<PAGE>
Dreyfus
Disciplined Equity
Income Fund
Annual Report
October 31, 1997
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
We are pleased to report that the performance of the Dreyfus Disciplined
Equity Income Fund kept pace with the strong results of the Standard & Poor's
500 Composite Stock Price Index ("S&P 500 Index") for the 12-month period ended
October 31, 1997, as shown in the following table:
Total Return*
-------------
Investor Shares 32.01%
Restricted Shares 32.35%
S&P 500 Index** 32.10%
ECONOMIC REVIEW
The U.S. economy has registered a step-up in growth in 1997 and incoming
evidence suggests that momentum is still building. Stronger growth this year has
helped keep corporate profits buoyant despite a substantially tighter labor
market. This is because nationwide shortages of labor have so far not generated
much wage inflation. Moreover, price inflation has decelerated markedly during
the year suppressed by the strong dollar, import competition and continued
disinflation in health care.
Although the Federal Reserve Board (the "Fed") has held a tightening bias
since mid-1996, the central bank has raised interest rates only once this year.
Expectations for further hikes have been continually postponed. They were first
dampened by the surprising drop in this year's price inflation, and more
recently by unfolding crises in foreign economies. Both events have helped to
cap short-term rates and to pull long-term interest rates lower since the
spring.
Real Gross Domestic Product growth accelerated to about 4% this year from 3%
in 1996. Virtually all economic sectors have been strong so far. Consumer
spending has been supported by rising real incomes. Capital spending has been
very robust and incoming orders imply continued strength. Even housing demand
has reached new highs. Most incoming signals support sustained growth. The
exception is that exporters' new orders have marginally slowed in recent months,
indicating that economic turmoil overseas may be impacting this sector. By
contrast, imports have been very robust and, if their growth is sustained, could
help mitigate the economic weakness abroad.
Overall corporate profits have continued to trend higher, although some
companies have been hurt by events overseas and the stronger dollar.
Domestically generated profits have typically remained solid, helped by strong
growth and contained wages.
MARKET OVERVIEW
Even though the equity markets stumbled badly in late October, the fiscal
year ended October 31, 1997 saw solid gains. For the same 12-month period,
measured by price changes alone, excluding income, the Dow Jones Industrial
Average gained 23.58%, the S&P 500 Index 29.96%, the Nasdaq Composite 30.43% and
the Russell 2000 Index, 27.52%. These gains were after the drop that occurred
the last week in October, and before counting the rebound that occurred in the
first week of November.
<PAGE>
In retrospect, it is apparent that stock valuations had been riding for a
fall. There was weakness in March when the Fed raised interest rates for the
first time in two years. By early summer, equity prices recovered and soared to
new highs. Then, however, some nervousness set in, related mainly to concern
about high stock valuations and fears of another Fed move to cool off the
bubbling economy. Weakness was apparent mainly in large capitalized companies,
while smaller companies, such as those listed in the Russell 2000 Index, gained
ground.
As autumn leaves began to turn, the stock market as a whole regained its wind
- -- but not for long. The relatively high valuations that had prevailed were
vulnerable to any major unpleasant surprise. That came in late October from an
unexpected source -- the Far East. Severe market setbacks in Hong Kong and
Southeast Asia, together with drops in their foreign exchange rates, triggered
the fall in the U.S. market.
Richard Hoey, Chief Economist for The Dreyfus Corporation, reviewing the
recent events, said that the U.S. stock market had a selling panic, followed by
a buying panic. The underlying logic of it all was valuation, he observed.
When the Dow Jones index peaked at above 8200 in early August, the stock
market was simply discounting favorable U.S. fundamentals into high stock
prices, said Hoey. The financial crisis in Asia was the trigger for a correction
of the major problem for the U.S. stock market: high valuation.
The market drop in Asia was caused by serious fundamental problems of excess
productive capacity, overvalued real estate and a banking system crisis.
European markets, of course, reacted to the Asian weakness, but less severely
because their economies are more stable. In the U.S., the sharp price drop,
followed by a vigorous rebound, reflected an economy with much greater
underlying strength.
The influx of investors into stocks when prices dipped was a good augury
for the future. The American investing public appears to be convinced that
equities are a good place to put money for the long term, when their prices are
attractive, despite the recent volatility of the market averages.
PORTFOLIO FOCUS
During the reporting period, we relied on our highly disciplined investment
process which emphasizes higher yielding stocks that are undervalued and/or have
improving earnings momentum. The five best performing stocks in the six-month
period were Guidant (+69%), Gap (+67%), Ahmanson (HF) & Co. (+57%), Salomon
(+56%), and Lilly (Eli) (+54%).
Effective on or about January 16, 1998, the Fund's nonfundamental investment
objective of seeking an above-average level of income along with moderate
long-term growth of income and principal will be changed to seeking investment
returns (including capital appreciation and income) consistently superior to the
S&P 500 Index. In seeking to enhance the Fund's ability to meet its modified
investment objective, certain of the Fund's nonfundamental investment policies
also will be changed. Accordingly, under normal circumstances, the Fund will
invest at least 65% of its total assets in equity securities. The Fund will no
longer invest in convertible bonds and preferred stocks; however, most of the
stocks held by the Fund will pay dividends. The Fund will continue to manage
risk by maintaining the structure of the Fund's portfolio similar to the S&P 500
Index, but will not overweight certain sectors in attempting to achieve higher
yields. The principal effect of these changes will probably be to decrease
slightly the portion of the Fund's total return attributable to investment
income as compared to the portion attributable to price appreciation.
<PAGE>
We thank you for entrusting us with assets to manage on your behalf. We will
maintain a disciplined approach in an effort to continue bringing you rewarding
returns.
Sincerely,
/s/ Bert J. Mullins
Bert J. Mullins
Portfolio Manager
November 18, 1997 New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
** SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
<PAGE>
Dreyfus Disciplined Equity Income Fund October 31, 1997
- ------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS DISCIPLINED
EQUITY INCOME FUND RESTRICTED SHARES AND THE STANDARD
& POOR'S 500 COMPOSITE STOCK PRICE INDEX
[INSERT PLOT POINTS FROM GRAPH HERE!!!!]
$20,667
Standard & Poor's 500
Composite Stock
Price Index*
$20,192
Dreyfus Disciplined
Equity Income Fund
(Restricted Shares)
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investor Shares* Restricted Shares*
- --------------------------------------------------- --------------------------------------------------
Period Ended 10/31/97 Period Ended 10/31/97
- ------------------------- ------------------------
<C> <C> <C> <C>
1 Year 32.01% 1 Year 32.35%
From Inception (9/14/94) 25.44 From Inception (9/2/94) 24.90
<FN>
- ------------------------------
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Restricted shares of
Dreyfus Disciplined Equity Income Fund on 9/2/94 (Inception Date) to a $10,000
investment made in the Standard & Poor's 500 Composite Stock Price Index on that
date. For comparative purposes, the value of the Index on 8/31/94 is used as the
beginning value on 9/2/94. All dividends and capital gain distributions are
reinvested. Performance for Investor shares will vary from the performance of
Restricted shares shown above due to differences in charges and expenses.
The Dreyfus Disciplined Equity Income Fund currently seeks to provide
above-average income along with moderate long-term growth of principal and
income by investing primarily in a diversified portfolio of dividend-paying
stocks. It is currently anticipated that on or about January 16, 1998, the
Fund's investment objective will change to seeking investment returns (including
capital appreciation and income) consistently superior to the Standard & Poor's
500 Composite Stock Price Index. Of course, the change to the Fund's investment
objective and related changes to certain of its investment policies do not
guarantee any particular performance. The Fund's performance shown in the line
graph takes into account all applicable fees and expenses. The Standard & Poor's
500 Composite Stock Price Index is a widely accepted, unmanaged index of overall
stock market performance, which does not take into account charges, fees and
other expenses. Further information relating to Fund performance, including
expense reimbursements, if applicable, is contained in the Financial Highlights
section of the Prospectus and elsewhere in this report.
* Effective August 15, 1997, the Fund's Institutional shares were redesignated
as Investor shares and Retail shares were redesignated as Restricted shares.
</TABLE>
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -------------------------------------------------------------------------------
Statement of Investments October 31, 1997
<TABLE>
<CAPTION>
Common Stocks--96.8% Shares Value
- ------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
Basic Industries--4.6% Dow Chemical.................................. 1,700 $ 154,275
duPont (EI) de Nemours........................ 5,500 312,812
Great Lakes Chemical.......................... 2,000 94,000
Imperial Chemical Industries, ADR............. 2,800 167,650
Lubrizol...................................... 3,150 121,275
Mead.......................................... 1,900 114,950
Morton International.......................... 2,600 85,800
PPG Industries................................ 3,600 203,850
Potash Corp. Saskatchewan..................... 1,750 143,391
Rohm & Haas................................... 1,100 91,644
Weyerhaeuser.................................. 1,950 93,112
------------
1,582,759
------------
Capital Spending--17.5% AlliedSignal................................... 3,700 133,200
BCE........................................... 10,500 293,344
Browning-Ferris Industries.................... 2,600 84,500
Caterpillar................................... 3,200 164,000
Cooper Industries............................. 3,500 182,438
Deere & Co.................................... 2,200 115,775
Eaton......................................... 1,950 188,419
Emerson Electric.............................. 2,000 104,875
General Dynamics.............................. 1,000 81,188
General Electric.............................. 15,400 994,263
Hewlett-Packard............................... 3,700 228,244
Ingersoll-Rand................................ 5,950 231,678
Intel......................................... 7,600 585,200
International Business Machines............... 6,300 617,794
Lockheed Martin............................... 2,956 281,005
Lucent Technologies........................... 2,600 214,337
Northrop Grumman.............................. 500 54,625
Omnicom Group................................. 1,550 109,468
Pitney Bowes.................................. 3,200 253,800
Raychem....................................... 1,300 117,731
Raytheon...................................... 3,700 200,725
Texas Instruments............................. 1,900 202,706
United Technologies........................... 2,500 175,000
Xerox......................................... 5,950 471,909
------------
6,086,224
------------
Consumer Cyclical--9.6% American Greetings, Cl. A...................... 3,500 121,406
American Stores............................... 3,600 92,475
Dayton Hudson................................. 4,150 260,672
Disney (Walt)................................. 2,100 172,725
Ford Motor.................................... 12,200 532,988
Gannett....................................... 1,400 73,587
Gap........................................... 3,550 188,816
Goodyear Tire & Rubber........................ 1,000 62,625
Limited....................................... 4,500 106,031
Liz Claiborne................................. 3,200 162,200
</TABLE>
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -------------------------------------------------------------------------------
Statement of Investments October 31, 1997
<TABLE>
<CAPTION>
Common Stock (continued) Shares Value
- ------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Consumer Cyclical (continued) Marriott International........................ 3,450 $ 240,638
May Department Stores......................... 2,350 126,606
McGraw-Hill Cos............................... 2,350 153,631
New York Times, Cl. A......................... 2,300 125,925
Penney (J.C.)................................. 4,500 264,094
Sears, Roebuck................................ 4,350 182,156
Time Warner................................... 1,700 98,069
Wal-Mart Stores............................... 9,900 347,738
------------
3,312,382
------------
Consumer Staples--12.5% Anheuser-Busch Cos............................. 4,200 167,737
Avon Products................................. 3,100 203,050
CPC International............................. 1,000 99,000
Clorox........................................ 2,000 140,000
Coca-Cola..................................... 9,350 528,275
Coca-Cola Enterprises......................... 4,800 135,000
Colgate-Palmolive............................. 2,900 187,775
ConAgra....................................... 5,800 174,725
Dole Food..................................... 1,750 77,547
Eastman Kodak................................. 1,450 86,819
Gillette...................................... 2,050 182,578
Hershey Foods................................. 1,700 93,925
Kimberly-Clark................................ 4,000 207,750
PepsiCo....................................... 9,600 353,400
Philip Morris Cos............................. 11,550 457,669
Procter & Gamble.............................. 8,300 564,400
Quaker Oats................................... 2,800 134,050
Ralston-Purina Group.......................... 750 67,313
Sara Lee...................................... 3,250 166,156
Unilever N.V.................................. 5,600 298,900
------------
4,326,069
------------
Energy--10.6% Amoco.......................................... 2,850 261,309
Atlantic Richfield............................ 3,000 246,938
Chevron....................................... 6,200 514,213
Columbia Gas System........................... 2,300 166,175
Exxon......................................... 11,600 712,675
Halliburton................................... 2,600 155,025
Mobil......................................... 3,400 247,563
Pacific Enterprises........................... 6,500 212,469
Phillips Petroleum............................ 4,500 217,687
Royal Dutch Petroleum, ADR.................... 9,500 499,937
Texaco........................................ 5,600 318,850
USX-Marathon Group............................ 3,500 125,125
------------
3,677,966
------------
Health Care--12.0% American Home Products......................... 4,800 355,800
Baxter International.......................... 1,300 60,125
Becton, Dickinson............................. 800 36,850
Bristol-Myers Squibb.......................... 4,800 421,200
</TABLE>
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -------------------------------------------------------------------------------
Statement of Investments October 31, 1997
<TABLE>
<CAPTION>
Common Stock (continued) Shares Value
- ------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Health Care (continued) Guidant....................................... 3,700 $ 212,750
Johnson & Johnson............................. 7,400 424,575
Lilly (Eli)................................... 10,200 682,125
Medtronic..................................... 3,300 143,550
Merck & Co.................................... 5,800 517,650
Pfizer........................................ 8,400 594,300
Schering-Plough............................... 7,700 431,681
SmithKline Beecham, ADS....................... 2,500 119,063
Warner-Lambert................................ 1,100 157,506
------------
4,157,175
------------
Interest Sensitive--18.3% Ahmanson (H F) & Co........................... 1,500 88,500
Allstate...................................... 4,051 335,980
American National Insurance................... 2,700 259,200
Banc One...................................... 10,640 554,610
BankAmerica................................... 5,600 400,400
BankBoston.................................... 1,260 102,139
Bankers Trust NY.............................. 3,000 354,000
Bear Stearns Cos.............................. 2,358 93,583
Block (H & R)................................. 4,150 153,550
CIGNA ........................................ 2,600 403,650
Chase Manhattan............................... 3,340 385,353
Countrywide Credit Industries................. 2,800 96,075
Fannie Mae.................................... 7,500 363,281
First Chicago NBD............................. 7,017 510,487
General Re.................................... 500 98,594
Hartford Financial Services Group............. 2,850 230,850
Merrill Lynch................................. 4,900 331,363
PNC Bank...................................... 10,650 505,875
Providian Financial........................... 1,750 64,750
SAFECO........................................ 3,350 159,543
Salomon....................................... 1,200 93,225
SouthTrust.................................... 2,900 139,200
Summit Bancorp................................ 4,050 172,884
Travelers Group............................... 3,493 244,510
Union Planters................................ 3,400 201,662
------------
6,343,264
------------
Mining And Metals--1.0% Aluminum Co. of America....................... 1,150 83,950
Freeport-McMoran Copper & Gold, Cl. B......... 3,400 81,175
Phelps Dodge.................................. 900 66,937
USX-U.S. Steel Group.......................... 3,300 112,200
------------
344,262
------------
Transportation--1.0% Canadian Pacific.............................. 5,800 172,913
Illinois Central.............................. 5,300 188,812
------------
361,725
------------
Utilities--9.7% Ameritech..................................... 5,700 370,500
Bell Atlantic................................. 8,939 714,003
</TABLE>
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -------------------------------------------------------------------------------
Statement of Investments October 31, 1997
<TABLE>
<CAPTION>
Common Stock (continued) Shares Value
- ------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Utilities (continued) BellSouth..................................... 7,950 $ 376,134
CINergy....................................... 3,600 118,800
Centerior Energy.............................. 9,100 118,300
Entergy....................................... 8,250 201,609
Florida Progress.............................. 5,500 179,094
GPU........................................... 5,400 195,413
GTE........................................... 4,350 184,603
SBC Communications............................ 6,400 407,200
Telefonos de Mexico, Cl. L, ADS.............. 3,500 151,375
Texas Utilities............................... 4,550 163,231
US West Communications Group.................. 4,600 183,137
------------
3,363,399
------------
TOTAL COMMON STOCKS
(cost $27,588,298)......................... $ 33,555,225
------------
------------
Convertible Preferred Stocks--.9%
- -------------------------------------------------------------------------------
Consumer Cyclical--.4% Kmart Financing, Cum., 7.75%.................. 700 39,856
TJX Cos., Ser. E, Cum., 7%.................... 300 97,500
------------
137,356
------------
Consumer Staples--.2% Case, Ser. A, Cum., $4.50..................... 600 86,100
------------
Health Care--.3% Pacific Health, Ser. A, Cum., $1.00........... 4,000 108,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $284,739)............................ $ 331,456
------------
------------
Principal
Convertible Corporate Bonds--.4% Amount
- ------------------------------------------------------------------------------- ------------
Federated Department Stores, Sub. Deb.,
5%, 10/1/2003.............................. $ 55,000 75,075
Hospitality Franchise, Sub. Deb.,
4.75%, 3/1/2003............................ 40,000 49,550
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(cost $107,868)............................ $ 124,625
------------
------------
Short-Term Investments--1.6%
- ------------------------------------------------------------------------------
Repurchase Agreements; Goldman Sachs & Company,
Tri-Party Repurchase Agreement, 5.67% dated
10/31/97 to be repurchased at $571,444 on
11/3/97, collateralized by $611,000 U.S.
Treasury Bills due 9/17/98
(cost $571,174)............................ $ 571,174 $ 571,174
------------
------------
TOTAL INVESTMENTS (cost $28,552,079)........................................... 99.7% $ 34,582,480
------ ------------
------ ------------
CASH AND RECEIVABLES (NET)..................................................... .3% $ 96,914
------ ------------
------ ------------
NET ASSETS..................................................................... 100.0% $ 34,679,394
------ ------------
------ ------------
See notes to financial statements.
</TABLE>
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1997
<TABLE>
<CAPTION>
Cost Value
------------ ------------
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $28,552,079 $34,582,480
Cash............................................. 63,572
Receivable for shares of Capital Stock subscribed 83,000
Dividends and interest receivable................ 54,897
------------
34,783,949
------------
LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 30,212
Due to Distributor............................... 126
Payable for shares of Capital Stock redeemed..... 74,217
------------
104,555
------------
NET ASSETS..................................................................... $34,679,394
------------
------------
REPRESENTED BY: Paid-in capital.................................. $26,325,849
Accumulated undistributed investment income--net.. 121,281
Accumulated net realized gain (loss) on investments 2,201,863
Accumulated net unrealized appreciation (depreciation)
on investments--Note 3.......................... 6,030,401
------------
NET ASSETS..................................................................... $34,679,394
------------
------------
</TABLE>
NET ASSET VALUE PER SHARE
-----------------------------
<TABLE>
<CAPTION>
Institutional Retail
Shares Shares
------------ ------------
<S> <C> <C>
Net Assets..................................................................... $6,455,595 $28,223,799
Shares Outstanding............................................................. 354,185 1,548,439
NET ASSET VALUE PER SHARE...................................................... $18.23 $18.23
------- -------
------- -------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Equity Income Fund
- ------------------------------------------------------------------------------
Statement of Operations Year Ended October 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME: Cash dividends (net of $4,746 foreign taxes
withheld at source)...................... $ 568,187
Interest................................... 30,426
-----------
Total Income............................. $ 598,613
EXPENSES: Management fee--Note 2(a)................... 229,763
Distribution fees (Institutional Shares)--Note 2(b) 13,466
Loan commitment fees--Note 4................ 250
-----------
Total Expenses........................... 243,479
-----------
INVESTMENT INCOME--NET.................................................... 355,134
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3:
Net realized gain (loss) on investments ... $2,208,370
Net unrealized appreciation (depreciation) on
investments ............................. 3,772,628
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................... 5,980,998
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $6,336,132
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Equity Income Fund
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996*
---------------- -----------------
OPERATIONS:
<S> <C> <C>
Investment income--net....................................................... $ 355,134 $ 202,762
Net realized gain (loss) on investments..................................... 2,208,370 651,540
Net unrealized appreciation (depreciation) on investments................... 3,772,628 1,346,152
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations......... 6,336,132 2,200,454
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Institutional shares...................................................... (63,272) (85,357)
Retail shares............................................................. (259,347) (64,198)
Net realized gain on investments:
Institutional shares...................................................... (156,988) (24,849)
Retail shares............................................................. (500,733) (38,584)
------------ ------------
Total Dividends......................................................... (980,340) (212,988)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Institutional shares...................................................... 3,553,780 11,592,746
Retail shares............................................................. 16,079,961 14,631,001
Dividends reinvested:
Institutional shares...................................................... 207,073 97,466
Retail shares............................................................. 635,024 31,502
Cost of shares redeemed:
Institutional shares...................................................... (3,076,864) (9,633,438)
Retail shares............................................................. (6,061,222) (6,943,843)
------------ ------------
Increase (Decrease) in Net Assets from Capital Stock Transactions....... 11,337,752 9,775,434
------------ ------------
Total Increase (Decrease) in Net Assets............................... 16,693,544 11,762,900
NET ASSETS:
Beginning of Period......................................................... 17,985,850 6,222,950
------------ ------------
End of Period............................................................... $ 34,679,394 $ 17,985,850
------------ ------------
------------ ------------
Undistributed investment income--net........................................... $ 121,281 $ 88,766
------------ ------------
Shares Shares
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Institutional Shares
Shares sold................................................................. 206,481 879,064
Shares issued for dividends reinvested...................................... 14,114 7,545
Shares redeemed............................................................. (183,798) (712,063)
------------ ------------
Net Increase (Decrease) in Shares Outstanding........................... 36,797 174,546
------------ ------------
------------ ------------
Retail Shares
Shares sold................................................................. 950,520 1,073,130
Shares issued for dividends reinvested...................................... 43,015 2,461
Shares redeemed............................................................. (368,789) (527,503)
------------ ------------
Net Increase (Decrease) in Shares Outstanding........................... 624,746 548,088
------------ ------------
------------ ------------
<FN>
- -------------------
* Effective July 15, 1996, Investor Class shares were redesignated as
Institutional shares and Class R shares were redesignated as Retail shares.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -------------------------------------------------------------------------------
Financial Highlights
Contained below is per share operating performance data for a share of
Capital Stock outstanding, total investment return, ratios to average net assets
and other supplemental data for each period indicated. This information has been
derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Institutional Shares
--------------------------------------------
Year Ended October 31,
--------------------------------------------
PER SHARE DATA: 1997 1996(1) 1995 1994(2,3)
------ ------ ------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $14.49 $12.00 $ 9.95 $10.00
------ ------ ------ ------
Investment Operations:
Investment income--net...................................... .20 .27 .22 .03
Net realized and unrealized gain (loss) on investments..... 4.26 2.54 2.05 (.08)
------ ------ ------ ------
Total from Investment Operations........................... 4.46 2.81 2.27 (.05)
------ ------ ------ ------
Distributions:
Dividends from investment income--net....................... (.20) (.20) (.22) --
Dividends from net realized gain on investments............ (.52) (.12) -- --
------ ------ ------ ------
Total Distributions........................................ (.72) (.32) (.22) --
------ ------ ------ ------
Net asset value, end of period............................. $18.23 $14.49 $12.00 $ 9.95
------ ------ ------ ------
------ ------ ------ ------
TOTAL INVESTMENT RETURN....................................... 32.01% 23.87% 23.20% (.50%)(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................... 1.15% 1.15% 1.15% .19%(4)
Ratio of net investment income to average net assets....... 1.23% 1.81% 2.32% .44%(4)
Portfolio Turnover Rate.................................... 37.17% 44.33% 37.57% 5.00%(4)
Average commission rate paid(5)............................ $.0560 $.0555 -- --
Net Assets, end of period (000's Omitted).................. $6,456 $4,599 $1,714 $1
<FN>
- -----------------------------
(1) Effective July 15, 1996, Investor Class shares were redesignated as
Institutional shares. (2) The Fund commenced operations on September 2,
1994.
(3) Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's
investment manager. Prior to October 17, 1994, Mellon Bank, N.A. served as
the Fund's investment manager.
(4) Not annualized.
(5) For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Equity Income Fund
- ------------------------------------------------------------------------------
Financial Highlights (continued)
Contained below is per share operating performance data for a share of
Capital Stock outstanding, total investment return, ratios to average net assets
and other supplemental data for each period indicated. This information has been
derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Retail Shares
--------------------------------------------
Year Ended October 31,
--------------------------------------------
PER SHARE DATA: 1997 1996(1) 1995 1994(2,3)
------ ------ ------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $14.49 $12.00 $ 9.95 $10.00
------ ------ ------ ------
Investment Operations:
Investment income--net...................................... .23 .21 .28 .05
Net realized and unrealized gain (loss) on investments..... 4.27 2.63 2.02 (.10)
------ ------ ------ ------
Total from Investment Operations........................... 4.50 2.84 2.30 (.05)
------ ------ ------ ------
Distributions:
Dividends from investment income--net....................... (.24) (.23) (.25) --
Dividends from net realized gain on investments............ (.52) (.12) -- --
------ ------ ------ ------
Total Distributions........................................ (.76) (.35) (.25) --
------ ------ ------ ------
Net asset value, end of period............................. $18.23 $14.49 $12.00 $ 9.95
------ ------ ------ ------
------ ------ ------ ------
TOTAL INVESTMENT RETURN....................................... 32.25% 24.18% 23.48% (.50%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................... .90% .90% .90% .15%(5)
Ratio of net investment income to average net assets....... 1.46% 2.06% 2.57% .48%(5)
Portfolio Turnover Rate.................................... 37.17% 44.33% 37.57% 5.00%(5)
Average commission rate paid(6)............................ $.0560 $.0555 -- --
Net Assets, end of period (000's Omitted).................. $28,224 $13,387 $4,509 $5,005
<FN>
- ------------------------------------
(1) Effective July 15, 1996, Class R shares were redesignated as Retail shares.
(2) The Fund commenced operations on September 2, 1994.
(3) Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's
investment manager. Prior to October 17, 1994, Mellon Bank, N.A. served as
the Fund's investment manager.
(4) Effective October 17, 1994, the Fund's Trust shares were redesignated Class
R shares.
(5) Not annualized.
(6) For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Equity Income Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Disciplined Equity Income Fund (the "Fund") is a series of The
Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering seventeen
series including the Fund. The Fund's investment objective is to seek an
above-average level of income along with moderate long-term growth of income and
principal by investing in a diversified list of securities, resulting in a
portfolio with a moderate level of risk. The Dreyfus Corporation ("Manager")
serves as the Fund's investment adviser. The Manager is a direct subsidiary of
Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor of
the Fund's shares. The Fund is authorized to issue 50 million of $.001 par value
Capital Stock. The Fund currently offers two classes of shares: Institutional
(20 million shares authorized) and Retail (30 million shares authorized).
Institutional shares are offered only to clients of banks, securities brokers or
dealers and other financial institutions (collectively, Service Agents) that
have entered into selling agreements with the Distributor and Retail shares are
offered to any investor. Other differences between the classes include the
services offered to and the expenses borne by each class.
Investment income, net of expenses (other than class specific expenses) and
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
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 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. 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.
(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.
(C) REPURCHASE AGREEMENTS: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian and sub-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 obligation, including interest. In the event of a
counter party 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 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.
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(D) DISTRIBUTIONS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid on a quarterly
basis. Dividends from net realized capital gain 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. To the extent
that net realized capital gain can be offset by capital loss carryovers, if any,
it is the policy of the Fund not to distribute such gain.
On November 4, 1997, the Board of Directors declared dividends from net
investment income for the Institutional shares and Retail shares in the amount
of $.04 per share and $.051 per share, respectively, payable on November 5, 1997
to shareholders of record on November 4, 1997.
(E) 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 Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2--Investment Management Fee and Other Transactions With Affiliates:
(A) INVESTMENT MANAGEMENT FEE: Pursuant to an Investment Management agreement
with the Manager, the Manager provides or arranges for one or more third parties
and/or affiliates to provide investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. The Manager also directs
the investments of the Fund in accordance with its investment objective,
policies and limitations. For these services, the Fund is contractually
obligated to pay the Manager a fee, calculated daily and paid monthly, at the
annual rate of .90% 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 fees,
taxes, interest, commitment fees, 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). Each director receives $27,000 per
year, $1,000 for each Board meeting attended and $750 for each Audit Committee
meeting attended and is reimbursed for travel and out-of-pocket expenses. The
Chairman of the Board receives an additional annual fee of $25,000 per year.
These fees pertain to the following Funds: The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Tax-Free Municipal Funds and The Dreyfus/Laurel Funds Trust.
These fees and expenses are charged and allocated to each series based on net
assets. Amounts required to be paid by the Company directly to the
non-interested Directors, that would be applied to offset a portion of the
management fee payable to the Manager, are in fact paid directly by the Manager
to the non-interested Directors.
(B) DISTRIBUTION PLAN: Under the Distribution plan (the "Plan") adopted
pursuant to Rule 12b-1 under the Act, the Fund may pay annually up to .25% of
the value of the average daily net assets attributable to its Institutional
shares to compensate the Distributor and Dreyfus Service Corporation, an
affiliate of the Manager, for shareholder servicing activities and the
Distributor for activities primarily intended to result in the sale of
Institutional shares. The Retail shares bear no distribution fee. During the
period ended October 31, 1997, the Fund was charged $13,466 for the
Institutional shares pursuant to the Plan.
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of majority of those Directors
who are not "interested persons" of the Company and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan.
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(C) BROKERAGE COMMISSIONS: During the period ended October 31, 1997, the Fund
incurred total brokerage commissions of $29,323, of which $8,315 was paid to
Dreyfus Investment Services Corporation, a subsidiary of Mellon Bank.
NOTE 3--Securities Transactions:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended October 31, 1997
amounted to $19,953,052 and $9,190,684, respectively.
At October 31, 1997, accumulated net unrealized appreciation on investments
was $6,030,401, consisting of $6,232,137 gross
unrealized appreciation and $201,736 gross unrealized depreciation.
At October 31, 1997, 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).
NOTE 4--Bank Line of Credit:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings. For the period ended October
31, 1997, the Fund did not borrow under the Facility.
NOTE 5--Subsequent Event:
On November 20, 1997, shareholders approved a reorganization, effective
January 15, 1998, in which the Fund's name will be changed to Dreyfus Premier
Large Company Stock Fund. The Fund's new investment objective will be to seek
capital appreciation by investing principally in equity securities of large
capitalization companies that are publicly traded in the United States. The Fund
will offer four classes of shares: Class A shares, Class B shares, Class C
shares and Class R shares. Class A shares will be subject to an initial sales
charge at the time of purchase and Class B and C shares will be subject to
contingent deferred sales charges. Former Institutional shares will be
redesignated as Class A shares and former Retail shares will be redesignated as
Class R shares. Holders of Institutional shares will continue to be eligible to
purchase Class A shares at NAV (without an initial sales charge) and holders of
Retail shares will continue to be eligible to purchase these shares.
<PAGE>
Dreyfus Disciplined Equity Income Fund
- -------------------------------------------------------------------------------
Independent Auditors' Report
THE BOARD OF DIRECTORS AND SHAREHOLDERS
THE DREYFUS/LAUREL FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Disciplined Equity Income
Fund of The Dreyfus/Laurel Funds, Inc. as of October 31, 1997, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years or 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 also 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, 1997, by correspondence with the custodian. 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 provide 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 Disciplined Equity Income Fund of The Dreyfus/Laurel Funds, Inc. as of
October 31, 1997, the results of its operations for the year then ended, changes
in its net assets for each of the years in the two-year period then ended and
its financial highlights for each of the years or periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
December 17, 1997
<PAGE>
Dreyfus Disciplined Equity Income Fund
- ------------------------------------------------------------------------------
Important Tax Information (Unaudited)
For Federal tax purposes the Fund hereby designates $.468 per share as a
long-term capital gain distribution of the $.577 per share paid on December
13, 1996.
The Fund also designates 79.72% of the ordinary dividends paid during the
fiscal year ended October 31, 1997 as qualifying for the corporate dividends
received deduction. Shareholders will receive notification in January 1998 of
the percentage applicable to the preparation of their 1997 income tax return.
<PAGE>
Dreyfus Disciplined Equity Income Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 318/718AR9710
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS
DISCIPLINED EQUITY INCOME FUND RESTRICTED SHARES WITH THE
STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX AND THE
LIPPER EQUITY INCOME FUND INDEX
EXHIBIT A:
DREYFUS
DISCIPLINED STANDARD &
EQUITY POOR'S 500 LIPPER
INCOME COMPOSITE EQUITY
FUND STOCK INCOME
PERIOD (RESTRICTED PRICE FUND
SHARES) INDEX* INDEX*
9/2/94 10,000 10,000 10,000
10/31/94 9,950 9,975 9,864
10/31/95 12,286 12,609 11,631
10/31/96 15,257 15,645 13,944
10/31/97 20,192 20,667 17,660
* Source: Lipper Analytical Services, Inc.
