DREYFUS FOCUS FUNDS, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
DECEMBER 23, 1993
(As Revised February 4, 1994)
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of Dreyfus Focus Funds, Inc. (the "Fund"), dated December 23,
1993, as it may be revised from time to time. To obtain a copy of the
Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call the following numbers:
Outside New York State -- Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
(Outside New York City -- Call Collect)
On Long Island -- Call 794-5200
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned
subsidiary of Dreyfus, is the distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . B-2
Management of the Fund. . . . . . . . . . . . . . B-8
Management Agreement. . . . . . . . . . . . . . . B-10
Purchase of Fund Shares . . . . . . . . . . . . . B-11
Distribution Plan and Shareholder Services Plan . B-12
Redemption of Fund Shares . . . . . . . . . . . . B-13
Shareholder Services. . . . . . . . . . . . . . . B-15
Determination of Net Asset Value. . . . . . . . . B-18
Dividends, Distributions and Taxes. . . . . . . . B-19
Portfolio Transactions. . . . . . . . . . . . . . B-21
Performance Information . . . . . . . . . . . . . B-22
Information About the Fund. . . . . . . . . . . . B-23
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . B-23
Financial Statements. . . . . . . . . . . . . . . B-24
Report of Independent Auditors. . . . . . . . . . B-28
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Description
of the Fund."
Portfolio Securities
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 each Portfolio are insured by the FDIC
(although such insurance may not be of material benefit to the Fund,
depending on 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 whose CDs may be purchased by the
Portfolios 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 of such laws and regulations
apply to the 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 branch, 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. These foreign
branches 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 record keeping 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 bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation or 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, by
foreign subsidiaries of domestic banks, by foreign branches of foreign
banks or by domestic branches of foreign banks, the Manager carefully
evaluates such investments on a case-by-case basis.
Management Policies
Each Portfolio may engage in the following practices in
furtherance of its objective.
Options Transactions. Each Portfolio may engage in options
transactions, such as purchasing or writing covered call or put options.
The principal reason for writing covered call options is to realize,
through the receipt of premiums, a greater return than would be realized on
the Portfolio's securities alone. In return for a premium, the writer of a
covered call option forfeits the right to any appreciation in the value of
the underlying security above the strike price for the life of the option
(or until a closing purchase transaction can be effected). Nevertheless,
the call writer retains the risk of a decline in the price of the
underlying security. Similarly, the principal reason for writing covered
put options is to realize income in the form of premiums. The writer of a
covered put option accepts the risk of a decline in the price of the
underlying security. The size of the premiums that the Portfolios may
receive may be adversely affected as new or existing institutions,
including other investment companies, engage in or increase their option-
writing activities.
Options written ordinarily will have expiration dates
between one and nine months from the date written. The exercise price of
the options may be below, equal to or above the market values of the
underlying securities at the 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. Each Portfolio may write
(a) in-the-money call options when the Manager expects that the price of
the underlying security will remain stable or decline moderately during the
option period, (b) at-the-money call options when the Manager expects that
the price of the underlying security will remain stable or advance
moderately during the option period and (c) out-of-the-money call options
when the Manager expects that the premiums received from writing the call
option plus the appreciation in market price of the underlying security up
to the exercise price will be greater than the appreciation in the price of
the underlying security alone. In these circumstances, if the market price
of the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by
the premium received. Out-of-the-money, at-the-money and in-the-money put
options (the reverse of call options as to the relation of exercise price
to market price) may be utilized in the same market environments that such
call options are used in equivalent transactions.
So long as the Portfolio's obligation as the writer of an
option continues, the Portfolio may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring the Portfolio 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 Portfolio effects a
closing purchase transaction. The Portfolio can no longer effect a closing
purchase transaction with respect to an option once it has been assigned an
exercise notice.
While it may choose to do otherwise, each Portfolio
generally will purchase or write only those options for which the Manager
believes there is an active secondary market so as to facilitate closing
transactions. There is no assurance that sufficient trading interest to
create a liquid secondary market on a securities exchange will exist for
any particular option or at any particular time, and for some options no
such secondary market may exist. A liquid secondary market in an option
may cease to exist for a variety of reasons. In the past, for example,
higher than anticipated trading activity or order flow, or other unforeseen
events, at times have rendered certain clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that otherwise may 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 a Portfolio is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise or it otherwise covers its position.
Stock Index Options. Each Portfolio may purchase and write
put and call options on stock indexes listed on U.S. or foreign securities
exchanges or traded in the over-the-counter market. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
Options on stock indexes are similar to options on stock
except that (a) the expiration cycles of stock index options are generally
monthly, while those of stock options are currently quarterly, and (b) the
delivery requirements are different. Instead of giving the right to take
or make delivery of a stock at a specified price, an option on a stock
index gives the holder the right to receive a cash "exercise settlement
amount" equal to (i) the amount, if any, by which the fixed exercise price
of the option exceeds (in the case of a put) or is less than (in the case
of a call) the closing value of the underlying index on the date of
exercise, multiplied by (ii) a fixed "index multiplier." Receipt of this
cash amount will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option. The
amount of cash received will be equal to such difference between the
closing price of the index and the exercise price of the option expressed
in dollars times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index options prior to
expiration by entering into a closing transaction on an exchange or it may
let the option expire unexercised.
Futures Contracts and Options on Futures Contracts. Upon
exercise of an option, the writer of the option will deliver to the holder
of the option the futures position and the accumulated balance in the
writer's futures margin account, which represents the amount by which the
market price of the futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of options on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time
of sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change
daily and that change would be reflected in the net asset value of the
Portfolio.
Foreign Currency Transactions. If a Portfolio enters into
a currency transaction, it will deposit, if so required by applicable
regulations, with its custodian cash or readily marketable securities in a
segregated account of the Portfolio in an amount at least equal to the
value of the Portfolio's total assets committed to the consummation of the
forward contract. If the value of the securities placed in the segregated
account declines, additional cash or securities will be placed in the
account so that the value of the account will equal the amount of the
Portfolio's commitment with respect to the contract.
At or before the maturity of a forward contract, the
Portfolio either may sell a security and make delivery of the currency, or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Portfolio
will obtain, on the same maturity date, the same amount of the currency
which it is obligated to deliver. If the Portfolio retains the portfolio
security and engages in an offsetting transaction, the Portfolio, at the
time of execution of the offsetting transaction, will incur a gain or loss
to the extent movement has occurred in forward contract prices. Should
forward prices decline during the period between the Portfolio's entering
into a forward contract for the sale of a currency and the date it enters
into an offsetting contract for the purchase of the currency, the Portfolio
will realize a gain to the extent the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Portfolio will suffer a loss to the
extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
The cost to a Portfolio of engaging in currency
transactions varies with factors such as the currency involved, the length
of the contract period and the market conditions then prevailing. Because
transactions in currency exchange usually are conducted on a principal
basis, no fees or commissions are involved. The use of forward currency
exchange contracts does not eliminate fluctuations in the underlying prices
of the securities, but it does establish a rate of exchange that can be
achieved in the future. If a devaluation generally is anticipated, the
Portfolio may not be able to contract to sell the currency at a price above
the devaluation level it anticipates. The requirements for qualification
as a regulated investment company under the Internal Revenue Code of 1986,
as amended (the "Code"), may cause the Portfolios to restrict the degree to
which they engage in currency transactions. See "Dividends, Distributions
and Taxes."
Lending Portfolio Securities. To a limited extent, each
Portfolio 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 securities, the
Portfolio can increase its income through the investment of the cash
collateral. For purposes of this policy, the Fund considers collateral
consisting of U.S. Government securities or irrevocable letters of credit
issued by banks whose securities meet the standards for investment by the
Portfolio to be the equivalent of cash. From time to time, the Fund may
return to the borrower or a third party which is unaffiliated with the
Fund, and which is acting as a "placing broker," a part of the interest
earned from the investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires
that the following conditions must be met whenever portfolio securities are
loaned: (1) the Portfolio must receive at least 100% cash collateral from
the borrower; (2) the borrower must increase such collateral whenever the
market value of the securities rises above the level of such collateral;
(3) the Portfolio must be able to terminate the loan at any time; (4) the
Portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions payable on the loaned
securities, and any increase in market value; (5) the Portfolio may pay
only reasonable custodian fees in connection with the loan; and (6) while
voting rights on the loaned securities may pass to the borrower, the Fund's
Board of 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.
Investment Restrictions. Each Portfolio has adopted
investment restrictions numbered 1 through 10 as fundamental policies.
These restrictions cannot be changed, as to a Portfolio, without approval
by the holders of a majority (as defined in the Investment Company Act of
1940, as amended (the "Act")) of such Portfolio's outstanding voting
shares. Investment restrictions numbered 11 through 16 are not fundamental
policies and may be changed by vote of a majority of the Fund's Directors
at any time. No Portfolio may:
1. Invest more than 5% of its assets in the obligations of
any single issuer, except that up to 25% of the value of the Portfolio's
total assets may be invested, and securities issued or guaranteed by the
U.S. Government, or its agencies or instrumentalities may be purchased,
without regard to any such limitation.
2. Hold more than 10% of the outstanding voting securities
of any single issuer. This Investment Restriction applies only with
respect to 75% of the Portfolio's total assets.
3. Invest more than 25% of the value of its total assets
in the securities of issuers in any single industry, provided that there
shall be no limitation on the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
4. Invest in commodities, except that the Portfolio may
purchase and sell options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts or indexes.
5. Purchase, hold or deal in real estate, or oil, gas or
other mineral leases or exploration or development programs, but the
Portfolio may purchase and sell securities that are secured by real estate
or issued by companies that invest or deal in real estate or real estate
investment trusts.
6. Borrow money, except to the extent permitted under the
Act. For purposes of this Investment Restriction, the entry into options,
forward contracts, futures contracts, including those relating to indexes,
and options on futures contracts or indexes shall not constitute borrowing.
7. Make loans to others, except through the purchase of
debt obligations and the entry into repurchase agreements. However, the
Portfolio may lend its portfolio securities in an amount not to exceed 33-
1/3% of the value of its total assets. Any loans of portfolio securities
will be made according to guidelines established by the Securities and
Exchange Commission and the Fund's Board of Directors.
8. Act as an underwriter of securities of other issuers,
except to the extent the Portfolio may be deemed an underwriter under the
Securities Act of 1933, as amended, by virtue of disposing of portfolio
securities.
9. Issue any senior security (as such term is defined in
Section 18(f) of the Act), except to the extent the activities permitted
in Investment Restriction Nos. 4, 6, 13 and 14 may be deemed to give rise
to a senior security.
10. Purchase securities on margin, but the Portfolio may
make margin deposits in connection with transactions in options, forward
contracts, futures contracts, including those relating to indexes, and
options on futures contracts or indexes.
11. Purchase securities of any company having less than
three years' continuous operations (including operations of any
predecessor) if such purchase would cause the value of the Portfolio's
investments in all such companies to exceed 5% of the value of its total
assets.
12. Invest in the securities of a company for the purpose
of exercising management or control, but the Portfolio will vote the
securities it owns in its portfolio as a shareholder in accordance with its
views.
13. Pledge, mortgage or hypothecate its assets, except to
the extent necessary to secure permitted borrowings and to the extent
related to the purchase of securities on a when-issued or forward
commitment basis and the deposit of assets in escrow in connection with
writing covered put and call options and collateral and initial or
variation margin arrangements with respect to options, forward contracts,
futures contracts, including those relating to indexes, and options on
futures contracts or indexes.
14. Purchase, sell or write puts, calls or combinations
thereof, except as described in the Fund's Prospectus and Statement of
Additional Information.
15. Enter into repurchase agreements providing for
settlement in more than seven days after notice or purchase securities
which are illiquid, if, in the aggregate, more than 15% of the value of the
Portfolio's net assets would be so invested.
16. Purchase securities of other investment companies,
except to the extent permitted under the Act.
If a percentage restriction is adhered to at the time of
investment, a later change in percentage resulting from a change in values
or assets will not constitute a violation of such restriction.
Each Portfolio may invest, notwithstanding any other
investment restriction (whether or not fundamental), all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies and
restrictions as the Portfolio.
The Fund may make commitments more restrictive than the
restrictions listed above so as to permit the sale of Portfolio shares in
certain states. Should the Fund determine that a commitment is no longer
in the best interest of the Portfolio and its shareholders, the Fund
reserves the right to revoke the commitment by terminating the sale of such
Portfolio's shares in the state involved.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with
information as to their principal business occupations during at least the
last five years, are shown below. Each Director who is deemed to be an
"interested person" of the Fund, as defined in the Act, is indicated by an
asterisk.
Directors and Officers of the Fund
*HOWARD STEIN, President, Investment Officer and Director. Chairman of the
Board and Chief Executive Officer of the Manager, Chairman of the
Board of the Distributor and an officer, director, general partner or
trustee of other investment companies advised and administered by the
Manager. His address is 200 Park Avenue, New York, New York 10166.
EHUD HOUMINER, Director. Since July, 1991, Professor and Executive-in
-Residence at the Columbia Business School, Columbia University and,
since February, 1992, a Consultant to Bear Stearns & Co., Inc.,
investment bankers. He was President and Chief Executive Officer of
Philip Morris USA, manufacturers of consumer products, from December
1988 until September 1990. He is a Director of Avnet Inc. His
address is Columbia Business School, Columbia University, Uris Hall,
Room 526, New York, New York 10027.
GLORIA MESSINGER, Director. From 1981 to 1993, Managing Director and Chief
Executive Officer of ASCAP (American Society of Composers, Authors and
Publishers). She is a member of the Board of Directors of the Yale
Law School Fund and was secretary of the ASCAP and served as a Trustee
of the Copyright Society of the United States. She is also a member
of numerous professional and civic organizations. Her address is 747
Third Avenue, 11th Floor, New York, new York 10017.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the
Directors of the Fund who are not "interested persons" of the Fund, as
defined in the Act, will be selected and nominated by the Directors who are
not "interested persons" of the Fund.
Officers of the Fund Not Listed Above
ERNEST G. WIGGINS, JR., Executive Vice President and Investment Officer.
Since January, 1994, an officer of investment companies advised and
administered by the manager. From August, 1993 to December 1993, he
was Senior Vice President of GAMCO Investors, Inc. He was President
of Gabelli International, Inc. from September, 1992 through July,
1993. Form 1980 through August, 1992, he was employed by Fidelity
Management and Research Company in various capacities, including
Director of Training and Development and Fund Manager of Fidelity
Value Fund.
DANIEL C. MACLEAN, Vice President. Vice President and General Counsel of
the Manager, Secretary of the Distributor and an officer or director
of other investment companies advised or administered by the Manager.
MARK N. JACOBS, Vice President. Secretary and Deputy General Counsel of
the Manager and an officer of other investment companies advised or
administered by the Manager.
JEFFREY N. NACHMAN, Vice President and Treasurer. Vice President-Mutual
Fund Accounting of the Manager and an officer of other investment
companies advised or administered by the Manager.
THOMAS J. DURANTE, Controller. Senior Accounting Manager in the Fund
Accounting Department of the Manager and an officer of other
investment companies advised or administered by the Manager.
STEVEN F. NEWMAN, Secretary. Associate General Counsel of the Manager and
an officer of other investment companies advised or administered by
the Manager.
MICHAEL A. ROSENBERG, Assistant Secretary. Since October 1991, an Attorney
in the Manager's Legal Department. From October 1990 to October 1991,
Associate with Sheriff, Friedman, Hoffman & Goodman. From 1986 to
September, 1989, Financial Analyst with the Securities and Exchange
Commission, Division of Investment Management.
CHRISTINE PAVALOS, Assistant Secretary. Assistant Secretary of the
Manager, the Distributor and other investment companies advised or
administered by the Manager.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated December 17, 1993, with the Fund. As to
each Portfolio, the Agreement is subject to annual approval by (i) the
Fund's Board of Directors or (ii) vote of a majority (as defined in the
Act) of the outstanding voting securities of the such Portfolio, provided
that in either event the continuance also is approved by a majority of the
Directors who are not "interested persons" (as defined in the Act) of the
Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. As to each Portfolio, the Agreement is
terminable without penalty, on 60 days' notice, by the Fund's Board of
Directors or by vote of the holders of a majority of such Portfolio's
shares, or, on not less than 90 days' notice, by the Manager. The
Agreement will terminate automatically, as to the relevant Portfolio, in
the event of its assignment (as defined in the Act).
The Manager manages each Portfolio's investments in accordance with
the stated policies of such Portfolio, subject to the approval of the
Fund's Board of Directors. The Manager is responsible for investment
decisions, and provides the Fund with Investment Officers who are
authorized by the Board of Directors to execute purchases and sales of
securities. The Fund's Investment Officers are Howard Stein, Patricia A.
Cuddy, Richard B. Hoey, Barbara L. Kenworthy, Jeffrey F. Friedman and
Ernest G. Wiggins, Jr. The Manager also maintains a research department
with a professional staff of portfolio managers and securities analysts who
provide research services for the Fund as well as for other funds advised
by the Manager. All purchases and sales are reported for the Directors'
review at the meeting subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: organizational costs, taxes, interest,
loan commitment fees, interest and distributions paid on securities sold
short, brokerage fees and commissions, if any, fees of Directors who are
not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory fees, charges
of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs of independent
pricing services, costs attributable to investor services (including,
without limitation, telephone and personnel expenses), costs of
shareholders' reports and corporate meetings, costs of preparing and
printing certain prospectuses and statements of additional information, and
any extraordinary expenses. Expenses attributable to a particular
Portfolio are charged against the assets of that Portfolio; other expenses
of the Fund are allocated between the Portfolios on the basis determined by
the Board of Directors, including, but not limited to, proportionately in
relation to the net assets of each Portfolio.
In addition, the Fund is subject to an annual distribution fee for
advertising, marketing and distributing Portfolio shares and an annual
service fee for ongoing personal services relating to shareholder accounts
and services related to the maintenance of shareholder accounts. See
"Distribution Plan and Shareholder Services Plan."
The Manager pays the salaries of all officers and employees employed
by both it and the Fund, maintains office facilities, and furnishes
statistical and research data, clerical help, accounting, data processing,
bookkeeping and internal auditing and certain other required services. The
Manager also may make such advertising and promotional expenditures, using
its own resources, as it from time to time deems appropriate.
As to each Portfolio, the Manager has agreed that if in any fiscal
year the aggregate expenses of the Portfolio, exclusive of taxes,
brokerage, interest on borrowings and (with the prior written consent of
the necessary state securities commissions) extraordinary expenses, but
including the management fee, exceed the expense limitation of any state
having jurisdiction over the Fund, the Fund may deduct from the payment to
be made to the Manager under the Agreement, or the Manager will bear, such
excess expense to the extent required by state law. Such deduction or
payment, if any, will be estimated daily, and reconciled and effected or
paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Portfolio's net assets increases.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made between the hours of 8:00 a.m. and 4:00 p.m., New York time, on
any business day that The Shareholder Services Group, Inc., the Fund's
transfer and dividend disbursing agent (the "Transfer Agent"), and the New
York Stock Exchange are open. Such purchases will be credited to the
shareholder's Fund account on the next bank business day. To qualify to
use the Dreyfus TeleTransfer Privilege, the initial payment for purchase of
Fund shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or Optional
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--Dreyfus
TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year, provided the information on the old Account Application
is still applicable.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan and Shareholder Services Plan."
Portfolio shares are subject to a Distribution Plan and a Shareholder
Services Plan.
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the Securities
and Exchange Commission under the Act provides, among other things, that an
investment company may bear expenses of distributing its shares only
pursuant to a plan adopted in accordance with the Rule. The Fund's Board
of Directors has adopted such a plan (the "Distribution Plan") with respect
to the Portfolios' shares, pursuant to which the Fund pays the Distributor
for advertising, marketing and distributing Portfolio shares. Under the
Distribution Plan, the Distributor may make payments to certain financial
institutions, securities dealers and other financial industry professionals
(collectively, "Service Agents") in respect to these services. The Fund's
Board of Directors believes that there is a reasonable likelihood that the
Distribution Plan will benefit each Portfolio and its shareholders. In
some states, certain financial institutions effecting transactions in
Portfolio shares may be required to register as dealers pursuant to state
law.
A quarterly report of the amounts expended under the Distribution
Plan, and the purposes for which such expenditures were incurred, must be
made to the Directors for their review. In addition, the Distribution Plan
provides that it may not be amended to increase materially the costs which
Portfolio shareholders may bear for distribution pursuant to the
Distribution Plan without shareholder approval and that other material
amendments of the Distribution Plan must be approved by the Board of
Directors, and by the Directors who are not "interested persons" (as
defined in the Act) of the Fund and have no direct or indirect financial
interest in the operation of the Distribution Plan or in any agreements
entered into in connection with the Distribution Plan, by vote cast in
person at a meeting called for the purpose of considering such amendments.
The Distribution Plan is subject to annual approval by such vote of the
Directors cast in person at a meeting called for the purpose of voting on
the Distribution Plan. The Distribution Plan may be terminated at any time
with respect to each Portfolio 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 the Distribution Plan or in any agreements
entered into in connection with the Distribution Plan or by vote of the
holders of a majority of the Portfolio's shares.
Shareholder Services Plan. The Fund has adopted a Shareholder
Services Plan, pursuant to which the Fund pays the Distributor for the
provision of certain services to each Portfolio's shareholders.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Directors for their review. In addition, the
Shareholder Services Plan provides that it may not be amended without
approval of the Directors, and by the Directors who are not "interested
persons" (as defined in the Act) of the Fund and have no direct or indirect
financial interest in the operation of the Shareholder Services Plan or in
any agreements entered into in connection with the Shareholder Services
Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Shareholder Services Plan is subject to
annual approval by such vote of the Directors cast in person at a meeting
called for the purpose of voting on the Shareholder Services Plan. The
Shareholder Services Plan is terminable at any time with respect to each
Portfolio 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 the Shareholder Services Plan or in any agreements entered into in
connection with the Shareholder Services Plan.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
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 Optional 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 TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
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."
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the Automated Clearing House ("ACH") system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Fund Shares--Dreyfus
TeleTransfer Privilege."
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
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York
Stock Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of a Portfolio,
limited in amount during any 90-day period to the lesser of $250,000 or 1%
of the value of such Portfolio's net assets at the beginning of such
period. Such commitment is irrevocable without the prior approval of the
Securities and Exchange Commission. In the case of requests for redemption
in excess of such amount, the Board of Directors reserves the right to make
payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the
Portfolio to the detriment of the existing shareholders. In such event,
the securities would be valued in the same manner as the Portfolio's
securities are 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 Securities and Exchange
Commission so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange Commission by order may permit to
protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Exchange Privilege. Shares of other Portfolios of the Fund or 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.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their
account number.
To use this Privilege, an investor or the investor's Service Agent
acting on the investor's behalf must give exchange instructions to the
Transfer Agent in writing, by wire or by telephone. Telephone exchanges
may be made only if the appropriate "YES" box has been checked on the
Account Application, or a separate signed Optional Services Form is on file
with the Transfer Agent. By using this Privilege, the investor authorizes
the Transfer Agent to act on telephonic, telegraphic or written exchange
instructions from any person representing himself or herself to be the
investor or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange.
To establish a Personal Retirement Plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and SEP-IRAs with only one
participant, the minimum initial investment is $750. To exchange shares
held in Corporate Plans, 403(b)(7) Plans and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with more than one participant, the
minimum initial investment is $100 if the plan has at least $2,500 invested
among the funds in the Dreyfus Family of Funds. To exchange shares held in
Personal Retirement Plans, the shares exchanged must have a current value
of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange permits an
investor to purchase, in exchange for shares of a Portfolio, shares of one
of the other Portfolios of the Fund or shares of another fund in the
Dreyfus Family of Funds. This Privilege is available only for existing
accounts. Shares will be exchanged on the basis of relative net asset
value as set forth under "Exchange Privilege" above. 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 Dreyfus Auto-Exchange Privilege are
available to shareholders resident in any state in which shares of the fund
being acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Optional Services Forms and prospectuses of the other funds may be
obtained from the Distributor, 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144. The Fund reserves the right to reject any exchange
request in whole or in part. The Exchange Privilege or the Dreyfus Auto-
Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Automatic Withdrawal Plan. Automatic Withdrawal 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 distribu-
tions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by completing
the appropriate application available from the Distributor. There is a
service charge of $.50 for each withdrawal check. Automatic Withdrawal may
be terminated at any time by the investor, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through
the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep Privilege. Dreyfus Dividend Sweep Privilege
allows investors to invest on the payment date their dividends or dividends
and capital gain distributions, if any, from a Portfolio in shares of
another Portfolio of the Fund or shares of another fund in the Dreyfus
Family of Funds of which the investor is a shareholder. Shares of other
funds purchased pursuant to this Privilege will be purchased on the basis
of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales load charged by
the fund from which dividends or distributions are being swept, without
giving effect to any reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested
in shares of other funds that impose a contingent deferred sales charge and
the applicable contingent deferred sales charge, if any, will be imposed
upon redemption of such shares.
Personal Retirement Plans. The Fund makes available Keogh Plans and
IRAs, including SEP-IRAs and IRA "Rollover Accounts" for individuals. Plan
support services also are available. For details, please contact the
Dreyfus Group Retirement Plans, a division of the Distributor, by calling
toll free 1-800-358-5566.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan or an IRA, including an SEP-IRA, may request from the Distributor
forms for adoption of such plans.
The entity acting as custodian for Keogh 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 Dreyfus-sponsored Keogh Plans, IRAs
and SEP-IRAs with only one participant, is normally $750, with no minimum
on subsequent purchases. Individuals who open an IRA may also 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.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund
Shares."
Valuation of Portfolio Securities. Each Portfolio's securities,
including covered call options written by a Portfolio, are valued at the
last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were
no transactions, are valued at the average of the most recent bid and asked
prices, except in the case of open short positions where the asked price is
used for valuation purposes. Bid price is used when no asked price is
available. Any assets or liabilities initially expressed in terms of
foreign currency will be translated into dollars at the midpoint of the
New York interbank market spot exchange rate as quoted on the day of such
translation by the Federal Reserve Bank of New York or if no such rate is
quoted on such date, at the exchange rate previously quoted by the Federal
Reserve Bank of New York or at such other quoted market exchange rate as
may be determined to be appropriate by the Manager. Forward currency
contracts will be valued at the current cost of offsetting the contract.
Because of the need to obtain prices as of the close of trading on various
exchanges throughout the world, the calculation of net asset value does not
take place contemporaneously with the determination of prices of certain of
the Portfolios' securities. Short-term investments are carried at
amortized cost, which approximates value. Any securities or other assets
for which recent market quotations are not readily available are valued at
fair value as determined in good faith by the Fund's Board of Directors.
Expenses and fees of the Fund, including the management fee paid by the
Fund and fees pursuant to the Distribution Plan and Shareholder Services
Plan are accrued daily and taken into account for the purpose of
determining the net asset value of Fund shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors
will review the method of valuation on a current basis. In making their
good faith valuation of restricted securities, the Directors generally will
take the following factors into consideration: restricted securities which
are, or are convertible into, securities of the same class of securities
for which a public market exists usually will be valued at market value
less the same percentage discount at which purchased. This discount will
be revised periodically by the Board of Directors if the Directors believe
that it no longer reflects the value of the restricted securities.
Restricted securities not of the same class as securities for which a
public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
It is expected that each Portfolio will qualify as a "regulated
investment company" under the Code, as long as such qualification is in the
best interests of its shareholders. As a regulated investment company, the
Portfolios will pay no Federal income tax on net investment income and net
realized securities gains to the extent that such income and gains are
distributed to shareholders in accordance with applicable provisions of the
Code. To qualify as a regulated investment company, each Portfolio must
distribute at least 90% of its net income (consisting of net investment
income and net short-term capital gain) to its shareholders, must derive
less than 30% of its annual gross income from gain on the sale of
securities held for less than three months, and must meet certain asset
diversification and other requirements. Accordingly, the Portfolios may be
restricted in the selling of securities held for less than three months.
The Code, however, allows the Portfolios to net certain offsetting
positions, making it easier for the Portfolios to satisfy the 30% test.
The term "regulated investment company" does not imply the supervision of
management or investment practices or policies by any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of the shares below the
cost of the investment. Such a dividend or distribution would be a return
of investment in an economic sense, although taxable as stated above. In
addition, the Code provides that if a shareholder holds shares of the Fund
for six months or less and has received a capital gain distribution with
respect to such shares, any loss incurred on the sale of such shares will
be treated as long-term capital loss to the extent of the capital gain
distribution received.
Depending upon the composition of a Portfolio's income, the entire
amount or a portion of the dividends paid by such Portfolio from net
investment income may qualify for the dividends received deduction
allowable to qualifying U.S. corporate shareholders ("dividends received
deduction"). In general, dividend income of a Portfolio distributed to
qualifying corporate shareholders will be eligible for the dividends
received deduction only to the extent that such Portfolio's income consists
of dividends paid by U.S. corporations. However, Section 246(c) of the
Code provides that if a qualifying corporate shareholder has disposed of
Portfolio shares not held for more than 46 days and has received a dividend
from net investment income with respect to such shares, the portion
designated by the Portfolio as qualifying for the dividends received
deduction will not be eligible for such shareholder's dividends received
deduction. In addition, the Code provides other limitations with respect to
the ability of a qualifying corporate shareholder to claim the dividends
received deduction in connection with holding Portfolio shares.
A Portfolio may qualify for and may make an election permitted under
Section 853 of the Code so that shareholders may be eligible to claim a
credit or deduction on their Federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro
rata portion of qualified taxes paid or incurred by the Portfolio to
foreign countries (which taxes relate primarily to investment income). A
Portfolio may make an election under Section 853, provided that more than
50% of the value of the Portfolio's total assets at the close of the
taxable year consists of securities in foreign corporations, and the
Portfolio satisfies the applicable distribution provisions of the Code.
The foreign tax credit available to shareholders is subject to certain
limitations imposed by the Code.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gain or
loss realized from the disposition of foreign currencies (including foreign
currency denominated bank deposits) and non-U.S. dollar denominated
securities (including debt instruments and certain forward contracts and
options) may be treated as ordinary income or loss under Section 988 of the
Code. In addition, all or a portion of the gain realized from the
disposition of market discount bonds will be treated as ordinary income
under section 1276. A market discount bond is defined as any bond
purchased by the Fund after April 30, 1993, and after its original
issuance, at a price below its face or accreted value. Finally, all or a
portion of the gain realized from engaging in "conversion transactions" may
be treated as ordinary income under Section 1258. "Conversion
transactions" are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold to produce capital
gains, or transactions described in Treasury regulations to be issued in
the future.
Under Section 1256 of the Code, any gain or loss realized by a
Portfolio from certain forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the
Portfolio's taxable year will be treated as sold for their then fair market
value, resulting in additional gain or loss to such Portfolio characterized
in the manner described above.
Offsetting positions held by a Portfolio involving certain foreign
currency forward contracts or options may constitute "straddles."
"Straddles" are defined to include "offsetting positions" in actively
traded personal property. The tax treatment of "straddles" is governed by
Sections 1092 and 1258 of the Code, which, in certain circumstances,
overrides or modifies the provisions of Section 1256 and 988. As such, all
or a portion of any short or long-term capital gain from certain "straddle"
transactions may be recharacterized to ordinary income.
If a Portfolio were treated as entering into "straddles" by reason of
its engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles"
were governed by Section 1256 of the Code. A Portfolio may make one or
more elections with respect to "mixed straddles." Depending on which
election is made, if any, the results to the Portfolio may differ. If no
election is made to the extent the "straddle" and conversion transaction
rules apply to positions established by the Portfolio, losses realized by
the Portfolio will be deferred to the extent of unrealized gain in the
offsetting position. Moreover, as a result of the "straddle" rules,
short-term capital loss on "straddle" positions may be recharacterized as
long-term capital loss, and long-term capital gains may be treated as
short-term capital gains or ordinary income.
If a Portfolio invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result
in the imposition of certain federal income taxes on the Portfolio. Under
Proposed Treasury Regulation Section 1.1291-8(a), the Portfolios can elect
to mark-to-market gains (but not losses) from PFIC securities in lieu of
paying taxes on gain or distributions therefrom. Such gains will be
treated as ordinary income under Proposed Treasury Regulation Section
1.1291-8(b)(2).
Investment by a Portfolio in securities issued at a discount or
providing for deferred interest or for payment of interest in the form of
additional obligation could under special tax rules affect the amount,
timing and character of distributions to shareholders by causing a
Portfolio to recognize income prior to the receipt of cash payments. For
example, a Portfolio could be required to accrue as income each year a
portion of the discount (or deemed discount) at which such securities were
issued and to distribute such income. In such case, a Portfolio may have
to dispose of securities which it might otherwise have continued to hold in
order to generate cash to satisfy these distribution requirements.
PORTFOLIO TRANSACTIONS
The Manager assumes general supervision over placing orders on behalf
of the Fund for the purchase or sale of investment securities. Allocation
of brokerage transactions, including their frequency, is made in the
Manager's best judgment and in a manner deemed fair and reasonable to
shareholders. The primary consideration is prompt execution of orders at
the most favorable net price. Subject to this consideration, the brokers
selected will include those that supplement the Manager's research
facilities with statistical data, investment information, economic facts
and opinions. Information so received is in addition to and not in lieu of
services required to be performed by the Manager and the fee of the Manager
is not reduced as a consequence of the receipt of such supplemental
information.
Such information may be useful to the Manager in serving both the Fund
and other funds which it manages and, conversely, supplemental information
obtained by the placement of business of other clients may be useful to the
Manager in carrying out its obligations to the Fund. Sales of Fund shares
by a broker may be taken into consideration, and brokers also will be
selected because of their ability to handle special executions such as are
involved in large block trades or broad distributions, provided the primary
consideration is met. Large block trades may, in certain cases, result
from two or more funds advised or administered by the Manager being engaged
simultaneously in the purchase or sale of the same security.
Portfolio turnover may vary from year to year as well as within a year.
It is anticipated that in any fiscal year the turnover rate of each
Portfolio may approach the 150% level; however, in periods in which
extraordinary market conditions prevail, the Manager will not be deterred
from changing each Portfolio's investment strategy as rapidly as needed, in
which case higher turnover rates can be anticipated which would result in
greater brokerage expenses. The overall reasonableness of brokerage
commissions paid is evaluated by the Manager based upon its knowledge of
available information as to the general level of commissions paid by other
institutional investors for comparable services.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of each
Portfolio's net asset value per share at the beginning of a stated period
from the net asset value per share at the end of the period (after giving
effect to the reinvestment of dividends and distributions during the
period), and dividing the result by the net asset value per share at the
beginning of the period.
Comparative performance may be used from time to time in advertising
the Fund's shares, including data from Lipper Analytical Services, Inc.,
Standard & Poor's 500 Composite Stock Price Index, the Wilshire 5000 Index,
the Dow Jones Industrial Average, Money Magazine, Morningstar, Inc. and
other industry publications. From time to time, the Fund may compare its
performance against inflation with the performance of other instruments
against inflation, such as short-term Treasury Bills (which are direct
obligations of the U.S. Government) and FDIC-insured bank money market
accounts.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. Portfolio shares are of one class and have equal rights as
to dividends and in liquidation. Shares have no preemptive, subscription
or conversion rights and are freely transferable.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
The Bank of New York, 110 Washington Street, New York, New York 10286,
is the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's transfer and dividend disbursing agent.
Neither The Bank of New York nor The Shareholder Services Group, Inc. has
any part in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-
2696, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares of
Common Stock being sold pursuant to the Fund's Prospectus.
Ernst & Young, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
DREYFUS FOCUS FUNDS, INC.
DREYFUS LARGE COMPANY GROWTH
Statement of Assets and Liabilities
December 17, 1993
ASSETS
Cash $25,000
Deferred organization expenses 25,531
Total Assets $50,531
LIABILITIES
Accrued organization expenses 25,531
NET ASSETS applicable to 2,000 shares of
common stock ($.001 par value) issued
and outstanding (100 million shares
authorized) $25,000
NET ASSET VALUE, and redemption price per
share ($25,000/2,000 shares of common
stock issued and outstanding) $12.50
NOTE - Dreyfus Focus Funds, Inc. (the "Fund") was incorporated on
November 16, 1993 and has had no operations since that date other than
matters relating to its organization and registration as an open-end
investment company under the Investment Company Act of 1940 and the
Securities Act of 1933 and the sale and issuance of 2,000 shares of common
stock of each Portfolio to The Dreyfus Corporation ("Initial Shares").
Organization expenses payable by the Fund have been deferred and will be
amortized from the date operations commence over a period which it is
expected that a benefit will be realized, not to exceed five years. If any
of the Initial Shares of any series are redeemed during the amortization
period by any holder thereof, the redemption proceeds will be reduced by
any unamortized organization expenses of that Portfolio in the same
proportion as the number of Initial Shares being redeemed bears to the
number of Initial Shares outstanding of that Portfolio at the time of the
redemption. DREYFUS FOCUS FUNDS, INC.
DREYFUS LARGE COMPANY VALUE
Statement of Assets and Liabilities
December 17, 1993
ASSETS
Cash $25,000
Deferred organization expenses 25,531
Total Assets $50,531
LIABILITIES
Accrued organization expenses 25,531
NET ASSETS applicable to 2,000 shares of
common stock ($.001 par value) issued
and outstanding (100 million shares
authorized) $25,000
NET ASSET VALUE, and redemption price per
share ($25,000/2,000 shares of common
stock issued and outstanding) $12.50
NOTE - Dreyfus Focus Funds, Inc. (the "Fund") was incorporated on
November 16, 1993 and has had no operations since that date other than
matters relating to its organization and registration as an open-end
investment company under the Investment Company Act of 1940 and the
Securities Act of 1933 and the sale and issuance of 2,000 shares of common
stock of each Portfolio to The Dreyfus Corporation ("Initial Shares").
Organization expenses payable by the Fund have been deferred and will be
amortized from the date operations commence over a period which it is
expected that a benefit will be realized, not to exceed five years. If any
of the Initial Shares of any series are redeemed during the amortization
period by any holder thereof, the redemption proceeds will be reduced by
any unamortized organization expenses of that Portfolio in the same
proportion as the number of Initial Shares being redeemed bears to the
number of Initial Shares outstanding of that Portfolio at the time of the
redemption. DREYFUS FOCUS FUNDS, INC.
DREYFUS SMALL COMPANY GROWTH
Statement of Assets and Liabilities
December 17, 1993
ASSETS
Cash $25,000
Deferred organization expenses 25,531
Total Assets $50,531
LIABILITIES
Accrued organization expenses 25,531
NET ASSETS applicable to 2,000 shares of
common stock ($.001 par value) issued
and outstanding (100 million shares
authorized) $25,000
NET ASSET VALUE, and redemption price per
share ($25,000/2,000 shares of common
stock issued and outstanding) $12.50
NOTE - Dreyfus Focus Funds, Inc. (the "Fund") was incorporated on
November 16, 1993 and has had no operations since that date other than
matters relating to its organization and registration as an open-end
investment company under the Investment Company Act of 1940 and the
Securities Act of 1933 and the sale and issuance of 2,000 shares of common
stock of each Portfolio to The Dreyfus Corporation ("Initial Shares").
Organization expenses payable by the Fund have been deferred and will be
amortized from the date operations commence over a period which it is
expected that a benefit will be realized, not to exceed five years. If any
of the Initial Shares of any series are redeemed during the amortization
period by any holder thereof, the redemption proceeds will be reduced by
any unamortized organization expenses of that Portfolio in the same
proportion as the number of Initial Shares being redeemed bears to the
number of Initial Shares outstanding of that Portfolio at the time of the
redemption. DREYFUS FOCUS FUNDS, INC.
DREYFUS SMALL COMPANY VALUE
Statement of Assets and Liabilities
December 17, 1993
ASSETS
Cash $25,000
Deferred organization expenses 25,531
Total Assets $50,531
LIABILITIES
Accrued organization expenses 25,531
NET ASSETS applicable to 2,000 shares of
common stock ($.001 par value) issued
and outstanding (100 million shares
authorized) $25,000
NET ASSET VALUE, and redemption price per
share ($25,000/2,000 shares of common
stock issued and outstanding) $12.50
NOTE - Dreyfus Focus Funds, Inc. (the "Fund") was incorporated on
November 16, 1993 and has had no operations since that date other than
matters relating to its organization and registration as a diversified,
open-end investment company under the Investment Company Act of 1940 and
the Securities Act of 1933 and the sale and issuance of 2,000 shares of
common stock of each Portfolio to The Dreyfus Corporation ("Initial
Shares"). Organization expenses payable by the Fund have been deferred and
will be amortized from the date operations commence over a period which it
is expected that a benefit will be realized, not to exceed five years. If
any of the Initial Shares of any series are redeemed during the
amortization period by any holder thereof, the redemption proceeds will be
reduced by any unamortized organization expenses of that series in the same
proportion as the number of Initial Shares being redeemed bears to the
number of Initial Shares outstanding of that series at the time of the
redemption.
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Directors
Dreyfus Focus Funds, Inc.
We have audited the accompanying statements of assets and liabilities of
Dreyfus Focus Funds, Inc. (comprising Dreyfus Large Company Growth, Dreyfus
Large Company Value, Dreyfus Small Company Growth and Dreyfus Small Company
Value portfolios) as of December 17, 1993. These statements of assets and
liabilities are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these statements of assets and
liabilities 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 these statements of assets and
liabilities are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the statement of assets and liabilities. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statement of assets and
liabilities presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of each of
the respective portfolios constituting the Dreyfus Focus Funds, Inc. at
December 17, 1993, in conformity with generally accepted accounting
principles.
New York, New York
December 20, 1993
Ernst & Young
