each Fund, shall pay to the Distributor for
distribution the Distribution Fee at an annual rate of .75 of 1% of the value of
the average daily net assets attributable to Class C shares of such Fund.
2. The Company, on behalf of each Fund, shall pay to the Distributor the
Service Fee at an annual rate of .25 of 1% of the value of the average daily net
assets attributable to such Fund's Class C shares in respect of the provision of
personal services to Class C shareholders of such Fund and/or the maintenance of
such Fund's Class C shareholder accounts. The Distributor shall determine the
amounts to be paid to one or more securities dealers, financial institutions
(which may include banks) or other industry professionals, such as investment
advisers, accountants and estate
<PAGE>
2
planning firms (severally, a "Service Agent") and the basis on which such
payments will be made. Payments to a Service Agent are subject to compliance by
the Service Agent with the terms of any related Plan agreement between the
Service Agent and the Distributor.
3. For purposes of determining the fees payable under this Plan, the
value of the net assets attributable to Class C shares of each Fund shall be
computed in the manner specified in the Company's charter documents, and each
Fund's prospectus and statement of additional information, as then in effect for
the computation of the value of the Company's net assets attributable to Class C
shares of such Fund.
4. The Company's Board shall be provided, at least quarterly, with a
written report of all amounts expended pursuant to this Plan. The report shall
state the purpose for which the amounts were expended.
5. This Plan will become effective with respect to each Fund upon
approval by (a) with respect to the Distribution Fee, holders of a majority of
such Fund's outstanding Class C shares, and (b) a majority of the Board members,
including a majority of the Board members who are not "interested persons" (as
defined in the Act) of the Company and have no direct or indirect financial
interest in the operation of this Plan or in any agreements entered into in
connection with this Plan, pursuant to a vote cast in person at a meeting called
for the purpose of voting on the approval of this Plan.
6. With respect to each Fund, this Plan shall continue for a period of
one year from its effective date, unless earlier terminated for such Fund in
accordance with its terms, and thereafter shall continue automatically for such
Fund for successive annual periods, provided such continuance is approved at
least annually in the manner provided in paragraph 5(b) hereof.
7. This Plan may be amended at any time by the Company's Board, provided
that (a) any amendment to increase materially the Distribution Fee or other
costs which are primarily intended to result in the sale of a Fund's Class C
shares which such Class C shares may bear pursuant to this Plan shall be
effective only upon approval by a vote of the holders of a majority of such
Fund's outstanding Class C shares, and (b) any material amendments of the terms
of this Plan shall become effective only upon approval as provided in paragraph
5(b) hereof.
8. This Plan is terminable with respect to a Fund without penalty at any
time (a) by vote of a majority of the Board members who are not "interested
persons" (as defined in the Act) of the Company and have no direct or indirect
financial interest in the operation of this Plan or in any agreements entered
into in connection with this Plan, or (b) with respect to the Distribution Fee
or other costs which are
<PAGE>
3
primarily intended to result in the sale of such Fund's Class C shares, by vote
of the holders of a majority of such Fund's outstanding Class C shares.
Dated: ___________ ___, 1996
Effective Date: ___________ ___, 1996
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
AMENDED AND RESTATED MULTICLASS PLAN PURSUANT TO RULE 18f-3
UNDER THE INVESTMENT COMPANY ACT OF 1940
_______________, 1996
I. BACKGROUND
This plan (the "Plan") pertains to the issuance by Comstock Partners
Funds, Inc. (the "Company"), a Maryland corporation consisting of two portfolios
(each, a "portfolio"), Comstock Partners Strategy Fund (the "Strategy Fund") and
Comstock Partners Capital Value Fund (the "Capital Value Fund", and together
with the Strategy Fund, the "Funds"), of multiple classes of capital stock and
is being adopted by the Company pursuant to Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "Act").
The Company's Board members, including a majority of its Directors who
are not "interested persons" (as defined in the Act), have found that this Plan
is in the best interests of each class individually and the Strategy Fund and
the Capital Value Fund as a whole.
The Company's Charter authorizes the Company to offer several classes
of shares: Strategy Fund Class O shares, Strategy Fund Class A shares, Strategy
Fund Class C shares, Capital Value Fund Class A shares, Capital Value Fund Class
B shares, Capital Value Fund Class C shares and Capital Value Fund Class R
shares.
II. ELIGIBILITY
Strategy Fund Class O shares are only issued in connection with the
reinvestment of dividends on outstanding Strategy Fund Class O shares. Strategy
Fund Class A shares, Strategy Fund Class C shares, Capital Value Fund Class A
shares, Capital Value Fund Class B shares, Capital Value Fund Class C shares and
Capital Value Fund Class R shares may be purchased from Premier Mutual Fund
Services, Inc., the Company's Distributor, through selected security dealers or
agents, or by mailing a purchase order directly to Dreyfus Transfer, Inc., the
Strategy Fund's and the Capital Value Fund's transfer agent.
III. SALES LOADS
Strategy Fund Class A shares and Capital Value Class A shares are sold
subject to the imposition of a sales charge at the time of purchase. Strategy
Fund Class C shares, Capital Value Class B shares and Capital Value Class C
shares are sold subject to the imposition of a contingent deferred sales charge.
In addition, deferred sales
<PAGE>
2
charge will be assessed on certain redemptions of Capital Value Fund Class A
shares purchased without an initial sales charge. Class R shares shall be
offered at net asset value only to institutional investors acting for themselves
or in a fiduciary, advisory, agency, custodial or similar capacity for qualified
or non-qualified employee benefit plans, including pension, profit-sharing, SEP-
IRAs and other deferred compensation plans, whether established by corporations,
partnerships, non-profit entities or state and local governments, but not
including IRAs or IRA "Rollover Accounts." The schedule of applicable sales
charges for each class of shares shall be as approved by the Company's Board of
Directors from time to time and as set forth in the Strategy Fund's or Capital
Value Fund's prospectus, as the case may be.
IV. DISTRIBUTION AND SHAREHOLDER SERVICING FEES
A. CLASS O SHARES. The Strategy Fund Class O shares are not subject
to any plan of distribution adopted pursuant to Rule 12b-1 under the Act.
B. CLASS A SHARES. The Strategy Fund Class A shares and Capital
Value Fund Class A shares are subject to the Class A Service and Distribution
Plan with respect thereto adopted by the Company's Board of Directors pursuant
to Rule 12b-1 under the Act.
C. CLASS B SHARES. The Capital Value Fund Class B shares are subject
to the Class B Service and Distribution Plan with respect thereto adopted by the
Company's Board of Directors pursuant to Rule 12b-1 under the Act (it being
noted that the "Service Fee" thereunder is intended to be a "service fee" as
defined in Article III, Section 26, of the NASD Rules of Fair Practice, and not
a cost which is primarily intended to result in the sale of Class B shares and
which would require approval pursuant to Rule 12b-1).
D. CLASS C SHARES. The Strategy Fund Class C shares and Capital Value
Fund Class C shares are subject to the Class C Service and Distribution Plan
with respect thereto adopted by the Fund's Board of Directors pursuant to Rule
12b-1 under the Act (it being noted that the "Service Fee" thereunder is
intended to be a "service fee" as defined in Article III, Section 26, of the
NASD Rules of Fair Practice, and not a cost which is primarily intended to
result in the sale of Class C shares and which would require approval pursuant
to Rule 12b-1).
E. CLASS R SHARES. The Capital Value Fund Class R shares are not
subject to any plan of distribution adopted pursuant to Rule 12b-1 under the
Act.
V. CONVERSION FEATURES
Capital Value Fund Class B shares shall automatically convert to Class A
shares after a specified period of time after the date of purchase, based on the
relative net asset
<PAGE>
3
of each such Class without the imposition of any sales charge, fee or other
charge. No other Class shall be subject to any automatic conversion feature.
The schedule for the conversion of Capital Value Fund Class B shares shall be as
approved by the Company's Board of Directors from time to time and as set forth
in the Capital Value Fund's prospectus.
VI. ALLOCATION OF EXPENSES
Expenses of the Strategy Fund are borne by the various classes of
shares of the Strategy Fund and expenses of the Capital Value Fund are borne by
the various classes of the Capital Value Fund. With respect to each Fund,
expenses are allocated between the various classes on the basis of the relative
net assets of each of those classes, except that (i) Strategy Fund Class C
shares, Capital Value Class B shares and Capital Value Class C shares bear the
additional incremental shareholder administrative expenses resulting from the
respective deferred sales charge arrangements, and (ii) Strategy Fund Class A
shares, Strategy Fund Class C shares, Capital Value Class A shares, Capital
Value Class B and Capital Value Class C shares bear their own fees and expenses
pursuant to the Class A, Class B and Class C Service and Distribution Plans, as
the case may be.
VII. VOTING RIGHTS
Except as described in the succeeding sentence, with respect to each
Fund, all shares of such Fund have equal voting rights and will be voted in the
aggregate and not by class, except where voting by class is required by law.
Class A shares of each Fund have exclusive voting rights with respect to matters
pertaining to the Company's Class A Service and Distribution Plan, as that plan
applies to such Fund's Class C shares, Capital Value Fund Class B shares have
exclusive voting rights with respect to the Company's Class B Service and
Distribution Plan and each Fund's Class C shares have exclusive voting rights
with respect to matters pertaining to the Company's Class C Service and
Distribution Plan, as that plan applies to such Fund's Class C shares.
VIII. EXCHANGE FEATURES
Shares of each class of the Strategy Fund and the Capital Value Fund
shall have such exchange privileges as shall be approved by the Company's Board
of Directors from time to time and as set forth in the Strategy Fund's or the
Capital Value Fund's prospectus, as the case may be.
IX. AMENDMENTS
No material amendment to this Plan may be made unless it is first
approved by a majority of both (a) the full Board of Directors of the Company
and (b) those Directors who are not interested persons of the Company, as that
term is defined in the Act.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FILED IN PART B OF THIS REGISTRATION STATEMENT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000830779
<NAME> COMSTOCK PARTNERS FUNDS, INC.
<SERIES>
<NUMBER> 011
<NAME> COMSTOCK PARTNERS CAPITAL VALUE FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 350,062
<INVESTMENTS-AT-VALUE> 373,174
<RECEIVABLES> 72,846
<ASSETS-OTHER> 697
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 446,717
<PAYABLE-FOR-SECURITIES> 2,539
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 85,278
<TOTAL-LIABILITIES> 87,819
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 469,863
<SHARES-COMMON-STOCK> 25,543
<SHARES-COMMON-PRIOR> 33,890
<ACCUMULATED-NII-CURRENT> 14,106
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (140,552)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,483
<NET-ASSETS> 271,051
<DIVIDEND-INCOME> 1,924
<INTEREST-INCOME> 20,727
<OTHER-INCOME> 0
<EXPENSES-NET> 7,970
<NET-INVESTMENT-INCOME> 14,681
<REALIZED-GAINS-CURRENT> (27,482)
<APPREC-INCREASE-CURRENT> (28,972)
<NET-CHANGE-FROM-OPS> (41,773)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,407
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,570
<NUMBER-OF-SHARES-REDEEMED> (12,383)
<SHARES-REINVESTED> 466
<NET-CHANGE-IN-ASSETS> (152,339)
<ACCUMULATED-NII-PRIOR> 9,772
<ACCUMULATED-GAINS-PRIOR> (113,069)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,207
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,970
<AVERAGE-NET-ASSETS> 329,066
<PER-SHARE-NAV-BEGIN> 11.88
<PER-SHARE-NII> .36
<PER-SHARE-GAIN-APPREC> (1.37)
<PER-SHARE-DIVIDEND> (.26)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.61
<EXPENSE-RATIO> .012
<AVG-DEBT-OUTSTANDING> 859
<AVG-DEBT-PER-SHARE> .02
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FILED IN PART B OF THIS REGISTRATION STATEMENT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000830779
<NAME> COMSTOCK PARTNERS FUNDS, INC
<SERIES>
<NUMBER> 012
<NAME> COMSTOCK PARTNERS CAPITAL VALUE FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 350,062
<INVESTMENTS-AT-VALUE> 373,174
<RECEIVABLES> 72,846
<ASSETS-OTHER> 697
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 446,717
<PAYABLE-FOR-SECURITIES> 2,539
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 85,278
<TOTAL-LIABILITIES> 87,819
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 469,863
<SHARES-COMMON-STOCK> 8,439
<SHARES-COMMON-PRIOR> 9,284
<ACCUMULATED-NII-CURRENT> 14,106
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (140,552)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,483
<NET-ASSETS> 87,846
<DIVIDEND-INCOME> 1,924
<INTEREST-INCOME> 20,727
<OTHER-INCOME> 0
<EXPENSES-NET> 7,970
<NET-INVESTMENT-INCOME> 14,681
<REALIZED-GAINS-CURRENT> (27,482)
<APPREC-INCREASE-CURRENT> (28,972)
<NET-CHANGE-FROM-OPS> (41,773)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,941
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,464
<NUMBER-OF-SHARES-REDEEMED> (3,400)
<SHARES-REINVESTED> 91
<NET-CHANGE-IN-ASSETS> (152,339)
<ACCUMULATED-NII-PRIOR> 9,772
<ACCUMULATED-GAINS-PRIOR> (113,069)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,207
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,970
<AVERAGE-NET-ASSETS> 98,478
<PER-SHARE-NAV-BEGIN> 11.69
<PER-SHARE-NII> .31
<PER-SHARE-GAIN-APPREC> (1.38)
<PER-SHARE-DIVIDEND> (.21)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> .020
<AVG-DEBT-OUTSTANDING> 859
<AVG-DEBT-PER-SHARE> 2
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FILED IN PART B OF THIS REGISTRATION STATEMENT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000830779
<NAME> COMSTOCK PARTNERS FUNDS, INC.
<SERIES>
<NUMBER> 013
<NAME> COMSTOCK PARTNERS CAPITAL VALUE FUND CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 350,062
<INVESTMENTS-AT-VALUE> 373,174
<RECEIVABLES> 72,846
<ASSETS-OTHER> 697
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 446,717
<PAYABLE-FOR-SECURITIES> 2,539
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 85,278
<TOTAL-LIABILITIES> 87,819
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 469,863
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 14,106
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (140,552)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,483
<NET-ASSETS> 1
<DIVIDEND-INCOME> 1,924
<INTEREST-INCOME> 20,727
<OTHER-INCOME> 0
<EXPENSES-NET> 7,970
<NET-INVESTMENT-INCOME> 14,681
<REALIZED-GAINS-CURRENT> (27,482)
<APPREC-INCREASE-CURRENT> (28,972)
<NET-CHANGE-FROM-OPS> (41,773)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (152,339)
<ACCUMULATED-NII-PRIOR> 9,772
<ACCUMULATED-GAINS-PRIOR> (113,069)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,207
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,970
<AVERAGE-NET-ASSETS> 1
<PER-SHARE-NAV-BEGIN> 10.64
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (.25)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> .003
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FILED IN PART B OF THIS REGISTRATION STATEMENT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000830779
<NAME> COMSTOCK PARTNERS FUNDS, INC.
<SERIES>
<NUMBER> 014
<NAME> COMSTOCK PARTNERS CAPITAL VALUE FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 350,062
<INVESTMENTS-AT-VALUE> 373,174
<RECEIVABLES> 72,846
<ASSETS-OTHER> 697
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 446,717
<PAYABLE-FOR-SECURITIES> 2,539
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 85,278
<TOTAL-LIABILITIES> 87,819
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 469,863
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 14,106
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (140,552)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,483
<NET-ASSETS> 1
<DIVIDEND-INCOME> 1,924
<INTEREST-INCOME> 20,727
<OTHER-INCOME> 0
<EXPENSES-NET> 7,970
<NET-INVESTMENT-INCOME> 14,681
<REALIZED-GAINS-CURRENT> (27,482)
<APPREC-INCREASE-CURRENT> (28,972)
<NET-CHANGE-FROM-OPS> (41,773)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (152,339)
<ACCUMULATED-NII-PRIOR> 9,772
<ACCUMULATED-GAINS-PRIOR> (113,069)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,207
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,970
<AVERAGE-NET-ASSETS> 1
<PER-SHARE-NAV-BEGIN> 10.84
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> (.26)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.62
<EXPENSE-RATIO> .001
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned, Stanley Salvigsen,
a director of Comstock Partners Funds, Inc. (formerly named Comstock Partners
Strategy Fund, Inc.), a Maryland corporation (hereinafter called the
"Company") does hereby constitute and appoint Charles Minter, Troy
Hottenstein and Robert C. Ringstad, and each of them, his true and lawful
attorneys and agents, with full power to act without the others, for him and
in his name, place and stead, in any and all capacities, to do any and all
acts and things, and execute in his name any and all instruments, which said
attorneys and agents may deem necessary or advisable in order to enable the
Company to comply with the Investment Company Act of 1940, Securities Act of
1933, any requirements of the Securities and Exchange Commission in respect
thereof, and any state securities laws, in connection with the registration
under said Acts of the aforesaid Company and the offerings of shares by such
Company including specifically power and authority to sign his name to any
and all Notifications of Registration and Registration Statements to be filed
with the Securities and Exchange Commission under either of said Acts in
respect to such Company and shares, and any amendments (including
post-effective amendments) or applications for amendment or supplements of or
to such Notifications of Registration and Registration Statements, and to
file the same with the Securities and Exchange Commission; and the
undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said agents and attorneys shall have, and may exercise, without the
others, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto as of
this day of February 12, 1996.
/s/ Stanley Salvigsen
_________________________
Stanley Salvigsen
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned, Charles Minter,
a director of Comstock Partners Funds, Inc. (formerly named Comstock Partners
Strategy Fund, Inc.), a Maryland corporation (hereinafter called the
"Company") does hereby constitute and appoint Stanley Salvigsen, Troy
Hottenstein and Robert C. Ringstad, and each of them, his true and lawful
attorneys and agents, with full power to act without the others, for him and
in his name, place and stead, in any and all capacities, to do any and all
acts and things, and execute in his name any and all instruments, which said
attorneys and agents may deem necessary or advisable in order to enable the
Company to comply with the Investment Company Act of 1940, Securities Act of
1933, any requirements of the Securities and Exchange Commission in respect
thereof, and any state securities laws, in connection with the registration
under said Acts of the aforesaid Company and the offerings of shares by such
Company including specifically power and authority to sign his name to any
and all Notifications of Registration and Registration Statements to be filed
with the Securities and Exchange Commission under either of said Acts in
respect to such Company and shares, and any amendments (including
post-effective amendments) or applications for amendment or supplements of or
to such Notifications of Registration and Registration Statements, and to
file the same with the Securities and Exchange Commission; and the
undersigned does hereby ratify and confirm all that said attorneys and
agents, and each of them, shall do or cause to be done by virtue hereof. Any
one of said agents and attorneys shall have, and may exercise, without the
others, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto as of
this day of February 12, 1996.
/s/ Charles Minter
_________________________
Charles Minter
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned, Robert M. Smith,
a director of Comstock Partners Funds, Inc. (formerly named Comstock Partners
Strategy Fund, Inc.), a Maryland corporation (hereinafter called the
"Company") does hereby constitute and appoint Stanley Salvigsen, Charles
Minter, Troy Hottenstein and Robert C. Ringstad, and each of them, his true
and lawful attorneys and agents, with full power to act without the others,
for him and in his name, place and stead, in any and all capacities, to do
any and all acts and things, and execute in his name any and all instruments,
which said attorneys and agents may deem necessary or advisable in order to
enable the Company to comply with the Investment Company Act of 1940,
Securities Act of 1933, any requirements of the Securities and Exchange
Commission in respect thereof, and any state securities laws, in connection
with the registration under said Acts of the aforesaid Company and the
offerings of shares by such Company including specifically power and
authority to sign his name to any and all Notifications of Registration and
Registration Statements to be filed with the Securities and Exchange
Commission under either of said Acts in respect to such Company and shares,
and any amendments (including post-effective amendments) or applications for
amendment or supplements of or to such Notifications of Registration and
Registration Statements, and to file the same with the Securities and
Exchange Commission; and the undersigned does hereby ratify and confirm all
that said attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof. Any one of said agents and attorneys shall have, and
may exercise, without the others, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto as of
this day of February 12, 1996.
/s/ Robert M. Smith
_________________________
Robert M. Smith
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned, M. Bruce
Adelberg, a director of Comstock Partners Funds, Inc. (formerly named
Comstock Partners Strategy Fund, Inc.), a Maryland corporation (hereinafter
called the "Company") does hereby constitute and appoint Stanley Salvigsen,
Charles Minter, Troy Hottenstein and Robert C. Ringstad, and each of them,
his true and lawful attorneys and agents, with full power to act without the
others, for him and in his name, place and stead, in any and all capacities,
to do any and all acts and things, and execute in his name any and all
instruments, which said attorneys and agents may deem necessary or advisable
in order to enable the Company to comply with the Investment Company Act of
1940, Securities Act of 1933, any requirements of the Securities and Exchange
Commission in respect thereof, and any state securities laws, in connection
with the registration under said Acts of the aforesaid Company and the
offerings of shares by such Company including specifically power and
authority to sign his name to any and all Notifications of Registration and
Registration Statements to be filed with the Securities and Exchange
Commission under either of said Acts in respect to such Company and shares,
and any amendments (including post-effective amendments) or applications for
amendment or supplements of or to such Notifications of Registration and
Registration Statements, and to file the same with the Securities and
Exchange Commission; and the undersigned does hereby ratify and confirm all
that said attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof. Any one of said agents and attorneys shall have, and
may exercise, without the others, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto as of
this day of February 12, 1996.
/s/ M. Bruce Adelberg
_________________________
M. Bruce Adelberg
