DREYFUS DISCIPLINED MIDCAP STOCK FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance of the Dreyfus Disciplined
Midcap Stock Fund for the 12-month reporting period ended October 31, 1997,
as shown in the following table:
Total Return*
____________
Investor Shares 38.40%
Restricted Shares 38.88%
Standard & Poor's MidCap 400 Index** 32.67%
Economic Review
The U.S. economy has registered a step-up in growth in 1997 and the
evidence coming in 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 new 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, as
measured by price changes alone, excluding income, the Dow Jones Industrial
Average gained 23.58%, the Standard & Poor's 500 Composite Stock Price 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 of October, and before
counting the rebound that occurred in the first week of November.
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 companies with large
capitalization, 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 fell
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 Review
The Fund's outperformance of the S&P MidCap 400 Index was achieved while
maintaining our sector-neutral policy. The primary source of outperformance
was individual stock selection achieved through adherence to our quantitative
valuation process. The Fund generally benefited from its exposure to
companies that had price/earnings characteristics that were modestly less
than the performance benchmark.
A number of companies in a broad array of industries contributed to the
Fund's strong performance. Some of these firms include City National, Barnett
Banks and Lehman Brothers Holdings in the financial services industry. In the
consumer sector, regional department store operator Carson & Pirie Scott
provided strong returns. Cort Business Services, along with independent power
producer AES, also had a positive impact on returns. Finally, in the energy
and basic industry sectors, Cliffs Drilling and Owens-Illinois added to the
performance of the Fund.
The year ahead will no doubt present more challenges. However, we hope to
continue bringing you rewarding returns on your investment.
Sincerely,
[John R. O'Toole, C.F.A. signature logo]
John R. O'Toole, C.F.A.
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 MidCap 400 Index is a broad-based index of 400 companies
and is a widely accepted, unmanaged index of medium-cap stock market
performance.
DREYFUS DISCIPLINED MIDCAP STOCK FUND
OCTOBER 31, 1997
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS DISCIPLINED
MIDCAP STOCK FUND
RESTRICTED SHARES AND THE STANDARD & POOR'S MIDCAP 400 INDEX
[Exhibit A:
Dollars
$21,343
Dreyfus Disciplined
Midcap Stock Fund
(Restricted Shares)
$19,320
Standard & Poor's
Midcap 400 Index*
*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
<S> <C> <C> <C>
_____________________ _____________________
1 Year 38.40% 1 Year 38.88%
From Inception (4/6/94) 23.30 From Inception (11/12/93) 21.04
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Restricted shares of
Dreyfus Disciplined Midcap Stock Fund on 11/12/93 (Inception Date) to a
$10,000 investment made in the Standard & Poor's MidCap 400 Index on that
date. For comparative purposes, the value of the Index on 10/31/93 is used
as the beginning value on 11/12/93. 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 Midcap Stock Fund seeks investment returns (including
capital appreciation and income) consistently superior to the Standard &
Poor's MidCap 400 Index. While the midcap market is the Fund's main focus,
the Fund can also invest in other areas, such as stocks of smaller and larger
corporations. The Fund's performance shown in the line graph takes into
account all applicable fees and expenses. The Standard & Poor's MidCap 400
Index is a broad-based Index of 400 companies with market capitalizations
generally ranging from $50 million to $10 billion and is a widely accepted,
unmanaged index of overall midcap 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>
<CAPTION>
DREYFUS DISCIPLINED MIDCAP STOCK FUND
STATEMENT OF INVESTMENTS OCTOBER 31, 1997
Common Stocks-92.3% Shares Value
____________ ____________
<S> <C> <C>
Basic Industries-7.1% ABT Building Products.................... 5,500 (a) $ 99,000
AptarGroup.................................. 3,800 208,763
Centex Construction Products................ 6,400 198,400
Cytec Industries............................ 9,100 (a) 443,625
International Specialty Products............ 18,400 (a) 274,850
Lennar...................................... 6,200 252,263
Lubrizol.................................... 6,600 254,100
Owens-Illinois.............................. 9,100 (a) 313,950
Rohm & Haas................................. 3,700 308,256
SCI Systems................................. 2,200 (a) 96,800
Wausau Paper Mills.......................... 14,000 282,625
____________
2,732,632
____________
Business Services-7.9% BMC Software.......... 8,000 (a) 483,000
Billing Information Concepts................ 5,400 (a) 211,950
Caribiner International..................... 4,500 (a) 200,531
Cort Business Services...................... 8,300 (a) 301,912
Equifax..................................... 7,800 242,287
Harte-Hanks Communications.................. 3,700 128,575
HealthCare COMPARE.......................... 5,200 (a) 279,500
Mutual Risk Management...................... 7,800 202,313
Paychex..................................... 10,000 381,250
SABRE Group Holdings, Cl. A................. 11,000 (a) 291,500
Snyder Communications....................... 11,000 (a) 324,500
____________
3,047,318
____________
Capital Spending-14.2% Applied Materials..... 10,600 (a) 353,775
CHS Electronics............................. 13,100 (a) 320,131
Case........................................ 4,000 239,250
Cummins Engine.............................. 3,100 188,906
DST Systems................................. 4,800 (a) 169,500
Dallas Semiconductor........................ 5,300 259,038
Danaher..................................... 6,500 356,281
Kennametal.................................. 9,200 446,200
Linear Technology........................... 5,800 364,675
Maxim Integrated Products................... 6,300 (a) 417,375
Solectron................................... 5,200 (a) 204,100
Stratus Computer............................ 8,500 (a) 300,687
Tellabs..................................... 8,100 (a) 437,400
Timken...................................... 9,400 314,900
VLSI Technology............................. 11,300 (a) 334,762
Waters...................................... 9,700 (a) 426,800
Western Digital............................. 11,200 (a) 335,300
____________
5,469,080
____________
Consumer Cyclical-13.6% Applebees International......... 4,900 108,719
Bed Bath & Beyond........................... 5,300 (a) 168,275
Borg-Warner Automotive...................... 3,800 207,100
Bowne & Co.................................. 9,000 313,875
Callaway Golf............................... 7,000 225,750
DREYFUS DISCIPLINED MIDCAP STOCK FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1997
Common Stocks (continued) Shares Value
____________ ____________
Consumer Cyclical (continued) Carson & Pirie Scott................ 5,200 (a) $ 250,575
Family Dollar Stores........................ 10,350 243,225
Furniture Brands International.............. 11,800 (a) 197,650
Harley-Davidson............................. 7,800 216,450
IHOP........................................ 5,500 (a) 185,625
King World Productions...................... 2,200 103,950
Leggett & Platt............................. 8,500 354,875
McClatchy Newspapers, Cl. A................. 1,800 59,062
Nautica Enterprises......................... 6,600 (a) 175,725
Payless ShoeSource.......................... 4,100 (a) 228,575
Proffitts................................... 12,000 (a) 344,250
Pulitzer Publishing......................... 3,600 193,950
Quality Food Centers........................ 5,000 (a) 238,125
Ross Stores................................. 9,600 358,800
Ruby Tuesday................................ 7,500 (a) 203,906
TJX Cos..................................... 12,800 379,200
V.F......................................... 4,300 384,312
Washington Post, Cl. B...................... 300 130,200
____________
5,272,174
____________
Consumer Staples-4.3% Alberto-Culver, Cl. B........ 5,800 175,088
DEKALB Genetics B....... 6,300 226,013
Hormel Foods................... 6,400 192,400
IBP................... 5,100 118,256
Interstate Bakeries................... 5,600 357,700
Lancaster Colony................... 2,900 143,550
Polaroid................... 5,450 244,909
Universal Foods................... 4,800 189,300
____________
1,647,216
____________
Energy-9.2% Cliffs Drilling................... 5,500 (a) 399,781
Cooper Cameron................... 4,500 (a) 325,125
Helmerich & Payne................... 4,700 379,231
Keyspan Energy................... 6,400 198,800
MAPCO................... 5,100 168,300
National Fuel Gas................... 7,100 313,288
Noble Drilling................... 12,300 (a) 437,418
Ocean Energy................... 6,800 (a) 419,900
Rowan Cos................... 10,300 (a) 400,413
Sun................... 12,600 504,787
____________
3,547,043
____________
Financial-15.7% American Bankers Insurance................... 6,600 246,675
American National Insurance................... 2,300 220,800
Associated Banc-Corp................... 8,500 426,063
Bear Stearns Cos................... 7,700 305,594
CMAC Investment................... 4,300 235,156
City National................... 13,200 396,825
Cullen/Frost Bankers................... 7,100 358,550
First Commercial.................. 9,000 445,500
DREYFUS DISCIPLINED MIDCAP STOCK FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1997
Common Stocks (continued) Shares Value
____________ ____________
Financial (continued) First of America Bank................... 4,350 $ 242,513
FIRSTPLUS Financial Group................... 2,800 (a) 154,000
Imperial Bancorp................... 1,700 (a) 74,163
Lehman Brothers Holdings................... 7,000 329,437
North Fork Bancorp................... 14,000 412,125
Old Republic International................... 7,900 282,425
PMI Group................... 5,100 308,231
Provident Financial Group................... 8,300 381,800
Regions Financial................... 7,000 257,250
RenaissanceRe Holdings................... 4,800 208,800
SouthTrust................... 9,700 465,600
T. Rowe Price Associates................... 4,900 324,625
____________
6,076,132
____________
Health Care-7.9% Ballard Medical Products................... 13,100 295,569
Bard (C.R.)................... 11,600 321,900
Biogen................... 6,700 (a) 224,450
Biomet................... 13,100 (a) 326,681
DENTSPLY International................... 8,000 227,000
DePuy................... 8,600 (a) 220,375
Elan, A.D.S ................... 8,500 (a) 423,938
Serologicals................... 6,000 (a) 138,000
STERIS...................................... 9,200 (a) 365,700
Watson Pharmaceuticals................... 16,200 (a) 514,350
____________
3,057,963
____________
Mining And Metals-.7% Alumax...................................... 1,600 (a) 52,000
Cleveland-Cliffs................... 1,600 69,500
Cyprus Amax Minerals................... 6,600 138,188
____________
259,688
____________
Transportation-1.7% Comair Holdings................... 9,100 334,425
Trico Marine Services................... 8,700 (a) 319,725
____________
654,150
____________
Utilities-10.0% AES...................................... 8,200 (a) 324,925
Boston Edison................... 13,800 435,563
CalEnergy................... 11,000 (a) 376,750
Century Telephone Enterprises.... 12,600 534,713
Commonwealth Energy Systems................... 17,800 509,525
DQE...................................... 8,700 269,156
GPU...................................... 12,100 437,869
DREYFUS DISCIPLINED MIDCAP STOCK FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1997
Common Stocks (continued) Shares Value
____________ ____________
Utilities (continued) Illinova................... 12,100 $ 269,225
PECO Energy................... 8,000 181,500
Pinnacle West Capital................... 11,200 389,900
US Cellular................... 4,800 (a) 156,000
____________
3,885,126
____________
TOTAL COMMON STOCKS
(cost $29,201,818)................... $35,648,522
============
Principal
Short-Term Investments-6.3% Amount
____________
Repurchase Agreements-6.2% Goldman Sachs & Company, Tri-
Party Repurchase Agreement,
5.67% dated 10/31/1997 to be
repurchased at $2,404,166 on
11/3/1997, collateralized by
$2,568,000 U.S. Treasury Bills
due 9/17/1998................... $..2,403,411 $ 2,403,411
U.S. Treasury Bills-.1% 4.91%, 12/18/1997................... 40,000 (b) 39,744
____________
TOTAL SHORT-TERM INVESTMENTS
(cost $2,443,170)................... $ 2,443,155
============
TOTAL INVESTMENTS (cost $31,644,988)................... ........................ 98.6% $38,091,677
======= =============
CASH AND RECEIVABLES (NET)................... ................................. 1.4% $ 524,316
======= =============
NET ASSETS.......................................................................................... 100.0% $38,615,993
======= =============
Notes to Statement of Investments:
(a) Non-income producing.
(b) Partially held by custodian in a segregated account as collateral
for open futures position.
STATEMENT OF FINANCIAL FUTURES OCTOBER 31, 1997
Market Value Unrealized
Covered (Depreciation)
Financial Futures: Contracts by Contracts Expiration at 10/31/97
_______________ ____________ _____________ ______________ _____________
Midcap 400................................... 9 $1,441,575 December '97 ($56,175)
=========
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS DISCIPLINED MIDCAP STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1997
Cost Value
____________ ____________
ASSETS: Investments in securities-See Statement of Investments $31,644,988 $38,091,677
Cash....................................... 558,101
Receivable for investment securities sold.. 699,943
Dividends and interest receivable.......... 46,144
Receivable for futures variation margin-Note 1(d) 30,375
Receivable for shares of Capital Stock subscribed 28,591
____________
39,454,831
____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 37,843
Due to Distributor......................... 151
Payable for investment securities purchased 689,540
Payable for shares of Capital Stock redeemed 111,215
Commitment fees payable.................... 89
____________
838,838
____________
NET ASSETS.................................................................. $38,615,993
============
REPRESENTED BY: Paid-in capital............................ $26,245,924
Accumulated undistributed investment income-net61,954
Accumulated net realized gain (loss) on investments 5,917,601
Accumulated net unrealized appreciation (depreciation)
on investments [including ($56,175) net unrealized
. (depreciation) on financial futures]-Note 3 6,390,514
____________
NET ASSETS.................................................................. $38,615,993
============
NET ASSET VALUE PER SHARE
_____________________________
Investor Restricted
Shares Shares
____________ ____________
Net Assets.................................................................. $6,847,411 $31,768,582
Shares Outstanding.......................................................... 402,416 1,864,999
NET ASSET VALUE PER SHARE................................................... $17.02 $17.03
======= =======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS DISCIPLINED MIDCAP STOCK FUND
STATEMENT OF OPERATIONS YEAR ENDED OCTOBER 31, 1997
INVESTMENT INCOME
INCOME: Cash dividends............................. $ 346,078
Interest................................... 93,118
___________
Total Income......................... $ 439,196
EXPENSES: Management fee-Note 2(a)................... 318,694
Distribution fees (Investor Shares)-Note 2(b) 9,591
Loan commitment fees-Note 4................ 370
___________
Total Expenses....................... 328,655
___________
INVESTMENT INCOME-NET....................................................... 110,541
___________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 3:
Net realized gain (loss) on investments.... $5,918,267
Net realized gain (loss) on financial futures 330
___________
Net Realized Gain (Loss)............. 5,918,597
Net unrealized appreciation (depreciation) on investments
[including ($56,175) net unrealized (depreciation) on
financial futures]..................... 3,500,980
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 9,419,577
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $9,530,118
===========
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS DISCIPLINED MIDCAP STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
October 31, 1997(1) October 31, 1996(2)
_________________ _________________
OPERATIONS:
Investment income-net............................................... $ 110,541 $ 71,325
Net realized gain (loss) on investments............................. 5,918,597 2,762,632
Net unrealized appreciation (depreciation) on investments........... 3,500,980 580,279
____________ ____________
Net Increase (Decrease) in Net Assets Resulting from Operations. 9,530,118 3,414,236
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Investor shares................................................... (1,586) (13,773)
Restricted shares................................................. (62,895) (71,135)
Net realized gain on investments:
Investor shares................................................... (493,147) (82,775)
Restricted shares................................................. (2,268,268) (513,426)
____________ ____________
Total Dividends................................................. (2,825,896) (681,109)
____________ ____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Investor shares................................................... 5,620,898 10,484,621
Restricted shares................................................. 93,962,959 14,547,685
Dividends reinvested:
Investor shares................................................... 477,790 94,778
Restricted shares................................................. 2,107,559 560,917
Cost of shares redeemed:
Investor shares................................................... (3,018,397) (9,412,409)
Restricted shares................................................. (86,087,710) (13,705,922)
____________ ____________
Increase (Decrease) in Net Assets from Capital Stock Transactions 13,063,099 2,569,670
____________ ____________
Total Increase (Decrease) in Net Assets....................... 19,767,321 5,302,797
NET ASSETS:
Beginning of Period................................................. 18,848,672 13,545,875
____________ ____________
End of Period....................................................... $ 38,615,993 $ 18,848,672
============ ============
Undistributed investment income-net................................... $ 61,954 $ 15,894
____________ ____________
Shares Shares
____________ ____________
CAPITAL SHARE TRANSACTIONS:
Investor Shares
_______________
Shares sold....................................................... 331,624 790,094
Shares issued for dividends reinvested............................ 37,543 7,750
Shares redeemed................................................... (189,963) (693,523)
____________ ____________
Net Increase (Decrease) in Shares Outstanding................... 179,204 104,321
============ ============
Restricted Shares
_________________
Shares sold....................................................... 5,925,097 1,093,321
Shares issued for dividends reinvested............................ 165,161 46,164
Shares redeemed................................................... (5,314,562) (1,068,009)
____________ ____________
Net Increase (Decrease) in Shares Outstanding................... 775,696 71,476
============ ============
(1) Effective August 15, 1997, Institutional Class shares were redesignated as Investor shares and Retail Class shares were
redesignated as Restricted shares.
(2) Effective July 15, 1996, Investor Class shares were redesignated as Institutional shares and Class R shares were
redesignated as Retail shares.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS DISCIPLINED MIDCAP STOCK 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.
Investor Shares
____________________________________________
Year Ended October 31,
____________________________________________
PER SHARE DATA: 1997(1) 1996(2) 1995 1994(3,4)
______ ______ ______ ________
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................. $14.36 $11.92 $9.75 $10.00
______ ______ ______ ______
Investment Operations:
Investment income-net................................. .02 .04 .09 .05
Net realized and unrealized gain (loss)
on investments...................................... 4.79 2.98 2.17 (.26)
______ ______ ______ ______
Total from Investment Operations...................... 4.81 3.02 2.26 (.21)
______ ______ ______ ______
Distributions:
Dividends from investment income-net.................. (.01) (.05) (.09) (.04)
Dividends from net realized gain on investments....... (2.14) (.53) .- .-
______ ______ ______ ______
Total Distributions................................... (2.15) (.58) (.09) (.04)
______ ______ ______ ______
Net asset value, end of period........................ $17.02 $14.36 $11.92 $ 9.75
====== ====== ====== ======
TOTAL INVESTMENT RETURN................................... 38.40% 26.29% 23.39% (2.06%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............... 1.35% 1.35% 1.35% .80%(5)
Ratio of net investment income
to average net assets............................... .16% .28% .86% .42%(5)
Portfolio Turnover Rate............................... 81.87% 90.93% 71.00% 83.00%(5)
Average commission rate paid (6)...................... $.0544 $.0390 .- .-
Net Assets, end of period (000's Omitted)............. $6,847 $3,205 $1,417 $54
(1) Effective August 15, 1997, Institutional shares were redesignated as Investor shares.
(2) Effective July 15, 1996, Investor Class shares were redesignated as Institutional shares.
(3) The Fund commenced selling Investor shares on April 6, 1994.
(4) 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.
(5) Not annualized.
(6) For fiscal years beginning on November 1, 1995, the Fund is required to disclose its average commission rate paid per share
for purchases and sales of investment securities.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS DISCIPLINED MIDCAP STOCK 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.
Restricted Shares
____________________________________________
Year Ended October 31,
____________________________________________
<S> <C> <C> <C> <C>
PER SHARE DATA: 1997(1) 1996(2) 1995 1994(3,4)
______ ______ ______ ________
Net asset value, beginning of period................. $14.36 $11.92 $ 9.76 $10.00
______ ______ ______ ______
Investment Operations:
Investment income-net................................ .05 .07 .12 .09(5)
Net realized and unrealized gain (loss)
on investments..................................... 4.80 2.98 2.16 (.27)
______ ______ ______ ______
Total from Investment Operations..................... 4.85 3.05 2.28 (.18)
______ ______ ______ ______
Distributions:
Dividends from investment income-net................. (.04) (.08) (.12) (.06)
Dividends from net realized gain on investments...... (2.14) (.53) .- .-
______ ______ ______ ______
Total Distributions.................................. (2.18) (.61) (.12) (.06)
______ ______ ______ ______
Net asset value, end of period....................... $17.03 $14.36 $11.92 $ 9.76
====== ====== ====== ======
TOTAL INVESTMENT RETURN.................................. 38.88% 26.61% 23.57% (1.77%)(6)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.............. 1.10% 1.10% 1.10% 1.13%(6,7)
Ratio of net investment income
to average net assets.............................. .42% .57% 1.11% .95%(6)
Portfolio Turnover Rate.............................. 81.87% 90.93% 71.00% 83.00%(6)
Average commission rate paid (8)..................... $.0544 $.0390 .- .-
Net Assets, end of period (000's Omitted)............ $31,769 $15,644 $12,129 $ 18,169
(1) Effective August 15, 1997, Retail shares were redesignated as Restricted shares.
(2) Effective July 15, 1996, Class R shares were redesignated as Retail shares.
(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) The Fund commenced operations on November 12, 1993. Any shares outstanding prior to April 4, 1994 were designated as Trust
shares. Effective October 17, 1994, the Fund's Trust shares were redesignated
as Class R shares.
(5) Net investment income before reimbursement of expenses by investment adviser for the period ended October 31, 1994 was $.06.
(6) Not annualized.
(7) Net annualized expense ratio before voluntary reimbursement of expenses by the investment adviser for the period ended
October 31, 1994 was 1.48%.
(8) For fiscal years beginning on November 1, 1995, the Fund is required to disclose its average commission rate paid per share
for purchases and sales of investment securities.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS DISCIPLINED MIDCAP STOCK FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Disciplined Midcap Stock 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 total investment returns (including capital appreciation and income)
which consistently outperform the Standard & Poor's 400 Midcap Index. 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. Effective August 15, 1997, Institutional shares were
redesignated as Investor shares and Retail shares were redesignated as
Restricted shares. The Fund is authorized to issue 82 million of $.001 par
value Capital Stock. The Fund currently offers two classes of shares:
Investor (22 million shares authorized) and Restricted (60 million shares
authorized). Investor 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
Restricted shares are offered to any investor. Other differences between the
two 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 (including financial
futures) are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market. Securities not listed on an exchange or the
national securities market, or securities for which there were no
transactions, are valued at the average of the most recent bid and asked
prices. 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.
DREYFUS DISCIPLINED MIDCAP STOCK FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(d) Financial futures: The Fund may invest in financial futures contracts
in order to gain exposure to or protect against
changes in the market. The Fund is exposed to market risk as a result of
changes in the value of the underlying financial instruments (see Statement
of Financial Futures). Investments in financial futures require the Fund to
"mark to market" on a daily basis, which reflects the change in the market
value of the contracts at the close of each day's trading. Typically,
variation margin payments are received or made to reflect daily unrealized
gains or losses. When the contracts are closed, the Fund recognizes a
realized gain or loss. These investments require initial margin deposits with
a custodian, which consist of cash or cash equivalents, up to approximately
10% of the contract amount. The amount of these deposits is determined by the
exchange or Board of Trade on which the contract is traded and is subject to
change. Contracts open at October 31, 1997, and their unrealized depreciation
are set forth in the Statement of Financial Futures.
(e) 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 to the Investor and Restricted shares in the amount of
$.004 per share and $.014 per share, respectively, payable on November 5,
1997 to shareholders of record on November 4, 1997.
(f) 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 1.10% 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 Trust.
These fees and expenses are 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 Investor shares
to compensate the Distributor and Dreyfus Service Corporation, an affiliate
of the Manager, for shareholder servicing
DREYFUS DISCIPLINED MIDCAP STOCK FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
activities and the Distributor for activities primarily intended to result in
the sale of Investor shares. The Restricted shares bear no distribution fee.
During the period ended October 31, 1997, the Fund was charged $9,591 for the
Investor 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.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities and financial futures, during the period
ended October 31, 1997 amounted to $29,884,075 and $22,368,118, respectively.
At October 31, 1997, accumulated net unrealized appreciation on
investments and financial futures was $6,390,514, consisting of $7,482,996
gross unrealized appreciation and $1,092,482 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
Midcap Stock Fund. 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
Investor shares will be redesignated as Class A shares and former Restricted
shares will be redesignated as Class R shares. Holders of Investor shares
will continue to be eligible to purchase Class A shares at NAV (without an
initial sales charge) and holders of Restricted shares will continue to be
eligible to purchase these shares.
DREYFUS DISCIPLINED MIDCAP STOCK 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, and statement of financial futures,
of Dreyfus Disciplined Midcap Stock 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 custodi
an and brokers. As to securities purchased and sold, but not received or
delivered, we performed other appropriate auditing procedures. 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 Midcap Stock 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 signature logo]
New York, New York
December 17, 1997
DREYFUS DISCIPLINED MIDCAP STOCK FUND
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates $1.279 per share as a
long-term capital gain distribution of the $2.135 per share paid on December
16, 1996.
The Fund also designates 17.42% 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
returns.
Registration Mark
[Dreyfus lion "d" logo]
DREYFUS DISCIPLINED
MIDCAP STOCK 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. 330/730AR9710
Disciplined Midcap
Stock Fund
Annual Report
October 31, 1997
Registration Mark
[Dreyfus logo]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
DREYFUS DISCIPLINED MIDCAP STOCK FUND RESTRICTED SHARES
AND THE STANDARD & POOR'S MIDCAP 400 INDEX
EXHIBIT A:
DREYFUS
DISCIPLINED STANDARD
MIDCAP & POOR'S
PERIOD STOCK FUND MIDCAP 400
(RESTRICTED SHARES) INDEX *
11/12/93 10,000 10,000
10/31/94 9,823 10,238
10/31/95 12,139 12,410
10/31/96 15,368 14,563
10/31/97 21,343 19,320
* Source: Lipper Analytical Services, Inc.