Dreyfus
Tax-Smart
Growth Fund
ANNUAL REPORT August 31, 2000
(reg.tm)
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
Contents
THE FUND
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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 Independent Auditors' Report
20 Important Tax Information
FOR MORE INFORMATION
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Back Cover
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 12-month period from September 1, 1999 through August 31, 2000.
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.
Although large-cap U.S. stocks generally provided attractive returns over the
past year, the reporting period was marked by high levels of volatility and
dramatic shifts in investor sentiment. Between September 1999 and March 2000,
the large-cap market advanced strongly, led by fast-growing technology stocks
that, many investors believed, would benefit most from the "new economy."
Subsequently, however, technology and other growth-oriented stocks corrected
sharply over concerns about rising interest rates and extremely high valuations.
In fact, since technology stocks declined in March and April 2000, various
investment styles and market sectors have moved in and out of favor among
investors. As a result, and in contrast to the first half of the reporting
period, investors with broadly diversified stock portfolios generally tended to
do better during the second half of the reporting period than "momentum"
investors who sought to follow market trends.
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 15, 2000
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?
For the 12-month period ended August 31, 2000, the fund produced a total return
of 13.22% .(1) For the same period, the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index"), the fund's benchmark, produced a total return of
16.31%.(2)
We attribute the fund' s relative underperformance to the market environment
during the first half of the reporting period, when investors speculated on
highly valued technology stocks and did not favor the types of fundamentally
strong business in which the fund invests. The fund's performance improved
markedly during the second half of the reporting period, when the market
experienced a dramatic shift in sentiment away from a speculative outlook and
toward companies with stronger fundamentals, such as consistent earnings growth
and strong franchises.
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 what we consider to be 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 example, while the
fund was invested in several leading technology
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
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 seeking short-term profits.
What other factors influenced the fund's performance?
The fund' s performance was primarily influenced by widely divergent market
conditions that existed before and after a shift in market sentiment that
occurred in March and April of 2000. Before that time, the stock market had been
dominated by a relative handful of technology stocks that had appreciated to
very high prices relative to their earnings.
In mid-March, the speculative technology bubble began to burst. Investors became
concerned that the Federal Reserve Board' s efforts to relieve a buildup of
inflationary pressures might cause demand for new technology to slacken. Faced
with these concerns, a major measure of technology stock performance, the Nasdaq
Composite Index, fell substantially.
Subsequently, stock market investors became much more selective, rewarding
stocks with strong business fundamentals and positive earnings reports, while
avoiding those without such attributes. Accordingly, recoveries ensued in
previously neglected industry groups such as pharmaceutical companies and
multinational consumer products companies, both areas on which the fund focused.
While the fund had less exposure to technology companies than the S&P 500 Index,
our technology holdings fared relatively well during the shift in sentiment,
largely because holdings such as Intel and Cisco Systems continued to enjoy
strong business fundamentals.
A number of company-specific issues also affected the fund's performance.
Pfizer, a major drug manufacturer that the fund held during the reporting
period, was rewarded for its merger with Warner-Lambert. Insurance company Marsh
& McLennan benefited from the market' s perception that interest rates may have
peaked. And financial powerhouse Citigroup' s stock rose as benefits of the
merger between Travelers Group and Citicorp improved bottom-line performance.
On the other hand, several holdings detracted from the fund's performance.
Consumer product giants Gillette and Proctor & Gamble saw their stocks decline
after missteps by former senior executives caused earnings to erode. Software
leader Microsoft' s stock fell because of an unfavorable ruling in the
government' s antitrust case against the company. We continue to hold all three
of these companies because we believe that their problems are temporary and
their long-term prospects remain bright.
What is the fund's current strategy?
We remain focused on our long-term, buy-and-hold investment strategy.
Accordingly, we have made few changes recently. We have maintained the fund's
emphasis on the health care, consumer staples and financial services industries
and we have de-emphasized commodities and basic industries. Our investment
discipline has also led us away from technology companies with stock prices
higher than we judge to be warranted by their financial strength and growth
rates. Of course, the fund's portfolio is subject to change as our long-term
outlook evolves.
September 15, 2000
(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 INC. -- REFLECTS REINVESTMENT OF 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
FUND PERFORMANCE
EXHIBIT A
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
--------------------------------------------------------------------------------
Average Annual Total Returns AS OF 8/31/00
Inception From
Date 1 Year Inception
--------------------------------------------------------------------------------
FUND 9/30/98 13.22% 19.96%
((+)) SOURCE: LIPPER 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 $10,000 INVESTMENT MADE IN THE STANDARD &
POOR'S 500 COMPOSITE STOCK PRICE INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL
GAIN DISTRIBUTIONS ARE REINVESTED.
THE FUND'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE
FEES AND EXPENSES. THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A
WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE WHICH DOES NOT
TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING
TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS
CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN
THIS REPORT.
STATEMENT OF INVESTMENTS
August 31, 2000
COMMON STOCKS--95.3% Shares Value ($)
--------------------------------------------------------------------------------
CAPITAL GOODS--6.8%
Emerson Electric 12,000 794,250
General Electric 48,000 2,817,000
Honeywell International 18,000 694,125
4,305,375
COMMUNICATIONS--4.1%
BellSouth 26,000 970,125
SBC Communications 26,580 1,109,715
Verizon Communications 12,000 523,500
2,603,340
CONSUMER CYCLICAL--2.0%
Ford Motor 52,445 1,268,520
CONSUMER STAPLES--2.1%
Walgreen 40,000 1,315,000
ELECTRONICS--9.6%
Agilent Technologies 5,530 (a) 333,528
Intel 76,000 5,690,500
6,024,028
ENERGY--6.5%
BP Amoco, ADR 23,000 1,270,750
Chevron 12,000 1,014,000
Exxon Mobil 22,080 1,802,280
4,087,030
FINANCE--4.3%
Bank of America 9,036 483,991
Chase Manhattan 27,000 1,508,625
SunTrust Banks 15,000 740,625
2,733,241
FINANCE--MISC.--7.2%
American Express 18,000 1,064,250
Citigroup 33,333 1,945,833
Federal National Mortgage Association 20,000 1,075,000
Merrill Lynch 3,000 435,000
4,520,083
FOOD, BEVERAGE & TOBACCO--6.7%
Coca--Cola 30,000 1,578,750
PepsiCo 30,000 1,278,750
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
--------------------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO (CONTINUED)
Philip Morris Cos. 45,000 1,333,125
4,190,625
HEALTH CARE--13.5%
Abbott Laboratories 20,000 875,000
Bristol--Myers Squibb 15,000 795,000
Johnson & Johnson 19,000 1,746,812
Merck & Co. 22,000 1,537,250
Pfizer 81,750 3,535,688
8,489,750
HOUSEHOLD PRODUCTS--MISC.--3.7%
Colgate--Palmolive 16,000 815,000
Gillette 25,000 750,000
Procter & Gamble 12,000 741,750
2,306,750
INSURANCE--3.8%
Berkshire Hathaway, Cl. A 12 (a) 692,400
Berkshire Hathaway, Cl. B 6 (a) 11,478
Marsh & McLennan Cos. 14,000 1,662,500
2,366,378
MEDIA/ENTERTAINMENT--5.0%
Fox Entertainment Group, Cl. A 20,000 (a) 578,750
McDonald's 23,000 687,125
Time Warner 10,000 855,000
Viacom, Cl. B 15,000 (a)1,009,687
3,130,562
PUBLISHING--1.6%
McGraw--Hill Cos. 16,000 991,000
RETAIL--1.6%
Wal--Mart Stores 22,000 1,043,625
TECHNOLOGY--14.8%
Cisco Systems 36,000 (a)2,466,000
EMC 18,000 (a)1,764,000
Hewlett--Packard 14,500 1,750,875
International Business Machines 15,000 1,980,000
Microsoft 19,000 (a)1,326,437
9,287,312
COMMON STOCKS (CONTINUED) Shares Value ($)
--------------------------------------------------------------------------------
TRANSPORTATION--2.0%
Norfolk Southern 25,000 401,563
United Parcel Service, Cl. B 15,200 842,650
1,244,213
TOTAL COMMON STOCKS
(cost $51,026,576) 59,906,832
--------------------------------------------------------------------------------
PREFERRED STOCKS--.3%
--------------------------------------------------------------------------------
PUBLISHING;
News Corp, ADR, Cum.,$.4428
(cost $101,138) 4,000 177,000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
SHORT--TERM INVESTMENTS--4.6% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS:
<S> <C> <C>
5.72%, 9/7/2000 46,000 45,955
5.78%, 9/14/2000 262,000 261,411
6.29%, 9/21/2000 841,000 837,846
5.97%, 9/28/2000 211,000 210,074
5.77%, 10/5/2000 66,000 65,619
5.96%, 10/12/2000 900,000 893,727
6.03%, 11/2/2000 250,000 247,367
6.07%, 11/9/2000 187,000 184,896
6.06%, 11/16/2000 67,000 66,137
6.12%, 11/30/2000 101,000 99,460
TOTAL SHORT--TERM INVESTMENTS
(cost $2,912,878) 2,912,492
---------------------------------------------------------------------------------------------
TOTAL INVESTMENT (cost $54,040,592) 100.2% 62,996,324
LIABILITIES, LESS CASH AND RECEIVABLES (.2%) (99,184)
NET ASSETS 100.0% 62,897,140
(A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of Investments 54,040,592 62,996,324
Cash 123,684
Dividends receivable 98,734
Receivable for shares of Common Stock subscribed 7,200
63,225,942
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 70,609
Payable for investment securities purchased 258,193
328,802
--------------------------------------------------------------------------------
NET ASSETS ($) 62,897,140
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid--in capital 53,337,749
Accumulated undistributed investment income--net 50,383
Accumulated net realized gain (loss) on investments 553,276
Accumulated net unrealized appreciation (depreciation)
on investments--Note 3 8,955,732
--------------------------------------------------------------------------------
NET ASSETS ($) 62,897,140
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(100 million shares of $.001 par value Common Stock authorized) 3,557,331
NET ASSET VALUE, offering and redemption price per share--Note 2(c) ($) 17.68
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended August 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $3,698 foreign taxes withheld at source) 760,975
Interest 94,370
TOTAL INCOME 855,345
EXPENSES:
Management fee--Note2(a) 630,975
Distribution fees--Note 2(b) 143,403
Interest expense--Note 4 785
Loan commitment fees--Note 4 468
TOTAL EXPENSES 775,631
INVESTMENT INCOME--NET 79,714
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 3 ($):
Net realized gain (loss) on investments 554,939
Net unrealized appreciation (depreciation) on investments 6,517,680
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 7,072,619
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 7,152,333
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year Ended August 31,
--------------------------------
2000 1999(a)
----------------------------------------------------------------------------------------------
OPERATIONS ($):
<S> <C> <C>
Investment income--net 79,714 72,473
Net realized gain (loss) on investments 554,939 (1,663)
Net unrealized appreciation (depreciation) on investments 6,517,680 2,438,052
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 7,152,333 2,508,862
------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (87,987) (13,817)
------------------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 19,856,309 51,207,743
Dividends reinvested 84,693 13,550
Cost of shares redeemed (14,538,376) (5,786,170)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS 5,402,626 45,435,123
TOTAL INCREASE (DECREASE) IN NET ASSETS 12,466,972 47,930,168
-------------------------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 50,430,168 2,500,000
END OF PERIOD 62,897,140 50,430,168
Undistributed investment income--net 50,383 58,656
------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 1,218,653 3,393,751
Shares issued for dividends reinvested 5,189 939
Shares redeemed (890,258) (370,943)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 333,584 3,023,747
(A) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
Year Ended August 31,
---------------------
2000 1999(a)
--------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 15.64 12.50
Investment Operations:
Investment income--net .02(b) .06(b)
Net realized and unrealized gain (loss) on investments 2.05 3.10
Total from Investment Operations 2.07 3.16
Distributions:
Dividends from investment income--net (.03) (.02)
Net asset value, end of period 17.68 15.64
--------------------------------------------------------------------------------
TOTAL RETURN (%) 13.22 25.26(c)
--------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets 1.35 1.24(c)
Ratio of net investment income
to average net assets .14 .26(c)
Portfolio Turnover Rate 11.47 --
--------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 62,897 50,430
(A) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1999.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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'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 Financial Corporation. Fayez Sarofim & Co. ("Sarofim")
serves as the fund's sub-investment adviser. Effective March 22, 2000, Dreyfus
Service Corporation (" DSC"), a wholly-owned subsidiary of the Manager, became
the distributor of the fund's shares, which are sold to the public without a
sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was
the distributor.
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) 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, 2000, 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, 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.
(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.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 $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
DSC for shareholder servicing activities and the distributor for expenses
primarily intended to result in the sale of fund shares. During the period ended
August 31, 2000, the fund was charged $143,403 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, 2000, the fund
incurred total brokerage commissions of $13,805, of which $3,280 was paid to
Dreyfus Brokerage Services, a wholly-owned subsidiary of Mellon Financial
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, 2000, amounted to
$11,682,204 and $6,340,971, respectively.
At August 31, 2000, accumulated net unrealized appreciation on investments was
$8,955,732, consisting of $13,347,031 gross unrealized appreciation and
$4,391,299 gross unrealized depreciation.
At August 31, 2000, 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).
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $500 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.
The average daily amount of borrowings outstanding during the period ended
August 31, 2000 was approximately $12,000 with a related weighted average
interest rate of 6.53%.
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, 2000, and the related statement of operations
for the year then ended, the statement of changes in net assets for the year
ended August 31, 2000 and for the period from September 30, 1998 (commencement
of operations) to August 31, 1999, and financial highlights for the year ended
August 31, 2000 and 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of August 31, 2000, 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,
2000, the results of its operations for the year then ended, the changes in its
net assets for the year ended August 31, 2000 and for the period from September
30, 1998 (commencement of operations) to August 31, 1999, and the financial
highlights for the year ended August 31, 2000 and for the period from September
30, 1998 (commencement of operations) to August 31, 1999, in conformity with
accounting principles generally accepted in the United States.
New York, New York
October 11, 2000
The Fund
IMPORTANT TAX INFORMATION (Unaudited)
The fund designates 100% of the ordinary dividends paid during the fiscal year
ended August 31, 2000 as qualifying for the corporate dividends received
deduction. Shareholders will receive notification in January 2001 of the
percentage applicable to the preparation of their 2000 income tax returns.
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
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
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) 2000 Dreyfus Service Corporation 047AR008
