<PAGE>
Dreyfus
Bond Market
Index Fund
Annual Report
October 31, 1995
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
For the annual period ending on October 31, 1995, the Fund's Investor
shares and Class R shares had total rates of return of 15.01% and 15.41%,
respectively.* The Dreyfus Bond Market Index Fund seeks to replicate the
returns of the domestic bond market's major benchmark, the Lehman Brothers
Government/Corporate Bond Index, which, for the same period, returned 16.16%,
slightly ahead of the Fund.**
Economic Review
Concerns about lagging economic growth prompted the Federal Reserve
to ease the Fed Funds rate in July. This was the first indication that the
Fed was moving away from its policy principally dedicated to fighting
inflation. The bond market has been well ahead of the Federal Reserve in
determining that inflation is, in fact, under control. Long-term interest
rates have fallen for 12 months and, accordingly, bond investors have enjoyed
significant capital gains.
Economic indicators remain mixed, some causing concern about possible
recession, while others point toward continued expansion. During times of
business uncertainty, attention often shifts to the consumer sector of the
economy, more particularly, regarding the consumer's ability to spend. And
here there are some indications that consumers are being pinched.
There is little doubt that the economic recovery, underway since
1991, has been productivity-driven. That is, corporations have succeeded in
paring expenses from their cost of doing business. With this reduction in
overhead, bottom line profits have grown dramatically. Yet little of this
corporate prosperity has spilled over into the consumer sector of the
economy. Wages and salaries grew at under 3% over the past year, not even
keeping pace with inflation. An additional consumer concern: new job creation
is at the slowest pace of the post-World War II era. And recent retail sales
reports were the weakest since June 1991 when the economy was in recession.
Also there is worry that the coming holiday season will be a poor one for
retailers, since debt-burdened consumers may spend cautiously.
Yet there are also significant signs of continued growth. Despite the
above indications of potential slowdown in consumer spending, the Conference
Board's latest consumer survey showed that consumer confidence remained high.
Business capital spending and home-building activity continue to surge,
providing substantial fuel for economic growth. Business investment in
durable equipment when calculated as a percentage of Gross Domestic Product
(GDP) is at a 35-year high with no sign of letup. And while job and wage
growth are slow, the index of hours worked (a key determinant of GDP growth
and income generation) is rising. Providing additional confidence is the fact
that the four-and-a-half year recovery has been well balanced: corporate debt
issuance has been moderate and the banking system is not overstretched.
The Market
Spurred by low inflation and falling long-term interest rates, the
bond market recovered strongly in 1995. The Fund, designed to track the
Lehman Brothers Government/Corporate Bond Index, benefitted from the
<PAGE>
market rally, If economic conditions remain sluggish and Congress is
able to arrive at an acceptable budget accord, there is a good chance that
the Fed will ease monetary policy further. We believe this indicates a rather
favorable outlook for the bond market in general, particularly with inflation
under control.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the Fund
and in The Dreyfus Corporation.
Sincerely,
Laurie Carroll
Portfolio Manager
November 15, 1995
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid.
**Source: Lehman Brothers -- Lehman Brothers Government Corporate Bond Index
is a widely accepted unmanaged index of government and corporate bond market
performance composed of U.S. Government, Treasury and agency securities,
fixed-income securities and nonconvertible investment grade corporate debt.
<PAGE>
Dreyfus Bond Market Index Fund October 31, 1995
- ------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS BOND
MARKET INDEX FUND CLASS R SHARES AND THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX
- -------------------------------------------------------------
Dreyfus Bond Lehman Brothers
Market Index Fund Government/Corporate
(Class R Shares) Bond Index*
- -------------------------------------------------------------
In Dollars
11/30/93 10,000 10,000
1/31/94 10,150 10,195
4/30/94 9,656 9,649
7/31/94 9,788 9,800
10/31/94 9,632 9,645
1/31/95 9,831 9,877
4/30/95 10,242 10,316
7/31/95 10,707 10,793
10/31/95 11,116 11,204
- -------------------------------------------------------------
*Source: Lehman Brothers
Average Annual Total Returns
- ------------------------------------------------------------------------
Investor Class Shares Class R Shares
- -------------------------------- ---------------------------------
Period ended 10/31/95 Period ended 10/31/95
- -------------------------------- ---------------------------------
1 Year 15.01% 1 Year 15.41%
From Inception (4/28/94) 9.36 From Inception (11/30/93) 5.68
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class R shares of
Dreyfus Bond Market Index Fund on 11/30/93 (Inception Date) to a $10,000
investment made in the Lehman Brothers Government/Corporate Bond Index on
that date. All dividends and capital gain distributions are reinvested.
Performance for Investor Class shares will vary from the performance of Class
R shares shown above due to differences in charges and expenses.
The Fund seeks to replicate the total return of the Lehman Brothers
Government/Corporate Bond Index. The Fund's performance shown in the line
graph takes into account all applicable fees and expenses. The Lehman
Brothers Government/Corporate Bond Index is intended to measure the
performance of the domestic fixed-rate, investment grade debt market and 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.
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Principal Coupon Maturity
Amount U.S. Treasury Obligations--61.8% Rate Date Value
--------- ------ --------- ----------
<S> <C> <C> <C> <C>
$100,000 U.S. Treasury Bonds.......................... 11.750% 02/15/01 $ 126,634
100,000 U.S. Treasury Bonds.......................... 10.750 05/15/03 128,683
275,000 U.S. Treasury Bonds.......................... 11.625 11/15/04 380,592
60,000 U.S. Treasury Bonds.......................... 10.750 08/15/05 80,395
150,000 U.S. Treasury Bonds.......................... 8.750 11/15/08 174,447
50,000 U.S. Treasury Bonds.......................... 9.250 02/15/16 66,023
200,000 U.S. Treasury Bonds.......................... 7.250 05/15/16 219,144
100,000 U.S. Treasury Bonds.......................... 7.500 11/15/16 112,554
50,000 U.S. Treasury Bonds.......................... 8.750 05/15/17 63,459
100,000 U.S. Treasury Bonds.......................... 8.875 08/15/17 128,509
225,000 U.S. Treasury Bonds.......................... 8.500 02/15/20 281,356
130,000 U.S. Treasury Bonds.......................... 8.750 05/15/20 166,698
150,000 U.S. Treasury Bonds.......................... 8.125 08/15/21 181,474
100,000 U.S. Treasury Bonds.......................... 6.250 08/15/23 97,735
100,000 U.S. Treasury Notes.......................... 6.250 01/31/97 100,775
250,000 U.S. Treasury Notes.......................... 4.750 02/15/97 247,220
100,000 U.S. Treasury Notes.......................... 5.625 08/31/97 99,982
100,000 U.S. Treasury Notes.......................... 8.875 11/15/97 106,125
200,000 U.S. Treasury Notes.......................... 6.000 11/30/97 201,422
100,000 U.S. Treasury Notes.......................... 5.125 04/30/98 98,724
100,000 U.S. Treasury Notes.......................... 4.750 08/31/98 97,539
75,000 U.S. Treasury Notes.......................... 5.125 11/30/98 73,772
100,000 U.S. Treasury Notes.......................... 6.375 01/15/99 101,882
150,000 U.S. Treasury Notes.......................... 7.000 04/15/99 155,700
100,000 U.S. Treasury Notes.......................... 6.875 03/31/00 104,067
100,000 U.S. Treasury Notes.......................... 6.375 01/15/00 102,119
175,000 U.S. Treasury Notes.......................... 6.250 08/31/00 178,117
75,000 U.S. Treasury Notes.......................... 7.750 02/15/01 80,381
100,000 U.S. Treasury Notes.......................... 7.750 02/15/01 108,602
200,000 U.S. Treasury Notes.......................... 5.750 08/15/03 197,268
80,000 U.S. Treasury Notes.......................... 7.250 05/15/04 86,552
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $4,194,598).......................... 4,347,950
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS--2.8%
200,000 Federal National Mortgage Association
(Cost $185,514)............................ 5.300 12/10/98 195,958
----------
CORPORATE BONDS AND NOTES--31.5%
AEROSPACE AND AVIATION--.8%
25,000 Boeing Corporation........................... 8.100% 11/15/06 27,906
30,000 Rockwell International Corporation 6.750 09/15/02 30,900
----------
58,806
----------
AUTOMOTIVE--.6%
40,000 General Motors Corporation................... 7.000 06/15/03 41,000
----------
BASIC INDUSTRIES--1.5%
50,000 Aluminum Company of America.................. 5.750 02/1/01 49,125
55,000 Gannett, Inc. ............................... 5.850 05/1/00 53,900
----------
103,025
----------
</TABLE>
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal Coupon Maturity
Amount CORPORATE BONDS AND NOTES (continued) Rate Date Value
--------- ------ --------- ----------
<S> <C> <C> <C> <C>
CHEMICALS--.7%
$ 40,000 du Pont (E.I.) de Nemours & Company.......... 6.750% 10/15/02 $ 40,900
10,000 Monsanto Company............................. 8.200 04/15/25 11,162
----------
52,062
----------
CONSUMER NON-DURABLES--2.8%
25,000 Archer Daniels Midland Company............... 8.125 06/1/12 28,000
35,000 Coca Cola Company............................ 6.625 10/1/02 36,006
25,000 Hershey Foods Corporation.................... 8.800 02/15/21 30,406
25,000 PepsiCo, Inc. ............................... 7.625 12/18/98 26,063
40,000 Philip Morris, Inc. ......................... 9.250 02/15/00 43,950
30,000 Procter & Gamble Company..................... 8.700 08/1/01 33,638
----------
198,063
----------
FINANCIAL SERVICES--10.6%
20,000 American General, Inc. ...................... 6.625 06/01/97 20,175
50,000 Associate Corporation of North America....... 7.500 05/15/99 52,000
50,000 AVCO Financial Services, Inc. ............... 7.500 11/15/96 50,812
25,000 BankAmerica Corporation...................... 7.750 07/15/02 26,625
50,000 Beneficial Corporation....................... 9.125 02/15/98 53,125
50,000 Chrysler Financial Corporation............... 5.375 10/15/98 48,750
20,000 Commercial Credit Bond....................... 6.375 09/15/02 19,950
25,000 Commercial Credit Group...................... 6.700 08/01/99 25,250
15,000 Dresdner Bank NY............................. 7.250 09/15/15 15,037
40,000 Ford Motor Credit Company.................... 8.000 06/15/02 43,100
25,000 General Electric Capital Corporation......... 8.750 11/26/96 25,733
100,000 General Motors Acceptance Corporation........ 7.750 04/15/97 102,375
20,000 Greyhound Financial Corporation.............. 9.125 02/27/02 22,575
50,000 International Lease Finance Corporation...... 4.750 01/15/97 49,313
25,000 NationsBank Corporation...................... 6.625 01/15/98 25,281
20,000 NationsBank Corporation Sub NT............... 6.625 04/15/98 21,125
25,000 Norwest Financial, Inc. ..................... 5.500 04/15/98 24,687
115,000 Wells Fargo & Company........................ 8.200 11/1/96 117,444
----------
743,357
----------
MANUFACTURING--.4%
25,000 Emerson Electic.............................. 6.300 11/1/05 24,719
----------
MULTI INDUSTRY--.7%
20,000 American Home Products....................... 7.700 02/15/00 21,025
10,000 Georgia Pacific Corp......................... 9.625 03/22/02 11,437
10,000 Lockheed Corp NTS............................ 6.750 03/15/03 10,113
10,000 Rayheon co NT................................ 6.500 07/15/05 10,013
----------
52,588
----------
OIL AND GAS--.7%
25,000 Mobil Corporation............................ 6.500 12/17/96 25,188
25,000 Texaco, Inc. ................................ 6.875 08/15/23 24,375
----------
49,563
----------
RETAIL--2.9%
50,000 J.C. Penney, Inc. ........................... 9.050 03/1/01 56,062
100,000 Sears Roebuck & Company...................... 8.550 08/1/96 101,875
50,000 Wal-Mart Stores, Inc. ....................... 5.500 03/1/98 49,438
----------
207,375
----------
</TABLE>
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal Coupon Maturity
Amount CORPORATE BONDS AND NOTES (continued) Rate Date Value
--------- ------ --------- ----------
<S> <C> <C> <C> <C>
TECHNOLOGY--.1%
$ 5,000 International Business Machs Corp............ 7.000% 10/30/25 $ 4,913
----------
UTILITIES--9.4%
50,000 Alabama Power Company........................ 6.000 03/1/00 49,687
50,000 American Telephone and Telegraph Corporation 5.125 04/1/01 47,563
20,000 B.P. North America, Inc. .................... 9.875 03/15/04 24,200
50,000 Carolina Power and Light Company............. 5.375 07/1/98 49,187
25,000 Consolidated Edison.......................... 6.250 04/1/98 25,031
40,000 Consolidated Natural Gas Company............. 5.375 10/15/98 39,800
50,000 Duke Power Company........................... 7.500 04/1/99 52,062
25,000 Florida Power and Light Company.............. 7.750 02/1/23 26,187
50,000 MCI Communications Corporation............... 6.250 03/23/99 50,188
25,000 New Jersey Bell Telephone Company............ 8.000 06/1/22 28,188
70,000 Pacific Telephone and Telegraph Corporation.. 4.625 04/1/99 65,888
25,000 Pennsylvania Power and Light Company......... 6.550 03/1/06 24,375
25,000 Public Service Electric & Gas Company........ 8.750 07/1/99 27,031
50,000 Southwestern Bell Telephone Company.......... 4.500 08/1/97 48,625
25,000 TVA Discount Bond............................ 6.750 11/1/25 24,875
50,000 Union Electric Company....................... 5.500 03/1/97 49,688
25,000 Virginia Electric & Power Company............ 7.625 07/1/07 27,031
----------
659,606
----------
MISCELLANEOUS--.3%
20,000 WMX Techologies Inc NTS...................... 6.375 12/1/03 19,825
----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $2,144,804).......................... 2,214,902
----------
GOVERNMENT SPONSORED--.8%
25,000 Government of Canada......................... 6.375 07/21/05 24,937
30,000 Province of Ontario Bond..................... 7.000 08/4/05 30,788
----------
TOTAL GOVERNMENT SPONSORED
(cost $54,809)............................. 55,725
----------
REPURCHASE AGREEMENT--4.2%
296,495 Agreement with Goldman Sachs & Company,
dated 10/31/95 5.88% to be repurchased at
$296,543 on 11/1/95, collateralized by
$297,000 U.S. Treasury Notes, due 7/31/97
(Cost $296,495)............................ 296,495
----------
TOTAL INVESTMENTS (Cost $6,876,220).......... 101.1 % 7,111,030
LIABILITIES, LESS CASH AND RECEIVABLES....... (1.1)% (80,305)
------- ----------
NET ASSETS................................... 100.0 % $7,030,725
------- ----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $6,876,220)-see Statement of
Investments (including repurchase agreements of $296,495)............. $7,111,030
Receivable for Capital Stock sold....................................... 31,862
Interest receivable..................................................... 131,152
Due from The Dreyfus Corporation........................................ 28,364
----------
7,302,408
LIABILITIES:
Payable for investment securities purchased............................. $229,493
Dividends payable....................................................... 35,178
Payable for Capital Stock redeemed...................................... 38
Accrued expenses and other liabilities.................................. 6,974 271,683
-------- ----------
NET ASSETS.................................................................. $7,030,725
----------
----------
REPRESENTED BY:
Paid-in capital......................................................... $6,879,619
Accumulated net realized (loss) on investments ......................... (83,704)
Accumulated net unrealized appreciation on investments--Note 3.......... 234,810
----------
NET ASSETS at value......................................................... $7,030,725
----------
----------
NET ASSET VALUE, offering and redemption price per share:
Investor Shares
(50 million shares of $.001 par value Capital Stock authorized)
($206,603 / 20,796 shares of capital stock outstanding)............... $9.93
-----
-----
Class R Shares
(100 million shares of $.001 par value Capital Stock authorized)
($6,824,122 / 686,811 shares of capital stock outstanding)............ $9.94
-----
-----
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest Income:........................................................ $429,825
Expenses:
Investment Management fee--Note 2(a).................................. $ 25,294
Directors' fees and expenses-Note 2(c)................................ 1,157
Distribution fees-Note 2(b)........................................... 376
--------
Total Expenses.................................................... 26,827
--------
INVESTMENT INCOME--NET............................................ 402,998
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized (loss) on investments...................................... $(14,771)
Net unrealized appreciation on investments.............................. 591,368
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 576,597
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $979,595
--------
--------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------
1995 1994(1)
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 402,998 $ 289,972
Net realized (loss) on investments................................... (14,771) (68,933)
Net unrealized appreciation (depreciation) on investments for the year 591,368 (356,558)
----------- -----------
Net Increase (Decrease) In Net Assets Resulting From Operations.. 979,595 (135,519)
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor Shares.................................................... (8,778) (622)
Class R Shares..................................................... (394,220) (289,350)
----------- -----------
Total Dividends.................................................. (402,998) (289,972)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Investor Shares.................................................... 853,158 38,751
Class R Shares..................................................... 4,460,744 14,406,896
Dividends reinvested:
Investor Shares.................................................... 6,274 468
Class R Shares..................................................... 356,355 261,497
Cost of shares redeemed:
Investor Shares.................................................... (705,375) (100)
Class R Shares..................................................... (3,019,117) (9,779,932)
----------- -----------
Increase In Net Assets From Capital Stock Transactions............. 1,952,039 4,927,580
----------- -----------
Total Increase In Net Assets..................................... 2,528,636 4,502,089
NET ASSETS:
Beginning of year.................................................... 4,502,089 --
----------- -----------
End of year ......................................................... $ 7,030,725 $ 4,502,089
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Shares
-------------------------------------------------------------
Investor Shares Class R Shares
------------------------- --------------------------
Year Ended October 31, Year Ended October 31,
------------------------- --------------------------
1995 1994(1)(2) 1995 1994(1)(2)
------- --------- -------- ---------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................... 88,106 4,136 481,015 1,448,406
Shares issued for dividends reinvested.... 651 50 37,460 27,373
Shares redeemed........................... (72,136) (11) (319,718) (987,725)
------- --------- -------- ---------
Net Increase In Shares Outstanding...... 16,621 4,175 198,757 488,054
------- --------- -------- ---------
------- --------- -------- ---------
<FN>
- --------------
(1) The Fund commenced operations on November 30, 1993.
(2) The Fund commenced selling Investor shares on April 28, 1994. Those
shares outstanding prior to April 4, 1994 were designated as Trust shares.
Effective October 17, 1994 the Fund's Trust shares were redesignated Class
R shares.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
Financial Highlights
Contained below is per share operating performance data for a share of
Capital Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Investor Shares Class R Shares
------------------------ ------------------------
Year Ended October 31, Year Ended October 31,
------------------------ ------------------------
PER SHARE DATA: 1995 1994(1)(2) 1995 1994(2)(3)
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year............. $ 9.15 $ 9.44 $ 9.15 $10.00
------ ------ ------ ------
Investment Operations:
Investment income (loss)--net.................. .55 .24 .58 .49(4)
Net realized and unrealized gain (loss) on
investments.................................. .78 (.28) .79 (.85)
------ ------ ------ ------
Total from Investment Operations......... 1.33 (.04) 1.37 (.36)
Distributions;
Dividends from investment income--net.......... (.55) (.25) (.58) (.49)
------ ------ ------ ------
Net asset value, end of year................... $ 9.93 $ 9.15 $ 9.94 $ 9.15
------ ------ ------ ------
------ ------ ------ ------
TOTAL INVESTMENT RETURN............................ 15.01% (.46)% 15.41% (3.68)%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........ .65% .65%(5) .40% .40%(5)(6)
Ratio of net investment income to average
net assets................................... 5.77% 4.81%(5) 6.10% 5.05%(5)
Portfolio Turnover Rate........................ 40.16% 188.00% 40.16% 188.00%
Net Asset, end of year (000's Omitted)......... $207 $38 $6,824 $4,464
<FN>
- ----------------
(1) The Fund commenced selling Investor shares on April 28, 1994.
(2) Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's
investment mananger. Prior to October 17, 1994, Mellon Bank, N.A. served as
the Fund's investment manager
(3) The Fund commenced operations on November 30, 1993. On April 28, 1994 the
Fund began selling Investor shares and the shares existing prior to April
28, 1994 were designated Trust shares. Effective October 17, 1994 the
fund's Trust shares were redesignated Class R shares.
(4) Net investment income before reimbursement of expenses by investment
adviser for the period ended October 31, 1994 was $0.39 per share.
(5) Annualized.
(6) Annualized expense ratio before reimbursement of expenses by investment
adviser for the period ended October 31, 1994 was 1.41%.
</TABLE>
See notes to financial statments.
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") 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
sixteen Series including the Dreyfus Bond Market Index Fund (the "Fund"). 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") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, is a wholly-owned subsidiary of FDI
Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holdings, Inc.,
the parent company of which is Boston Institutional Group, Inc.
The Fund is currently authorized to issue two classes of shares: Investor
shares and Class R shares. Investor shares are sold primarily to retail
investors and bear a distribution fee. Class R shares are sold primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
and bear no distribution fee. Each class of shares has identical rights and
privileges, except with respect to the distribution fee and voting rights on
matters affecting a single class. The Company has the authority to issue 25
billion shares of capital stock with a par value of $.001.
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.
(a) Portfolio Valuation: The Fund's investments (excluding short-term
investments and U.S. Government obligations) are valued each business day by
an independent pricing service ("Service") approved by the Board of
Directors. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by
the Service from dealers in such securities). Other investments (which
constitute majority of the portfolio securities) are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
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.
Investments in U.S. Government obligations are valued at the mean between
quoted bid and asked prices. Short-term investments are carried at amortized
cost, which approximates value.
(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. Interest
income is recognized on the accrual basis. Cost of investments represents
amortized cost.
(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
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding period.
The value of the collateral is at least equal, at all times, to the total
amount of the repurchase obligations, including interest. In the event of a
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There is potential loss to the Fund in the event the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's 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.
(d) Distributions to Shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net. Such dividends are paid
monthly. 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. To the extent that net realized capital gain can be offset by
capital loss carryovers, 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 Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $84,000
available for Federal income tax purposes to be applied against future net
securities profits, if any realized subsequent to October 31, 1995. If not
applied, $69,000 of the carryover expires in fiscal 2003 and $15,000 of the
carryover exprires in fiscal 2003.
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 .40% 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, 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).
(b) Distribution Plan: The Fund has adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its Investor
shares. Under the Plan, the Fund may pay annually up to .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 activities and the
<PAGE>
Dreyfus Bond Market Index Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Distributor for activities primarily intended to result in the sale of
Investor shares. The Class R shares bear no distribution fee. For the year
ended October 31, 1995, the distribution fee for the Investor shares was
$376.
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 Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
NOTE 3--Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
other than short-term securities, during the year ended October 31, 1995,
amounted to $4,223,811 and $2,414,216, respectively.
At October 31, 1995, accumulated net unrealized appreciation on
investments was $234,810, consisting of $257,049 gross unrealized
appreciation and $22,239 gross unrealized depreciation.
At October 31, 1995, 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).
<PAGE>
Dreyfus Bond Market Index 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 of
the Dreyfus Bond Market Index Fund of The Dreyfus/Laurel Funds, Inc.,
including the statement of investments, as of October 31, 1995, and the
related statement of operations for the year then ended, and the statement of
changes in net assets and the financial highlights for each of the 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 audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, 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 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 the Dreyfus Bond Market Index Fund of The Dreyfus/Laurel Funds,
Inc., as of October 31, 1995, and the results of its operations for the year
then ended, and the changes in its net assets and the financial highlights
for each of the periods indicated herein, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
<PAGE>
Dreyfus Bond Market
Index Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Transfer Agent &
Dividend Disbursing Agent
First Data Investor Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained in the Prospectus,
which must precede or accompany this report.
Printed in U.S.A. 710/310AR9510
