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PROSPECTUS FEBRUARY 28, 1995
DREYFUS FOCUS FUNDS, INC.
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Dreyfus Focus Funds, Inc. (the "Fund") is an open-end, management
investment company, known as a mutual fund. The Fund consists of four
separate diversified portfolios (each, a "Portfolio"): Dreyfus Large Company
Growth; Dreyfus Large Company Value; Dreyfus Small Company Growth; and
Dreyfus Small Company Value. Each Portfolio seeks capital appreciation by
investing primarily in common stocks in one of four sub-categories of
companies which meet certain criteria established by The Dreyfus Corporation.
The Dreyfus Corporation professionally manages each Portfolio.
You can invest, reinvest or redeem shares at any time without charge
or penalty imposed by the Fund.
This Prospectus sets forth concisely information about the Fund that
you should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information, dated February 28, 1995,
which may be revised from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of interest
to some investors. It has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. For a free copy, write to
the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call 1-800-645-6561. When telephoning, ask for Operator 666.
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.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
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TABLE OF CONTENTS
Page
Annual Fund Operating Expenses.................... 3
Condensed Financial Information................... 4
Description of the Fund........................... 4
Management of the Fund............................ 16
How to Buy Fund Shares............................ 17
Shareholder Services.............................. 19
How to Redeem Fund Shares......................... 22
Distribution Plan and Shareholder Services Plan... 24
Dividends, Distributions and Taxes................ 25
Performance Information........................... 26
General Information............................... 26
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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This Page Intentionally Left Blank
Page 2
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C> <C> <C> <C>
LARGE LARGE SMALL SMALL
COMPANY COMPANY COMPANY COMPANY
GROWTH VALUE GROWTH VALUE
Management Fees.................... .75% .75% .75% .75%
12b-1 Fees......................... .50% .50% .50% .50%
Other Expenses..................... 1.09% 1.14% 1.08% 1.22%
Total Portfolio Operating Expenses. 2.34% 2.39% 2.33% 2.47%
EXAMPLE:
An investor would pay the
following expenses on a $1,000
investment, assuming (1) 5%
annual return and (2) redemption
at the end of each time period:
1 YEAR............................. $ 24 $ 24 $ 24 $ 25
3 YEARS............................ $ 73 $ 75 $ 73 $ 77
5 YEARS............................ $125 $128 $125 $132
10 YEARS........................... $268 $273 $267 $281
</TABLE>
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The amounts listed in the example should not be considered as
representative of past or future expenses and actual
expenses may be greater or less than those indicated. Moreover, while the
example assumes a 5% annual return, each Portfolio's actual performance will
vary and may result in an actual return greater or less than 5%.
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The purpose of the foregoing table is to assist you in understanding
the various costs and expenses borne by the Fund, and therefore indirectly by
investors, the payment of which will reduce investors' return on an annual
basis. Long-term investors could pay more in 12b-1 fees than the economic
equivalent of paying a front-end sales charge. The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain Service Agents (as defined below)
may charge their clients direct fees for effecting transactions in Fund
shares; such fees are not reflected in the foregoing table. See "Management
of the Fund," "How to Buy Fund Shares" and "Distribution Plan and Shareholder
Services Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each Portfolio for the period December
29, 1993 (commencement of operations) to October 31, 1994. This information
has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
LARGE LARGE SMALL SMALL
COMPANY COMPANY COMPANY COMPANY
GROWTH VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning of period..... $12.50 $12.50 $12.50 $12.50
------- ------- ------ -----
-Investment Operations:
Investment income_net .................. .17 .26 .09 .30
Net realized and unrealized gain (loss) on investments
and foreign currency transactions........ .38 (.13) (.32) (.37)
------- ------- ------ ------
Total from Investment Operations......... .55 .13 (.23) (.07)
------- ------- ------ ------
Net asset value, end of period........... $13.05 $12.63 $12.27 $12.43
======= ====== ======= ======
Total Investment Return*................... 4.40% 1.04% (1.84%) (.56%)
Ratios / Supplemental Data:
Ratio of operating expenses to
average net assets*..................... -- -- -- --
Ratio of dividends on securities sold short to
average net assets*..................... -- -- -- .01%
Ratio of net investment income to
average net assets *.................... 1.37% 2.08% .79% 2.39%
Decrease reflected in above expense ratios due to
undertaking by The Dreyfus Corporation*..... 1.97% 2.01% 1.96% 2.07%
Portfolio Turnover Rate*................. 12.08% 48.35% 25.95% 219.63%
Net Assets, end of period (000's Omitted)... $5,281 $5,168 $5,039 $5,166
</TABLE>
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*Not annualized.
Further information about each Portfolio's performance is contained in
its 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.
DESCRIPTION OF THE FUND
GENERAL
The Fund is a "series fund," which is a mutual fund divided into
separate portfolios. Each Portfolio is treated as a separate entity for
certain matters under the Investment Company Act of 1940 and for other
purposes, and a shareholder of one Portfolio is not deemed to be a
shareholder of any other Portfolio. As described below, for certain matters
Fund shareholders vote together as a group; as to others they vote separately
by Portfolio.
INVESTMENT OBJECTIVE
Each Portfolio's goal is capital appreciation. Each Portfolio's
investment objective cannot be changed without approval by the holders of a
majority (as defined in the Investment Company Act of 1940) of such
Portfolio's outstanding voting shares. There can be no assurance that a
Portfolio's investment objective will be achieved.
Page 4
MANAGEMENT POLICIES
DREYFUS LARGE COMPANY GROWTH invests, under normal market conditions,
substantially all of its assets in equity securities of issuers with market
capitalizations of between $900 million and $90 billion identified by The
Dreyfus Corporation as growth companies.
DREYFUS LARGE COMPANY VALUE invests, under normal market conditions,
substantially all of its assets in equity securities of issuers with market
capitalizations of between $900 million and $90 billion identified by The
Dreyfus Corporation as value companies.
DREYFUS SMALL COMPANY GROWTH invests, under normal market conditions,
substantially all of its assets in equity securities of issuers with market
capitalizations of between $90 million and $900 million identified by The
Dreyfus Corporation as growth companies.
DREYFUS SMALL COMPANY VALUE invests, under normal market conditions,
substantially all of its assets in equity securities of issuers with market
capitalizations of between $90 million and $900 million identified by The
Dreyfus Corporation as value companies.
To determine whether a company's stock falls within the growth or
value classification, The Dreyfus Corporation analyzes each company based on
fundamental factors such as price to book value ratios, price to earnings
ratios, earnings growth, dividend payout ratios, return on equity, and the
company's beta (a measure of stock price volatility relative to the market
generally). In general, The Dreyfus Corporation believes that companies with
relatively low price to book ratios, low price to earnings ratios and higher
than average dividend payments in relation to price should be classified as
value companies. Alternatively, companies which have above average earnings
or sales growth and retention of earnings and command higher price to
earnings ratios fit the more classic growth description.
At least 65% of the value of each Portfolio's total assets ordinarily
will be invested in equity securities of domestic and foreign issuers. Equity
securities consist of common stocks, convertible securities and preferred
stocks. Each Portfolio may invest, in anticipation of investing cash
positions, in money market instruments consisting of U.S. Government
securities, certificates of deposit, time deposits, bankers' acceptances,
short-term investment grade corporate bonds and other short-term debt instrume
nts, and repurchase agreements, as set forth under "Certain Portfolio
Securities" below. When The Dreyfus Corporation determines that adverse
market conditions exist, each Portfolio may adopt a temporary defensive
posture and invest all of its assets in money market instruments.
In an effort to increase each Portfolio's returns, the Fund may
engage in various investment techniques which, if successful, would produce
short-term capital gains. The use of investment techniques such as
short-selling, borrowing for investment purposes, engaging in foreign
exchange transactions, engaging in options and futures transactions and
lending of portfolio securities involves greater risk than that incurred by
many other funds. Options and futures transactions involve so-called
"derivative securities." You should purchase shares of a Portfolio only as a
supplement to an overall investment program and only if you are willing to
undertake the risks involved.
INVESTMENT TECHNIQUES
LEVERAGE THROUGH BORROWING _ Each Portfolio may borrow for investment
purposes up to 331/3% of the value of its total assets. This borrowing, which
is known as leveraging, generally will be unsecured, except to the extent a
Portfolio 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 Portfolio's investment securities. Money
borrowed for leveraging will be subject to interest costs that 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 each Portfolio may engage is
the entry into reverse repurchase agreements with banks, brokers or dealers.
These transactions involve the transfer by a Portfolio
Page 5
of an underlying debt instrument in return for cash proceeds based on a
percentage of the value of the security. The Portfolio retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Portfolio repurchases the security at principal, plus
accrued interest.
SHORT-SELLING _ Each Portfolio may make short sales, which are transactions
in which the Portfolio 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 Portfolio must borrow the security to make delivery to the buyer. The
Portfolio then is obligated to replace the security borrowed by purchasing it
at the market price at the time of replacement. The price at such time may be
more or less than the price at which the security was sold by the Portfolio. A
Portfolio 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 Portfolio replaces the borrowed security. A Portfolio will realize
a gain if the security declines in price between those dates. 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 by a Portfolio would exceed
25% of the value of such Portfolio's net assets. A Portfolio 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 such Portfolio's net
assets. A Portfolio 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, each Portfolio may
make short sales "against the box," a transaction in which the Portfolio
enters into a short sale of a security which such Portfolio owns. The Fund at
no time will have more than 15% of the value of a Portfolio's net assets in
deposits on short sales against the box.
FOREIGN CURRENCY TRANSACTIONS _ Each Portfolio may engage in currency
exchange transactions to the extent consistent with its investment objective
or to hedge its portfolio. Each Portfolio will conduct its currency exchange
transactions either on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, or through entering into forward contracts to
purchase or sell currencies. A forward currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which
must be more than two days from the date of the contract, at a price set at
the time of the contract. Forward currency exchange contracts are entered
into in the interbank market conducted directly between currency traders
(typically commercial banks or other financial institutions) and their
customers. Each Portfolio also may combine forward currency exchange
contracts with investments in securities denominated in other currencies.
Each Portfolio also may maintain short positions in forward currency
exchange transactions, which would involve the Portfolio agreeing to exchange
an amount of a currency it did not currently own for another currency at a
future date in anticipation of a decline in the value of the currency sold
relative to the currency the Portfolio contracted to receive in the exchange.
The Portfolio will maintain in a segregated custodial account cash or U.S.
Government securities or other high quality liquid debt securities at least
equal to the aggregate amount of its short positions, plus accrued interest,
in certain cases, in accordance with releases promulgated by the Securities
and Exchange Commission.
OPTIONS ON FOREIGN CURRENCY _ Each Portfolio may purchase and sell call and
put options on foreign currency for the purpose of hedging against changes in
future currency exchange rates. Call options convey the right to buy the
underlying currency at a price which is expected to be lower than the spot
price of the currency at the time the option expires. Put options convey the
right to sell the underlying currency at a price which is anticipated to be
higher than the spot prices of the currency at the time the option expires.
Each Portfolio may use foreign currency options for the same purposes as
forward currency exchange and futures transactions, as described herein. See
also "Call and Put Options on Specific Securities" and "Currency Futures and
Options on Currency Futures" below.
CALL AND PUT OPTIONS ON SPECIFIC SECURITIES _ Each Portfolio may invest up
to 5% of its assets, represented by the premium paid, in the purchase of call
and put options in respect of specific securities (or
Page 6
groups or "baskets" of specific securities) in which the Portfolio may invest.
Each Portfolio may write covered call and put option contracts to the extent
of 20% of the value of its net assets at the time such option contracts are
written. A call option gives the purchaser of the option the right to buy,
and obligates the writer to sell, the underlying security at the exercise
price at any time during the option period. Conversely, a put option gives
the purchaser of the option the right to sell, and obligates the writer to
buy, the underlying security at the exercise price at any time during the
option period. A covered call option sold by a Portfolio, which is a call
option with respect to which the Portfolio owns the underlying security,
exposes the Portfolio during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
security or to possible continued holding of a security which might otherwise
have been sold to protect against depreciation in its market price. 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. A covered put option sold by a Portfolio exposes
the Portfolio during the term of the option to a decline in price of the
underlying security. Similarly, the principal reason for writing covered put
options is to realize income in the form of premiums. A put option sold by a
Portfolio is covered when, among other things, cash or liquid securities are
placed in a segregated account with the Fund's custodian to fulfill the
obligation undertaken.
To close out a position when writing covered options, a Portfolio may
make a "closing purchase transaction" by purchasing an option on the same
security with the same exercise price and expiration date as the option it
has previously written. To close out a position as a purchaser of an option,
a Portfolio may make a "closing sale transaction," which involves liquidating
the Portfolio's position by selling the option previously purchased. A
Portfolio will realize a profit or loss from a closing purchase or sale
transaction depending upon the difference between the amount paid to purchase
an option and the amount received from the sale thereof.
The Fund intends to treat options in respect of specific securities
that are not traded on a national securities exchange and the securities
underlying covered call options written by the Portfolios as illiquid
securities. See "Certain Portfolio Securities _ Illiquid Securities" below.
Each Portfolio will purchase options only to the extent permitted by
the policies of state securities authorities in states where shares of the
Portfolio are qualified for offer and sale.
STOCK INDEX OPTIONS _ Each Portfolio may purchase and write put and call
options on stock indices listed on U.S. 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.
The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in the Portfolio's
investments correlate with price movements of the stock index selected.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, whether a Portfolio
will realize a gain or loss from the purchase or writing of options on an
index depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indices, in an industry or market
segment, rather than movements in the price of a particular stock.
Accordingly, successful use by each Portfolio of options on stock indices
will be subject to The Dreyfus Corporation's ability to predict correctly
movements in the direction of the stock market generally or of a particular
industry. This requires different skills and techniques than predicting
changes in the price of individual stocks.
When a Portfolio writes an option on a stock index, the Portfolio
will place in a segregated account with the Fund's custodian or sub-custodian
cash or liquid securities in an amount at least equal to the market value of
the underlying stock index and will maintain the account while the option is
open or otherwise will cover the transaction.
FUTURES TRANSACTIONS _ IN GENERAL _ The Fund is not a commodity pool.
However, as a substitute for a comparable market position in the underlying
securities or for hedging purposes, each Portfolio may engage in futures and
options on futures transactions as described below.
Page 7
Each Portfolio may trade futures contracts and options on futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and
the International Monetary Market of the Chicago Mercantile Exchange, or, to
the extent permitted under applicable law, on exchanges located outside the
United States, such as the London International Financial Futures Exchange
and the Sydney Futures Exchange Limited. Foreign markets may offer
advantages, such as trading in commodities that are not currently traded in
the United States or arbitrage possibilities not available in the United
States. Foreign markets, however, may have greater risk potential than
domestic markets. See "Risk Factors _ Foreign Commodity Transactions" below.
Each Portfolio's commodities transactions must constitute bona fide
hedging or other permissible transactions pursuant to regulations promulgated
by the Commodity Futures Trading Commission (the "CFTC"). In addition, a
Portfolio may not engage in such transactions if the sum of the amount of
initial margin deposits and premiums paid for unexpired commodity options,
other than for bona fide hedging transactions, would exceed 5% of the
liquidation value of the Portfolio's assets, after taking into account
unrealized profits and unrealized losses on such contracts it has entered
into; provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the money amount may be excluded in
calculating the 5%. Pursuant to regulations and/or published positions of the
Securities and Exchange Commission, each Portfolio may be required to
segregate cash or high quality money market instruments in connection with
its commodities transactions in an amount generally equal to the value of the
underlying commodity. To the extent a Portfolio engages in the use of futures
and options on futures for other than bona fide hedging purposes, the
Portfolio may be subject to additional risk.
Initially, when purchasing or selling futures contracts a Portfolio
will be required to deposit with the Fund's custodian in the broker's name an
amount of cash or cash equivalents up to approximately 10% of the contract
amount. This amount is subject to change by the exchange or board of trade on
which the contract is traded and members of such exchange or board of trade
may impose their own higher requirements. This amount is known as "initial
margin" and is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Portfolio upon termination of the
futures position, assuming all contractual obligations have been satisfied.
Subsequent payments, known as "variation margin," to and from the broker will
be made daily as the price of the index or securities underlying the futures
contract fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking-to-market." At
any time prior to the expiration of a futures contract, the Portfolio may
elect to close the position by taking an opposite position at the then
prevailing price, which will operate to terminate the Portfolio's existing
position in the contract.
Although each Portfolio intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be
given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount
of fluctuation permitted in futures contract prices during a single trading
day. Once the daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond the limit or trading may be
suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting a Portfolio to substantial losses. If it
is not possible or the Portfolio determines not to close a futures position
in anticipation of adverse price movements, the Portfolio will be required to
make daily cash payments of variation margin. In such circumstances, an
increase in the value of the portion of a Portfolio's securities being
hedged, if any, may offset partially or completely losses on the futures
contract. However, no assurance can be given that the price of the securities
being hedged will correlate with the price movements in a futures contract
and thus provide an offset to losses on the futures contract.
To the extent a Portfolio is engaging in a futures transaction as a
hedging device, because of the risk of an imperfect correlation between
securities owned by the Portfolio that are the subject of a hedging
transaction and the futures contract used as a hedging device, it is possible
that the hedge will not be
Page 8
fully effective if, for example, losses on the portfolio securities exceed
gains on the futures contract or losses on the futures contract exceed gains
on the portfolio securities. For futures contracts based on indices, the risk
of imperfect correlation increases as the composition of a Portfolio's
securities varies from the composition of the index. In an effort to
compensate for the imperfect correlation of movements in the price of the
securities being hedged and movements in the price of futures contracts, the
Portfolio may buy or sell futures contracts in a greater or lesser dollar
amount than the dollar amount of the securities being hedged if the historical
volatility of the futures contract has been less or greater than that of the
securities. Such "over hedging" or "under hedging" may adversely affect a
Portfolio's net investment results if the market does not move as anticipated
when the hedge is established.
Successful use of futures by a Portfolio also is subject to The
Dreyfus Corporation's ability to predict correctly movements in the direction
of the market or interest rates. For example, if a Portfolio has hedged
against the possibility of a decline in the market adversely affecting the
value of securities held in its portfolio and prices increase instead, the
Portfolio will lose part or all of the benefit of the increased value of
securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Portfolio has
insufficient cash, it may have to sell securities to meet daily variation
margin requirements. The Portfolio may have to sell such securities at a time
when it may be disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the option exercise
period. The writer of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a
long position if the option is a put). Upon exercise of the option, the
assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account which represents the amount by which the
market price of the futures contract, at exercise, exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
on the futures contract.
Call options sold by a Portfolio with respect to futures contracts
will be covered by, among other things, entering into a long position in the
same contract at a price no higher than the strike price of the call option,
or by ownership of the instruments underlying, or instruments the prices of
which are expected to move relatively consistently with the instruments
underlying, the futures contract. Put options sold by a Portfolio with
respect to futures contracts will be covered in the same manner as put
options on specific securities as described above.
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES _ Each Portfolio may
purchase and sell stock index futures contracts and options on stock index
futures contracts.
A stock index future obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of
the last trading day of the contract and the price at which the agreement is
made. No physical delivery of the underlying stocks in the index is made.
With respect to stock indices that are permitted investments, each Portfolio
intends to purchase and sell futures contracts on the stock index for which
it can obtain the best price with consideration also given to liquidity.
The price of stock index futures may not correlate perfectly with the
movement in the stock index because of certain market distortions. First, all
participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which would distort the normal relationship between the index
and futures markets. Secondly, from the point of view of speculators, the
deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market also may cause temporary price distortions.
Page 9
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE FUTURES
CONTRACTS _ Each Portfolio may invest in interest rate futures contracts and
options on interest rate futures contracts as a substitute for a comparable
market position or to hedge against adverse movements in interest rates.
To the extent a Portfolio has invested in interest rate futures
contracts or options on interest rate futures contracts as a substitute for a
comparable market position, the Portfolio will be subject to the investment
risks of having purchased the securities underlying the contract.
Each Portfolio may purchase call options on interest rate futures
contracts to hedge against a decline in interest rates and may purchase put
options on interest rate futures contracts to hedge its portfolio securities
against the risk of rising interest rates.
Each Portfolio may sell call options on interest rate futures
contracts to partially hedge against declining prices of its portfolio
securities. If the futures price at expiration of the option is below the
exercise price, the Portfolio will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in such Portfolio's holdings. Each Portfolio may sell put options on
interest rate futures contracts to hedge against increasing prices of the secu
rities which are deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is higher than the exercise price,
the Portfolio will retain the full amount of the option premium which
provides a partial hedge against any increase in the price of securities
which the Portfolio intends to purchase. If a put or call option sold by a
Portfolio is exercised, the Portfolio will incur a loss which will be reduced
by the amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities and
changes in the value of its futures positions, a Portfolio's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of its portfolio securities.
Each Portfolio also may sell options on interest rate futures
contracts as part of closing purchase transactions to terminate its options
positions. No assurance can be given that such closing transactions can be
effected or that there will be a correlation between price movements in the
options on interest rate futures and price movements in a Portfolio's
securities which are the subject of the hedge. In addition, a Portfolio's
purchase of such options will be based upon predictions as to anticipated inte
rest rate trends, which could prove to be inaccurate.
CURRENCY FUTURES AND OPTIONS ON CURRENCY FUTURES _ Each Portfolio may
purchase and sell currency futures contracts and options thereon. See "Call
and Put Options on Specific Securities" above. By selling foreign currency
futures, the Portfolio can establish the number of U.S. dollars it will
receive in the delivery month for a certain amount of a foreign currency. In
this way, if the Portfolio anticipates a decline of a foreign currency
against the U.S. dollar, the Portfolio can attempt to fix the U.S. dollar
value of some or all of its securities that are denominated in that currency.
By purchasing foreign currency futures, the Portfolio can establish the
number of U.S. dollars it will be required to pay for a specified amount of a
foreign currency in the delivery month. Thus, if the Portfolio intends to buy
securities in the future and expects the U.S. dollar to decline against the
relevant foreign currency during the period before the purchase is effected,
the Portfolio, for the price of the currency future, can attempt to fix the
price in U.S. dollars of the securities it intends to acquire.
The purchase of options on currency futures will allow each
Portfolio, for the price of the premium it must pay for the option, to decide
whether or not to buy (in the case of a call option) or to sell (in the case
of a put option) a futures contract at a specified price at any time during
the period before the option expires. If the Portfolio, in purchasing an
option, has been correct in its judgment concerning the direction in which
the price of a foreign currency would move as against the U.S. dollar, it may
exercise the option and thereby take a futures position to hedge against the
risk it had correctly anticipated or close out the option position at a gain
that will offset, to some extent, currency exchange losses otherwise suffered
by the Portfolio. If exchange rates move in a way the Portfolio did not
anticipate, the Portfolio will
Page 10
have incurred the expense of the option without obtaining the expected
benefit. As a result, the Portfolio's profits on the underlying securities
transactions may be reduced or overall losses incurred.
OPTIONS ON SWAPS _ Each Portfolio may purchase cash-settled options on
equity index swaps in pursuit of its investment objective. Equity index swaps
involve the exchange by a Portfolio with another party of cash flows based
upon the performance of an index or a portion of an index of securities which
usually include dividends. A cash-settled option on a swap gives the
purchaser the right, but not the obligation, in return for the premium paid,
to receive an amount of cash equal to the value of the underlying swap as of t
he exercise date. These options typically are purchased in privately
negotiated transactions from financial institutions, including securities
brokerage firms. The use of swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio security transactions.
FUTURE DEVELOPMENTS _ Each Portfolio 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 Portfolios or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the
Portfolio's investment objective and legally permissible for the Portfolio.
Before entering into such transactions or making any such investment on behalf
of a Portfolio, the Fund will provide appropriate disclosure in its
prospectus.
LENDING PORTFOLIO SECURITIES _ From time to time, each Portfolio may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions.
Such loans may not exceed 331/3% of the value of such Portfolio's total
assets. In connection with such loans, the Portfolio 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. Each Portfolio can
increase its income through the investment of such collateral. The Portfolio
engaging in the portfolio loan transaction 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. A
Portfolio might experience risk of loss if the institution with which it has
engaged in a portfolio loan transaction breaches its agreement with the
Portfolio.
CERTAIN PORTFOLIO SECURITIES
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITORY RECEIPTS _ The Fund's assets
may be invested in the securities of foreign issuers in the form of American
Depository Receipts ("ADRs") and European Depository Receipts ("EDRs"). These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically
issued by a United States bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs, which are
sometimes referred to as Continental Depository Receipts ("CDRs"), are
receipts issued in Europe typically by non-United States banks and trust
companies that evidence ownership of either foreign or domestic securities.
Generally, ADRs in registered form are designed for use in the United States
securities markets and EDRs and CDRs in bearer form are designed for use in
Europe.
CONVERTIBLE SECURITIES _ Each Portfolio may purchase convertible securities,
which are fixed-income securities, such as bonds or preferred stock, that may
be converted at either a stated price or stated rate into underlying shares
of common stock. Convertible securities have general characteristics similar
to both fixed-income and equity securities. Although to a lesser extent than
with fixed-income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends
to increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stock, and,
therefore, also will react to variations in the general market for equity
securities. A
Page 11
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.
MONEY MARKET INSTRUMENTS _ The Fund may invest, in circumstances described
under "Management Policies" above, in the following types of money market
instruments.
U.S. GOVERNMENT SECURITIES. Each Portfolio may purchase securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities which include U.S. Treasury securities. 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 U.S. 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 or instrumentalities, no assurance can be given
that it will always do so, because the U.S. Government is not obligated to do
so by law.
BANK OBLIGATIONS. Each Portfolio may purchase certificates of
deposit, time deposits, bankers' acceptances and other short-term obligations
of domestic banks, foreign subsidiaries of domestic banks, foreign branches
of domestic banks, and domestic and foreign branches of foreign banks,
domestic savings and loan associations and other banking institutions. With
respect to such securities issued by foreign branches of domestic banks,
foreign subsidiaries of domestic banks, and domestic and foreign branches of
foreign banks, the Fund may be subject to additional investment risks that
are different in some respects from those incurred by a fund which invests
only in debt obligations of U.S. domestic issuers. Such risks include
possible future political and economic developments, the possible imposition
of foreign withholding taxes on interest income payable on the securities,
the possible establishment of exchange controls or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on these securities and the possible seizure or
nationalization of foreign deposits. See "Risk Factors _ Investing in
Foreign Securities" below.
Page 12
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by each Portfolio will not benefit from insurance
from the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation. No Portfolio will
invest more than 15% of the value of its net assets in time deposits that are
illiquid and in other illiquid securities.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and of the drawer to pay the face amount of
the instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
REPURCHASE AGREEMENTS. Repurchase agreements involve the acquisition
by a Portfolio of an underlying debt instrument, subject to an obligation of
the seller to repurchase, and the Portfolio to resell, the instrument at a
fixed price, usually not more than one week after its purchase. Certain costs
may be incurred in connection with the sale of the securities if the seller
does not repurchase them in accordance with the repurchase agreement. In
addition, if bankruptcy proceedings are commenced with respect to the seller
of the securities, realization on the securities by the Fund may be delayed
or limited.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS.
Commercial paper consists of short-term, unsecured promissory notes issued to
finance short-term credit needs. The commercial paper purchased by a
Portfolio will consist only of direct obligations which, at the time of their
purchase, are (a) rated not lower than Prime-1 by Moody's, A-1 by S&P, F-1 by
Fitch Investors Service, Inc. ("Fitch") or Duff-1 by Duff & PhelpsCredit
Rating Co. ("Duff"), (b) issued by companies having an outstanding unsecured
debt issue currently rated not lower than Aa3 by Moody's or AA- by S&P, Fitch
or Duff, or (c) if unrated, determined by The Dreyfus Corporation to be of
comparable quality to those rated obligations which may be purchased by the
Portfolio. Each Portfolio may purchase floating and variable rate demand
notes and bonds, which are obligations ordinarily having stated maturities in
excess of one year, but which permit the holder to demand payment of
principal at any time or at specified intervals.
WARRANTS _ Each Portfolio may invest up to 5% of its net assets in warrants,
except that this limitation does not apply to warrants acquired in units or
attached to securities. Included within that amount, but not to exceed 2% of
the of the value of the Fund's net assets, may be warrants which are not
listed on the New York Stock Exchange or American Stock Exchange. A warrant
is an instrument issued by a corporation which gives the holder the right to
subscribe to a specified amount of the corporation's capital stock at a set
price for a specified period of time.
ZERO COUPON SECURITIES _ Each Portfolio 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. Each Portfolio also may invest in zero coupon
securities issued by corporations and financial institutions which constitute
a proportionate ownership of the issuer's pool of underlying U.S. Treasury
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity. The amount of
the discount fluctuates with the market price of the security. The market
prices of zero coupon securities generally are more volatile than the market
prices of securities that pay interest periodically and are likely to respond
to a greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.
ILLIQUID SECURITIES _ Each Portfolio may invest up to 15% of the value of
its net assets in securities as to which a liquid trading market does not
exist, provided such investments are consistent with the Portfolio's
investment objective. Such securities may include securities that are not
readily marketable,
Page 13
such as certain securities that are subject to legal or contractual
restrictions on resale and repurchase agreements providing for settlement
in more than seven days after notice. As to these securities, a Portfolio
is subject to a risk that should the Fund desire to sell them when a ready
buyer is not available at a price the Fund deems representative of
their value, the value of the Portfolio's net assets could be adversely
affected.
CERTAIN FUNDAMENTAL POLICIES
Each Portfolio may (i) borrow money to the extent permitted under the
Investment Company Act of 1940, which currently limits borrowing to no more
than 331/3% of the value of the Portfolio's total assets; (ii) invest up to
5% of its total assets in the obligations of any issuer, except that up to
25% of the value of its total assets may be invested, and securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities may
be purchased, without regard to any such limitation; and (iii) invest up to
25% of its total assets in the securities of issuers in a single industry,
provided that there shall be no such limitation on investments in securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. This paragraph describes fundamental policies that cannot
be changed as to a Portfolio without approval by the holders of a majority
(as defined in the Investment Company Act of 1940) of such Portfolio's
outstanding voting shares. See "Investment Objective and Management Policies
_ Investment Restrictions" in the Fund's Statement of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
Each Portfolio may (i) purchase securities of any company having less
than three years' continuous operation (including operations of any
predecessors) if such purchase does not cause the value of such Portfolio's
investments in all such companies to exceed 5% of the value of its total
assets; (ii) pledge, hypothecate, mortgage or otherwise encumber its assets,
but only to secure permitted borrowings; and (iii) invest up to 15% of the
value of its net assets in repurchase agreements providing for settlement in
more than seven days after notice and in other illiquid securities. See
"Investment Objective and Management Policies _ Investment Restrictions" in
the Fund's Statement of Additional Information.
RISK FACTORS
INVESTING IN FOREIGN SECURITIES _ Foreign securities markets generally are
not as developed or efficient as those in the United States. Securities of
some foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States. The issuers of
some of these securities, such as foreign bank obligations, may be subject to
less stringent or different regulations than are U.S. issuers. In addition,
there may be less publicly available information about a non-U.S. issuer, and
non-U.S. issuers generally are not subject to uniform accounting and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers.
Because stock certificates and other evidences of ownership of such
securities usually are held outside the United States, each Portfolio 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 that might
adversely affect the payment of principal, interest and dividends on the
foreign securities or might restrict the payment of principal, interest and
dividends to investors located outside the country of the issuers, whether
from currency blockage or otherwise. Custodial expenses for a portfolio of
non-U.S. securities generally are higher than for a portfolio of U.S.
securities.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. Some currency exchange costs may be
incurred when the Portfolios change investments from one country to another.
Page 14
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
Portfolios from sources within foreign countries may be reduced by
withholding or 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 a Portfolio will reduce its net income
available for distribution to investors.
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 United States 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 a Portfolio of unrealized profits or force a Portfolio 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 a Portfolio 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 Portfolio
might realize in trading could be eliminated by adverse changes in the
exchange rate, or the Portfolio could incur losses as a result of those
changes. Transactions on foreign exchanges may include both commodities which
are traded on domestic exchanges and those which are not.
OTHER INVESTMENT CONSIDERATIONS _ Each Portfolio's net asset value is not
fixed and should be expected to fluctuate. You should purchase Portfolio
shares only as a supplement to an overall investment program and only if you
are willing to undertake the risks involved.
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
a Portfolio's securities will result in changes in the value of such
Portfolio's shares and thus the Portfolio's yield and total return to
investors.
The use of investment techniques such as leveraging, short-selling,
engaging in financial futures and options transactions, entering into equity
index swaps and options on swaps and lending portfolio securities involves
greater risk than that incurred by many other funds with similar objectives.
These risks are described above under "Investment Techniques." In addition,
using these techniques may produce higher than normal portfolio turnover and
may affect the degree to which the Portfolio'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. The
Fund's ability to engage in certain short-term transactions may be limited by
the requirement that, to qualify as a regulated investment company, each
Portfolio must earn less than 30% of its gross income from the disposition of
securities held for less than three months. This 30% test limits the extent
to which a Portfolio may sell securities held for less than three months,
write options expiring in less than three months and invest in certain
futures contracts, among other strategies. However, portfolio turnover will
not otherwise be a limiting factor when making investment decisions. Under
normal market conditions, a Portfolio's turnover rate generally will not
exceed 150%. See "Portfolio Transactions" in the Statement of Additional
Information.
Page 15
Investment decisions for each Portfolio are made independently from
those of other investment companies advised by The Dreyfus Corporation.
However, if such other investment companies are prepared to invest in, or
desire to dispose of, securities of the type in which a Portfolio invests at
the same time as such Portfolio, available investments or opportunities for
sales will be allocated equitably to each. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by the
Portfolio or the price paid or received by the Portfolio.
MANAGEMENT OF THE FUND
The Dreyfus Corporation, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947 and serves as the Fund's investment adviser.
The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank, N.A.,
which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As
of January 31, 1995, The Dreyfus Corporation managed or administered
approximately $70 billion in assets for more than 1.9 million investor
accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the overall authority of the Fund's Board of Directors in
accordance with Maryland law. The primary portfolio manager of each Portfolio
is Ernest G. Wiggins, Jr. He has held that position with Dreyfus Large
Company Value and Dreyfus Small Company Value since the Fund's inception and
has held that position with Dreyfus Large Company Growth and Dreyfus Small
Company Growth since February 1995 and has been an employee of The Dreyfus
Corporation since December 1993. From 1992 to December 1993, Mr. Wiggins was
President of Gabelli International and, prior thereto, he held various
positions with Fidelity Management and ResearchCompany. The Fund's other
portfolio managers are identified under "Management of the Fund" in the
Fund's Statement of Additional Information. The Dreyfus Corporation also
provides research services for the Fund as well as for other funds advised by
The Dreyfus Corporation through a professional staff of portfolio managers
and securities analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCOCredit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed
approximately $193 billion in assets as of December 31, 1994, including
approximately $70 billion in mutual fund assets. As of December 31, 1994,
various subsidiaries of Mellon provided non-investment services, such as
custodial or administration services, for approximately $654 billion in
assets including approximately $74 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .75 of 1% of
the value of each Portfolio's average daily net assets. The management fee is
higher than that paid by most other investment companies. From time to time,
The Dreyfus Corporation may waive receipt of its fees and/or voluntarily
assume certain expenses of a Portfolio, which would have the effect of
lowering the overall expense ratio of that Portfolio and increasing yield to
investors at the time such amounts are waived or assumed, as the case may be.
The Fund will not pay The Dreyfus Corporation at a later time for any amounts
it may waive, nor will the Fund reimburse The Dreyfus Corporation for any
amounts it may assume. For the period December 29, 1993 (commencement of
operations) to October 31, 1994, no management fee was paid by the Fund
pursuant to an undertaking by The Dreyfus Corporation.
Page 16
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay Service Agents
in respect of these services.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor is a wholly-owned subsidiary of Institutional Administration
Services, Inc., a provider of mutual fund administration services, the parent
company of which is Boston Institutional Group, Inc.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The
Bank of New York, 110 Washington Street, New York, New York 10286, is the
Fund's Custodian.
HOW TO BUY FUND SHARES
You can purchase Portfolio shares through the Distributor or certain
financial institutions, securities dealers and other industry professionals
(collectively, "Service Agents") that have entered into agreements with the
Distributor. 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.
Management understands that some Service Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus, and, to the extent permitted by applicable regulatory authority,
may charge their clients direct fees which would be in addition to any
amounts which might be received under the Shareholder Services Plan. Each
Service Agent has agreed to transmit to its clients a schedule of such fees.
You should consult your Service Agent in this regard. See "Distribution Plan
and Shareholder Services Plan."
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. The initial investment must be accompanied by the Fund's Account
Application. For full-time or part-time employees of The Dreyfus Corporation
or any of its affiliates or subsidiaries, directors of The Dreyfus
Corporation, Board members of a fund advised by The Dreyfus Corporation,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing, the minimum initial investment is $1,000. For full-time or
part-time employees of The Dreyfus Corporation or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund account, the minimum initial investment is $50. The Fund reserves
the right to offer Portfolio 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.
You may purchase Portfolio shares by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds," or, if for Dreyfus retirement plan
accounts, to "The Dreyfus Trust Company, Custodian" and should specify the
Portfolio in which you are investing. Payments to open new accounts which are
mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application.
For subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to The Dreyfus
Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. For Dreyfus
retirement plan accounts, both initial and subsequent investments should be
sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Neither initial nor subsequent investments should be
made by third party check. Purchase orders may be delivered in person only to
a Dreyfus Financial Center. THESE ORDERS WILL BE FORWARDED TO THE FUND
Page 17
AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the applicable
Portfolio's DDA# as shown below, for purchase of shares in your name:
DDA# 8900088125/Dreyfus Focus Funds, Inc./Dreyfus Large Company
Growth
DDA# 8900088133/Dreyfus Focus Funds, Inc./Dreyfus Large Company
Value
DDA# 8900088141/Dreyfus Focus Funds, Inc./Dreyfus Small Company
Growth
DDA# 8900088168/Dreyfus Focus Funds, Inc./Dreyfus Small Company
Value
The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Portfolio shares is by wire, please call 1-800-645-6561 after completing your
wire payment to obtain your Fund account number. Please include your Fund
account number on the Fund's Account Application and promptly mail the
Account Application to the Fund, as no redemptions will be permitted until
the Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be made in
U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for investment in your
account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through compatible
computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Shares of each Portfolio are sold on a continuous basis at net asset
value per share next determined after an order in proper form is received by
the Transfer Agent or other agent. Net asset value per share is determined as
of the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m., New York time), on each day the New York Stock Exchange
is open for business. For purposes of determining net asset value, options
and futures contracts will be valued 15 minutes after the close of trading on
the floor of the New York Stock Exchange. Net asset value per share is
computed by dividing the value of the Portfolio's net assets (i.e., the value
of its assets less liabilities) by the total number of such Portfolio's
shares outstanding. Each Portfolio's investments are valued based on market
value or, where market quotations are not readily available, based on fair
value as determined in good faith by the Fund's Board of Directors. For
further information regarding the methods employed in valuing the Portfolios'
investments, see "Determination of Net Asset Value" in the Fund's Statement
of Additional Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject you
to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TeleTransfer PRIVILEGE
You may purchase Portfolio 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.
Page 18
Only a bank account maintained in a domestic financial institution which is
an Automated Clearing House member may be so designated. The Fund may modify
or terminate this Privilege at any time or charge a service fee upon notice
to shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Portfolio shares by calling
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those in
this Prospectus. You should consult your Service Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Portfolio, shares of
one of the other Portfolios or shares of certain other funds managed or
administered by The Dreyfus Corporation, to the extent such shares are
offered for sale in your state of residence. These funds have different
investment objectives which may be of interest to you. The exchange privilege
may be exercised twice during the calendar year as described below. If you
desire to use this service, you should consult your Service Agent or call
1-800-645-6561 to determine if it is available and whether any other
conditions are imposed on its use.
To request an exchange, you or your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing or by
telephone. Before any exchange, you must obtain and should review a copy of
the current prospectus of the fund into which the exchange is being made.
Prospectuses may be obtained by calling 1-800-645-6561. Except in the case of
Personal Retirement Plans, the shares being exchanged must have a current
value of at least $500; furthermore, when establishing a new account by
exchange, the shares being exchanged must have a value of at least the
minimum initial investment required for the fund into which the exchange is
being made. The ability to issue exchange instructions by telephone is given
to all Fund shareholders automatically, unless you check the applicable
"NO"box on the Account Application, indicating that you specifically refuse
this Privilege. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, or by a separate signed Shareholder Services Form, also available by
calling 1-800-645-6561. If you have established the Telephone Exchange
Privilege, you may telephone exchange instructions by calling 1-800-221-4060
or, if you are calling from overseas, call 1-401-455-3306. See "How to Redeem
Fund Shares _ Procedures." Upon an exchange into a new account, the following
shareholder services and privileges, as applicable and where available, will
be automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Wire Redemption Privilege, Telephone Redemption
Privilege, Dreyfus TELETRANSFER Privilege and the dividend/capital gain
distribution option (except for Dreyfus Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging 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 of the Fund 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
your exchange you must notify the Transfer Agent or your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation of
your holdings through a check of appropriate records. See "Shareholder
Services" in the Statement of Additional Information. No fees currently are
charged shareholders directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with rules promulgated by the
Securities and Exchange Commission. The Fund
Page 19
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.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
a Portfolio, in shares of one of the other Portfolios or shares of certain
other funds in the Dreyfus Family of Funds of which you are currently an
investor. The amount you designate, which can be expressed either in terms of
a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however, a sales load may be charged with respect to exchanges
into funds sold with a sales load. See "Shareholder Services" in the
Statement of Additional Information. The right to exercise this Privilege may
be modified or canceled by the Fund or the Transfer Agent. You may modify or
cancel your exercise of this Privilege at any time by mailing written
notification to The Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode
Island 02940-9671. The Fund may charge a service fee for the use of this
Privilege. No such fee currently is contemplated. 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. For more
information concerning this Privilege and the funds in the Dreyfus Family of
Funds eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Portfolio
shares (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Portfolio shares are purchased by transferring
funds from the bank account designated by you. At your option, the account
designated by you will be debited in the specified amount, and Portfolio
shares will be purchased, once a month, on either the first or fifteenth day,
or twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. To establish a Dreyfus-AUTOMATIC Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Portfolio shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in the 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. The
Fund may terminate your participation upon 30 days' notice to you.
Page 20
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by a Portfolio in
shares of another Portfolio of the Fund or shares of another fund in the
Dreyfus Family of Funds 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 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. See "Shareholder Services" in the Statement of
Additional Information. Dreyfus Dividend ACH permits you to transfer
electronically dividends or dividends and capital gain distributions, if any,
from a Portfolio to a designated bank account. Only an account maintained at
a domestic financial institution which is an Automated Clearing House member
may be so designated. Banks may charge a fee for this service.
For more information concerning these privileges, or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three business
days following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Portfolio shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon your employer's direct deposit program, you may have part or all of your
paycheck transferred to your existing Dreyfus account electronically through
the Automated Clearing House system at each pay period. To establish a
Dreyfus Payroll Savings Plan account, you must file an authorization form
with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not Dreyfus Service
Corporation, The Dreyfus Corporation, the Fund, the Transfer Agent or any
other person, to arrange for transactions under the Dreyfus Payroll Savings
Plan. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. There is a service
charge of 50cents for each withdrawal check. The Automatic Withdrawal Plan
may be ended at any time by you, the Fund or the Transfer Agent. Shares for
which certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
Page 21
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
The Fund imposes no charges when shares are redeemed. Service Agents
may charge a nominal fee for effecting redemptions of Portfolio shares. Any
certificates representing Portfolio 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 upon the Portfolio's then-current
net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE
REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE
OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC
ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN
ADDITION, THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE
OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT
BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE
DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER
AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY
IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A
SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST.
PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL
ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS
OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
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 Dreyfus TELETRANSFER Privilege. Other redemption
procedures may be in effect for clients of certain Service Agents. The Fund
makes available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
In addition, the Distributor or its designee will accept orders from
dealers with which it has sales agreements for the repurchase of shares held
by investors. Repurchase orders received by the dealer prior to the close of
trading on the floor of the New York Stock Exchange on any business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the New York Stock
Exchange on that day. Otherwise, the shares will be redeemed at the next
determined net asset value. It is the responsibility of the dealer to
transmit orders on a timely basis. The dealer may charge the investor a fee
for executing the order. This repurchase arrangement is discretionary and may
be withdrawn at any time.
You may redeem shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless
Page 22
you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Service Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Fund nor the Transfer
Agent will be liable for following telephone instructions reasonably believed
to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of a Portfolio's 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 had been used. During the delay, such Portfolio's net asset value
may fluctuate.
REGULAR REDEMPTION _ Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call one of the
telephone numbers listed under "General Information." Redemption requests
must be signed by each shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion
Program. If you have any questions with respect to signature-guarantees,
please call one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE _ You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $1,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of not more than $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-221-4060 or, if you
are calling from overseas, call 1-401-455-3306. The Fund reserves the right
to refuse any redemption request, including requests made shortly after a
change of address, and may limit the amount involved or the number of such
requests. This Privilege may be modified or terminated at any time by the
Transfer Agent or the Fund. The Fund's Statement of Additional Information
sets forth instructions for 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.
TELEPHONE REDEMPTION PRIVILEGE _ You may redeem shares (maximum $150,000 per
day) by telephone if you have checked the appropriate box on the Fund's
Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if you
Page 23
are calling from overseas, call 1-401-455-3306. The Fund reserves the right
to refuse any request made by telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of
telephone redemption requests. This Privilege may be modified or terminated
at any time by the Transfer Agent or the Fund. Shares held under Keogh Plans,
IRAs or other retirement plans, and shares for which certificates have been
issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE _ You may redeem shares (minimum $500 per
day) by telephone if you have checked the appropriate box and supplied the
necessary information on the Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between your Fund account and the bank account designated in one
of these documents. Only such an account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
Redemption proceeds will be on deposit in your account at an Automated
Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period. The
Fund reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. The Fund may modify or terminate
this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Portfolio shares by calling
1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. Shares held under Keogh Plans, IRAs or other retirement
plans, and shares issued in certificate form, are not eligible for this
Privilege.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Portfolio shares are subject to a Distribution Plan and a Shareholder
Services Plan.
DISTRIBUTION PLAN _ Under the Distribution Plan, adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, the Fund (a) reimburses the
Distributor for payments to certain Service Agents for distributing the
Portfolios' shares and (b) pays The Dreyfus Corporation, Dreyfus Service
Corporation, a wholly-owned subsidiary of The Dreyfus Corporation, and any
affiliate of either of them for advertising and marketing relating to the
Fund, at an aggregate annual rate of .50 of 1% of the value of each
Portfolio's average daily net assets. The Distributor may pay one or more
Service Agents in respect of distribution services. The Distributor
determines the amounts, if any, to be paid to Service Agents under the
Distribution Plan and the basis on which such payments are made. The fees
payable under the Distribution Plan are payable without regard to actual
expenses incurred.
The Fund bears the costs of preparing and printing prospectuses and
statements of additional information used for regulatory purposes and for
distribution to existing Fund shareholders. Under the Distribution Plan, the
Fund bears (a) the costs of preparing, printing and distributing prospectuses
and statements of additional information used for other purposes and (b) the
costs associated with implementing and operating the Distribution Plan, the
aggregate of such amounts not to exceed in any fiscal year of the Fund the
greater of $100,000 or .005 of 1% of the value of each Portfolio's average
daily net assets for such fiscal year.
SHAREHOLDER SERVICES PLAN _ Under the Shareholder Services Plan, the Fund
pays the Distributor for the provision of certain services to Portfolio
shareholders a fee at the annual rate of .25 of 1% of the value of each
Portfolio's average daily net assets. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
The Distributor may make payments to Service Agents in respect of these
services. The Distributor determines the amounts to be paid to Service
Agents. Each Service Agent is required to disclose to its clients any
compensation payable to it by the Fund pursuant to
Page 24
the Shareholder Services Plan and any other compensation payable by their
clients in connection with the investment of their assets in Portfolio shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Internal Revenue Code of 1986, as amended (the "Code"),
each Portfolio of the Fund is treated as a separate corporation for purposes
of qualification and taxation as a regulated investment company. Each
Portfolio ordinarily pays dividends from its 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 provis
ions of the Investment Company Act of 1940. The Fund will not make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose
whether to receive dividends and distributions in cash or to reinvest in
additional shares at net asset value. All expenses are accrued daily and
deducted before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Portfolios will be taxable to U.S.
shareholders as ordinary income whether received in cash or reinvested in
additional shares. Distributions from net realized long-term securities gains
of the Portfolios will be taxable to U.S. shareholders as long-term capital
gains for Federal income tax purposes, regardless of how long shareholders
have held their Portfolio shares and whether such distributions are received
in cash or reinvested in Fund shares. The Code provides that the net capital
gain of an individual generally will not be subject to Federal income tax at
a rate in excess of 28%. Dividends and distributions may be subject to state
and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Portfolios to a foreign investor generally
are subject to U.S. nonresident withholding taxes at the rate of 30%, unless
the foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Portfolios to a foreign investor as well as the proceeds of any
redemptions from a foreign investor's account, regardless of the extent to
which gain or loss may be realized, generally will not be subject to U.S.
nonresident withholding tax. However, such distributions may be subject to
backup withholding, as described below, unless the foreign investor certifies
his non-U.S. residency status.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup wi
thholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Page 25
Management of the Fund believes that each Portfolio has qualified for
the fiscal year ended October 31, 1994 as a "regulated investment company"
under the Code. Each Portfolio intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Such
qualification relieves the Portfolio of any liability for Federal income tax
to the extent its earnings are distributed in accordance with applicable
provisions of the Code. In addition, each Portfolio is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes, if any.
PERFORMANCE INFORMATION
For purposes of advertising, performance will be calculated on the
basis of average annual total return. Advertisements also may include
performance calculated on the basis of total return.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in a Portfolio 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 each Portfolio's performance will include such Portfolio's average annual
total return for one, five and ten year periods, or for shorter periods
depending upon the length of time during which the Portfolio has operated.
Computations of average annual total return for periods of less than one year
represent an annualization of the Portfolio's actual total return for the
applicable period.
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 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.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Standard & Poor's 500 Composite Stock Price Index,
Wilshire 5000 Index, the Dow Jones Industrial Average, MONEY MAGAZINE,
Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on November 16, 1993,
and commenced operations on December 29, 1993. The Fund is authorized to
issue 400 million shares of Common Stock (with 100 million allocated to each
Portfolio), par value $.001 per share. Each share has one vote.
Unless otherwise required by the Investment Company Act of 1940,
ordinarily it will not be necessary for the Fund to hold annual meetings of
shareholders. As a result, Fund shareholders may not consider each year the
election of Directors or the appointment of auditors. However, pursuant to
the Fund's By-Laws, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Fund to hold a special meeting of
shareholders for purposes of removing a Director from office or for any other
purpose. Fund shareholders may remove a Director by the affirmative vote of a
majority of the Fund's
Page 26
outstanding voting shares. In addition, the Board of Directors will call a
meeting of shareholders for the purpose of electing Directors if, at any time,
less than a majority of the Directors then holding office have been elected
by shareholders.
To date, the Board of Directors has authorized the creation of four
series of shares. All consideration received by the Fund for shares of one of
the Portfolios and all assets in which such consideration is invested will
belong to that Portfolio (subject only to the rights of creditors of the
Fund) and will be subject to the liabilities related thereto. The income
attributable to, and the expenses of, one Portfolio are treated separately
from those of the other Portfolios. The Fund has the ability to create, from
time to time, new series without shareholder approval.
Rule 18f-2 under the Investment Company Act of 1940 provides that any
matter required to be submitted under the provisions of the Investment
Company Act of 1940 or applicable state law or otherwise to the holders of
the outstanding voting securities of an investment company, such as the Fund,
will not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each Portfolio affected by
such matter. Rule 18f-2 further provides that a Portfolio shall be deemed to
be affected by a matter unless it is clear that the interests of each
Portfolio in the matter are identical or that the matter does not affect any
interest of such Portfolio. However, the Rule exempts the selection of
independent accountants and the election of Directors from the separate
voting requirements of the Rule.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquires may be made to your Service Agent or by writing
to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144,
or by calling toll free, 1-800-645-6561. In New York City, call
1-718-895-1206; on Long Island, call 794-5452.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 27
DREYFUS
Focus Funds, Inc.
Prospectus
(LION LOGO)
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
FFIp3022895
DREYFUS FOCUS FUNDS, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
FEBRUARY 28, 1995
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 February 28, 1995, as it
may be revised from time to time. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . B-10
Management Agreement. . . . . . . . . . . . . . . . . . . . . . B-12
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . B-15
Distribution Plan and Shareholder Services Plan . . . . . . . . B-15
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . B-18
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . B-20
Determination of Net Asset Value. . . . . . . . . . . . . . . . B-23
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . B-24
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . B-26
Performance Information . . . . . . . . . . . . . . . . . . . . B-27
Information About the Fund. . . . . . . . . . . . . . . . . . . B-28
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . . . . B-28
Financial Statements. . . . . . . . . . . . . . . . . . . . . . B-29
Report of Independent Auditors. . . . . . . . . . . . . . . . . B-50
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.
Repurchase Agreements. The Fund's custodian or subcustodian will have
custody of, and will hold in a segregated account, securities acquired by a
Portfolio under a repurchase agreement. Repurchase agreements are
considered by the staff of the Securities and Exchange Commission to be
loans by the Portfolio which enters into them. In an attempt to reduce the
risk of incurring a loss on a repurchase agreement, a Portfolio will enter
into repurchase agreements only with domestic banks with total assets in
excess of $1 billion or primary government securities dealers reporting to
the Federal Reserve Bank of New York, with respect to securities of the
type in which the Portfolio may invest, and will require that additional
securities be deposited with it if the value of the securities purchased
should be decreased below resale price. The Manager 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 a Portfolio
enters into repurchase agreements.
Commercial Paper and Other Short-Term Corporate Obligations. Variable
rate demand notes include variable amount master demand notes, which are
obligations that permit the Portfolios to invest fluctuating amounts at
varying rates of interest pursuant to direct arrangements between the Fund,
as lender, and the borrower. These notes permit daily changes in the
amounts borrowed. As mutually agreed between the parties, the Fund may
increase the amount under the notes at any time up to the full amount
provided by the note agreement, or decrease the amount, and the borrower
may repay up to the full amount of the note without penalty. Because these
obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value, plus accrued
interest, at any time. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements, the
Fund's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. In connection with floating and variable
rate demand obligations, the Manager will consider, on an ongoing basis,
earning power, cash flow and other liquidity ratios of the borrower, and
the borrower's ability to pay principal and interest on demand. Such
obligations frequently are not rated by credit rating agencies, and the
Portfolios may invest in them only if at the time of an investment the
borrower meets the criteria set forth in the Fund's Prospectus for other
commercial paper issuers.
Illiquid Securities. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not
readily marketable, the Fund will endeavor to obtain the right to
registration at the expense of the issuer. Generally, there will be a
lapse of time between the Fund's decision to sell any such security and the
registration of the security permitting sale. During any such period, the
price of the securities will be subject to market fluctuations. However,
if a substantial market of qualified institutional buyers develops pursuant
to Rule 144A under the Securities Act of 1933, as amended, for certain of
these securities held by the Fund, the Fund intends to treat such
securities as liquid securities in accordance with procedures approved by
the Fund's Board of Directors. Because it is not possible to predict with
assurance how the market for restricted securities pursuant to Rule 144A
will develop, the Fund's Board of Directors has directed the Manager to
monitor carefully each Portfolio's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a
period of time, qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, a Portfolio's investing in such
securities may have the effect of increasing the level of illiquidity in
such Portfolio's investments during such period.
Management Policies
Each Portfolio may engage in the following practices in furtherance of
its objective.
Leverage Through Borrowing. Each Portfolio may borrow for investment
purposes. The Investment Company Act of 1940, as amended (the "Act"),
requires each Portfolio to maintain continuous asset coverage (that is,
total assets including borrowings, less liabilities exclusive of
borrowings) of 300% of the amount borrowed. If the 300% asset coverage
should decline as a result of market fluctuations or other reasons, a
Portfolio may be required to sell some of its portfolio holdings within
three days to reduce the debt and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell
securities at that time. Each Portfolio also may be required to maintain
minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowings over the stated interest
rate. To the extent a Portfolio enters into a reverse repurchase
agreement, the Portfolio will maintain in a segregated custodial account
cash or U.S. Government securities or other high quality liquid debt
securities at least equal to the aggregate amount of its reverse repurchase
obligations, plus accrued interest, in certain cases, in accordance with
releases promulgated by the Securities and Exchange Commission. The
Securities and Exchange Commission views reverse repurchase transactions as
collateralized borrowings by the relevant Portfolio. These agreements,
which are treated as if reestablished each day, are expected to provide the
Portfolios with a flexible borrowing tool.
Short Selling. The Fund may make short sales of securities. Until
the Portfolio replaces a borrowed security in connection with a short sale,
the Portfolio will: (a) maintain daily a segregated account, containing
cash or U.S. Government securities, at such a level that (i) the amount
deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and (ii)
the amount deposited in the segregated account plus the amount deposited
with the broker as collateral will not be less than the market value of the
security at the time it was sold short; or (b) otherwise cover its short
position.
Options Transactions. Each Portfolio may engage in options
transactions, such as purchasing or writing covered call or put options.
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. 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 indices 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 indices 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.
Options on Swaps. A Portfolio usually will enter into swap
transactions on a net basis. In so doing, the two payment streams are
netted out, with the Portfolio receiving or paying, as the case may be,
only the net amount of the two payments. If a Portfolio enters into a
swap, it would maintain a segregated account in the full amount accrued on
a daily basis of the Portfolio's obligations with respect to the swap. If
there is a default by the other party to such a transaction, the Portfolio
will have contractual remedies pursuant to the agreements related to the
transaction. There is no limit on the amount of swap transactions that may
be entered into by a Portfolio. These transactions do not involve the
delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to swaps is limited to the net
amount of payments that a Portfolio is contractually obligated to make. If
the other party to a swap defaults, the Portfolio's risk of loss consists
of the net amount of payments that the Fund contractually in entitled to
receive.
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 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 indices, and options on futures contracts or indices.
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 (which
currently limits borrowing to no more than 33 1/3% of the value of the
portfolio's total assets). For purposes of this Investment Restriction,
the entry into options, forward contracts, futures contracts, including
those relating to indices, and options on futures contracts or indices
shall not constitute borrowing.
7. 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 indices, and options on
futures contracts or indices.
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 indices, and options on futures contracts or indices.
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 of the Fund
JOHN M. FRASER, JR., Director, President of Fraser Associates, a service
company for planning and arranging corporate meetings and other
events. From September 1975 to June 1978, he was Executive Vice
President of Flagship Cruises, Ltd. Prior thereto, he was Senior Vice
President and Resident Director of the Swedish-American Line for the
United States and Canada. His address is 133 East 64th Street, New
York, New York 10021.
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 to September 1990. He also is a Director of Avnet Inc. His
address is c/o 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, Theatre for a New Audience, Inc. and was secretary of
the ASCAP Foundation 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.
Mr. Houminer is also a director of Dreyfus Capital Value (A Premier
Fund), Dreyfus Municipal Bond Fund, Inc., Dreyfus Insured Municipal Bond
Fund, Inc., Dreyfus Strategic Municipals, Inc., Dreyfus Strategic Municipal
Bond Fund, Inc. and Dreyfus Municipal Money Market Fund, Inc., and a
trustee of Dreyfus California Tax Exempt Money Market Fund. In addition,
Mr. Fraser is a director of Dreyfus A Bonds Plus, Inc., Dreyfus Balanced
Fund, Inc., Dreyfus Capital Growth Fund (A Premier Fund), Dreyfus Global
Bond Fund, Inc., Dreyfus Growth and Income Fund, Inc., Dreyfus Growth
Opportunity Fund, Inc., Dreyfus International Equity Fund, Inc., Dreyfus
International Recovery Fund, Inc., and Dreyfus Money Market Instruments,
Inc., and a trustee of Dreyfus Institutional Money Market Fund and Dreyfus
Variable Investment Fund.
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.
The Fund does not pay any remuneration to its officers and Directors
other than fees and expenses to Directors who are not "interested persons"
of the Fund, which totalled $8,375 for the period December 29, 1993
(commencement of operations) through October 31, 1994 for all such
Directors as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991
to July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., a wholly-owned subsidiary of The Boston Company,
Inc. Prior to December 1991, she served as Vice President and
Controller, and later as Senior Vice President, of The Boston Company
Advisors, Inc.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. From August 1990 to February 1992, he was employed as an
Associate at Ropes & Gray, and prior to August 1990, he was employed
as an Associate at Sidley & Austin.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to August
1994, he was Manager of the High Performance Fabric Division of
Springs Industries Inc.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September 1992
to August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System.
JOSEPH S. TOWER,III, Assistant Treasurer. Senior Vice President, Treasurer
and Chief Financial Officer of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
July 1988 to August 1994, he was employed by The Boston Company, Inc.
where he held various management positions in the Corporate Finance an
Treasurer.
JOHN J. PYBURN, Assistant Treasurer. Vice President of the Distributor and
an officer of other investment companies advised or administered by
the Manager. From 1984 to July 1994, he held the position of
Assistant Vice President in the Mutual Fund Accounting Department of
the Manager.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts and, prior thereto, was
employed as a Research Assistant for the Bureau of National Affairs.
PAUL FURCINITO, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From January 1992 to July 1994, he was a
Senior Legal Product Manager, and from January 1990 to January 1992,
he was a mutual fund accountant, for The Boston Company Advisors, Inc.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Directors and officers of the Fund, as a group, owned less than 1% of
each Portfolio's shares of common stock outstanding on December 21, 1994.
The following persons are known by the Fund to own of record or
beneficially 5% or more of the Fund's outstanding voting securities as of
December 21, 1994: Major Trading Corporation, attn. Maurice Bendrihem, 200
Park Avenue, New York, New York 10166 - 98.7% of the outstanding shares of
Dreyfus Large Company Growth Portfolio, 98.8% of the outstanding shares of
Dreyfus Large Company Value, 93.5% of the outstanding shares of Dreyfus
Small Company Growth Portfolio and 97.3% of the outstanding shares of
Dreyfus Small Company Value Portfolio. A shareholder who beneficially
owns, directly or indirectly, more than 25% of the Fund's voting securities
may be deemed a "control person" (as defined in the Act) of the Fund.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994, 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 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. The Agreement was approved by
shareholders at a meeting held on August 5, 1994 and was last approved by
the Fund's Board of Directors, including a majority of the Directors who
are not "interested persons" of any party to the Agreement, at a meeting
held on May 23, 1994. 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 following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Robert E. Riley, President and Chief
Operating Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Paul H. Snyder, Vice President and Chief Financial Officer;
Daniel C. Maclean, Vice President and General Counsel; Elie M. Genadry,
Vice President-Wholesale; Henry D. Gottmann, Vice President-Retail; Jeffrey
N. Nachman, Vice President-Mutual Fund Accounting; Diane M. Coffey, Vice
President-Corporate Communications; Barbara E. Casey, Vice President-
Retirement Services; Katherine C. Wickham, Vice President-Human Resources;
Mark N. Jacobs, Vice President-Fund Legal and Compliance and Secretary;
Maurice Bendrihem, Controller; and Mandell L. Berman, Frank V. Cahouet,
Alvin E. Friedman, Lawrence M. Greene, Abigail Q. McCarthy, Julian M.
Smerling and David B. Truman, directors.
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 portfolio managers who are authorized
by the Board of Directors to execute purchases and sales of securities.
The Fund's portfolio managers are Howard Stein, Richard B. Hoey, 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. 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." 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.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
As compensation for the Manager's services to the fund, the Fund has
agreed to pay the Manager a monthly fee at the annual rate of .75 of 1% of
the value of each Portfolio's average daily net assets. For the period
December 29, 1993 (commencement of operations) through October 31, 1994,
the management fee payable, and amounts waived by the Manager, for each
Portfolio were as follows:
<TABLE>
<CAPTION>
Reduction Net Fee
Portfolio Management Fee Payable in Fee Paid
<S> <C> <C> <C>
Dreyfus Large Company $31,700 $31,700 $0
Growth
Dreyfus Large Company $32,302 $32,302 $0
Value
Dreyfus Small Company $30,774 $30,774 $0
Growth
Dreyfus Small Company $32,544 $32,544 $0
Value
</TABLE>
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 or 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
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--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 SHAREHOLDERS SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan and Shareholders 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. Under the Distribution Plan, the Fund
reimburses the Distributor for payments to certain financial institutions,
securities dealers and other financial industry professionals
(collectively, "Service Agents") for distributing the Portfolios' shares
and pays the Manager, Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager, any affiliate of either of them (collectively,
"Dreyfus") for advertising and marketing relating to the Fund. 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 effection 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 was last approved by the
Directors at a meeting held on May 23, 1994, and was last approved by
shareholders on August 5, 1994. 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.
For the period August 24, 1994 through October 31, 1994, the amounts
payable by each Portfolio pursuant to the Distribution Plan were as
follows:
<TABLE>
<CAPTION>
Prospectus and
statement of
additional
Distribution information Reductions Net
Advertising expenses expenses due to amount
Portfolio and marketing payable payable undertakings paid
<S> <C> <C> <C> <C> <C>
Dreyfus Large $4,819 $0 $0 $4,819 $0
Company Growth
Dreyfus Large $4,914 $0 $0 $4,914 $0
Company Value
Dreyfus Small $4,582 $0 $0 $4,582 $0
Company Growth
Dreyfus Small $4,878 $0 $0 $4,878 $0
Company Value
</TABLE>
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.
For the period August 24, 1994 through October 31, 1994, the amounts
charged to each Portfolio pursuant to the Shareholder Services Plan were as
follows:
Portfolio Amount Charged
Dreyfus Large Company Growth $2,410
Dreyfus Large Company Value $2,457
Dreyfus Small Company Growth $2,291
Dreyfus Small Company Value $2,439
Prior Distribution Plan and Shareholder Services Plan. As of August
24, 1994, the Fund terminated its then existing Distribution Plan, which
provided for payments to be made to Dreyfus Service Corporation for
advertising, marketing and distributing Fund shares at the annual rate of
.50% of 1% of the value of each Portfolio's average daily net assets. For
the period December 29, 1993 (commencement of operations) through August
23, 1994, the amounts payable by each Portfolio pursuant to such Plan were
as follows:
<TABLE>
<CAPTION>
Prospectus and
Advertising, statement of
marketing and additional
distribution information Reductions
expenses expenses due to Net amount
Portfolio payable payable undertakings paid
<S> <C> <C> <C> <C>
Dreyfus Large $16,314 $0 $16,314 $0
Company Growth
Dreyfus Large $16,620 $0 $16,620 $0
Company Value
Dreyfus Small $15,934 $0 $15,934 $0
Company Growth
Dreyfus Small $16,818 $0 $16,818 $0
Company Value
</TABLE>
As of August 24, 1994, the Fund also terminated its then existing
Shareholder Services Plan, which provided for payments to be made to
Dreyfus Service Corporation for expenses related to providing shareholder
services. For the period December 29, 1993 (commencement of operations)
through August 23, 1994, the amounts charged to each Portfolio pursuant to
such Plan were as follows:
Portfolio Amount Charged
Dreyfus Large Company Growth $8,157
Dreyfus Large Company Value $8,310
Dreyfus Small Company Growth $7,967
Dreyfus Small Company Value $8,409
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 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 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."
Fund Exchanges. 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 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.
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 IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in Corporate Plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
Personal Retirement Plans, the shares exchanged must have a current value
of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for 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 "Fund Exchanges" 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.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available
to shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained 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 Dreyfus Auto-Exchange Privilege may be modified or terminated at any
time upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. 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. Dreyfus Dividend Sweep 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. Investors 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.
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 or if no such rate is quoted on such date, 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."
Management of the Fund believes that each Portfolio has qualified for
the fiscal year ended October 31, 1994 as a "regulated investment company"
under the Code. Each Portfolio intends to continue to so qualify if 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 any gains realized from the sale or
other disposition of certain market discount bonds will be treated as
ordinary income under Section 1276. Finally, all or a portion of the gain
realized from engaging in "conversion transactions" may be treated as
ordinary income under Section 1258. "Conversion transactions" are defined
to include certain forward, futures, option and straddle transactions,
transactions marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, 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 Sections 1256 and 988 of the Code.
As such, all or a portion of any short or long-term capital gain from
certain "straddle" transactions may be recharacterized to ordinary income.
If 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" 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" and conversion transaction 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 acquires shares 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. In addition, gain realized from the sale or other disposition
of PFIC shares may be treated as ordinary income under Section 1291 of the
Code.
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 obligations 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.
For the period December 29, 1993 (commencement of operations) through
October 31, 1994, the following amounts were paid by each Portfolio for
brokerage commissions, none of which was paid to the Distributor:
Portfolio Amount Paid
Dreyfus Large Company Growth $6,813
Dreyfus Large Company Value $14,019
Dreyfus Small Company Growth $12,169
Dreyfus Small Company Value $57,029
For the period of December 29, 1993 (commencement of operations)
through October 31, 1994, there were no gross spreads and concessions on
principal transactions.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
The average annual return for the period December 29, 1993
(commencement of operations) through October 31, 1994 for each Portfolio
was as follows: Dreyfus Large Company Growth Portfolio 5.25%; Dreyfus
Large Company Value Portfolio 1.24%; Dreyfus Small Company Growth Portfolio
(2.18)%; and Dreyfus Small Company Value Portfolio -(0.67)%. 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.
The Fund's total return for the period December 29, 1993 (commencement
of operations) through October 31, 1994 for each Portfolio was as follows:
Dreyfus Large Company Growth Portfolio 4.40%; Dreyfus Large Company Value
Portfolio 1.04%; Dreyfus Small Company Growth Portfolio (1.84)%; and
Dreyfus Small Company Value Portfolio -(0.56)%. 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.
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 LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
<TABLE>
<CAPTION>
<S> <C>
PERFORMANCE
Total return for the period ended October 31, 1994: (1)
Large Company Growth Portfolio 4.40%
Wilshire Large Company Growth Index (2) 4.20%
Large Company Value Portfolio 1.04%
Wilshire Large Company Value Index (2) (1.11%)
Small Company Growth Portfolio (1.84%)
Wilshire Small Company Growth Index (2) 2.35%
Small Company Value Portfolio (0.56%)
Wilshire Small Company Value Index (2) (1.79%)
Past performance is not predictive of future performance.
Standard & Poor's 500 Composite Stock Price Index 3.60% (3)
Dow Jones Industrial Average 6.52% (3)
Russell 2000 Index (0.35%)(3)
</TABLE>
(1) Total return figures for the Focus portfolios are from Inception
(December 29, 1993). For the various stock market indices, the total
return figures are from December 31, 1993. Total return represents the
change during the period in a hypothetical account with dividends
reinvested.
(2) SOURCE: WILSHIRE ASSOCIATES, INC. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Wilshire Large Company Growth Index, Small Company Growth Index, Large
Company Value Index and Small Company Value Index are unmanaged indices
derived from the largest 2,500 securities in the Wilshire 5000 Index. The
Large Company universe consists of the largest 750 companies in the
Wilshire 5000 and the Small Company universe consists of the remaining
securities in the top 2,500. The Value universe and Growth universe
consist of companies which embody the characteristics of each style
respectively.
(3) SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment
of income dividends and, where applicable, capital gain distributions.
The Dow Jones Industrial Average, the Standard & Poor's 500 Composite
Stock Price Index and the Russell 2000 Index are widely accepted
unmanaged indexes of various aspects of stock market performance.
Performance
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN LARGE COMPANY GROWTH
PORTFOLIO
AND LARGE COMPANY VALUE PORTFOLIO OF DREYFUS FOCUS FUNDS
AND THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX *
<TABLE>
<CAPTION>
Exhibit A
* Source: Lipper Analytical Services, Inc.
Actual Aggregate Total Returns
From Inception (12/29/93)
to October 31, 1994
-------------------
<S> <C>
Large Company Growth Portfolio 4.40%
Large Company Value Portfolio 1.04%
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Large Company Growth
Portfolio and Large Company Value Portfolio of the Dreyfus Focus Funds on
12/29/93 (Inception Date of both Portfolios) to a $10,000 investment made in
the Standard & Poor's 500 Composite Stock Price Index on that date. For
comparative purposes, the value of the Index on 12/31/93 is used as the
beginning value on 12/29/93. All dividends and capital gain distributions are
reinvested.
The Fund's performance takes into account applicable fees and expenses. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted,
unmanaged index of overall stock market performance, which does not take into
account charges, fees and other expenses. Further information relating to
Fund performance, including expense reimbursements, if applicable, is
contained in the Condensed Financial Information section of the Prospectus
and elsewhere in this report.
Performance
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN SMALL COMPANY GROWTH
PORTFOLIO
AND THE SMALL COMPANY VALUE PORTFOLIO OF DREYFUS FOCUS FUNDS, INC.
AND THE RUSSELL 2000 INDEX
Exhibit B
* Source: Lipper Analytical Services, Inc.
Actual Aggregate Total Returns
From Inception (12/29/93)
to October 31, 1994
-------------------
Small Company Growth Portfolio (1.84%)
Small Company Value Portfolio (.56%)
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Small Company Growth
Portfolio and Small Company Value Portfolio of the Dreyfus Focus Funds on
12/29/93 (Inception Date of both Portfolios) to a $10,000 investment made in
the Russell 2000 Index on that date. For comparative purposes, the value of
the Index on 12/31/93 is used as the beginning value on 12/29/93. All
dividends and capital gain distributions are reinvested.
The Portfolio's performance takes into account all applicable fees and
expenses. The Russell 2000 Index is an unmanaged index and is composed of the
2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index is
composed of 3,000 of the largest U.S. companies by market capitalization. The
Index does not take into account charges, fees and other expenses. Further
information relating to Portfolio performance, including expense
reimbursements, if applicable, is contained in the Condensed Financial
Information section of the Prospectus and elsewhere in this report.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS FOCUS FUNDS, INC., Large Company Growth Portfolio
STATEMENT OF INVESTMENTS OCTOBER 31, 1994
COMMON STOCKS_97.0% SHARES VALUE
--------- ------------
<S> <C> <C>
CONSUMER NON-DURABLES_10.9%
Archer-Daniels-Midland............... 3,360 $ 96,180
Coca-Cola........................ 2,200 110,550
Colgate-Palmolive................ 1,000 61,000
General Mills.................... 1,000 56,000
Gillette......................... 1,000 74,375
International Flavors & Fragrances 1,200 52,650
Roche Holdings, A.D.R. .......... 1,900 84,194
Wrigley, (Wm.) Jr................ 900 40,612
---------
575,561
---------
CONSUMER SERVICES_4.5%
Bell Cablemedia, A.D.R. (a) 3,200 75,200
Comcast, Cl. A .................. 2,900 48,212
Comcast, Cl. A (Non-voting)...... 1,450 23,744
Grupo Televisa S.A. ............. 2,000 88,750
---------
235,906
---------
ENERGY_11.3%
Anadarko Petroleum................ 1,600 78,200
Ashland Oil...................... 1,500 58,313
Baker Hughes..................... 4,700 96,350
Louisiana Land & Exploration..... 1,900 86,212
Schlumberger..................... 2,700 158,625
Total, Cl. B, A.D.S. ............ 3,600 118,800
---------
596,500
---------
FINANCE_8.9%
American International Group......... 1,400 131,075
Federal National Mortgage Association.... 1,400 106,400
MGIC Investment.................. 3,100 97,263
Morgan (J.P.) & Co............... 1,300 80,437
Progressive Corp, Ohio........... 1,500 57,000
---------
472,175
---------
HEALTH CARE_10.7%
ALZA.............................. (a) 3,300 58,575
Abbott Laboratories.............. 3,000 93,000
Amgen............................. (a) 1,200 66,900
Chiron............................ (a) 1,000 67,375
Genentech......................... (a) 1,200 60,900
Genzyme........................... (a) 2,400 78,600
U.S. HealthCare.................. 1,350 63,788
United Healthcare................ 1,400 73,850
---------
562,988
---------
NON-ENERGY MINERALS_1.7%
Inco .............................. 3,000 90,375
---------
PRODUCER MAUFACTURING_4.2%
Deere & Co.......................... 1,200 86,100
General Electric................. 1,800 87,975
Trinity Industries............... 1,400 47,950
---------
222,025
---------
DREYFUS FOCUS FUNDS, INC., Large Company Growth Portfolio (continued)
STATEMENT OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- -----------
RETAIL TRADE_1.3%
Albertson's......................... 2,200 $ 66,000
---------
TECHNOLOGY_19.9%
Apple Computer...................... 2,200 95,013
COMPAQ Computer................... (a) 2,400 96,300
Ericsson (LM) Telephone, Cl. B, A.D.R. 2,400 146,250
General Instrument................ (a) 4,800 160,800
Hewlett-Packard.................. 1,100 107,525
Microsoft........................ (a) 2,200 138,600
Motorola......................... 2,800 164,850
Scientific-Atlanta............... 3,600 77,850
Tandem Computers................. (a) 3,700 65,212
---------
1,052,400
---------
TRANSPORTATION_2.9%
AMR............................... (a) 1,400 77,175
Delta Air Lines.................. 1,500 78,188
---------
155,363
---------
UTILITIES_20.7%
Cable & Wireless, A.D.S. ......... 3,100 63,550
Hong Kong Telecom, A.D.R. ....... 4,200 89,250
LIN Broadcasting................. (a) 700 96,600
MCI Communications............... 6,200 142,600
MFS Communications................ (a) 2,000 74,000
NEXTEL Communications, Cl. A..... (a) 2,100 43,969
Telecom Corp New Zealand, A.D.S. 1,800 100,125
Telecomunicacoes Brasileiras S.A., A.D.R. 2,300 110,400
Telefonica de Espana, A.D.S. .... 2,000 81,000
Telefonos de Mexico, Cl. L, A.D.R. 1,500 82,687
Telephone & Data Systems......... 1,700 84,150
Vodafone Group, A.D.R. .......... 3,600 125,100
---------
1,093,431
---------
TOTAL COMMON STOCKS
(cost $4,853,687).............. $5,122,724
==========
PRINCIPAL
SHORT-TERM INVESTMENTS_.5% AMOUNT
----------
U.S. TREASURY BILL; 4.42%, 11/10/94
(cost $25,971)................. $ 26,000 $ 25,971
==========
TOTAL INVESTMENTS (cost $4,879,658)................... 97.5% $5,148,695
===== ===========
CASH AND RECEIVABLES (NET)............................ 2.5% $ 132,261
===== ===========
NET ASSETS............................................ 100.0% $5,280,956
===== ===========
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS FOCUS FUNDS, INC., Large Company Value Portfolio
STATEMENT OF INVESTMENTS OCTOBER 31, 1994
COMMON STOCKS_95.6% SHARES VALUE
------ -------
<S> <C> <C>
CONSUMER DURABLES_5.0%
American Greetings, Cl. A ........ 800 $ 21,900
Black & Decker................... 500 12,563
Fleetwood Enterprises............ 200 4,600
Ford Motor....................... 4,000 118,000
Masco............................ 1,000 23,750
Volkswagen A.G., A.D.R........... 1,300 76,050
---------
256,863
---------
CONSUMER NON-DURABLE_-7.8%
American Brands.................. 800 27,800
Archer-Daniels-Midland........... 2,730 78,146
Dean Foods....................... 300 8,663
Heinz (H.J.)..................... 700 25,988
Liz Claiborne.................... 1,100 25,437
Pet ............................. 1,500 25,875
Philip Morris Cos................ 1,800 110,250
RJR Nabisco Holdings.............. (a) 6,500 44,687
Seagram.......................... 1,800 55,575
---------
402,421
---------
CONSUMER SERVICES_1.1%
King World Productions............ (a) 500 17,750
Knight-Ridder.................... 800 41,200
---------
58,950
---------
ENERGY_5.8%
Amerada Hess...................... 500 24,875
Exxon............................ 1,100 69,163
Horsham.......................... 2,200 34,100
MAPCO............................ 500 27,312
Mobil............................ 500 43,000
Royal Dutch Petroleum............ 500 58,250
Tosco............................ 1,300 41,275
---------
297,975
---------
FINANCE_22.5%
ACE.......................... 1,100 25,025
Aetna Life & Casualty............ 2,200 101,475
Ahmanson (H.F.) & Co. ........... 1,000 19,125
Allmerica Property & Casualty Cos 1,100 17,600
American Express................. 4,700 144,525
American International Group..... 600 56,175
BankAmerica...................... 1,518 66,033
Chase Manhattan.................. 1,900 68,400
Commerce Bancshares.............. 600 19,050
Crestar Financial................ 800 33,000
Federal National Mortgage Association 1,400 106,400
First Chicago.................... 1,600 78,400
First Tennessee National......... 600 28,200
Fleet Financial Group............ 1,800 61,650
Lincoln National................. 800 29,000
Merrill Lynch & Co............... 700 27,562
DREYFUS FOCUS FUNDS, INC., Large Company Value Portfolio (continued)
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
------- --------
FINANCE (CONTINUED)
Morgan (J.P.) & Co ............... 1,100 $ 68,063
Ryder System..................... 1,000 23,500
St. Paul Cos. ................... 1,000 43,625
Student Loan Marketing Association 1,800 57,825
SunAmerica....................... 800 31,100
Travelers........................ 1,700 59,075
---------
1,164,808
---------
HEALTH CARE_4.7%
Columbia/HCA Healthcare............. 40 1,665
FHP International................. (a) 700 20,300
Genetics Institute (Depository Shares)(a) 200 8,100
Healthtrust-The Hospital Company.. (a) 1,600 56,000
Johnson & Johnson................ 700 38,238
Lily (Eli) & Co.................. 700 43,400
Schering-Plough.................. 500 35,625
Warner-Lambert................... 500 38,125
---------
241,453
---------
NON-ENERGY MINERALS_1.2%
AK Steel Holding............... (a) 1,300 42,575
Bethlehem Steel................... (a) 1,200 22,800
---------
65,375
---------
PROCESS INDUSTRIES_5.4%
Bowater............. 900 24,300
Georgia-Pacific.................. 300 22,163
Grace (W.R.) & Co. .............. 1,600 63,400
IMC Global........................ (a) 1,100 46,750
International Paper.............. 300 22,350
James River...................... 1,200 27,450
Rayonier......................... 250 7,375
Sherwin-Williams................. 600 19,575
Stone Container................... (a) 1,000 16,750
Temple-Inland.................... 600 28,350
---------
278,463
---------
PRODUCER MANUFACTURING_12.8%
Canadian Pacific.......... 1,800 28,800
Champion International........... 1,400 51,800
Dial............................. 2,000 41,250
General Electric................. 1,300 63,537
Honeywell........................ 1,700 54,825
ITT....................... 800 70,600
Litton Industries................. (a) 700 25,725
Loews...................... 600 52,950
Louisiana Pacific................ 1,400 42,875
Philips Electronics, N.V. ....... 3,900 127,725
Varity............................ (a) 1,000 38,250
Xerox................................. 600 61,500
---------
659,837
---------
DREYFUS FOCUS FUNDS, INC., Large Company Value Portfolio (continued)
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
------- ---------
RETAIL TRADE_15.4%
American Stores................... 1,500 $ 40,688
Dayton Hudson.................... 400 31,000
Dillard Department Stores, Cl. A 2,600 68,900
Kroger............................ (a) 1,500 39,188
May Department Stores............ 1,900 71,487
Melville......................... 600 20,025
Mercantile Stores................ 700 31,850
Penney (J.C.).................... 1,500 75,937
Premark International............ 2,500 111,875
Rite Aid......................... 1,500 36,000
Sears, Roebuck & Co. ............ 2,400 118,800
Tandy............................ 2,400 106,200
United States Shoe............... 2,400 42,900
---------
794,850
---------
TECHNOLOGY_5.1%
Apple Computer............. 1,300 56,144
Martin Marietta.................. 1,700 77,988
Rockwell International........... 1,700 59,287
Sun Microsystems.................. (a) 1,400 45,850
Unicom........................... 1,200 25,950
---------
265,219
---------
TRANSPORTATION_2.8%
AMR............................ (a) 500 27,563
Conrail.......................... 1,100 59,812
Illinois Central, Ser. A......... 700 22,487
Southern Pacific Rail............. (a) 2,000 34,750
---------
144,612
---------
UTILITIES_6.0%
AT&T................... 1,000 55,000
CMS Energy....................... 2,400 55,200
Illinova......................... 2,500 49,375
MCI Communications............... 2,000 46,000
NYNEX............................ 700 27,475
Pinnacle West Capital............ 2,500 46,562
TransCanada Pipelines............ 2,500 32,500
---------
312,112
---------
TOTAL COMMON STOCKS
(cost $4,942,654).............. $4,942,938
==========
PRINCIPAL
SHORT-TERM INVESTMENTS_2.0% AMOUNT
-------
U.S. TREASURY BILLS; 4.40%, 11/10/94
(cost $100,889)................ $ 101,000 $ 100,889
==========
TOTAL INVESTMENTS (cost $5,043,543)........... 97.6% $5,043,827
===== ===========
CASH AND RECEIVABLES (NET).................... 2.4% $ 124,571
===== ===========
NET ASSETS................................... 100.0% $5,168,398
===== ===========
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS FOCUS FUNDS, INC., Small Company Growth Portfolio
STATEMENT OF INVESTMENTS OCTOBER 31, 1994
COMMON STOCKS_83.7% SHARES VALUE
---------- ---------
<S> <C> <C>
CONSUMER DURABLES_3.8%
Avid Technology.................. (a) 2,800 $ 105,350
Oakwood Homes.................... 3,600 85,500
---------
190,850
---------
CONSUMER SERVICES_1.0%
People's Choice TV............ (a) 2,700 52,650
---------
ENERGY_18.6%
Global Marine............... (a) 32,300 153,425
Helmerich & Payne................ 2,800 87,500
Hornbeck Offshore Services........ (a) 4,900 73,500
Noble Drilling.................... (a) 8,500 62,688
Parker Drilling................... (a) 15,100 92,488
Rowan............................. (a) 15,900 121,237
Sonat Offshore Drilling.......... 5,000 99,375
Unit.............................. (a) 12,200 44,225
Varco International.............. .(a) 11,900 83,300
Weatherford International......... (a) 10,500 119,437
---------
937,175
---------
FINANCE_3.8%
Ethical Holdings, A.D.R. ...... (a) 7,500 53,437
PXRE............................. 3,000 73,875
United Companies Financial....... 2,000 66,500
---------
193,812
---------
HEALTH CARE_9.4%
COR Therapeutics............. (a) 6,500 84,500
Centocor.......................... (a) 5,500 97,281
GMIS.............................. (a) 4,400 82,500
Immune Response................... (a) 8,000 65,000
Mariner Health Group.............. (a) 3,500 79,188
Noven Pharmaceuticals............. (a) 4,300 65,575
---------
474,044
---------
INDUSTRIAL SERVICES_1.5%
Catalina Marketing............... (a) 1,500 76,312
---------
MISCELLANEOUS_1.7%
Brown (Tom).................... (a) 6,700 85,844
---------
NON-ENERGY MINERALS_1.5%
Cleveland-Cliffs............ 2,000 76,250
---------
PROCESS INDUSTRIES_2.5%
Albany International, Cl. A ............. 3,700 73,075
Seda Speciality Packaging......... (a) 4,000 52,000
---------
125,075
---------
PRODUCER MANUFACTURING_1.8%
Lam Research........... (a) 2,000 90,000
---------
TECHNOLOGY_24.9%
ANTEC...................... (a) 3,100 88,350
Altera........................... (a) 2,400 94,650
Andrew........................... (a) 2,400 124,200
Aspen Technology................. (a) 4,500 76,500
Auspex Systems.................... (a) 8,600 63,425
Chipcom........................... (a) 2,600 156,650
DREYFUS FOCUS FUNDS, INC., Small Company Growth Portfolio (continued)
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
-------- -------------
TECHNOLOGY (CONTINUED)
FORE Systems ................... (a) 2,000 $ 99,500
Keane............................. (a) 3,300 67,650
Novellus Systems................. .(a) 1,800 98,100
Tellabs........................... (a) 5,400 263,250
Zilog............................. (a) 4,200 120,750
---------
1,253,025
---------
TRANSPORTATION_4.0%
Comair Holdings........... 3,200 69,600
SkyWest.......................... 3,000 61,500
Werner Enterprises............... 2,700 68,850
---------
199,950
---------
UTILITIES_9.2%
Associated Communications, Cl. B (a) 3,200 82,400
C-TEC, Cl. B...................... (a) 2,400 67,200
Cellular Communications, Cl. A ... (a) 2,800 149,100
Rogers Cantel Mobile Communications, Cl. B (a) 2,800 85,575
United International Holdings, Cl. A (a) 5,200 81,900
---------
466,175
---------
TOTAL COMMON STOCKS
(cost $3,954,924).............. $4,221,162
==========
PRINCIPAL
SHORT-TERM INVESTMENTS_13.5% AMOUNT
-----------
U.S. TREASURY BILLS: 4.42%, 11/10/94 $ 307,000 $ 306,661
4.61%, 11/17/94.................. 235,000 234,518
4.73%, 12/22/94.................. 139,000 138,069
==========
TOTAL SHORT-TERM INVESTMENTS
(cost $679,248)................ $ 679,248
==========
TOTAL INVESTMENTS (cost $4,634,172).......... 97.2% $4,900,410
===== ===========
CASH AND RECEIVABLES (NET)................... 2.8% $ 138,955
===== ===========
NET ASSETS................................... 100.0% $5,039,365
===== ===========
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS FOCUS FUNDS, INC., Small Company Value Portfolio
STATEMENT OF INVESTMENTS OCTOBER 31, 1994
COMMON STOCKS_86.1% SHARES VALUE
-------- -----------
<S> <C> <C>
CONSUMER DURABLES_5.6%
Coachmen Industries .............. 3,000 $ 38,250
Continental Homes Holding........ 2,300 31,913
Fedders........................... (a) 3,900 23,400
Fedders, Cl. A (non-voting)...... 1,950 8,775
Johnson Worldwide Associates, Cl. A (a) 1,500 33,938
LADD Furniture................... 2,600 16,250
NVR............................... (a) 1,700 9,775
Pentech International............. (a) 4,000 20,250
Scotts, Cl. A..................... (a) 1,500 23,250
U.S. Home......................... (a) 2,000 31,750
Vista Resources................... (a) 2,300 49,737
---------
287,288
---------
CONSUMER NON-DURABLE_5.4%
Alberto Culver, Cl. A............. 3,500 82,688
Block Drug, Cl. A (non-voting)... 500 17,812
DeSoto............................ (a) 3,600 18,000
Duplex Products................... (a) 1,000 9,500
Ennis Business Forms............. 2,600 35,100
Gibson (C.R.).................... 2,200 17,187
GoodMark Foods................... 4,200 67,725
Graphic Industries............... 3,100 30,225
---------
278,237
---------
CONSUMER SERVICES_8.8%
Broadcasting Partners, Cl. A ..... (a) 1,800 28,575
Chris-Craft Industries........... (a) 1,339 50,547
Daka International................ (a) 5,400 82,350
Kinder-Care Learning Centers...... (a) 2,800 37,100
Longhorn Steaks................... (a) 4,300 35,475
Luby's Cafeterias................ 1,900 43,938
MDC, Cl. A........................ (a) 18,500 36,918
Plenum Publishing................ 700 17,850
Pulitzer Publishing.............. 1,000 35,750
Ryan's Family Steak House........ (a) 3,000 18,750
SFX Broadcasting, Cl. A........... (a) 3,900 66,300
---------
453,553
---------
ENERGY_8.4%
DI Industries................... (a) 12,000 12,000
Grad & Walker Energy.............. (a) 2,600 22,700
Offshore Pipelines................ (a) 4,000 81,500
Plains Petroleum................. 2,500 67,500
Santa Fe Energy Resources........ (a) 6,000 54,750
Total Petroleum, N.A............. 4,800 69,000
Trident NGL Holdings............. 4,500 47,812
Western Co. of North America...... (a) 4,600 81,650
---------
436,912
---------
FINANCE_14.3%
Acceptance Insurance Cos. (Warrants) (a) 10,000 53,750
Advantage Bancorp................ (a) 700 20,038
DREYFUS FOCUS FUNDS, INC., Small Company Value Portfolio (continued)
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
------- ----------
FINANCE (CONTINUED)
Albank Financial.................. 2,000 $ 44,750
Allmerica Property & Casualty Cos. 1,800 28,800
AmeriFed Financial............... 500 22,000
Anchor Bancorp................... (a) 2,000 29,625
Argonaut Group................... 1,100 31,075
Astoria Financial................ 900 25,875
Capital Guaranty................. 800 12,100
Citizens......................... 1,000 16,375
City National..................... (a) 3,800 41,800
Downey Savings & Loan Association. 2,300 43,412
Fidelity New York Federal Savings Bank (a) 2,300 64,544
First Palm Beach Bancorp.......... (a) 1,300 22,100
Fleet Financial Group............ 548 18,769
MMI Cos.......................... 3,000 43,125
Merchants Group.................. 1,300 19,175
Meridian Insurance Group......... 3,600 37,800
NBB Bancorp...................... 800 38,200
National Mercantile Bancorp...... (a) 2,700 12,319
Primark........................... (a) 1,000 13,000
Roosevelt Financial Group........ 2,211 33,441
Standard Federal Bank............ 2,000 53,000
Sterling Financial................ (a) 1,430 16,087
---------
741,160
---------
HEALTH CARE_6.0%
Advanced Technology Laboratories.......... (a) 1,300 20,800
Datascope......................... (a) 1,500 26,250
Living Centers of America........ (a) 2,800 84,350
Nellcor.......................... (a) 1,500 46,500
OrNda Healthcorp.................. (a) 1,294 20,542
PSICOR............................ (a) 1,300 12,188
Safeguard Health Enterprises...... (a) 2,900 27,912
SpaceLabs Medical................ (a) 2,400 50,400
Wellpoint Health Networks, Cl. A (a) 700 19,250
---------
308,192
---------
INDUSTRIAL SERVICES_3.0%
Appliance Recycling Centers of America (a) 2,000 14,000
CHC Helicopter, Cl. B............ 5,700 24,751
Groundwater Technology........... (a) 1,300 16,575
International Recovery........... 5,300 82,150
UTILX............................. (a) 5,000 19,375
---------
156,851
---------
NON-ENERGY MINERALS_2.5%
Chaparral Steel................... 3,400 27,200
Kentucky Electric Steel........... (a) 2,400 24,600
Miramar Mining................... (a) 4,000 17,369
Schnitzer Steel Industries, Cl. A 2,600 59,150
---------
128,319
---------
DREYFUS FOCUS FUNDS, INC., Small Company Value Portfolio (continued)
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- ----------
PROCESS INDUSTRIES_3.2%
CalMat.................... 3,500 $ 72,625
Lone Star Industries............. (a) 324 6,278
NCH.............................. 500 33,312
Paragon Trade Brands............. (a) 1,100 26,400
Slocan Forest Products........... 2,800 27,938
---------
166,553
---------
PRODUCER MANUFACTURING_5.5%
Borg-Warner Automotive......... 1,500 33,750
Cherry, Cl. A ................... 800 12,600
Cherry, Cl. B .................... (a) 800 13,600
Defiance.......................... (a) 3,400 24,650
Harnischfeger Industries......... 2,000 50,000
Nashua........................... 1,200 27,300
PAR Technology................... (a) 6,600 49,500
RB&W............................. (a) 4,700 36,425
Thomas Industries................ 2,400 35,400
---------
283,225
---------
RETAIL TRADE_9.6%Allou Health & Beauty, Cl. A (a) 1,500 12,563
Blair............................ 600 25,200
Bon-Ton Stores................... (a) 6,800 85,000
Designs.......................... (a) 3,300 24,338
Dress Barn........................ (a) 3,700 36,537
Lechters.......................... (a) 3,500 62,125
Lillian Vernon................... 2,600 43,875
Little Switzerland................ (a) 1,800 9,675
Morgan Products................... (a) 3,200 16,000
Pier 1 Imports................... 6,500 50,375
Shopko Stores.................... 1,700 16,787
Uni-Marts........................ 10,000 56,250
Venture Stores................... 300 4,650
Waban............................. (a) 3,000 53,250
---------
496,625
---------
TECHNOLOGY_10.5%
Beamscope Canada.................. 7,000 67,258
Code Alarm........................ (a) 5,800 63,800
Conner Peripherals................ (a) 4,000 46,000
Core Industries.................. 2,400 21,600
Cray Research..................... (a) 1,400 26,775
Evans & Sutherland Computer...... (a) 1,000 11,750
Micrografx........................ (a) 4,700 29,375
Printronix........................ (a) 2,000 42,000
QMS............................... (a) 10,500 105,000
Quantum.......................... (a) 1,500 23,062
Read-Rite......................... (a) 3,000 52,125
Rexon............................. (a) 10,000 52,500
Tripos........................... 333 1,582
---------
542,827
---------
DREYFUS FOCUS FUNDS, INC., Small Company Value Portfolio (continued)
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
------- ----------
TRANSPORTATION_3.2%
Alexander & Baldwin................ 1,100 $ 25,575
Arkansas Best.................... 4,500 58,219
Builders Transport................ (a) 3,500 39,375
Cannon Express, Cl. B............. (a) 2,100 25,200
Matlack Systems................... (a) 1,500 14,812
---------
163,181
---------
UTILITIES_.1%
Associated Communication, Cl. A .. (a) 300 7,762
---------
TOTAL COMMON STOCKS
(cost $4,824,118).............. $4,450,685
==========
PRINCIPAL
SHORT-TERM INVESTMENTS_12.5% AMOUNT
------------
U.S. TREASURY BILLS: 4.50%, 12/1/94..... (b) $ 292,000 $ 290,905
4.71%, 12/22/94.... 355,000 352,630
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $643,535)................ $ 643,535
===========
TOTAL INVESTMENTS (cost $5,467,653).......... 98.6% $5,094,220
===== ===========
CASH AND RECEIVABLES (NET)................ 1.4% $ 71,571
===== ===========
NET ASSETS................................. 100.0% $5,165,791
===== ===========
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Partially held by broker as collateral for open short positions
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Dreyfus Focus Funds, Inc., Small Company Value Portfolio
Statement of Securities Sold Short
October 31, 1994
Common Stocks_1.6% Shares Value
------ --------
<S> <C> <C>
Appliance Recycling Centers of America...................................... 4,000 $ 28,000
Lone Star Industries........................................................ 324 6,278
Lone Star Industries (Warrants)............................................. 1,654 13,232
Presstek.................................................................... 1,000 34,000
--------
TOTAL SECURITIES SOLD SHORT
(proceeds $99,299)...................................................... $ 81,510
========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Dreyfus Focus Funds, Inc.
Statement of Assets and Liabilities
October 31, 1994
Large Large Small Small
Company Company Company Company
Growth Value Growth Value
Portfolio Portfolio Portfolio Portfolio
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
[cost_Note 4(b)]_see statement....... $5,148,695 $5,043,827 $4,900,410 $5,094,220
Cash................................... 76,556 52,091 98,631 --
Receivable for investment securities sold 42,562 174,100 167,359 239,851
Dividends and interest receivable...... 4,112 10,367 -- 11,123
Receivable from brokers for proceeds on
securities sold short................ -- -- -- 99,299
Prepaid expenses_Note 2(g)............. 25,091 26,133 26,201 25,764
Due from The Dreyfus Corporation....... 6,180 7,032 6,048 8,316
---------- --------- --------- ---------
5,303,196 5,313,550 5,198,649 5,478,573
---------- --------- --------- ---------
LIABILITIES:
Due to the Distributor................. $ 3,276 $ 3,263 $ 3,137 $ 3,286
Due to Custodian....................... -- -- -- 205,310
Payable for investment securities purchased -- 120,885 138,500 --
Securities sold short, at value (proceeds $99,299) -- -- -- 81,510
Accrued expenses and other liabilities. 18,964 21,004 17,647 22,676
---------- --------- --------- ---------
22,240 145,152 159,284 312,782
---------- --------- --------- ---------
NET ASSETS ...................... $5,280,956 $5,168,398 $5,039,365 $5,165,791
=========== ========== ========== ==========
REPRESENTED BY:
Paid-in capital........................ $5,060,887 $5,116,478 $5,131,448 $5,197,419
Accumulated undistributed investment
income_net.......................... 68,916 106,661 38,622 123,146
Accumulated undistributed net realized gain
(loss) on investments, securities sold short
and foreign currency transactions.... (117,884) (55,025) (396,943) 200,873
Accumulated net unrealized appreciation
(depreciation) on investments, securities
sold short and foreign currency
transactions_Note 4(b)............... 269,037 284 266,238 (355,647)
---------- --------- --------- ---------
NET ASSETS at value........................ $5,280,956 $5,168,398 $5,039,365 $5,165,791
=========== ========== ========== ==========
Shares Outstanding
[400 million shares (with 100 million allocated
to each series) of $.001 par value Common Stock
authorized]............................ 404,823 409,217 410,862 415,510
=========== ========== ========== ==========
NET ASSET VALUE per share
(Net Assets / Shares Outstanding)...... $13.05 $12.63 $12.27 $12.43
=========== ========== ========== ==========
See notes to financial statements.
Dreyfus Focus Funds, Inc.
Statement of Operations
from December 29, 1993 (commencement of operations) to October 31, 1994
Large Large Small Small
Company Company Company Company
Growth Value Growth Value
Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- ---------
INVESTMENT INCOME:
Income:
Cash dividends (net of $2,225, $1,328 and $333
foreign taxes withheld at source for the Large
Company Growth, Large Company Value and
Small Company Value Portfolios, respectively) $ 54,058 $ 98,206 $ 8,750 $ 100,925
Interest.................................. 14,858 8,455 29,872 22,605
---------- --------- --------- ---------
Total Income........................ 68,916 106,661 38,622 123,530
---------- --------- --------- ---------
Expenses_Note 2(d):
Management fee_Note 3(a).................. $ 31,700 $ 32,302 $ 30,774 $ 32,544
Shareholder servicing costs_Note 3(b,c)... 35,544 36,046 33,266 36,393
Auditing fees............................. 10,013 10,012 9,613 10,413
Legal fees................................ 6,899 7,071 6,724 7,122
Organization expenses_Note 2(g)........... 5,303 5,447 5,411 5,485
Shareholders' reports..................... 3,174 3,182 3,143 3,250
Registration fees......................... 2,246 2,535 2,558 2,536
Directors' fees and expenses_Note 3(d).... 2,013 2,111 1,951 2,300
Custodian fees............................ 1,206 3,328 1,335 5,761
Dividends on securities sold short........ -- -- -- 384
Miscellaneous............................. 1,046 959 956 962
---------- --------- --------- ---------
99,144 102,993 95,731 107,150
Less_expense reimbursement from Manager
due to undertaking_Note 3(a).......... 99,144 102,993 95,731 106,766
---------- --------- --------- ---------
Total Expenses...................... -- -- -- 384
---------- --------- --------- ---------
INVESTMENT INCOME_NET............... 68,916 106,661 38,622 123,146
---------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments_Note 4(a):
Long transactions (including foreign currency
transactions)....................... $(117,884) $ (55,025) $(396,943) $ 182,814
Short sale transactions............... -- -- -- 18,059
---------- --------- --------- ---------
Net Realized Gain (Loss).............. (117,884) (55,025) (396,943) 200,873
Net unrealized appreciation (depreciation) on
investments, securities sold short and foreign
currency transactions................. 269,037 284 266,238 (355,647)
---------- --------- --------- ---------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS...... 151,153 (54,741) (130,705) (154,774)
---------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................... $ 220,069 $ 51,920 $ (92,083) $ (31,628)
========== ========= =========== ===========
See notes to financial statements.
Dreyfus Focus Funds, Inc.
Statement of Changes in Net Assets
from December 29, 1993 (commencement of operations) to October 31, 1994
Large Large Small Small
Company Company Company Company
Growth Value Growth Value
Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- ---------
OPERATIONS:
Investment income_net................. $ 68,916 $ 106,661 $ 38,622 $ 123,146
Net realized gain (loss) on investments (117,884) (55,025) (396,943) 200,873
Net unrealized appreciation (depreciation) on
investments for the period........... 269,037 284 266,238 (355,647)
---------- --------- --------- ---------
Net Increase (Decrease) In Net Assets
Resulting From Operations...... 220,069 51,920 (92,083) (31,628)
---------- --------- --------- ---------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.......... 5,053,200 5,101,555 5,286,073 5,174,759
Cost of shares redeemed................ (17,313) (10,077) (179,625) (2,340)
---------- --------- --------- ---------
Increase In Net Assets From Capital
Stock Transactions............. 5,035,887 5,091,478 5,106,448 5,172,419
---------- --------- --------- ---------
Total Increase In Net Assets 5,255,956 5,143,398 5,014,365 5,140,791
NET ASSETS:
Beginning of period_Note 1............ 25,000 25,000 25,000 25,000
---------- --------- --------- ---------
End of period (including undistributed
investment income_net_see Statement of
Assets and Liabilities).............. $5,280,956 $5,168,398 $5,039,365 $5,165,791
---------- --------- --------- ---------
---------- --------- --------- ---------
Shares Shares Shares Shares
---------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 404,190 407,991 424,287 413,701
Shares redeemed........................ (1,367) (774) (15,425) (191)
---------- --------- --------- ---------
Net Increase In Shares Outstanding 402,823 407,217 408,862 413,510
========= ========== ======= ==========
See notes to financial statements.
</TABLE>
Dreyfus Focus Funds, Inc.
Financial Highlights
Reference is made to Page 4 of the Fund's Prospectus dated February 28, 1995.
See notes to financial statements.
Dreyfus Focus Funds, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE 1_General:
Dreyfus Focus Funds, Inc. (the "Fund") was incorporated on November 16,
1993 and operates as a series company currently offering four classes of
shares of Common Stock: the Large Company Growth Portfolio, the Large Company
Value Portfolio, the Small Company Growth Portfolio and the Small Company
Value Portfolio. The Fund accounts separately for the assets, liabilities and
operations of each series. The Fund had no operations until December 29, 1993
(when operations commenced for all series) other than matters relating to its
organization and registration as a diversified open-end management investment
company under the Investment Company Act of 1940 ("Act") and the Securities
Act of 1933 and the sale and issuance of 2,000 shares of Common Stock ("Initia
l Shares") of each series to The Dreyfus Corporation ("Manager"). Dreyfus
Service Corporation, a wholly-owned subsidiary of the Manager, until August
24, 1994, acted as the distributor of the Fund's shares. Effective August 24,
1994, the Manager became a direct subsidiary of Mellon Bank, N.A.
As of October 31, 1994 Major Trading Corporation, a subsidiary of Mellon
Bank Investments Corporation, the parent company of which is Mellon Bank,
held the following shares:
<TABLE>
<CAPTION>
<S> <C> <S> <C>
Large Company Growth Portfolio 402,000 Small Company Growth Portfolio 402,000
Large Company Value Portfolio 402,000 Small Company Value Portfolio 407,816
</TABLE>
On August 24, 1994, Premier Mutual Fund Services, Inc, (the "Distributor")
was engaged as the Fund's distributor. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, is a wholly-owned subsidiary of
Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc.
NOTE 2_Significant Accounting Policies:
(a) Portfolio valuation: Each series' investments in securities 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. Short-term investments
are carried at amortized cost, which approximates value. Investments
denominated in foreign currencies are translated to U.S. dollars at the
prevailing rates of exchange.
(b) 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.
Reported 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 at fiscal year end, resulting from changes in
exchange rate.
Dreyfus Focus Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
(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) Expenses: Expenses directly attributable to each series are charged
to that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(e) Dividends to shareholders: Dividends payable to shareholders are
recorded by each series on the ex-dividend date. Dividends from investment
income-net and dividends from net realized capital gain, with respect to each
series, are normally declared and paid annually, but each series may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that a net realized
capital gain of a series can be offset by a capital loss carryover of that
series, such gain will not be distributed.
(f) Federal income taxes: It is the policy of the Fund to qualify as a
regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicaple 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. For
Federal income tax purposes, each series is treated as a single entity for
the purpose of determining such qualification.
The Large Company Growth Portfolio has an unused capital loss carryover
of approximately $118,000 available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
October 31, 1994. If not applied, the carryover expires in fiscal 2002.
The Large Company Value Portfolio has an unused capital loss carryover of
approximately $55,000 available for Federal income tax purposes to be applied
against future net securities profits, if any, realized subsequent to October
31, 1994. If not applied, the carryover expires in fiscal 2002.
The Small Company Growth Portfolio has an unused capital loss carryover
of approximately $397,000 available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
October 31, 1994. If not applied, the carryover expires in fiscal 2002.
(g) Other: Organization expenses paid by the Fund are included in prepaid
expenses and are being amortized to operations from the date operations
commenced over the period during which it is expected that a benefit will be
realized, not to exceed five years. At October 31, 1994, the unamortized
balance of such expenses for each of the respective series amounted to the
following:
<TABLE>
<CAPTION>
<S> <C> <S> <C>
Large Company Growth Portfolio $23,629 Small Company Growth Portfolio $24,133
Large Company Value Portfolio 24,235 Small Company Value Portfolio 23,947
</TABLE>
In the event that any of the Initial Shares, with respect to all series,
are redeemed during the amortization period, the redemption proceeds will be
reduced by any unamortized organization expenses for that series in the same
proportion as the number of such shares being redeemed bears to the number of
such shares outstanding of that series at the time of such redemption.
NOTE 3_Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .75 of 1% of the average
daily value of each series' net assets and is payable monthly. The Agreement
provides that if in any full fiscal year the aggregate expenses of any
series, exclusive of taxes, brokerage, interest on borrowings (which, in the
view of Stroock & Stroock &
Dreyfus Focus Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
Lavan, counsel to the Fund, also contemplates dividends accrued on securities
sold short) and extraordinary expenses, exceed the expense limitation of any
state having jurisdiction over the Series, that series may deduct from
payments to be made to the Manager, or the Manager will bear the amount of
such excess to the extent required by state law. The most stringent state
expense limitation applicable to each Series presently requires reimbursement
of expenses in any full fiscal year that such expenses (exclusive of
distribution expenses and certain expenses as described above) exceed 2 1/2%
of the first $30 million, 2% of the next $70 million and 1 1/2% of the excess
over $100 million of the average value of that series' net assets in
accordance with California "blue sky" regulations. However, the Manager has
undertaken from December 29, 1993 through December 31, 1994, or until such
time as the net assets of a series exceed $25 million, regardless of whether
they remain at that level, to assume all expenses of each Series (excluding
certain expenses as described above).
The expense reimbursements, pursuant to the undertaking amounted to the
following for the period ended October 31, 1994:
<TABLE>
<CAPTION>
<S> <C> <S> <C>
Large Company Growth Portfolio $ 99,144 Small Company Growth Portfolio $ 95,731
Large Company Value Portfolio 102,993 Small Company Value Portfolio 106,766
</TABLE>
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the agreement.
(b) On August 5, 1994, the shareholders approved a revised Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Pursuant to the Plan,
effective August 24, 1994, the Fund (a) reimburses the Distributor for
payments to certain Service Agents for distributing each Series' shares and
(b) pays the Manager, Dreyfus Service Corporation and any affiliate of either
of them for advertising and marketing relating to each Series, at an
aggregate annual rate of .50 of 1% of the value of each Series' average daily
net assets. The Distributor may pay one or more Service Agents in respect of
distribution services. The Distributor determines the amounts, if any, to be
paid to Service Agents under the Plan and the basis on which such payments
are made. The fees payable under the Plan are payable without regard to
actual expenses incurred. The Plan also separately provides for the Fund to
bear the costs of preparing, printing and distributing certain of the Fund's
prospectuses and statements of additional information and costs associated
with implementing and operating the Plan, not to exceed the greater of
$100,000 or .005 of 1% of each Series' average daily net assets for any full
fiscal year.
Prior to August 24, 1994, the Fund's Distribution Plan ("prior
Distribution Plan") provided that each Series pay Dreyfus Service Corporation
at an annual rate of .50 of 1% of the value of each Series' average daily net
assets, for costs and expenses in connection with advertising, marketing and
distributing the Series' shares and for servicing shareholder accounts.
Dreyfus Service Corporation made payments to one or more Service Agents based
on the value of the Series' shares owned by clients of the Service Agents.
The prior Distribution Plan also separately provided for the Fund to bear the
costs of preparing, printing and distributing certain of the Fund's
prospectuses and statements of additional information and costs associated
with implementing and operating the prior Distibution Plan, not to exceed the
greater of $100,000 or .005 of 1% of each Series' average daily net assets
for any full fiscal year.
Dreyfus Focus Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
During the period ended October 31, 1994, the following was charged to
each series pursuant to the Plan:
<TABLE>
<CAPTION>
<S> <C> <S> <C>
Large Company Growth Portfolio $4,819 Small Company Growth Portfolio $4,582
Large Company Value Portfolio 4,914 Small Company Value Portfolio 4,878
</TABLE>
and the following was charged to each series pursuant to the prior
Distribution Plan:
<TABLE>
<CAPTION>
<S> <C> <S> <C>
Large Company Growth Portfolio $16,314 Small Company Growth Portfolio $15,934
Large Company Value Portfolio 16,620 Small Company Value Portfolio 16,818
</TABLE>
(c) Under the Shareholder Services Plan, each series pays the Distributor
at an annual rate of .25 of 1% of the value of a series' average daily net
assets for servicing shareholder accounts. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Series 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.
The following summarizes the aggregate amount charged by Dreyfus Service
Corporation, pursuant to the Shareholder Services Plan from December 29, 1994
through August 23, 1994:
<TABLE>
<CAPTION>
<S> <C> <S> <C>
Large Company Growth Portfolio $8,157 Small Company Growth Portfolio $7,967
Large Company Value Portfolio 8,310 Small Company Value Portfolio 8,409
</TABLE>
and the following summarizes the aggregate amount charged by the Distributor,
pursuant to the Shareholder Services Plan from August 24, 1994 through
October 31, 1994:
<TABLE>
<CAPTION>
<S> <C> <S> <C>
Large Company Growth Portfolio $2,410 Small Company Growth Portfolio $2,291
Large Company Value Portfolio 2,457 Small Company Value Portfolio 2,439
</TABLE>
(d) Prior to August 24, 1994 certain officers and directors of the Fund
were "affiliated persons," as defined in the Act, of the Manager and/or
Dreyfus Service Corporation. Each director who is not an "affiliated person"
receives from the Fund an annual fee of $3,000 and an attendance fee of $250
per meeting.
NOTE 4_Securities Transactions:
(a) The following summarizes the aggregate amount of purchases and sales
of investment securities and securities sold short, excluding short-term
securities, for the period ended October 31, 1994:
Long Transactions:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Large Company Growth Portfolio................................... $ 5,538,049 $ 566,037
Large Company Value Portfolio.................................... 7,397,149 2,399,042
Small Company Growth Portfolio................................... 5,410,726 1,058,375
Small Company Value Portfolio.................................... 14,802,118 10,160,353
Short Sale Transactions;
Purchases Sales
------------- -------------
Small Company Value Portfolio.................................... $ 315,298 $ 432,656
</TABLE>
Dreyfus Focus Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
The Small Company Value Portfolio is engaged in short-selling which
obligates the Series to replace the security borrowed by purchasing the
security at current market value. The Series would incur a loss if the price
of the security increases between the date of the short sale and the date on
which the Series replaces the borrowed security. The Series would realize a
gain if the price of the security declines between those dates. Until the
Series replaces the borrowed security, the Series will maintain daily, a
segregated account with a broker and custodian, of cash and/or U.S.
Government securities sufficient to cover its short position. Securities sold
short at October 31, 1994 and their related market values and proceeds are
set forth in the Statement of Securities Sold Short.
(b) The following summarizes the accumulated net unrealized appreciation
(depreciation) on investments, excluding foreign currency transactions, for
each series at October 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Appreciation (Depreciation) Net
--------- ---------- ---------
<S> <C> <C> <C>
Large Company Growth Portfolio.......................... $525,342 $(256,305) $ 269,037
Large Company Value Portfolio........................... 241,180 (240,896) 284
Small Company Growth Portfolio.......................... 532,190 (265,952) 266,238
Small Company Value Portfolio........................... 179,642 (535,286) (355,644)
</TABLE>
At October 31, 1994, the cost of investments of each series for Federal
income tax purposes was substantially the same as the
cost for financial reporting purposes. The cost of investments for each
series for financial reporting purposes as of October 31, 1994 was as
follows:
<TABLE>
<CAPTION>
<S> <C> <S> <C>
Large Company Growth Portfolio $4,879,658 Small Company Growth Portfolio $4,634,172
Large Company Value Portfolio 5,043,543 Small Company Value Portfolio 5,467,653
</TABLE>
Dreyfus Focus Funds, Inc.
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
Dreyfus Focus Funds, Inc.
We have audited the accompanying statement of assets and liabilities,
including the statements of investments and securities sold short, of Dreyfus
Focus Funds, Inc. (comprising, respectively, the Large Company Growth
Portfolio, the Large Company Value Portfolio, the Small Company Growth
Portfolio and the Small Company Value Portfolio), as of October 31, 1994, and
the related statements of operations and changes in net assets and financial
highlights for the period from December 29, 1993 (commencement of operations)
to October 31, 1994. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1994 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
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 each of the respective portfolios constituting the Dreyfus Focus
Funds, Inc. at October 31, 1994, and the results of their operations, the
changes in their net assets and the financial highlights for the period from
December 29, 1993 to October 31, 1994, in conformity with generally accepted
accounting principles.
New York, New York
December 5, 1994
