Dreyfus
Tax-Smart
Growth Fund
ANNUAL REPORT August 31, 1999
(reg.tm)
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The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation is working to avoid Year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by Year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
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Contents
THE FUND
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
13 Financial Highlights
14 Notes to Financial Statements
19 Report of Independent Auditors
20 Important Tax Information
FOR MORE INFORMATION
Back Cover
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The Fund
Dreyfus
Tax-Smart Growth Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Tax-Smart Growth Fund,
covering the period from September 30, 1998 (inception date) through August 31,
1999. Inside, you' ll find valuable information about how the fund was managed
during the reporting period, including a discussion with the fund's portfolio
manager, Fayez Sarofim, of Fayez Sarofim & Co., the fund's sub-investment
adviser.
The past year has been rewarding for most equity investors. When the reporting
period began, most sectors of the U.S. stock market were in the midst of a sharp
correction caused primarily by concerns regarding the spread of the global
financial crisis in overseas markets. Soon after 1999 began, however, those
fears abated. In fact, the U.S. economy remained strong, characterized by low
inflation and high levels of consumer spending. These conditions supported
continued strength in the stock market. Several major market indices set new
records, including the Dow Jones Industrial Average, the broader S&P 500 Index
and the technology-laden NASDAQ Index.
Beginning in April, many previously out-of-favor market sectors rallied
strongly, including value-oriented stocks. This has helped narrow the valuation
gap that had developed over the past several years between the growth and value
sectors of the stock market.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Tax-Smart Growth Fund.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
September 14, 1999
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DISCUSSION OF FUND PERFORMANCE
Fayez Sarofim, Portfolio Manager
Fayez Sarofim & Co., Sub-Investment Adviser
How did Dreyfus Tax-Smart Growth Fund perform relative to its benchmark?
The fund produced a total return of 25.26% over the period from its inception on
September 30, 1998 through August 31, 1999.(1) In comparison, the fund's
benchmark, the Standard & Poor' s 500 Composite Stock Price Index ("S&P 500
Index"), provided a total return of 31.38% over the same time period.(2)
We attribute the fund's relative underperformance during the period to its lack
of exposure to technology companies relative to the S&P 500 Index. The higher
quality technology stocks that we own, such as Microsoft, Cisco Systems and
Intel, did well, but our weighting in technology companies represented only 14%
of the fund as compared to over 20% for the technology sector of the S&P 500
Index as of August 31, 1999. Much of the technology sector's returns was
produced by a handful of high-flying Internet companies. In our view, these
companies' fundamentals do not support such sky-high prices. We believed -- and
continue to believe -- that the risks of such investments generally outweigh the
potential benefits.
What is the fund's investment approach?
The fund seeks long-term capital appreciation consistent with minimizing
realized capital gains and taxable current income. We evaluate investment
opportunities one company at a time in order to identify large, established
growth companies that we believe are well positioned to weather difficult
economic climates and thrive during favorable times. Such companies typically
are selected for their sustained patterns of profitability, strong balance
sheets, talented management teams, expanding global presence and above-average
growth potential.
Our investment strategy is also predicated on purchasing growth at a price we
consider to be justified by a company' s fundamentals. For The Fun
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DISCUSSION OF FUND PERFORMANCE (CONTINUED)
example, while the fund was invested in several leading technology companies
during the period, such as Intel and Microsoft, we avoided most Internet
companies because we found their prices to be higher than warranted by their
financial strength and growth rates.
Central to our objective of minimizing taxable distributions, we maintain a
" buy-and-hold" investment strategy. This strategy is based on remaining fully
invested and on targeting long-term growth over a three- to five-year time
frame, rather than going for short-term profits. During the reporting period,
the fund maintained a turnover rate of less than 1%, well within our goal of an
annual turnover rate below 15% .
What other factors influenced the fund's performance?
When the reporting period began, the stock market was in the midst of a sharp
correction caused primarily by concerns related to economic weakness in overseas
markets. When it later became clear that these international events were
unlikely to derail U.S. economic growth, the stock market rebounded. In fact,
many broad measures of U.S. stock market performance established new highs in
1999.
During the second quarter of 1999, when investors began to recognize that
economic growth in the United States might be stronger than they had
anticipated, they became concerned about a possible resurgence of inflation. In
fact, reports of low levels of U.S. unemployment and rising global energy and
commodity prices further fueled inflationary fears. As a result, interest rates
rose sharply. This triggered a change in stock market leadership.
Generally, when interest rates rise, growth companies become less attractive to
investors. That' s because higher interest rates make profits projected for the
future worth less currently. Accordingly, many investors began to buy more
attractively priced value-oriented companies. In addition, investors turned
their attention to companies whose earnings are sensitive to changes in economic
conditions, such as paper and chemical producers. Because our long-term
perspective favors high-quality companies with consistent and longstanding track
records of earnings growth, some of the companies in which we invested were hurt
by the market' s short-term preference for value stocks.
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What is the fund's current strategy?
We continue to maintain our long-term investment strategy. Our
company-by-company analyses have led us to maintain the fund's relatively high
level of exposure to stocks in the pharmaceutical, consumer non-durables and
financial services sectors, and relatively low participation in cyclical and
technology stocks.
The fund's investments in financial services stocks performed particularly well
as investors became more comfortable that the worst-case scenarios were unlikely
to materialize for banks, brokerage firms and insurance companies doing business
in Asian and Latin American emerging markets. Financial giant Citigroup provided
particularly attractive returns in the wake of the apparently successful merger
of Citicorp and Travelers Group. Companies such as Bank of America and Chase
Manhattan also provided attractive returns.
We have continued to focus on the growth trends that we believe will drive the
U.S. and global economies. These trends include the globalization of
international trade, higher worldwide demand for consumer products from a more
affluent population, the influence of technology on the development of new
products in the pharmaceutical industry, and the beneficial effects of corporate
restructuring on companies' profits.
Our investment strategy can be summarized as follows: we believe that, over the
long term, high-quality growth companies can produce strong returns. We intend
to maintain that strategy regardless of short-term market influences.
September 14, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN FLUCTUATE SUCH THAT UPON REDEMPTION FUND SHARES MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
(2) 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.
The Fund
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FUND PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Tax-Smart Growth
Fund and the Standard & Poor's 500 Composite Stock Price Index
Actual Aggregate Total Return AS OF 8/31/99
Inception
(9/30/98)
FUND 25.26%
((+)) SOURCE: LIPPER ANALYTICAL SERVICES, INC.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS TAX-SMART GROWTH
FUND ON 9/30/98 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE STANDARD &
POOR'S 500 COMPOSITE STOCK PRICE INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL
GAIN DISTRIBUTIONS ARE REINVESTED.
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 U.S. 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.
$13,138
Standard & Poor's 500 Composite Stock Price Index((+)
$12,526
Dreyfus Tax-Smart Growth Fund
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STATEMENT OF INVESTMENTS
August 31, 1999
<S> <C> <C>
COMMON STOCKS--94.3% Shares Value ($)
CAPITAL GOODS--9.0%
AlliedSignal 13,000 796,250
Boeing 11,000 498,437
Emerson Electric 12,000 751,500
General Electric 16,000 1,797,000
Rockwell International 12,000 709,500
4,552,687
COMMUNICATIONS--4.5%
Ameritech 5,000 315,625
Bell Atlantic 1,500 91,875
BellSouth 22,000 995,500
SBC Communications 18,000 864,000
2,267,000
CONSUMER CYCLICAL--10.0%
DaimlerChrysler 8,070 606,763
Ford Motor 30,000 1,563,750
McGraw-Hill Cos. 16,000 827,000
Polo Ralph Lauren 7,500 (a) 145,313
Sony, A.D.R. 8,000 1,018,500
Wal-Mart Stores 20,000 886,250
5,047,576
CONSUMER STAPLES--18.0%
Coca-Cola 30,000 1,794,375
Colgate-Palmolive 16,000 856,000
Fox Entertainment Group, Cl. A 24,000 (a) 553,500
Gillette 25,000 1,165,625
McDonald's 18,000 744,750
PepsiCo 25,000 853,125
Philip Morris Cos. 35,000 1,310,312
Procter & Gamble 11,000 1,091,750
Walgreen 30,000 695,625
9,065,062
ENERGY MINERALS--3.1%
BP Amoco, A.D.R. 7,000 784,875
Exxon 3,000 236,625
Mobil 5,500 563,062
1,584,562
The Fund
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STATEMENT OF INVESTMENTS (CONTINUED)
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
FINANCE--17.6%
American Express 6,000 825,000
Associates First Capital, Cl. A 25,000 857,812
Bank of America 12,036 728,178
Berkshire Hathaway, Cl. A 12 (a) 770,400
Berkshire Hathaway, Cl. B 6 (a) 12,018
Chase Manhattan 15,000 1,255,313
Citigroup 28,000 1,244,250
Federal National Mortgage Association 20,000 1,242,500
Marsh & McLennan 10,000 728,125
Merrill Lynch 3,000 223,875
SunTrust Banks 15,000 964,687
8,852,158
HEALTH CARE--15.6%
Abbott Laboratories 20,000 867,500
American Home Products 15,000 622,500
Bristol-Myers Squibb 14,000 985,250
Johnson & Johnson 14,000 1,431,500
Merck & Co. 22,000 1,478,125
Pfizer 66,000 2,491,500
7,876,375
MEDIA/ENTERTAINMENT--1.3%
Viacom, Cl. B 15,000 (a) 630,938
TECHNOLOGY--13.9%
Cisco Systems 18,000 1,220,625
Conexant Systems 3,000 (a) 215,625
Hewlett-Packard 10,000 1,053,750
Intel 35,000 2,876,563
Microsoft 18,000 (a) 1,666,125
7,032,688
TRANSPORTATION--1.3%
Norfolk Southern 25,000 654,688
TOTAL COMMON STOCKS
(cost $45,130,224) 47,563,734
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PREFERRED STOCKS--.2% Shares Value ($)
CONSUMER CYCLICAL;
News Corp, A.D.R., Cum., $.4428
(cost $101,138) 4,000 105,750
Principal
SHORT-TERM INVESTMENTS--5.3% Amount ($) Value ($)
U.S. TREASURY BILLS:
4.52%, 9/30/1999 19,000 18,931
4.51%, 10/7/1999 107,000 106,509
4.50%, 10/14/1999 598,000 594,753
4.66%, 11/4/1999 925,000 917,369
4.68%, 11/12/1999 484,000 479,421
4.79%, 11/26/1999 530,000 523,921
TOTAL SHORT-TERM INVESTMENTS
(cost $2,640,974) 2,640,904
TOTAL INVESTMENTS (cost $47,872,336) 99.8% 50,310,388
CASH AND RECEIVABLES (NET) .2% 119,780
NET ASSETS 100.0% 50,430,168
(A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999
Cost Value
ASSETS ($):
Investments in securities--See Statement of Investments 47,872,336 50,310,388
Cash 116,880
Dividends receivable 57,642
50,484,910
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 52,818
Due to Distributor 1,924
54,742
NET ASSETS ($) 50,430,168
COMPOSITION OF NET ASSETS ($):
Paid-in capital 47,935,123
Accumulated undistributed investment income--net 58,656
Accumulated net realized gain (loss) on investments (1,663)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 3 2,438,052
NET ASSETS ($) 50,430,168
SHARES OUTSTANDING
(100 million shares of $.001 par value Common Stock authorized) 3,223,747
NET ASSET VALUE, offering and redemption price per share--Note 2(c)($) 15.64
SEE NOTES TO FINANCIAL STATEMENTS.
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STATEMENT OF OPERATIONS
from September 30, 1998 (commencement of operations) to August 31, 1999
INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $2,577 foreign taxes withheld at source) 334,524
Interest 87,084
TOTAL INCOME 421,608
EXPENSES:
Management fee--Note 2(a) 284,470
Distribution fees--Note 2(b) 64,652
Loan commitment fees--Note 4 13
TOTAL EXPENSES 349,135
INVESTMENT INCOME--NET 72,473
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 3 ($):
Net realized gain (loss) on investments (1,663)
Net unrealized appreciation (depreciation) on investments 2,438,052
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,436,389
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,508,862
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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STATEMENT OF CHANGES IN NET ASSETS
from September 30, 1998 (commencement of operations) to August 31, 1999
OPERATIONS ($):
Investment income--net 72,473
Net realized gain (loss) on investments (1,663)
Net unrealized appreciation (depreciation) on investments 2,438,052
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,508,862
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (13,817)
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 51,207,743
Dividends reinvested 13,550
Cost of shares redeemed (5,786,170)
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS 45,435,123
TOTAL INCREASE (DECREASE) IN NET ASSETS 47,930,168
NET ASSETS ($):
Beginning of Period 2,500,000
END OF PERIOD 50,430,168
Undistributed investment income--net 58,656
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 3,393,751
Shares issued for dividends reinvested 939
Shares redeemed (370,943)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 3,023,747
SEE NOTES TO FINANCIAL STATEMENTS.
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FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal period from
September 30, 1998 (commencement of operations) to August 31, 1999. Total return
shows how much your investment in the fund would have increased (or decreased)
during the period, assuming you had reinvested all dividends and distributions.
These figures have been derived from the fund's financial statements.
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PER SHARE DATA ($):
Net asset value, beginning of period 12.50
Investment Operations:
Investment income--net .06 (a
Net realized and unrealized gain (loss) on investments 3.10
Total from Investment Operations 3.16
Distributions:
Dividends from investment income--net (.02)
Net asset value, end of period 15.64
TOTAL RETURN (%) 25.26 (b
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets 1.24 (b
Ratio of net investment income to average net assets .26 (b)
Portfolio Turnover Rate --
Net Assets, end of period ($ x 1,000) 50,430
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Tax-Smart Growth Fund (the "fund") is a separate diversified series of
The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the
Investment Company Act of 1940, as amended (the "Act" ), as an open-end
management investment company and operates as a series company currently
offering nineteen series, including the fund. The fund had no operations until
September 30, 1998, except for the sale and issuance of 200,000 shares of Common
Stock to the MBC Investment Corp., an indirect subsidiary of Mellon Bank
Corporation. The fund' s investment objective is to achieve long-term capital
appreciation consistent with minimizing realized capital gains and taxable
current income. The Dreyfus Corporation (the "Manager") serves as the fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
(" Mellon Bank") which is a wholly-owned subsidiary of Mellon Bank Corporation.
Fayez Sarofim & Co. (" Sarofim") serves as the fund's sub-investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor of the
fund's shares, which are sold to the public without a sales charge.
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
<PAGE>
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) 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. 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. At August 31, 1999, there
were no open financial futures contracts.
(d) Distributions to shareholders: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and dividends from net realized
capital gain, if any, are normally declared and paid annually, but the fund may
make distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the fund not to distribute such gain.
The Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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 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 $40,000 per
year, plus $5,000 for each joint Board meeting of The Dreyfus/Laurel Funds,
Inc., The Dreyfus/Laurel Tax-Free Municipal Funds, and The Dreyfus/Laurel Funds
Trust (the "Dreyfus/Laurel Funds" ) attended, $2,000 for separate committee
meetings attended which are not held in conjunction with a regularly scheduled
board meeting and $500 for Board meetings and separate committee meetings
attended that are conducted by telephone and is reimbursed for travel and
out-of-pocket expenses. The Chairman of the Board receives an additional 25% of
such compensation (with the exception of reimbursable amounts). In the event
that there is a joint committee meeting of the Dreyfus/Laurel Funds and the
Dreyfus High Yield Strategies Fund, the
<PAGE>
$2,000 fee will be allocated between the Dreyfus/Laurel Funds and the Dreyfus
High Yield Strategies Fund. 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.
Pursuant to a Sub-Investment Advisory Agreement between the Manager and Sarofim,
the Manager has agreed to pay Sarofim an annual fee of .30 of 1% of the value of
the fund's average daily net assets, payable monthly.
(b) Distribution plan: Under a 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 fund's average daily net assets to compensate Mellon Bank, the Manager or
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and the Distributor for shareholder servicing activities
and expenses primarily intended to result in the sale of fund shares. During the
period ended August 31, 1999, the fund was charged $64,652 pursuant to the Plan
(c) A 1% redemption fee is charged and retained by the fund on shares redeemed
within six months following the date of issuance, including redemptions made
through the use of the fund's Exchange privilege.
(d) Brokerage commissions: During the period ended August 31, 1999, the fund
incurred total brokerage commissions of $33,908, of which $7,125 was paid to
Dreyfus Brokerage Services, a wholly-owned subsidiary of Mellon Bank
Corporation.
NOTE 3--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended August 31, 1999, amounted to
$45,231,461 and $92, respectively.
At August 31, 1999, accumulated net unrealized appreciation on
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
investments was $2,438,052, consisting of $4,344,336 gross unrealized
appreciation and $1,906,284 gross unrealized depreciation.
At August 31, 1999, 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 (the "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. During the period ended August
31, 1999, the fund did not borrow under the Facility.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of Dreyfus
Tax-Smart Growth Fund of The Dreyfus/Laurel Funds, Inc. including the statement
of investments, as of August 31, 1999, and the related statement of operations,
the statement of changes in net assets, and the financial highlights for the
period from September 30, 1998 (commencement of operations) to August 31, 1999.
These financial statements and financial highlights are the responsibility of
the Fund' s management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit 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
August 31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Tax-Smart Growth Fund of The Dreyfus/Laurel Funds, Inc. as of August 31,
1999, the results of its operations, changes in its net assets, and the
financial highlights for the period from September 30, 1998 to August 31, 1999,
in conformity with generally accepted accounting principles.
New York, New York
October 4, 1999
KPMG LLP
The Fund
<PAGE>
IMPORTANT TAX INFORMATION (Unaudited)
The fund designates 100% of the ordinary dividends paid during the fiscal year
ended August 31, 1999 as qualifying for the corporate dividends received
deduction. Shareholders will receive notification in January 2000 of the
percentage applicable to the preparation of their 1999 income tax returns.
<PAGE>
The Fund
For More Information
Dreyfus Tax-Smart Growth Fund
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Fayez Sarofim & Co.
Two Houston Center
Suite 2907
Houston, TX 77010
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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 1999 Dreyfus Service Corporation 047AR998
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS TAX-SMART GROWTH FUND AND THE STANDARD &
POOR'S 500 COMPOSITE STOCK PRICE INDEX
EXHIBIT A:
STANDARD
& POOR'S 500 DREYFUS
PERIOD COMPOSITE STOCK TAX-SMART GROWTH
PRICE INDEX* FUND
9/30/98 10,000 10,000
11/30/98 11,467 11,512
2/28/99 12,242 12,061
5/31/99 12,913 12,246
8/31/99 13,138 12,526
*Source: Lipper Analytical Services, Inc.
