<PAGE>
THE DREYFUS
Dreyfus/Laurel Short-Term Government Securities Fund
EDGAR DESCRIPTIONS
DESCRIPTION OF ART WORK ON REPORT COVER
Small box above fund name showing a lions face.
<PAGE>
Dear Shareholder,
We are pleased to provide you with a review of the financial markets
environment for the past year as well as performance and portfolio
activity information for the Dreyfus/Laurel Short-Term Government Securities
Fund for the period 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 Short-Term Government Securities Fund is now known, and publicly
listed, as the Dreyfus/Laurel Short-Term Government Securities 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. The integration is discussed in
greater detail in the notes to the financial statements of this report.
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
Dreyfus/Laurel Short-Term
Government Securities Fund
December 9, 1994
1
<PAGE>
D/L SHORT-TERM GOVERNMENT FUND
<TABLE>
TABLE OF CONTENTS
********************************************************
<S> <C>
Shareholder Letter................................ 1
Economic Review................................... 3
Portfolio Overview................................ 4
Portfolio Summary................................. 5
Portfolio of Investments.......................... 7
Statement of Assets and Liabilities............... 8
Statement of Operations........................... 9
Statement of Changes in Net Assets................ 10
Financial Highlights.............................. 11
Notes to Financial Statements..................... 13
Independent Auditors' Report...................... 17
</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 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 soaring 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. Those 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 Dreyfus/Laurel Short-Term Government Securities Fund seeks a
high-level of current income by investing primarily in U.S. government and
agency obligations with maturities of five years or less. Generally, the Fund's
securities will have a total dollar-weighted average maturity of eighteen
months to three years.
As interest rates rose throughout the year, fixed income investments
continued decline in price. However, fixed income investments with shorter
maturities suffered less price depreciation than higher yielding longer-term
securities. The Fund's management anticipated rising interest rates and kept
the average maturity of the Fund's securities shorter than normal, which
enabled the Fund to post a positive return.
During the period ended October 31, 1994, the Fund, which commenced
operations on April 6, 1994, posted an aggregate total return of 2.04% and
1.84% for its Class R shares and Investor Class shares, respectively. In
comparison, the Salomon 1 Year Treasury benchmark posted a return of 2.02%.
Many of the Fund's holdings offer minimal credit risk, offering the
full faith and credit of the U.S. Government. However, it is important to
distinguish between credit risk and market risk. The Fund's credit quality does
not mean that it is invulnerable to price declines when interest rates rise.
However, by investing in short-term securities, the Fund seeks less volatility
of principal than higher yielding, longer-term securities.
The Fund's management continues to believe that short- term interest
rates are more likely to go up than go down during 1995. Therefore, the current
strategy is to continue to maintain shorter maturities for the Fund.
4
<PAGE>
PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND (UNAUDITED)
<TABLE>
CHANGE IN VALUE OF $10,000 INVESTED FROM APRIL 12, 1994 --- OCTOBER 31, 1994+
DESCRIPTION OF MOUNTAIN CHART IN DREYFUS COVERS (INVESTOR SHARES)
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in Dreyfus/Laurel
Short-Term Government Securities Fund Investor Shares from April 12, 1994
through October 31, 1994 as compared with the growth of a $10,000 investment in
Saloman 1-Year Treasury Bill Index. The plot points used to draw the line graph
were as follows:
<CAPTION>
GROWTH OF $10,000 GROWTH OF $10,000
INVESTED IN INVESTOR SHARES INVESTMENT IN THE
MONTH ENDED OF THE FUND SALOMON 1-YEAR
TREASURY BILL INDEX
<S> <C> <C>
3/94 - $10,000
4/12/94 $10,000 -
4/94 $10,014 $ 9,991
5/94 $10,038 $10,010
6/94 $10,064 $10,046
9/94 $10,152 $10,159
10/94 $10,184 $10,201
</TABLE>
<TABLE>
AGGREGATE TOTAL RETURN --- INVESTOR SHARES
- --------------------------------------------------------------------
<S> <C>
Inception (4/12/94) through 10/31/94 1.84%
- --------------------------------------------------------------------
<FN>
+ Hypothetical illustration of $10,000 invested in Investor Shares at inception
(April 12, 1994) and reinvestment of dividends and capital gains at net asset
value through October 31, 1994.
The Salomon 1-Year Treasury Bill Index represents an average of current
on-the-run U.S. Treasury bills with maturities of one year, purchased at a
discount.
Index information is available at month-end only, therefore, the closest
month-end to inception date of the Fund has been used.
This period was one in which bond prices fluctuated and the results
should not be considered as representative of dividend income or
capital gain or loss which may be realized from an investment in
the Fund today. No adjustment has been made for a shareholder's
tax liability on dividends or capital gains.
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
- --------------------------------------------------------------------------------
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND (UNAUDITED)
<TABLE>
CHANGE IN VALUE OF $10,000 INVESTED FROM APRIL 6, 1994 --- OCTOBER 31, 1994+
DESCRIPTION OF MOUNTAIN CHART IN DREYFUS COVERS (CLASS R SHARES)
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in Dreyfus/Laurel
Short-Term Government Securities Fund Class R Shares from April 6, 1994 through
October 31, 1994 as compared with the growth of a $10,000 investment in Saloman
1-Year Treasury Bill Index. The plot points used to draw the line graph were as
follows:
<CAPTION>
GROWTH OF $10,000 GROWTH OF $10,000
INVESTED IN CLASS R SHARES INVESTMENT IN THE
MONTH ENDED OF THE FUND SALOMON 1-YEAR
TREASURY BILL INDEX
<S> <C> <C>
3/94 - $10,000
4/06/94 $10,000 -
4/94 $10,020 $ 9,991
5/94 $10,047 $10,010
6/94 $10,074 $10,046
9/94 $10,169 $10,159
10/94 $10,204 $10,201
</TABLE>
<TABLE>
AGGREGATE TOTAL RETURN --- CLASS R SHARES (FORMERLY TRUST SHARES)
- ----------------------------------------------------------------------
<S> <C>
Inception (4/6/94) through 10/31/94 2.04%
- ----------------------------------------------------------------------
<FN>
+ Hypothetical illustration of $10,000 invested in Class R Shares (formerly
Trust Shares ) at inception (April 6, 1994) and reinvestment of dividends and
capital gains at net asset value through October 31, 1994.
The Salomon 1-Year Treasury Bill Index represents an average of current
on-the-run U.S. Treasury bills with maturities of one year, purchased at a
discount.
Index information is available at month-end only, therefore, the closest
month-end to inception date of the Fund has been used.
This period was one in which bond prices fluctuated and the results should
not be considered as representative of dividend income or capital gain or
loss which may be realized from an investment in the Fund today. No
adjustment has been made for a shareholder's tax liability on dividends or
capital gains.
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>
<TABLE>
THE DREYFUS/LAUREL FUNDS, INC.
PORTFOLIO OF INVESTMENTS
<CAPTION>
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND OCTOBER 31, 1994
ANNUALIZED
YIELD ON DATE
PRINCIPAL OF PURCHASE MATURITY VALUE
AMOUNT (UNAUDITED) DATE (NOTE 1)
<S> <C> <C> <C> <C>
U.S. TREASURY
OBLIGATION - 87.1%
(COST $734,818)
$735,000 U. S. Treasury Bills 4.450% 11/03/94 $734,726
REPURCHASE AGREEMENT - 12.3%
(COST $103,574)
103,574 Agreement with Barclays de Zoete Wedd,
dated 10/31/94 bearing 4.780% to be
repurchased at $103,588 on 11/01/94,
collateralized by $103,756 U.S. Treasury
Bill, 4.360% due 11/10/94 103,574
--------
TOTAL INVESTMENTS (COST $838,392*) 99.4% 838,300
OTHER ASSETS AND LIABILITIES (NET) 0.6 5,049
--------- --------
NET ASSETS 100.0% $843,349
========= ========
<FN>
______________________________________________________
* Aggregate cost for Federal tax purposes.
</TABLE>
See Notes to Financial Statements
7
<PAGE>
<TABLE>
THE DREYFUS/LAUREL FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND OCTOBER 31, 1994
<S> <C> <C>
ASSETS
Investments, at value (Cost $838,392)
(Note 1) See accompanying schedule:
Securities $734,726
Repurchase Agreement 103,574
--------
Total Investments 838,300
Cash 1
Receivable for Fund shares sold 6,241
Interest receivable 14
--------
TOTAL ASSETS 844,556
--------
LIABILITIES
Payable for Fund shares redeemed $700
Investment management fee payable (Note 2) 410
Accrued Directors' fees and expenses (Note 2) 92
Dividends payable 4
Distribution fee payable (Note 3) 1
----
TOTAL LIABILITIES 1,207
--------
NET ASSETS $843,349
========
NET ASSETS consist of:
Accumulated net realized loss on investments sold $ (7)
Unrealized depreciation of investments (92)
Par value 84
Paid-in capital in excess of par value 843,364
--------
TOTAL NET ASSETS $843,349
========
NET ASSET VALUE
INVESTOR SHARES
Net asset value, offering and redemption price per
share ($37,857 / 3,786 shares of capital
stock outstanding) $ 10.00
========
CLASS R SHARES
Net asset value, offering and redemption price per
share ($805,492 / 80,559 shares of capital
stock outstanding) $ 10.00
========
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
THE DREYFUS/LAUREL FUNDS, INC.
STATEMENT OF OPERATIONS
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND
FOR THE PERIOD ENDED OCTOBER 31, 1994*
<S> <C> <C>
INVESTMENT INCOME
Interest $18,673
--------
EXPENSES
Investment management fee (Note 2) $2,415
Directors' fees and expenses (Note 2) 92
Distribution fee (Note 3) 48
------
Total Expenses 2,555
--------
NET INVESTMENT INCOME 16,118
--------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(Notes 1 and 4):
Net realized loss on investments sold during the period (7)
Net unrealized depreciation of investments during the period (92)
--------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (99)
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $16,019
========
<FN>
__________________________________________________________
* The Fund commenced operations on April 6, 1994.
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
<TABLE>
THE DREYFUS/LAUREL FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND
<CAPTION>
PERIOD
ENDED
10/31/94*
<S> <C>
Net investment income $ 16,118
Net realized loss on investments sold (7)
Net unrealized depreciation of investments during
the period (92)
---------
Net increase in net assets resulting from operations 16,019
Distributions to shareholders from net investment income:
Investor Shares (648)
Class R Shares (15,470)
Net increase in net assets from Fund share transactions (Note 5):
Investor Shares 37,859
Class R Shares 805,589
---------
Net increase in net assets 843,349
NET ASSETS:
Beginning of period -
---------
End of period $843,349
=========
<FN>
_______________________________________________________________
* The Fund commenced operations on April 6, 1994.
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
THE DREYFUS/LAUREL FUNDS, INC.
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<CAPTION>
PERIOD
ENDED
10/31/94*
<S> <C>
Net asset value, beginning of period $10.00
-------
Income from investment operations:
Net investment income 0.18
Less distributions:
Distributions from net investment income (0.18)
-------
Net asset value, end of period $10.00
=======
Total return++ 1.84%
=======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 38
Ratio of operating expenses to average
net assets 0.80%+
Ratio of net investment income to average net assets 3.30%+
<FN>
_________________________
* The Fund commenced selling Investor Shares on April 12, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
<TABLE>
THE DREYFUS/LAUREL FUNDS, INC.
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<CAPTION>
PERIOD
ENDED
10/31/94*
<S> <C>
Net asset value, beginning of period $10.00
-------
Income from investment operations:
Net investment income 0.20
Less distributions:
Distributions from net investment income (0.20)
-------
Net asset value, end of period $10.00
=======
Total return++ 2.04%
=======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 805
Ratio of operating expenses to average
net assets 0.55%+
Ratio of net investment income to average net assets 3.55%+
<FN>
_____________________________
* The Fund commenced operations on April 6, 1994. Effective October 17, 1994,
the Fund's Trust Shares were redesignated as Class R Shares.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND
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. This report contains financial statements for the Dreyfus/Laurel
Short-Term Government Securities 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 April 6, 1994. The Fund
currently offers two classes of shares: Investor Shares and Class R Shares
(effective October 17, 1994, the Trust Shares were redesignated as Class R
shares). Investor 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 the distribution fee 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, in accordance with generally accepted accounting
principles.
(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 closing 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 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
13
<PAGE>
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND
Notes to Financial Statements (continued)
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 sold
are recorded on the identified cost basis. Investment income and realized and
unrealized gains and losses are allocated based upon the 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 prorated 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's 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
monthly. 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.
(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.
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 0.55% 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
14
<PAGE>
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND
Notes to Financial Statements (continued)
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 6, 1994 (commencement of operations) through October
16, 1994, Mellon Bank served as the Fund's investment manager pursuant to the
investment management agreement described above.
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 6, 1994 (commencement of
operations) to September 23, 1994, Mellon Bank, as investment manager, paid the
Administrator's fee out of the management fee described above.
For the period from April 6, 1994 (commencement of operations) through October
16, 1994, Funds Distributor, Inc. served as distributor of the Fund'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 of 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.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act relating to its Investor 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 Investor 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 Investor
Shares. Class R Shares bear no distribution fee.
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.
15
<PAGE>
DREYFUS/LAUREL SHORT-TERM GOVERNMENT SECURITIES FUND
Notes to Financial Statements (continued)
4. SECURITIES TRANSACTIONS
At October 31, 1994, aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was $92. There
was no aggregate gross unrealized appreciation for any securities in which
there was an excess of value over tax cost.
<TABLE>
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. The Fund has authority to issue two classes
of shares. The table below summarizes the transactions in Fund shares for the
period indicated:
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
------ ------
<S> <C> <C>
INVESTOR SHARES:
Sold ................................. 4,091 $40,907
Issued as reinvestment of
dividends and distributions ...... 62 624
Redeemed ............................. (367) (3,672)
----- -------
Net increase ......................... 3,786 $37,859
===== =======
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
------ ------
<S> <C> <C>
CLASS R SHARES:
Sold ................................. 96,520 $ 965,199
Issued as reinvestment of
dividends and distributions ...... 1,545 15,449
Redeemed ............................. (17,506) (175,059)
------- ---------
Net increase ......................... 80,559 $ 805,589
======= =========
<FN>
____________________
*The Fund commenced operations and began selling Trust Shares on April 6,
1994. The Fund began selling Investor Shares on April 12, 1994. Effective as of
October 17, 1994, the Fund's Trust Shares were redesignated as Class R Shares.
</TABLE>
6. CAPITAL LOSS CARRYFORWARD
At October 31, 1994, the Fund had available for federal income tax
purposes unused capital loss carryforward of $7 expiring in 2002.
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Dreyfus/Laurel Short-Term Government Securities Fund of The Dreyfus/Laurel
Funds, Inc., including the portfolio of investments, as of October 31, 1994, and
the related statement of operations, statement of changes in net assets, and the
financial highlights for the period then ended. 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 the
Dreyfus/Laurel Short-Term Government Securities Fund of The Dreyfus/Laurel
Funds, Inc., as of October 31, 1994, and the results of its operations, changes
in its net assets, and the financial highlights for the period then ended, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
17
