DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
It is a pleasure to introduce John S. Cone who has been managing Dreyfus
Premier Market Neutral Fund since its inception June 29, 1998.
John is Executive Vice President of Franklin Portfolio Associates, one of the
investment management firms with which we are affiliated as members of the
Mellon Bank family. He joined Franklin in 1982.
A Chartered Financial Analyst, John has an extensive background in computer
modeling and quantitative methods. A graduate of Rice University, he earned his
Masters degree at the Krannert Graduate School of Management at Purdue
University, where he was honored as a Krannert Associates Fellow. He is a member
of the Boston Security Analysts Society and the Chicago Quantitative Alliance.
We have every confidence in John Cone' s ability to manage this
Dreyfus-sponsored Fund.
Sincerely,
[Stephen E. Canter signature logo}
Stephen E. Canter
Chief Investment Officer
October 22, 1998
New York, N.Y.
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
This is the first report to shareowners for Dreyfus Premier Market Neutral
Fund, which started operations on June 29, 1998 and marked its first annual
reporting period September 30, 1998.
As you know, stocks suffered a severe setback during the three months that the
Fund has been in existence, making it very difficult to generate positive
returns during this initial quarter.
Performance figures for the Fund' s various classes of shares, and for its
relevant benchmark, are show below:
Total Return*
June 29, 1998-September 30, 1998
____________________________
Class A Shares -7.12%
Class B Shares -7.28%
Class C Shares -7.12%
Class R Shares -7.04%
Return on 90-Day Treasury Bills ** 1.21%
MARKET ENVIRONMENT/PORTFOLIOFOCUS
The Dreyfus Premier Market Neutral Fund is managed with a quantitative process
which drives security selection and weighting in the long and short portfolios.
The stock selection approach we employ utilizes both "value" and "growth"
components. The value components of our process performed inversely during the
third quarter and were the source of the poor absolute performance. The negative
performance of the equity markets in general coincided with the performance of
the Fund, as it was constructed and maintained in a market neutral mode
The events of the summer in financial markets have been both dramatic and
unusual. I feel that it is appropriate to outline my understanding of what has
been happening, and specifically to discuss the impact on our investment
process. You no doubt are aware that this has been a difficult period for money
managers generally, and we ourselves have not been immune from this.
The third calendar quarter was characterized generally by rapidly increasing
awareness of economic and market risks. In reality none of these risks was new,
but the third quarter was when market participants finally chose to focus on
them. The major concerns range from domestic fears of a corporate profit
slowdown to global issues that include the continuing, grave problems of Asia
and de facto Russian debt default.
This new focus on risk is self-evident in the financial data for the period.
The Standard & Poor' s 500 Composite Stock Price Index fell 9.92% over the
quarter. The credit spread -- the yield premium paid by corporate bonds above
Treasury bonds -- rose by 1.04%. This is not only the biggest quarterly increase
this decade, but is more than twice as large as the second biggest increase of
0.44% in February 1991. The events over the third quarter were thus quantifiably
extreme.
Conventional value-type strategies are expected to perform well in difficult
economic and market conditions; value strategies are commonly considered
" defensive." However, our research clearly demonstrates that on those rare
occasions when deterioration of expectations is both large and rapid, value
strategies in fact perform badly. In particular, very large increases in the
credit spread tend to be associated with negative relative returns to value
There are a number of potential explanations for this. The most likely of
these is that in situations of rapidly increasing risk, the premium that the
market will pay for "quality" or "safety" increases dramatically in relative
terms. Thus, while a market-wide increase in the risk premium will tend to favor
value stocks -- hence the common notion that value is defensive -- in extreme
circumstances this is more than offset by the revised relative premiums paid for
" quality." It is unfortunate but true that almost by definition large movements
in perceived risk cannot be forecast.
PORTFOLIO FOCUS
The stock selection models that we employ utilize a variety of information
types, including but not limited to measures of value. Our overall approach thus
includes a tendency to favor value stocks; accordingly, at the portfolio level
there is a deliberate bias towards value. While this bias is relatively modest
compared to a more extreme "pure" value approach, it is nevertheless present.
Therefore, on the basis of the preceding discussion, the events of the summer
were likely to have a negative impact on our performance, and this has in fact
been the case.
While we are always concerned whenever returns are below benchmark, we do not
in the present circumstances see any reason to modify our core investment
process. The events of recent months have been highly unusual. Though their
impact on returns was negative, they do not constitute a strong case for making
changes in our underlying approach to security selection.
When viewed over the long-term, the performance of the stock market has been
positive. However, short-term periods of negative return are not new to the
market, nor are they uncommon. While past performance cannot guarantee future
results, we believe in the strength of our investment process.
Thank you for your participation in the Fund.
Sincerely,
[John S. Cone signature logo]
John S. Cone
Portfolio Manager
October 22, 1998
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid,
and does not take into consideration the maximum initial sales charge in the
case of Class A shares, or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B and Class C shares.
**90-Day Treasury bill returns are an average-price based return on all
three-month Treasury bill auctions over the course of the previous month.
<TABLE>
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1998
Common Stocks--82.8% Shares Value
- ------------------------------------------------------- ___________ __________
<S> <C> <C>
Commercial Services--4.6% Donnelley (R.R.) & Sons . . . . . . . . . . . . . . . 800 $ 28,150
Ikon Office Solutions . . . . . . . . . . . . . . . . 3,300 23,719
Ogden . . . . . . . . . . . . . . . . . . . . . . . . 300 8,531
Supervalu . . . . . . . . . . . . . . . . . . . . . . 4,800 111,900
Wallace Computer Services . . . . . . . . . . . . . . 2,500 44,844
___________
217,144
___________
Consumer Durables--2.5% International Game Technology . . . . . . . . . . . . 2,300 42,694
Maytag . . . . . . . . . . . . . . . . . . . . . . . . 700 33,425
Rubbermaid . . . . . . . . . . . . . . . . . . . . . . 300 7,181
Shaw Industries . . . . . . . . . . . . . . . . . (a) 1,800 29,250
Whirlpool . . . . . . . . . . . . . . . . . . . . . . 100 4,700
___________
117,250
___________
Consumer Non-Durables--5.8% Dole Food . . . . . . . . . . . . . . . . . . . . . . 1,700 61,413
Flowers Industries . . . . . . . . . . . . . . . . . . 3,500 76,344
Fruit of the Loom, Cl. A . . . . . . . . . . . . . (a) 4,800 72,300
Interstate Bakeries . . . . . . . . . . . . . . . . . 400 12,400
Universal . . . . . . . . . . . . . . . . . . . . . . 1,500 53,625
___________
276,082
___________
Consumer Services--8.1% Brinker International . . . . . . . . . . . . . . (a) 1,600 30,000
Hollinger International, Cl. A . . . . . . . . . . . . 7,500 107,812
Host Marriott . . . . . . . . . . . . . . . . . . (a) 5,800 73,587
Knight-Ridder . . . . . . . . . . . . . . . . . . . . 2,500 111,250
Tribune . . . . . . . . . . . . . . . . . . . . . . . 1,300 65,406
___________
388,055
___________
Electronic Technology--3.8% Apple Computer . . . . . . . . . . . . . . . . . . (a) 1,200 45,750
EG&G . . . . . . . . . . . . . . . . . . . . . . . . . 4,300 97,288
Thermo Instrument Systems . . . . . . . . . . . . (a) 3,600 39,600
___________
182,638
___________
Finance--13.7% CIGNA . . . . . . . . . . . . . . . . . . . . . . . . 1,200 79,350
CarrAmerica Realty . . . . . . . . . . . . . . . . . . 2,500 57,031
City National . . . . . . . . . . . . . . . . . . . . 2,200 68,887
Commerce Bancshares . . . . . . . . . . . . . . . . . 200 7,875
Edwards (A.G.) . . . . . . . . . . . . . . . . . . . . 1,200 36,375
Equitable . . . . . . . . . . . . . . . . . . . . . . 1,600 66,200
GATX . . . . . . . . . . . . . . . . . . . . . . . . . 3,400 112,412
Golden State Bancorp . . . . . . . . . . . . . . . (a) 1,100 21,931
Lehman Brothers Holdings . . . . . . . . . . . . . . . 1,200 33,900
Liberty Property Trust . . . . . . . . . . . . . . . . 2,200 52,388
North Fork Bancorp . . . . . . . . . . . . . . . . . . 1,800 36,000
Republic New York . . . . . . . . . . . . . . . . . . 2,000 79,000
Trustmark . . . . . . . . . . . . . . . . . . . . . . 100 1,550
___________
652,899
___________
Health Services--5.3% Beverly Enterprises . . . . . . . . . . . . . . . (a) 5,700 45,600
Cardinal Health . . . . . . . . . . . . . . . . . . . 100 10,325
HEALTHSOUTH . . . . . . . . . . . . . . . . . . . (a) 2,300 24,294
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------- ___________ __________
Health Services (continued) Integrated Health Services . . . . . . . . . . . . . . 2,900 $ 48,756
PacifiCare Health Systems, Ser. B . . . . . . . . (a) 900 67,050
United Healthcare . . . . . . . . . . . . . . . . . . 1,600 56,000
___________
252,025
___________
Health Technology--.5% ICN Pharmaceuticals . . . . . . . . . . . . . . . . . 1,300 22,750
___________
Industrial Services--1.8% Fluor . . . . . . . . . . . . . . . . . . . . . . . . 1,500 61,594
Republic Industries . . . . . . . . . . . . . . . (a) 1,700 24,756
___________
86,350
___________
Process Industries--6.4% Crompton & Knowles . . . . . . . . . . . . . . . . . . 4,600 66,988
Engelhard . . . . . . . . . . . . . . . . . . . . . . 3,000 53,062
Goodrich (B.F.) . . . . . . . . . . . . . . . . . . . 2,200 71,912
International Specialty Products . . . . . . . . . (a) 1,100 13,475
Lyondell Chemical . . . . . . . . . . . . . . . . . . 300 6,675
RPM . . . . . . . . . . . . . . . . . . . . . . . . . 6,500 93,844
___________
305,956
___________
Producer Manufacturing--6.2% Aeroquip-Vickers . . . . . . . . . . . . . . . . . . . 1,000 28,750
Dana . . . . . . . . . . . . . . . . . . . . . . . . . 400 14,925
Pentair . . . . . . . . . . . . . . . . . . . . . . . 1,100 35,475
Precision Castparts . . . . . . . . . . . . . . . . . 1,500 61,875
Thermo Electron . . . . . . . . . . . . . . . . . (a) 6,700 100,919
Trinity Industries . . . . . . . . . . . . . . . . . . 1,700 55,144
___________
297,088
___________
Retail--5.1% Federated Department Stores . . . . . . . . . . . (a) 1,600 58,200
K mart . . . . . . . . . . . . . . . . . . . . . . (a) 4,800 57,300
Limited . . . . . . . . . . . . . . . . . . . . . . . 1,300 28,519
Neiman Marcus Group . . . . . . . . . . . . . . . (a) 1,400 30,275
Office Depot . . . . . . . . . . . . . . . . . . . (a) 1,400 31,413
TJX Cos. . . . . . . . . . . . . . . . . . . . . . . . 2,100 37,406
___________
243,113
___________
Technology Services--.8% Autodesk . . . . . . . . . . . . . . . . . . . . . . . 700 18,375
Learning Company . . . . . . . . . . . . . . . . . (a) 900 17,831
___________
36,206
___________
Transportation--2.8% AMR . . . . . . . . . . . . . . . . . . . . . . . . . 2,400 133,050
___________
Utilities--15.4% AT&T . . . . . . . . . . . . . . . . . . . . . . . . . 2,600 151,937
Citizens Utilities . . . . . . . . . . . . . . . . (a) 6,737 54,736
Florida Progress . . . . . . . . . . . . . . . . . . . 600 25,988
Houston Industries . . . . . . . . . . . . . . . . . . 4,100 127,612
LG&E Energy . . . . . . . . . . . . . . . . . . . . . 2,200 61,325
New Century Energies . . . . . . . . . . . . . . . . . 2,100 102,244
Paging Network . . . . . . . . . . . . . . . . . . (a) 6,800 41,013
Public Service Enterprise Group . . . . . . . . . . . 4,300 169,044
___________
733,899
___________
TOTAL COMMON STOCKS
(cost $5,062,244) . . . . . . . . . . . . . . . . $3,944,505
___________
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1998
Principal
Short-Term Investments--1.3% Amount Value
- ------------------------------------------------------- ___________ ___________
Repurchase Agreement; Bear Stearns & Cos., 5.40% dated 9/30/1998,
due 10/1/1998 in the amount of $62,447
[fully collateralized by $110,000 Federal
National Mortgage Association, Gtd. REMIC
Pass-Thru Ctfs., Ser. 1996-14, Zero Coupon,
4/25/2024, (Principal Only), value $64,109]
(cost $62,447) . . . . . . . . . . . . . . . . . . $ 62,447 $ 62,447
___________
TOTAL INVESTMENTS (cost $5,124,691). . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.1% $4,006,952
_______ ___________
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9% $ 758,878
_______ ___________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $4,765,830
_______ ___________
Notes to Statement of Investments: -----------------------------------------------------------------------------
(a) Non-income producing.
SEE NOTES TO FINANCIAL STA TEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF SECURITIES SOLD SHORT SEPTEMBER 30, 1998
Common Stocks--85.0% Shares Value
- ------------------------------------------------------- ___________ __________
<S> <C> <C>
Commercial Services--.4% Lamar Advertising, Cl. A . . . . . . . . . . . . . . . 700 $ 19,600
___________
Consumer Durables--1.8% Callaway Golf . . . . . . . . . . . . . . . . . . . . 2,200 23,788
Mattel . . . . . . . . . . . . . . . . . . . . . . . . 2,100 58,800
___________
82,588
___________
Consumer Non-Durables--13.3% Campbell Soup . . . . . . . . . . . . . . . . . . . . 2,300 115,431
Clorox . . . . . . . . . . . . . . . . . . . . . . . . 1,600 132,000
Coca-Cola . . . . . . . . . . . . . . . . . . . . . . 500 28,813
Hershey Foods . . . . . . . . . . . . . . . . . . . . 200 13,688
International Flavors & Fragrances . . . . . . . . . . 900 29,700
Kellogg . . . . . . . . . . . . . . . . . . . . . . . 1,200 39,525
Nabisco Holdings, Cl. A . . . . . . . . . . . . . . . 1,600 57,500
NIKE, Cl. B . . . . . . . . . . . . . . . . . . . . . 1,900 69,944
RJR Nabisco Holdings . . . . . . . . . . . . . . . . . 500 12,594
Reebok International . . . . . . . . . . . . . . . . . 1,700 23,056
Sara Lee . . . . . . . . . . . . . . . . . . . . . . . 900 48,600
Wrigley, (Wm) Jr. . . . . . . . . . . . . . . . . . . 800 60,750
___________
631,601
___________
Consumer Services--12.1% Central Newspapers, Cl. A . . . . . . . . . . . . . . 2,500 142,500
Harcourt General . . . . . . . . . . . . . . . . . . . 1,900 91,913
MGM Grand . . . . . . . . . . . . . . . . . . . . . . 1,700 39,206
Mirage Resorts . . . . . . . . . . . . . . . . . . . . 4,200 70,350
Scripps (E.W.), Cl. A . . . . . . . . . . . . . . . . 200 8,700
Starbucks . . . . . . . . . . . . . . . . . . . . . . 400 14,475
Tele-Communications, Liberty Media Cl. A . . . . . . . 2,000 73,375
Times Mirror, Cl. A . . . . . . . . . . . . . . . . . 2,400 127,500
USA Networks . . . . . . . . . . . . . . . . . . . . . 500 9,719
___________
577,738
___________
Electronic Technology--6.0% Adaptec . . . . . . . . . . . . . . . . . . . . . . . 700 6,650
Applied Materials . . . . . . . . . . . . . . . . . . 200 5,050
Boeing . . . . . . . . . . . . . . . . . . . . . . . . 1,800 61,763
Compaq Computer . . . . . . . . . . . . . . . . . . . 1,000 31,625
KLA-Tencor . . . . . . . . . . . . . . . . . . . . . . 1,100 27,363
Linear Technology . . . . . . . . . . . . . . . . . . 300 15,000
Perkin-Elmer . . . . . . . . . . . . . . . . . . . . . 1,400 96,162
Rockwell International . . . . . . . . . . . . . . . . 100 3,612
Texas Instruments . . . . . . . . . . . . . . . . . . 700 36,925
Varian Associates . . . . . . . . . . . . . . . . . . 100 3,525
___________
287,675
___________
Energy--2.4% Atlantic Richfield . . . . . . . . . . . . . . . . . . 1,600 113,500
___________
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------- ___________ __________
Finance--11.2% Catellus Development . . . . . . . . . . . . . . . . . 7,000 $ 91,000
First Virginia Banks . . . . . . . . . . . . . . . . . 3,000 133,313
Franklin Resources . . . . . . . . . . . . . . . . . . 1,300 39,000
Schwab (Charles) . . . . . . . . . . . . . . . . . . . 400 15,750
T. Rowe Price Associates . . . . . . . . . . . . . . . 2,000 58,750
U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . 3,300 117,356
Union Planters . . . . . . . . . . . . . . . . . . . . 1,000 50,250
Wesco Financial . . . . . . . . . . . . . . . . . . . 100 29,200
___________
534,619
___________
Health Technology--4.7% Boston Scientific . . . . . . . . . . . . . . . . . . 1,000 51,375
Immunex . . . . . . . . . . . . . . . . . . . . . . . 400 22,150
Medtronic . . . . . . . . . . . . . . . . . . . . . . 2,600 150,475
___________
224,000
___________
Industrial Services--1.9% CalEnergy . . . . . . . . . . . . . . . . . . . . . . 3,000 79,500
Nabors Industries . . . . . . . . . . . . . . . . . . 300 4,556
Rowan Cos. . . . . . . . . . . . . . . . . . . . . . . 700 7,831
___________
91,887
___________
Minerals (Non-Energy)--2.1% Newmont Mining . . . . . . . . . . . . . . . . . . . . 1,000 24,250
Phelps Dodge . . . . . . . . . . . . . . . . . . . . . 1,400 73,062
___________
97,312
___________
Process Industries--4.7% Corning . . . . . . . . . . . . . . . . . . . . . . . 300 8,831
duPont (E.I.) de Nemours & Co. . . . . . . . . . . . . 1,300 72,962
Hercules . . . . . . . . . . . . . . . . . . . . . . . 2,400 72,150
Sealed Air . . . . . . . . . . . . . . . . . . . . . . 1,100 35,062
Millipore . . . . . . . . . . . . . . . . . . . . . . 1,800 34,312
___________
223,317
___________
Producer Manufacturing--3.2% AGCO . . . . . . . . . . . . . . . . . . . . . . . 1,700 11,263
Harnischfeger Industries . . . . . . . . . . . . . . . 2,200 24,750
Minnesota Mining & Manufacturing . . . . . . . . . . . 1,600 117,900
___________
153,913
___________
Retail Trade--5.6% Amazon.Com . . . . . . . . . . . . . . . . . . . . . . 400 44,650
CompUSA . . . . . . . . . . . . . . . . . . . . . . . 4,000 69,250
Consolidated Stores . . . . . . . . . . . . . . . . . 2,800 54,950
CVS . . . . . . . . . . . . . . . . . . . . . . . . . 100 4,381
Fastenal . . . . . . . . . . . . . . . . . . . . . . . 1,700 42,500
Winn-Dixie Stores . . . . . . . . . . . . . . . . . . 1,400 52,063
___________
267,794
___________
Technology Services--.9% Computer Associates International . . . . . . . . . . 1,200 44,400
___________
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------- ___________ __________
Transportation--4.2% Southwest Airlines . . . . . . . . . . . . . . . . . . 1,800 $ 36,000
Union Pacific . . . . . . . . . . . . . . . . . . . . 2,200 93,775
US Airways Group . . . . . . . . . . . . . . . . . . . 1,400 70,875
___________
200,650
___________
Utilities--10.5% Century Telephone Enterprises . . . . . . . . . . . . 700 33,075
Cincinnati Bell . . . . . . . . . . . . . . . . . . . 200 5,200
Entergy . . . . . . . . . . . . . . . . . . . . . . . 5,200 159,900
GPU . . . . . . . . . . . . . . . . . . . . . . . . . 300 12,750
Intermedia Communications . . . . . . . . . . . . . . 1,500 36,844
Illinova . . . . . . . . . . . . . . . . . . . . . 2,200 63,112
Peoples Energy . . . . . . . . . . . . . . . . . . . . 2,900 104,400
Telephone & Data Systems . . . . . . . . . . . . . . . 2,400 83,700
___________
498,981
___________
TOTAL INVESTMENTS IN SECURITIES
SOLD SHORT (proceeds $4,774,259) . . . . . . . . . $4,049,575
___________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1998
Cost Value
__________ ___________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of
Investments--Note 1(b) . . . . . . . . . . . . . . . . $5,124,691 $4,006,952
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 4,523
Receivable from brokers for proceeds
on securities sold short . . . . . . . . . . . . . . . 4,674,259
Dividends and interest receivable . . . . . . . . . . . . 60,723
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 94,900
___________
8,841,357
___________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 1,624
Due to Distributor . . . . . . . . . . . . . . . . . . . 2,431
Securities sold short, at value
(proceeds $4,774,259)--see statement . . . . . . . . . 4,049,575
Dividends payable on securities sold short . . . . . . . 5,672
Accrued expenses . . . . . . . . . . . . . . . . . . . . 16,225
___________
4,075,527
___________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,765,830
___________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $5,126,526
Accumulated undistributed investment income--net . . . . 45,141
Accumulated net realized gain (loss) on investments . . . (12,782)
Accumulated net unrealized appreciation (depreciation)
on investments and securities sold short--Note 3(b) . . (393,055)
___________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,765,830
___________
NET ASSET VALUE PER SHARE
_____________________________
Class A Class B Class C Class R
___________ ___________ ___________ ___________
Net Assets . . . . . . . . . . . . . . . . . . . . . . $1,868,900 $1,967,690 $464,384 $464,856
Shares Outstanding . . . . . . . . . . . . . . . . . . 161,000 169,842 40,000 40,000
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . . . $11.61 $11.59 $11.61 $11.62
_______ _______ _______ _______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FROM JUNE 29, 1998 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 67,708
Cash dividends . . . . . . . . . . . . . . . . . . . . . 19,004
__________
Total Income . . . . . . . . . . . . . . . . . . . $ 86,712
EXPENSES: Management fee--Note 2(a) . . . . . . . . . . . . . . . . 18,944
Dividends on securities sold short . . . . . . . . . . . 16,238
Auditing fees . . . . . . . . . . . . . . . . . . . . . . 10,000
Distribution fees--Note 2(b) . . . . . . . . . . . . . . 4,794
Shareholder servicing costs--Note 2(c) . . . . . . . . . 2,972
Legal fees . . . . . . . . . . . . . . . . . . . . . . . 2,000
Registration fees . . . . . . . . . . . . . . . . . . . . 1,952
Prospectus and shareholders' reports . . . . . . . . . . 1,672
Custodian fees . . . . . . . . . . . . . . . . . . . . . 320
Directors' fees and expenses--Note 2(d) . . . . . . . . . 216
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 7,448
__________
Total Expenses . . . . . . . . . . . . . . . . . . 66,556
Less--expense reimbursement from Dreyfus
due to undertaking--Note 2(a) . . . . . . . . . . . . (20,273)
__________
Net Expenses . . . . . . . . . . . . . . . . . . . 46,283
__________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,429
__________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3:
Net realized gain (loss) on investments:
Long transactions . . . . . . . . . . . . . . . . . . $ (36,633)
Short sale transactions . . . . . . . . . . . . . . . 23,851
__________
Net Realized Gain (Loss) . . . . . . . . . . . . . (12,782)
Net unrealized appreciation (depreciation) on investments
and securities sold short . . . . . . . . . . . . . . (393,055)
__________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . (405,837)
__________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $(365,408)
__________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FROM JUNE 29, 1998 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1998
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,429
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,782)
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . . . . . . . . (393,055)
___________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . . . . . . (365,408)
___________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,012,390
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,167,422
Class C shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000
Class R shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000
Cost of shares redeemed:
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48,574)
___________
Increase (Decrease) in Net Assets from Capital Stock Transactions . . . . . . . . . . . . . . 5,131,238
___________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 4,765,830
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
___________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,765,830
___________
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,141
___________
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FROM JUNE 29, 1998 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1998
CAPITAL SHARE TRANSACTIONS:
Class A
_______
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,000
________
Class B
_______
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,948
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,106)
________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . . 169,842
________
Class C
_______
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
________
Class R
_______
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
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 the period from June 29, 1998 (commencement of
operations) to September 30, 1998. This information has been derived from the
Fund's financial statements.
Class A Class B Class C Class R
________ ________ ________ ________
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period . . . . . . . . . . . . . $ 12.50 $ 12.50 $ 12.50 $ 12.50
________ ________ ________ ________
Investment Operations:
Investment income--net (1) . . . . . . . . . . . . . . . . . . .11 .09 .09 .11
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . . . . . . (1.00) (1.00) (.98) (.99)
________ ________ ________ ________
Total from Investment Operations . . . . . . . . . . . . . . . (.89) (.91) (.89) (.88)
________ ________ ________ ________
Net asset value, end of period . . . . . . . . . . . . . . . . $ 11.61 $ 11.59 $ 11.61 $ 11.62
________ ________ ________ ________
TOTAL INVESTMENT RETURN (2). . . . . . . . . . . . . . . . . . . . (7.12%)(3) (7.28%)(3) (7.12%)(3) (7.04%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets (2) . . . . . .51% .71% .71% .51%
Ratio of dividends on securities sold short to
average net assets (2) . . . . . . . . . . . . . . . . . . .33% .33% .33% .33%
Ratio of net investment income
to average net assets (2) . . . . . . . . . . . . . . . . . .92% .73% .73% .92%
Decrease reflected in above expense ratios
due to undertaking by the Manager (2) . . . . . . . . . . . .42% .41% .42% .38%
Portfolio Turnover Rate (2) . . . . . . . . . . . . . . . . . . 36.54% 36.54% 36.54% 36.54%
Net Assets, end of period (000's Omitted) . . . . . . . . . . . $1,869 $1,968 $464 $465
- -----------------------------
(1) Based on average shares outstanding.
(2) Not annualized.
(3) Exclusive of sales load.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Premier Market Neutral Fund (the "Fund") is a separate diversified
series of Dreyfus Premier Equity Funds, Inc., (the "Company" ) which is
registered under the Investment Company Act of 1940, as amended (the "Act") as
an open-end management investment company and operates as a series company
currently offering four series, including the Fund which commenced operations on
June 29, 1998. The Fund' s investment objective is long-term capital
appreciation, while maintaining minimum exposure to general equity market risk.
The Dreyfus Corporation (the "Manager") serves as the Fund's investment adviser.
The Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Bank Corporation.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor of
the Fund' s shares. The Fund is authorized to issue 50 million shares of $1.00
par value Common Stock in each of the following classes of shares: Class A,
Class B, Class C and Class R shares. Class A shares are subject to a sales
charge imposed at the time of purchase, Class B shares are subject to a
contingent deferred sales charge ("CDSC") imposed on Class B share redemptions
made within six years of purchase, Class C shares are subject to a CDSC imposed
on Class C shares redeemed within one year of purchase and Class R shares are
sold at net asset value per share only to institutional investors. Other
differences between the classes include the services offered to and the expenses
borne by each class and certain voting rights.
As of September 30, 1998, MBIC Investment Corp., an indirect subsidiary of
Mellon Bank Corporation, held the following shares:
Class A...............160,000 Class C.....................40,000
Class B...............160,000 Class R.....................40,000
The Company accounts separately for the assets, liabilities and operations of
each fund. Expenses directly attributable to each fund are charged to that
fund' s operations; expenses which are applicable to all funds are allocated
among them on a pro rata basis.
The Fund' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices, except for open
short positions, where the asked price is used for valuation purposes. Bid price
is used when no asked price is available. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Directors. Forward currency exchange contracts are
valued at the forward rate.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis.
The Fund may enter into repurchase agreements with financial institutions,
deemed to be creditworthy by the Fund' s Manager, subject to the seller's
agreement to repurchase and the Fund's agreement to resell such securities at a
mutually agreed upon price. Securities purchased subject to repurchase
agreements are deposited with the Fund's custodian and, pursuant to the terms of
the repurchase agreement, must have an aggregate market value greater than or
equal to the DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
repurchase price plus accrued interest at all times. If the value of the
underlying securities falls below the value of the repurchase price plus accrued
interest, the Fund will require the seller to deposit additional collateral by
the next business day. If the request for additional collateral is not met, or
the seller defaults on its repurchase obligation, the Fund maintains the right
to sell the underlying securities at market value and may claim any resulting
loss against the seller.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain, if any, are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $11,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to September 30, 1998. If not
applied, the carryover expires in fiscal 2006.
As of September 30, 1998, the Fund reclassified certain components of net
assets. The reclassification resulted in an increase of $4,712 to investment
income-net and a decrease of $4,712 to paid-in capital. Net assets were not
affected by these reclassifications.
NOTE 2--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 1.50% of the value of the
Fund' s average daily net assets and is payable monthly. The Manager had
undertaken from June 29, 1998 through September 30, 1998 to reduce the
management fee paid by or reimburse such excess expenses of the Fund, to the
extent that the Fund's aggregate expenses, excluding 12b-1 distribution fees,
taxes, brokerage, interest on borrowings (which, in the view of Stroock &
Stroock & Lavan LLP, counsel to the Fund, also contemplates commitment fees and
dividends and interest accrued on securities sold short) and extraordinary
expenses exceeded an annual rate of 2.00% of the value of the Fund's average
daily net assets. The expense reimbursement, pursuant to the undertaking,
amounted to $20,273 during the period ended September 30, 1998.
(B) Under the Distribution Plan, adopted pursuant to Rule 12b-1 under the Act,
Class B and Class C shares pay the Distributor for distributing their shares at
an annual rate of .75 of 1% of the value of their average daily net assets.
During the period ended September 30, 1998, Class B and Class C shares were
charged $3,863 and $931, respectively, pursuant to the Distribution Plan.
(C) Under the Shareholder Services Plan, Class A, Class B and Class C shares
pay the Distributor a fee at the annual rate of .25 of 1% of the value of the
average daily net assets for the provision of certain services. The services
provided may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and services related to the maintenance of shareholder
accounts. The Distributor may make payments to Service Agents (a securities
dealer, financial institution or other industry professional) in respect of
these services. The Distributor determines the amounts to be paid to Service
Agents. During the period ended September 30, 1998, Class A, Class B and Class C
shares were charged $1,248, $1,288 and $310, respectively, pursuant to the
Shareholder Services Plan.
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund.
(D) Each director who is not an "affiliated person" as defined in the Act
receives from the Company an annual fee of $4,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3--SECURITIES TRANSACTIONS:
(A) The following summarizes the aggregate amount of purchases and sales of
investment securities and securities sold short, excluding short-term securities
during the period ended September 30, 1998:
Purchases Sales
___________ __________
Long transactions. . . ................... $6,173,891 $1,075,014
Short sale transactions. . . . ........... 720,332 5,494,590
___________ __________
TOTAL . . . . . . . . . . . . . . . . . $6,894,223 $6,569,604
___________ ___________
The Fund is engaged in short-selling which obligates the Fund to replace the
security borrowed by purchasing the security at current market value. The Fund
would incur a loss if the price of the security increases between the date of
the short sale and the date on which the Fund replaces the borrowed security.
The Fund would realize a gain if the price of the security declines between
those dates. The Fund's long security positions serve as collateral for the open
short positions. Securities sold short at September 30, 1998, and their related
market values and proceeds are set forth in the Statement of Securities Sold
Short.
(B) At September 30, 1998, accumulated net unrealized depreciation on
investments and securities sold short was $393,055, consisting of $883,110 gross
unrealized appreciation and $1,276,165 gross unrealized depreciation.
At September 30, 1998, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
DREYFUS PREMIER MARKET NEUTRAL FUND
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS PREMIER MARKET NEUTRAL FUND
We have audited the accompanying statement of assets and liabilities,
including the statements of investments and securities sold short, of Dreyfus
Premier Market Neutral Fund (one of the Series constituting Dreyfus Premier
Equity Funds, Inc.) as of September 30, 1998, and the related statements of
operations and changes in net assets and financial highlights for the period
from June 29, 1998 (commencement of operations) to September 30, 1998. 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 and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1998 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
Dreyfus Premier Market Neutral Fund at September 30, 1998, and the results of
its operations, the changes in its net assets and the financial highlights for
the period from June 29, 1998 to September 30, 1998, in conformity with
generally accepted accounting principles.
New York, New York
November 11, 1998
DREYFUS PREMIER MARKET NEUTRAL FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 335AR989
ANNUAL REPORT
- -------------------------------------------------------------------------------
DREYFUS PREMIER
MARKET NEUTRAL
FUND
- -------------------------------------------------------------------------------
SEPTEMBER 30, 1998
