<PAGE>
A N N U A L R E P O R T
Small box above fund name showing a lion's face.
/ /
PREMIER LIMITED TERM INCOME FUND
/ /
OCTOBER 31, 1994
<PAGE>
DEAR SHAREHOLDER,
We are pleased to provide you with a review of the financial markets
environment as well as performance and portfolio activity information for the
Premier Limited Term Income Fund for the year ended October 31, 1994.
As you know from recent correspondence, The Laurel Family of Funds is
integrating with The Dreyfus Family of Funds. As part of this integration, the
Laurel Intermediate Income Fund is now known, and publicly listed, as the
Premier Limited Term Income Fund. Please be assured that the new name does not
affect the value of your account or the investment objective or strategy of
your Fund.
In the pages that follow, we have provided detailed financial statements and a
commentary on your Fund's investment management strategy and portfolio changes
for the reporting period.
We would like to extend our appreciation for your support and hope that you
will find that the Fund, which is now part of The Dreyfus Family of Funds,
will continue to satisfy your investment needs. As always, we welcome your
thoughts and suggestions.
Sincerely,
Marie E. Connolly
President
Premier Limited Term Income Fund
December 9, 1994
1
................................................................................
<PAGE>
TABLE of CONTENTS
................................................................................
<TABLE>
<S> <C>
Shareholder Letter...................... 1
Economic Review......................... 3
Portfolio Overview...................... 4
Performance Summary..................... 5
Portfolio of Investments................ 7
Statement of Assets and Liabilities..... 11
Statement of Operations................. 12
Statement of Changes in Net Assets...... 13
Financial Highlights.................... 14
Notes to Financial Statements........... 16
Independent Auditors' Report............ 22
Tax Information......................... 23
</TABLE>
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. ALL MUTUAL FUND
SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THE FUND IS DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
2
................................................................................
<PAGE>
ECONOMIC REVIEW
................................................................................
One of the biggest news stories of the year--business or otherwise--was the
rise in interest rates. This year's rise in rates was the most dramatic in
decades and impacted the markets, the housing industry, the growth of the
economy and perhaps even had an effect on the outcome of the November mid-term
elections, held one week after the end of the fiscal year.
On February 4, 1994, the Federal Reserve Board embarked on the first of five
interest rate hikes during the fiscal year ending October 31, 1994. On
November 15, 1994, the sixth and largest rate increase occurred. All told, the
Fed raised rates a total of 2.50 percentage points, nearly doubling short-term
rates from 3.00% to 5.50%.
At the same time, long-term interest rates rose in lock step to short-term
rates, creating havoc in the bond markets. Between October 31, 1993 and
October 31, 1994, the Lehman Brothers Treasury Bond Index fell 4.46%. Stocks,
as measured by the Standard & Poor's 500 Composite Stock Price Index,
performed better--up 3.86% for the period. Stocks are influenced by many
factors, principally corporate earnings.
Despite rising interest rates throughout fiscal 1994, the economy grew at a
rate of 3.50%. Inflation is still a risk, but our 1995 outlook is still under
3.50%. We expect the latest Fed action to slow the economy slightly in 1995 to
3.00%. We also expect that inflation fears will ebb, and that long-term
interest rates will flatten out, which is good news for the battered bond
market.
Recent overall growth rates understate the vigor in the private economy. While
Gross Domestic Product advanced at a rate of 3.70% in the first six months of
1994, a 3.10% decline in the public sector masked a roaring 5.20% advance in
the private economy.
Higher interest rates have taken some steam out of housing activity, but
rising job and income growth have proven to be powerful offsets. Moreover,
recent homebuyers are contributing to still-solid gains in consumer outlays
for furniture and appliances. In addition, the rise in interest rates has not
yet dampened either consumers' desire to borrow or lenders' willingness to
supply credit.
However, two factors may dampen consumer optimism by early next year. First,
rising rates will increase monthly mortgage payments for consumers holding
adjustable rate mortgages. These adjustable rate mortgages will reset at rates
approximately 2 percentage points higher than they carried in 1994, taking
$12-15 billion out of the spending stream by 1995. Thus, housing and the
consumer may shift away from starring roles in the expansion of the economy.
Second, exports and capital spending are taking center stage, and should
offset the effects of slower household spending growth on economic
performance. U.S. exports should benefit from the dollar's 1994 weakness by
taking advantage of overseas growth and increased capital spending worldwide.
3
................................................................................
<PAGE>
PORTFOLIO OVERVIEW
................................................................................
The Premier Limited Term Income Fund is an intermediate term portfolio which
invests in both government and corporate securities. By keeping the
portfolio's average maturity in an intermediate range the Fund is able to seek
higher current income than a more price stable short-term bond fund while
seeking more stability of principal than a higher yielding longer-term bond
fund. However, due to rising interest rates the Fund's management targeted the
portfolio's average maturity to be shorter than the average maturity of the
Fund's benchmark.
The Fund's Class R Shares posted a total return of -2.46%, close to its
benchmark, the Lehman Brothers Intermediate Government/Corporate Index, which
returned -1.93% for the year ended October 31, 1994. The Fund's Class A Shares
posted a total return of .11% for the period beginning April 4, 1994
(inception date) and ending October 31, 1994, while the Lehman Brothers
Intermediate Government/Corporate Bond Index posted a total return of 0.20%
for the period beginning March 31, 1994 through October 31, 1994.
In order to minimize the decline in the Fund's NAV brought about by the
significant rise in the level of interest rates during the reporting period
the Fund's management initiated a few different strategies. First, the Fund's
management sought to overweight the Fund's holdings of corporate securities.
The Fund ended the reporting period with 45% of its assets invested in
corporate securities, which is twice the typical Fund allocation. Corporate
bonds benefited from an improving economy as corporate bond yields provided an
income cushion over and above the risk-free rate treasuries.
Second, the Fund's management continued the use of a "barbell" strategy,
overweighting investment concentrations in both the short and the long
maturities, to meet the targeted average maturity. With interest rates
increasing the most in the intermediate maturities during the reporting period
the utilization of this barbell strategy minimized the volatile bond market's
effect on the portfolio's performance.
Looking ahead to 1995, the Fund's management continues to believe that
interest rates are more likely to rise than fall. Thus, the current strategy
will be to continue to construct a portfolio with a shorter than average
maturity.
The Fund's credit analysts thoroughly research the Fund's holdings to ensure
the quality of each security. The Fund seeks to emphasize quality as well as
provide a high level of current income.
4
................................................................................
<PAGE>
PERFORMANCE SUMMARY
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND (UNAUDITED)
CHANGE IN VALUE OF $10,000 INVESTED FROM APRIL 7, 1994 - OCTOBER 31, 1994+
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in Premier Limited
Term Income Fund Class A Shares from April 7, 1994 through October 31, 1994 as
compared with the growth of a $10,000 investment in Lehman Brothers
Intermediate Government/Corporate Index. The plot points used to draw the line
graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTMENT IN
THE LEHMAN BROTHERS
GROWTH OF $10,000 INTERMEDIATE
MONTH INVESTED IN CLASS A SHARES GOVERNMENT/CORPORATE
ENDED OF THE FUND INDEX
<S> <C> <C>
3/30/94 -- $10,000
4/7/94 $10,000 --
4/94 $ 9,962 $ 9,932
5/94 $ 9,963 $ 9,939
6/94 $ 9,953 $ 9,940
9/94 $10,007 $10,021
10/94 $10,011 $10,020
</TABLE>
AGGREGATE TOTAL RETURN -- CLASS A SHARES (FORMERLY INVESTOR SHARES)
<TABLE>
<S> <C> <C>
----------------------------------------------------------------
Inception (4/7/94) through 10/31/94 (0.11)%
----------------------------------------------------------------
<FN>
+ HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN CLASS A SHARES (FORMERLY
INVESTOR SHARES) AT INCEPTION (APRIL 7, 1994) AND REINVESTMENT OF DIVIDENDS
AND CAPITAL GAINS AT NET ASSET VALUE THROUGH OCTOBER 31, 1994.
THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE INDEX IS A WEIGHTED
COMPOSITE OF LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX, WHICH IS
COMPRISED OF ALL PUBLICLY ISSUED, NON-CONVERTIBLE DEBT OF THE U.S. GOVERNMENT
OR ANY AGENCY THEREOF, QUASI-FEDERAL CORPORATIONS, AND CORPORATE DEBT
GUARANTEED BY THE U.S. GOVERNMENT WITH A MATURITY OF BETWEEN ONE AND TEN
YEARS.
INDEX INFORMATION IS AVAILABLE AT MONTH-END ONLY, THEREFORE, THE CLOSEST
MONTH-END TO INCEPTION DATE OF THE FUND HAS BEEN USED.
NOTE: ALL FIGURES CITED HERE AND ON THE FOLLOWING PAGES REPRESENT PAST
PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES
UPON REDEMPTION MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
</TABLE>
5
................................................................................
<PAGE>
PERFORMANCE SUMMARY (continued)
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND (UNAUDITED)
CHANGE IN VALUE OF $10,000 INVESTED FROM JULY 11, 1991 - OCTOBER 31, 1994+
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in Premier Limited
Term Income Fund Class R Shares from July 11, 1991 through October 31, 1994 as
compared with the growth of a $10,000 investment in Lehman Brothers
Intermediate Government/Corporate Index. The plot points used to draw the line
graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTMENT IN THE
LEHMAN BROTHERS
GROWTH OF $10,000 INTERMEDIATE
MONTH INVESTED IN CLASS R SHARES GOVERNMENT/CORPORATE
ENDED OF THE FUND INDEX
<S> <C> <C>
6/91 -- $10,000
07/11/91 $10,000 --
7/91 $10,070 $10,111
9/91 $10,434 $10,481
12/91 $10,930 $10,984
3/92 $10,808 $10,884
6/92 $11,190 $11,315
9/92 $11,690 $11,814
12/92 $11,605 $11,772
3/93 $12,060 $12,240
6/93 $12,298 $12,504
9/93 $12,574 $12,787
12/93 $12,534 $12,808
3/94 $12,292 $12,548
6/94 $12,194 $12,473
9/94 $12,268 $12,575
10/94 $12,275 $12,574
</TABLE>
AVERAGE ANNUAL TOTAL RETURN -- CLASS R SHARES (FORMERLY TRUST SHARES)
<TABLE>
<S> <C> <C>
-------------------------------------------------------------------
Year Ended 10/31/94 (2.46)%
-------------------------------------------------------------------
Inception (7/11/91) through 10/31/94 6.40%
-------------------------------------------------------------------
<FN>
+ HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN CLASS R SHARES (FORMERLY
TRUST SHARES) AT INCEPTION (JULY 11, 1991) AND REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS AT NET ASSET VALUE THROUGH OCTOBER 31, 1994.
THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE INDEX IS A WEIGHTED
COMPOSITE OF LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX, WHICH IS
COMPRISED OF ALL PUBLICLY ISSUED, NON-CONVERTIBLE DEBT OF THE U.S. GOVERNMENT
OR ANY AGENCY THEREOF, QUASI-FEDERAL CORPORATIONS, AND CORPORATE DEBT
GUARANTEED BY THE U.S. GOVERNMENT WITH A MATURITY OF BETWEEN ONE AND TEN
YEARS.
INDEX INFORMATION IS AVAILABLE AT MONTH-END ONLY, THEREFORE, THE CLOSEST
MONTH-END TO INCEPTION DATE OF THE FUND HAS BEEN USED.
NOTE: ALL FIGURES CITED HERE AND ON THE FOLLOWING PAGES REPRESENT PAST
PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES
UPON REDEMPTION MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
</TABLE>
6
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CORPORATE BONDS AND NOTES -- 49.5%
<C> <S> <C>
FINANCIAL SERVICES -- 14.2%
$2,500,000 Advanta Corporation
5.125% due 11/15/96 $ 2,390,625
500,000 American Express Company
8.500% due 08/15/01 515,000
2,100,000 Commercial Credit Group
7.375% due 11/15/96 2,107,875
250,000 Ford Motor Credit Company
8.875% due 08/01/96 256,875
972,105 Ford Motor Credit Company
6.500% due 11/15/96 972,397
1,000,000 Ford Motor Credit Company
7.125% due 12/01/97 987,500
1,500,000 General Motors Acceptance Corporation
7.875% due 02/28/97 1,509,375
1,154,871 General Motors Acceptance Corporation
4.500% due 09/15/97 1,139,050
2,000,000 U.S. Leasing Corporation
7.000% due 11/01/97 1,967,500
-----------
11,846,197
-----------
BANKING AND FINANCE -- 9.6%
500,000 American General Finance Corporation
8.100% due 08/15/95 506,250
500,000 Associates Corporation of North America
6.000% due 12/01/95 496,875
1,500,000 BankAmerica Corporation
6.850% due 03/01/03 1,351,875
3,000,000 Chemical Banking Corporation
7.625% due 01/15/03 2,835,000
500,000 International Lease Finance Corporation
6.625% due 06/01/96 496,875
2,500,000 International Lease Finance Corporation
5.750% due 03/15/98 2,350,000
-----------
8,036,875
-----------
UTILITIES -- 6.7%
4,000,000 Bell Atlantic New Jersey
5.875% due 02/01/04 3,430,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 7
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CORPORATE BONDS AND NOTES (continued)
<C> <S> <C>
UTILITIES (CONTINUED)
$2,000,000 Texas Utilities Company
6.375% due 08/01/97 $ 1,940,000
200,000 Virginia Electric & Power Company
6.375% due 03/01/95 200,250
-----------
5,570,250
-----------
ENERGY -- 5.4%
940,000 Du Pont (E.I.) de Nemours & Company
8.450% due 10/15/96 961,150
2,500,000 Exxon Capital Corporation
8.250% due 11/01/99 2,546,875
1,000,000 Shell Oil Company
7.700% due 02/01/96 1,011,250
-----------
4,519,275
-----------
CONSUMER NON-DURABLES -- 3.7%
2,000,000 McDonald's Corporation
8.375% due 10/29/99 2,052,500
1,000,000 Warner-Lambert Company
8.000% due 09/01/98 1,013,750
-----------
3,066,250
-----------
TECHNOLOGY -- 3.7%
3,000,000 Rockwell International Corporation
8.375% due 02/15/01 3,052,500
-----------
CONSUMER SERVICES -- 2.6%
2,100,000 Wal-Mart Stores, Inc.
8.625% due 04/01/01 2,163,000
-----------
CONSUMER DURABLES -- 0.9%
500,000 Gillette Company
4.750% due 08/15/96 481,250
250,000 Johnson & Johnson
8.500% due 08/15/95 254,062
-----------
735,312
-----------
</TABLE>
8 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CORPORATE BONDS AND NOTES (continued)
<C> <S> <C>
OTHER -- 2.7%
$ 500,000 BP America, Inc.
7.875% due 05/15/02 $ 492,500
2,000,000 Hoechst-Celanese Corporation
7.125% due 03/15/09 1,762,500
-----------
2,255,000
-----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $44,112,594) 41,244,659
-----------
U.S. TREASURY BONDS AND NOTES -- 35.9%
1,060,000 U.S. Treasury Bonds, 12.375% due 05/15/04 1,382,155
1,000,000 U.S. Treasury Bonds, 12.000% due 05/15/05 1,293,110
3,090,000 U.S. Treasury Notes, 4.250% due 07/31/95 3,050,663
2,000,000 U.S. Treasury Notes, 4.625% due 08/15/95 1,978,340
3,000,000 U.S. Treasury Notes, 8.500% due 08/15/95 3,055,080
7,550,000 U.S. Treasury Notes, 9.250% due 01/15/96 7,793,638
5,000,000 U.S. Treasury Notes, 9.375% due 04/15/96 5,192,050
5,000,000 U.S. Treasury Notes, 8.875% due 11/15/98 5,260,650
1,000,000 U.S. Treasury Notes, 7.250% due 05/15/04 963,450
-----------
TOTAL U.S. TREASURY BONDS AND NOTES
(Cost $30,534,068) 29,969,136
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 4.3%
1,375,245 Government National Mortgage Association
7.000% due 11/15/23 1,232,992
1,406,879 Government National Mortgage Association
7.000% due 03/15/24 1,261,355
1,194,711 Government National Mortgage Association
7.500% due 03/15/24 1,109,588
-----------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (Cost
$4,074,421) 3,603,935
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 9
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
REPURCHASE AGREEMENT -- 9.1% (Cost $7,549,964)
<C> <S> <C>
$7,549,964 Agreement with Barclays de Zoete Wedd dated 10/31/94 bearing
4.780% to be repurchased at $7,550,966 on 11/01/94,
collateralized by $7,495,000 U.S. Treasury Notes,
5.875% due 05/15/95 $ 7,549,964
-----------
TOTAL INVESTMENTS (Cost $86,271,047*) 98.8% 82,367,694
OTHER ASSETS AND LIABILITIES (NET) 1.2 970,423
------ ----------
NET ASSETS 100.0% $83,338,117
------ -----------
------ -----------
------------------------------------------------------------------------------------
<FN>
* AGGREGATE COST FOR FEDERAL TAX PURPOSES.
</TABLE>
10 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of ASSETS and LIABILITIES
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments, at value (Cost $86,271,047) (Note 1)
See accompanying schedule $82,367,694
Interest receivable 1,510,635
Receivable for Fund shares sold 55,206
Receivable from investment adviser (Note 2) 16,734
-----------
TOTAL ASSETS 83,950,269
-----------
-----------
LIABILITIES
Payable for Fund shares redeemed 438,997
Dividends payable 116,721
Investment management fee payable (Note 2) 45,326
Accrued Directors' fees and expenses (Note 2) 11,078
Distribution fee payable (Note 3) 30
--------
TOTAL LIABILITIES 612,152
-----------
NET ASSETS $83,338,117
-----------
-----------
NET ASSETS consist of:
Distributions in excess of net investment income $ (22,636)
Accumulated net realized loss on investments sold (1,854,346)
Unrealized depreciation on investments (3,903,353)
Par value 8,156
Paid-in capital in excess of par value 89,110,296
-----------
TOTAL NET ASSETS $83,338,117
-----------
-----------
NET ASSET VALUE
CLASS A SHARES
Net asset value, offering and redemption price per share
($932,275 DIVIDED BY 91,241 shares of capital stock
outstanding) $10.22
------
------
CLASS R SHARES
Net asset value, offering and redemption price per share
($82,405,842 DIVIDED BY 8,064,772 shares of capital
stock outstanding) $10.22
------
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 11
................................................................................
<PAGE>
STATEMENT of OPERATIONS
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
FOR THE YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 4,811,000
-----------
EXPENSES
Investment management fee (Note 2) $300,989
Investment advisory fee (Note 2) 154,930
Transfer agent fees (Note 2) 24,766
Custodian fees (Note 2) 22,751
Directors' fees and expenses (Note 2) 13,668
Administration fee (Note 2) 11,049
Legal and audit fees 7,099
Amortization of organization costs (Note 6) 3,533
Distribution fee (Note 3) 527
Other 13,598
Expenses reimbursed by investment adviser (Note 2) (8,622)
--------
TOTAL EXPENSES 544,288
-----------
NET INVESTMENT INCOME 4,266,712
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(Notes 1 and 4):
Net realized loss on investments sold during the year (1,876,669)
Net change in unrealized depreciation of investments
during
the year (4,583,309)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (6,459,978)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(2,193,266)
-----------
-----------
</TABLE>
12 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of CHANGES in NET ASSETS
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
10/31/94 10/31/93
<S> <C> <C>
Net investment income $ 4,266,712 $ 1,420,169
Net realized gain/(loss) on investments sold during the year (1,876,669) 490,042
Net unrealized appreciation/(depreciation) of investments
during the year (4,583,309) 402,009
----------- -----------
Net increase/(decrease) in net assets resulting from
operations (2,193,266) 2,312,220
Distribution to shareholders from net investment income:
Class A Shares (10,352) --
Class R Shares (4,462,330) (1,306,236)
----------- -----------
Distribution to shareholders from net realized gain:
Class R Shares (490,042) (190,884)
Net increase in net assets from Fund share transactions
(Note 5):
Class A Shares 944,565 --
Class R Shares 30,016,014 38,099,357
----------- -----------
Net increase in net assets 23,804,589 38,099,357
NET ASSETS:
Beginning of year 59,533,528 20,619,071
----------- -----------
End of year (including undistributed net investment income
of $205,994 at October 31, 1993) $83,338,117 $59,533,528
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 13
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
PERIOD
ENDED
10/31/94*
<S> <C>
------------------------------------------------------------------------
Net asset value, beginning of period $10.49
----------
Income from investment operations:
Net investment income 0.28
Net realized and unrealized loss on investments (0.27)
----------
Total from investment operations 0.01
Less distributions:
Dividends from net investment income (0.28)
----------
Total distributions (0.28)
----------
Net asset value, end of period $10.22
----------
Total return+ 0.11%
----------
----------
Ratios to average net assets/Supplemental Data:
Net assets, end of period (in 000's) $932
Ratio of operating expenses to average net assets 0.83%**
Ratio of net investment income to average net assets 4.47%**
Portfolio turnover rate 117%
------------------------------------------------------------------------
<FN>
* THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 7, 1994. EFFECTIVE AS OF
OCTOBER 17, 1994, THE FUND'S INVESTOR SHARES WERE REDESIGNATED AS CLASS A
SHARES.
** ANNUALIZED.
+ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIOD INDICATED.
</TABLE>
14 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
................................................................................
- --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/94* 10/31/93 10/31/92 10/31/91*
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------
Net asset value, beginning of year $ 11.07 $ 10.71 $ 10.41 $ 10.00
--------- -------- -------- ----------
Income from investment operations:
Net investment income 0.49# 0.51 0.62 0.19
Net realized and unrealized gain/ (loss) on
investments (0.75) 0.46 0.30 0.36
--------- -------- -------- ----------
Total from investment operations (0.26) 0.97 0.92 0.55
Less distributions:
Distributions from net investment income (0.53) (0.52) (0.62) (0.14)
Distributions from net realized capital gains (0.06) (0.09) -- --
--------- -------- -------- ----------
Total distributions (0.59) (0.61) (0.62) (0.14)
--------- -------- -------- ----------
Net asset value, end of year $ 10.22 $ 11.07 $ 10.71 $ 10.41
--------- -------- -------- ----------
Total return++ (2.46)% 9.33% 9.11% 5.49%
--------- -------- -------- ----------
--------- -------- -------- ----------
Ratios to average net assets/ Supplemental Data:
Net assets, end of year (in 000's) $82,406 $59,534 $20,619 $ 9,608
Ratio of expenses to average net assets+++ 0.60%+ 0.60% 0.51% 0.02%**
Ratio of net investment income to average net
assets 4.70% 4.81% 5.91% 7.16%**
Portfolio turnover rate 117% 112% 67% 23%
------------------------------------------------------------------------------------
* THE FUND COMMENCED OPERATIONS ON JULY 11, 1991. THE FUND COMMENCED SELLING INVESTOR SHARES ON
APRIL 7, 1994. THOSE SHARES OUTSTANDING PRIOR TO APRIL 4, 1994 WERE DESIGNATED AS TRUST
SHARES. EFFECTIVE AS OF OCTOBER 17, 1994, THE FUND'S TRUST SHARES WERE REDESIGNATED AS CLASS
R SHARES.
** ANNUALIZED.
+ ANNUALIZED EXPENSE RATIO BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER WAS .60%
FOR THE YEAR ENDED OCTOBER 31,1994.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
+++ FOR THE YEAR ENDED OCTOBER 31, 1992 AND THE PERIOD ENDED OCTOBER 31, 1991, THE INVESTMENT
ADVISER WAIVED ALL OR A PORTION OF ITS ADVISORY FEE AMOUNTING TO $0.0064 AND $0.0107 PER
SHARE, RESPECTIVELY. FOR THE YEARS ENDED OCTOBER 31, 1993 AND 1992 AND THE PERIOD ENDED
OCTOBER 31, 1991, THE INVESTMENT ADVISER REIMBURSED EXPENSES OF THE FUND AMOUNTING TO
$0.0509, $0.1147, AND $0.0732 PER SHARE, RESPECTIVELY.
# NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER WAS $0.49
FOR THE YEAR ENDED OCTOBER 31, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 15
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS
................................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that are now part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund with 19 separate investment
portfolios. These financial statements report on the Premier Limited Term
Income Fund (formerly the Laurel Intermediate Income Fund) (the "Fund"). The
Investment Company was incorporated on August 6, 1987 as a Maryland
corporation and is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a
diversified open-end management investment company. The Fund commenced
operations on July 11, 1991. As of October 31, 1994, the Fund offers two
classes of shares: Class A Shares and Class R Shares (effective October 17,
1994, the Investor Shares and Trust Shares were redesignated as the Class A
Shares and Class R Shares, respectively). Class A Shares are sold primarily to
retail investors and bear a distribution fee. Class R Shares are sold
primarily to bank trust departments and other financial service providers
acting on behalf of customers having a qualified trust or investment account
or relationship at such institution, and bear no distribution fee. Each class
of shares has identical rights and privileges, except with respect to
distribution fees and voting rights on matters affecting a single class. The
following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
(A) PORTFOLIO VALUATION
Investments in securities traded on a national securities exchange are valued
at the last reported sales price or, in the absence of a recorded sale, at the
mean of the latest bid and asked prices. Over-the-counter securities are
valued at the mean of the latest bid and asked prices. When market quotations
are not readily available, securities are valued at fair value as determined
in good faith by the Board of Directors. Bonds are valued through valuations
obtained from a commercial pricing service or at the most recent mean of the
bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors. Investments in U.S.
government securities (other than short-term securities) are valued at the
most recent quoted bid price in the over-the-counter market. Debt securities
with maturities of 60 days or less from the valuation day are valued on the
basis of amortized cost.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund, through its custodian, takes
possession of an underlying debt obligation, subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding
period. This arrangement results in a fixed rate of return that is not subject
to market fluctuations during the Fund's holding period. The value of the
16
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
collateral is at least equal at all times to the total amount of the
repurchase obligations, including interest. In the event of counterparty
default, the Fund has the right to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is delayed
or prevented from exercising its rights to dispose of the collateral
securities including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's investment manager, acting under the supervision of the
Board of Directors, reviews the value of the collateral and the
creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements to evaluate potential risks.
(C) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Interest income is
recorded on the accrual basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Investment income and
realized and unrealized gains and losses are allocated based upon relative
average daily net assets of each class.
(D) EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class
of shares are pro rated between the classes based upon the relative average
daily net assets of each class. Distribution expense is directly attributable
to a particular class of shares and is charged only to that class' operations.
(E) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are determined on a class level
and are declared daily and paid monthly. Distributions from net realized
capital gains, if any, are determined on a Fund level and are declared and
paid annually. Additional distributions of net investment income and capital
gains for the Fund may be made at the discretion of the Board of Directors in
order to avoid the 4% nondeductible federal excise tax. Income distributions
and capital gain distributions on a Fund level are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the
Fund, timing differences and differing characterization of distributions made
by the Fund as a whole. Permanent differences incurred during the year ended
October 31, 1994 resulting from a reclassification of income to gains.
(F) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
17
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES
AND OTHER RELATED PARTY TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment
management agreement with Mellon Bank, N.A.("Mellon Bank"), a wholly-owned
subsidiary of Mellon Bank Corporation, was transferred to The Dreyfus
Corporation (the "Manager"), a wholly-owned subsidiary of Mellon Bank. The
Manager provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Investment Company. The Manager also directs the
investments of the Fund in accordance with its investment objective, policies
and limitations. For these services, the Fund pays the Manager a fee,
calculated daily and paid monthly, at the annual rate of 0.60% of the value of
the Fund's average daily net assets. Out of its fee, the Manager pays all of
the expenses of the Fund except brokerage, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
For the period from April 4, 1994 to October 16, 1994, Mellon Bank served as
the Investment Company's investment manager pursuant to the investment
management agreement described above. Prior to April 4, 1994, the Investment
Company had individual contracts with Mellon Bank to provide custody,
accounting, and transfer agent services to the Fund. Effective April 4, 1994,
custody, accounting, and transfer agent services are covered by the investment
management agreement described above.
Prior to April 4, 1994, the Investment Company had an investment advisory
agreement under which the Fund paid Mellon Bank an annual fee of 0.30% of the
value of the Fund's average daily net assets for investment advisory services.
For the period from November 1, 1993 through April 3, 1994, Mellon Bank, as
investment adviser, voluntarily agreed to reimburse expenses in the amount of
$8,622.
Prior to September 23, 1994, Frank Russell Investment Management Company (the
"Administrator") served as the Fund's administrator and provided, pursuant to
an administration agreement, various administrative and corporate secretarial
services to the Fund. For the period from April 4, 1994 to September 23, 1994,
Mellon Bank, as investment manager, paid the Administrator's fee out of the
management fee described above. Prior to April 4, 1994, the Investment Company
paid the Administrator the following fees for the services supplied by the
Administrator pursuant to the administration agreement: (i) an annual fee of
$500,000; (ii) an annual asset-based fee, payable monthly on a pro rata basis,
based on the following percentages of the aggregate average daily net assets
of the Investment Company: up to and including $10 billion -- 0.01%, over $10
billion -- 0.005%; and (iii) all start-up costs (including out-of-pocket, blue
sky registration and personnel costs) for new portfolios (prior to and for 6
months following commencement of operations).
18
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
Prior to April 4, 1994, the Investment Company had a contract with Russell
Fund Distributors, Inc. to serve as distributor of its shares. Effective April
4, 1994 through October 16, 1994, Funds Distributor, Inc. served as
distributor of the Investment Company's shares. Effective as of October 17,
1994, Premier Mutual Fund Services, Inc. ("Premier") serves as the Investment
Company's distributor. Premier also serves as the Investment Company's
sub-administrator and, pursuant to a sub-administration agreement with the
Manager, provides various administrative and corporate secretarial services to
the Investment Company.
No officer or employee of Premier (or of any parent, subsidiary or affiliate
thereof) receives any compensation from The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds or The
Dreyfus/Laurel Investment Series (collectively, "The Dreyfus/Laurel Funds")
for serving as an officer or Director/Trustee of The Dreyfus/Laurel Funds. In
addition, no officer or employee of the Manager (or any parent, subsidiary or
affiliate thereof) serves as an officer or Director/ Trustee of the
Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pay each Director/Trustee who
is not an officer or employee of Premier (or any parent, subsidiary or
affiliate thereof) $27,000 per annum, $1,000 for each Board meeting attended
and $750 for each Audit Committee meeting attended, and reimburse each
Director/Trustee for travel and out-of-pocket expenses. Prior to April 4,
1994, the Investment Company paid each Director $15,000 per annum plus
reimbursement for travel and out-of-pocket expenses.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act relating to its Class A Shares. Under the Plan, the Fund
may pay annually up to 0.25% of the value of the average daily net assets
attributable to its Class A Shares to compensate Premier and Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing activities
and Premier for activities primarily intended to result in the sale of Class A
Shares. Class R Shares bear no distribution fee. Prior to April 4, 1994, the
Fund had a distribution and shareholder services plan, under which the Fund
was authorized to spend annually up to 0.35% of the value of its average daily
net assets on distribution and shareholder servicing expenses.
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of a majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
19
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments and U.S. government securities, for the year ended
October 31, 1994 were $45,331,313 and $16,666,615, respectively.
The cost of purchases and proceeds from sales of long-term U.S. government
securities for the year ended October 31, 1994 were $76,226,491 and
$77,485,470, respectively.
At October 31, 1994, aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there was an excess
of tax cost over value were $1,709 and $3,905,062, respectively.
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. As of October 31, 1994, the Fund offered two
classes of shares. The table below summarizes the transactions in Fund shares
for the years or period indicated:
-------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
CLASS A SHARES:
Sold 91,768 $ 950,058
Issued as reinvestment of
dividends
and distributions 390 4,011
Redeemed (917) (9,504)
---------- ------------
---------- ------------
Net increase 91,241 $ 944,565
---------- ------------
---------- ------------
----------------------------------------------------------------------------------
</TABLE>
20
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994* OCTOBER 31, 1993
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS R SHARES:
Sold 6,051,387 $ 65,415,979 4,667,037 $ 51,383,142
Issued as reinvestment of
dividends
and distributions 352,406 3,726,095 85,459 923,840
Redeemed (3,716,619) (39,126,060) (1,300,206) (14,207,625)
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
Net increase 2,687,174 $ 30,016,014 3,452,290 $ 38,099,357
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
----------------------------------------------------------------------------------
<FN>
* THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 7, 1994. THOSE SHARES
OUTSTANDING PRIOR TO APRIL 4, 1994 WERE DESIGNATED AS TRUST SHARES. EFFECTIVE
AS OF OCTOBER 17, 1994, THE INVESTOR SHARES AND TRUST SHARES WERE
REDESIGNATED AS THE CLASS A SHARES AND CLASS R SHARES, RESPECTIVELY.
</TABLE>
6. ORGANIZATION COSTS
The Fund paid all costs in connection with the Fund's organization including
the fees and expenses of registering and qualifying the Fund's shares for
distribution under federal and state securities regulations. Prior to April 4,
1994, all such costs were being amortized on the straight-line method over a
period of five years. On April 4, 1994, the remaining unamortized organization
costs were reimbursed by Mellon Bank as the investment adviser.
7. CAPITAL LOSS CARRYFORWARDS
At October 31, 1994, the Fund had available for federal income tax purposes
unused capital loss carryforwards of $1,854,347 expiring in the year 2002.
21
................................................................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
................................................................................
[LOGO]
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Premier Limited Term Income Fund of The Dreyfus/Laurel Funds, Inc., including
the portfolio of investments, as of October 31, 1994, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of 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 audits 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 the
Premier Limited Term Income Fund of The Dreyfus/Laurel Funds, Inc. as of
October 31, 1994, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
22
................................................................................
<PAGE>
TAX INFORMATION (unaudited)
................................................................................
PREMIER LIMITED TERM INCOME FUND
YEAR ENDED OCTOBER 31, 1994
During the fiscal year the Fund paid $154,195 of Long Term Capital Gains to
its shareholders.
23
................................................................................
