<PAGE>
Dreyfus
Disciplined
Intermediate
Bond Fund
Annual Report
October 31, 1997
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- --------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
We are pleased to report the performance of the Dreyfus Disciplined
Intermediate Bond Fund for the 12-month period ended October 31, 1997 as shown
in the following table:
<TABLE>
<CAPTION>
Income Dividends
Total Return* (Approximate Per Share) Distribution Rate Per Share**
------------- ----------------------- -----------------------------
<S> <C> <C> <C>
Investor Shares 8.21% $.743
Restricted Shares 8.49% $.774 6.18%
Lehman Brothers Aggregate
Bond Index*** 8.89%
</TABLE>
THE ECONOMY
With the level of inflation as low as has been seen since 1964 and
unemployment still near a 23-year low, the economy continued its solid growth
over the reporting period. Gross Domestic Product (GDP) -- the dollar total of
all goods and services produced in the United States -- has grown in excess of
3% for the past four quarters, a level and consistency of gain unmatched since
1984. This extraordinary economic performance has been fueled by huge business
investment in new plants and equipment as well as a renewed surge in consumer
spending over the summer. Consumers play a substantial role in determining the
course of the economy since their spending accounts for two thirds of all
economic activity. Retail sales rose through the summer and into September,
although there was some sign of deceleration as the third quarter progressed.
The big economic story continued to be the lack of inflation in an economy
now in its seventh year of expansion. This remarkable price stability, at a time
in the business cycle when inflationary pressures would usually be apparent, has
enabled the Federal Reserve Board (the "Fed") to refrain from tightening
monetary policy. The Federal Open Market Committee (FOMC), the policy-making arm
of the Fed, has raised interest rates just once in over two years, a period
roughly coinciding with the surge of growth in the economy. The last increase in
short-term interest rates came on March 25, 1997 when the FOMC increased the
Federal Funds rate by a modest one quarter of a percentage point to 5.50%. (The
Federal Funds rate is the rate of interest that banks charge one another for
overnight loans.)
Of course, the recent financial market turbulence arising from currency
devaluations in some of the economically weaker Southeast Asian countries has
added a cautionary note to any Fed monetary actions that might further roil
investment markets. The Southeast Asian economies have been cooling or in
outright recession for some time and represent a large share of the global
economy and the U.S. import/export market. The recent crisis has boosted the
value of the U.S. dollar and could further dampen the demand for U.S. exports to
this region. This bodes well for continued low inflation in the U.S. and weakens
the argument that we are on the brink of price acceleration.
In fact, inflation remains in check. The Implicit Price Deflator, an
indicator of inflation that measures the prices of all goods and services in the
U.S., has risen at an annual rate of less than 2% for the past two quarters.
This favorable trend in prices has been mirrored by both the Consumer Price and
Producer Price Indices. The Labor Department's Employment
<PAGE>
Cost Index, a broad measure of changes in wages and benefits, has indicated
relatively modest increases in labor costs. Still, the labor market remains
tight, with the unemployment rate at a low level unmatched in 23 years.
Whether the economy will slow without further monetary restraint by the Fed
remains an open question. Industrial production has been strong and operating
rates, an indicator of possible future price pressures, have edged to their
highest level in two years. Of paramount concern to Fed Chairman Alan Greenspan
is the possibility that continuing strong economic growth will drive the
unemployment rate even lower, which could cause a subsequent corresponding
upsurge in wage rates thereby reigniting inflation. The performance of the
economy over the coming months appears crucial in determining whether the Fed
will actively restrain the economy. We remain alert to changes in economic
trends that would increase the risk of rising inflation and, consequently, the
prospect of higher interest rates.
THE MARKET AND THE PORTFOLIO
Over the 12-month reporting period, long-term interest rates traded in a
range of 7.17% to 6.13%. At the beginning of the period, the long bond traded at
a yield-to-maturity of 6.64%. Subsequently, yields then fell to 6.35% by the end
of November 1996, thereafter rising to 7.17% on April 14, 1997. This surge in
interest rates was in reaction to increasing economic growth, low unemployment
and the hike in the Fed Funds rate earlier in the spring by the Fed. Investors
were also concerned that pressure on wages might contribute to an upsurge in
rates of inflation. Yet despite continued healthy economic growth, interest
rates generally declined over the second half of the reporting period. A budget
agreement and a shrinking budget deficit helped propel long-term interest rates
to 6.13% as of October 27, 1997, a 12-month low. Furthermore, the long end of
the yield curve outperformed the short end due to increased investor demand and
lower supply of long-term issues during the second half of the reporting period.
Worries over the summer that the Fed would again raise the Fed Funds rate proved
unwarranted due to the monetary crisis in Southeast Asia and continued low
domestic inflation.
The Lehman Brothers Corporate Bond Index rose 9.25% over the reporting
period, outperforming the Lehman Brothers Treasury Bond Index by 64 basis
points. However, demand for corporates waned late in the reporting period due to
credit concerns resulting from the economic developments in Southeast Asia and
Latin America. Yield spreads on many corporate bonds widened 5 to 30 basis
points depending on their exposure to overseas markets. Money center banks with
high exposure to emerging-market debt were particularly hard hit. Conversely,
the Lehman Brothers Mortgage Index performed strongly during the period, rising
9.12%.
We gradually shortened the portfolio's duration, or sensitivity to interest
rate movements, from 5.0 years to 4.5 years over a period that began late last
year. This sustained the portfolio's performance as interest rates rose during
December 1996 and the first quarter of 1997. In April, we reversed course and
extended duration once again out to 5.0 years, a decision that proved
advantageous since interest rates fell later in the year. Our portfolio strategy
to overweight corporates and asset-backed securities, while underweighting
Treasuries, also worked well over the past 12 months. Mortgage exposure
throughout the year was essentially neutral relative to the benchmark index.
<PAGE>
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 greatly appreciate your continued confidence in the Fund and in The
Dreyfus Corporation.
Very truly yours,
/s/ Ridgway Powell
Ridgway Powell
Portfolio Manager
November 18, 1997
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
** Distribution rate per share is based upon dividends per share paid from net
investment income during the period, divided by the net asset value per share at
the end of the period.
*** SOURCE: LEHMAN BROTHERS -- The Lehman Brothers Aggregate Bond Index is a
widely accepted unmanaged index of corporate, government and government agency
debt instruments, mortgage-backed securities and asset-backed securities.
Reflects reinvestment of dividends and capital gains.
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund October 31, 1997
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS DISCIPLINED
INTERMEDIATE BOND FUND INVESTOR SHARES AND RESTRICTED SHARES AND THE LEHMAN
BROTHERS AGGREGATE BOND INDEX
Dollars
$11,526
Lehman Brothers
Aggregate Bond Index*
$11,331
Dreyfus Disciplined
Intermediate Bond Fund
(Restricted Shares)
$11,273
Dreyfus Disciplined
Intermediate Bond Fund
(Investor Shares)
*Source: Lehman Brothers
Average Annual Total Returns
- -------------------------------------------------------------------------
Investor Shares* Restricted Shares*
---------------------------------- ---------------------------------
Period Ended 10/31/97 Period Ended 10/31/97
--------------------- ---------------------
1 Year 8.21% 1 Year 8.49%
From Inception (11/1/95) 6.18 From Inception (11/1/95) 6.45
- -------------
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in each of the Investor
shares and Restricted shares of Dreyfus Disciplined Intermediate Bond Fund
on 11/1/95 to a $10,000 investment made in the Lehman Brothers Aggregate
Bond Index on that date. For comparative purposes, the value of the Index on
10/31/95 is used as the beginning value on 11/1/95. 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 Lehman Brothers Aggregate Bond Index is a
widely accepted, unmanaged index of corporate, government and government agency
debt instruments, mortgage-backed securities, and asset-backed securities.
The Index does not take into account charges, fees and other expenses.
Further information relating to Fund performance, including expense
reimbursements, if applicable, is contained in the Financial Highlights
section of the Prospectus and elsewhere in this report.
* Effective August 15, 1997, the Fund's Institutional shares were redesignated
as Investor shares and Retail shares were redesignated as Restricted shares.
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- -----------------------------------------------------------------------------
Statement of Investments October 31, 1997
<TABLE>
<CAPTION>
Principal
Bonds and Notes--97.4% Amount Value
- ------------------------------------------------------------------------------- --------------- -------------
<S> <C> <C> <C>
Banking--6.0% BT Preferred Capital Trust II,
Gtd. Preferred Securities,
Ser. II, 7 7/8%, 2027...................... $ 1,500,000 $ 1,524,823
BankAmerica,
Sub. Notes, 6 7/8%, 2003................... 1,500,000 1,537,276
BankBoston, N.A.,
Sub. Notes, 7%, 2007....................... 2,250,000 2,314,809
First Union National Bank of North Carolina,
Sub. Notes, 6.18%, 2006.................... 1,250,000(a) 1,224,549
------------
6,601,457
------------
Collateralized
Mortgage Obligations--.5% Countrywide Funding,
Mortgage Pass-Through Ctfs.,
Ser. 1994-10, Cl. A-5, 6%, 2009............ 161,401 159,875
Residential Funding Mortgage Securities I,
Mortgage Pass-Through Ctfs.,
Ser. 1994-S10, Cl. A-6, 6 1/2%, 2009....... 389,824 380,071
------------
539,946
------------
Commercial Mortgage
Obligations--3.2% Asset Securitization,
Commercial Mortgage Pass-Through Ctfs.:
Ser. 1995-MD IV, C1. A-1, 7.10%, 2029... 704,965 731,512
Ser. 1997-D4, Cl. A-CS1, 1.539%, 2029
(Interest only Obligation)............ 18,948,565(b,c) 719,453
GS Mortgage Securities II,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-GL1, Cl. A-2B, 6.86%, 2030....... 1,000,000 1,025,320
Merrill Lynch Mortgage Investors,
Mortgage Pass-Through Ctfs.,
Ser. 1997-C1, Cl. A-3, 7.12%, 2029......... 1,000,000 1,037,035
------------
3,513,320
------------
Consumer--1.7% News America Holdings,
Gtd. Sr. Deb., 8%, 2016.................... 1,750,000 1,813,207
------------
Finance--10.2% ERP Operating L.P.,
Notes, 7.57%, 2006......................... 1,000,000(d) 1,054,171
Ford Motor Credit,
Notes, 6 5/8%, 2003........................ 1,140,000 1,156,934
GMAC,
Sr. Floating Rate Notes, 5.906%, 2002...... 2,000,000(c) 2,003,386
Green Tree Financial,
Medium-Term Notes, Ser. A, 6 1/2%, 2002.... 2,000,000 2,010,990
Lehman Brothers,
Sr. Sub. Notes, 7.36%, 2003................ 1,500,000 1,562,529
Markel,
Notes, 7 1/4%, 2003........................ 360,000 372,240
</TABLE>
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1997
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------------------------------- --------------- -------------
<S> <C> <C> <C>
Finance (continued) NYNEX Capital Funding,
Gtd. Medium-Term Notes, 7.63%, 1999........ $ 1,500,000(c,e)$ 1,701,032
Salomon,
Medium-Term Floating-Rate Notes,
Ser. D, 5.849%, 1999....................... 1,230,000(c) 1,224,305
------------
11,085,587
------------
Finance/Asset Backed--5.6% Chase Credit Card Master Trust,
Asset Backed Ctfs.,
Ser. 1997-2, C1. A, 6.30%, 2003............ 1,000,000 1,006,250
CitiBank Credit Card Master Trust I,
Credit Card Participation Ctfs.,
Ser. 1997-3, Cl. A, 6.84%, 2004............ 1,500,000 1,516,172
Green Tree Financial,
Manufactured Housing Contract
Pass-Through Ctfs.,
Ser. 1996-10, Cl. A5, 6.83%, 2028.......... 1,000,000 1,029,062
NationsBank Auto Grantor Trust 1995-A,
Asset Backed Ctfs., Cl. A, 5.85%, 2002..... 47,482 47,517
Premier Auto Trust 1996-2,
Asset Backed Notes, Cl. A-4, 6.575%, 2000.. 1,000,000 1,011,290
WFS Financial Owner Trust,
Auto Receivable Backed Notes,
Ser. 1996-D, Cl. A3, 6.05%,2001............ 1,500,000 1,500,469
------------
6,110,760
------------
Foods/Beverages--1.4% Dole Food,
Notes, 6 3/4%, 2000........................ 1,500,000 1,519,133
------------
Foreign/Yankee--8.9% ABN AMRO Bank N.V.,
Sub. Notes, 7 1/4%, 2005................... 2,500,000 2,614,435
Hanson Overseas B.V.,
Gtd. Sr. Notes, 7 3/8%, 2003............... 2,500,000 2,603,713
Midland Bank plc,
Sub. Notes, 7 5/8%, 2006................... 2,500,000 2,672,130
Province of Quebec,
Deb., 7.295%, 2006......................... 1,000,000(f) 1,076,220
Smurfit Capital Funding plc,
(Gtd. by Jefferson Smurfit Group plc),
Deb., 7 1/2%, 2025......................... 750,000 780,623
------------
9,747,121
------------
Healthcare--.9% Columbia/HCA Healthcare,
Notes, 6.91%, 2005......................... 1,000,000 982,605
------------
Hotels/Motels--2.3% Hilton Hotels,
Sr. Notes, 7%, 2004........................ 2,500,000 2,521,225
------------
</TABLE>
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- ----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1997
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------------------------------- --------------- -------------
<S> <C> <C> <C>
Industrial--3.3% Coca Cola Enterprises,
Notes, 6 3/8%, 2001........................ $ 1,025,000 $ 1,031,956
Waste Management,
Notes, 6 5/8%, 2002........................ 2,500,000 2,527,650
-------------
3,559,606
-------------
Leisure-Travel--1.1% Royal Caribbean Cruises,
Deb., 7 1/2%, 2027......................... 1,250,000 1,257,366
-------------
Other--.4% New Jersey Economic Development Authority,
St. Pension Funding Revenue
Revenue Bonds, 7.425%, 2029 ............... 400,000 434,368
-------------
Transportation--1.7% American Airlines Pass-Through Trusts,
Pass Through Ctfs., Ser. 1991-A, 9.71%, 2007 1,118,661 1,276,046
Norfolk Southern,
Notes, 7.35%, 2007......................... 500,000 525,030
-------------
1,801,076
-------------
U.S. Government/
Mortgage Backed --24.8% Federal Home Loan Mortage Corp.:
6%, 3/1/2004............................... 879,914 884,587
Multiclass Mortgage Participation Ctfs.,
REMIC:
Ser. 1453, Cl. S, 6.89%, 2000......... 574,683(g) 578,455
Ser. 1929, Cl. NH, 7 1/2%, 2011....... 1,500,000 1,543,125
Ser. 1279, Cl. PH, 7 1/4%, 2020....... 400,000 406,988
Ser. 1660, Cl. H, 6 1/2%, 2009........ 2,570,000 2,598,109
Federal National Mortgage Association:
6 1/2%, 11/30/27........................... 2,500,000(h) 2,457,800
7%, 6/1/2009-10/1/2027..................... 4,749,042 4,790,221
7 1/2%, 9/01/2027-10/1/2027................ 2,989,985 3,054,450
REMIC Trust, Pass-Through Ctfs.
(collateralized by FNMA Pass-Through Ctfs.),
Ser. 1997-30, Cl. VG, 7%, 2012.......... 2,000,000 2,063,125
Government National Mortgage Association I:
6%, 1/15/2009-10/31/2012................... 794,241(i) 787,826
6 1/2%, 2/15/2024.......................... 2,452,751 2,444,314
7%, 11/15/2023............................. 2,004,083 2,025,988
7 1/2%, 1/15/2026.......................... 908,264 932,106
8%, 2/15/2008.............................. 997,551 1,056,776
8 1/2%, 4/15/2025-8/15/2025................ 1,293,613 1,362,874
9 1/2%, 4/15/2018.......................... 48,098 52,442
-------------
27,039,186
-------------
U.S. Government--25.4% U.S. Treasury Bonds:
7 7/8%, 2/15/2021.......................... 2,250,000 2,694,375
</TABLE>
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- -------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1997
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------------------------------- --------------- -------------
<S> <C> <C> <C>
U.S. Government (continued) U.S. Treasury Bonds (continued):
12%, 8/15/2013............................. $ 2,880,000 $ 4,215,150
U.S. Treasury Notes:
5 3/4%, 8/15/2003.......................... 2,500,000 2,491,797
6%, 7/31/2002.............................. 2,000,000 2,019,375
6 3/8%, 5/15/1999.......................... 2,000,000 2,021,250
6 5/8%, 4/30/2002.......................... 5,300,000 5,476,391
7%, 7/15/2006.............................. 6,750,000 7,234,102
U.S. Treasury Principal Strips,
Zero Coupon, 8/15/2004..................... 2,320,000 1,563,900
-------------
27,716,340
-------------
TOTAL BONDS AND NOTES
(cost $104,344,840)........................ $106,242,303
-------------
-------------
Short-Term Investments--2.5%
- -------------------------------------------------------------------------------
Commercial Paper--.4% General Motors Acceptance Corp.,
5.53%, 11/17/1997.......................... $ 390,000 $ 390,000
Repurchase Agreement--2.1% Salomon Brothers, 5.70%
Dated 10/31/1997, due 11/3/1997 in the amount
of $2,296,000 (fully collateralized by
$2,324,000 U.S.Treasury Notes, 57/8%,
3/31/1999 value $2,343,522)................ 2,296,000 2,296,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,686,000).......................... $ 2,686,000
-------------
-------------
TOTAL INVESTMENTS (cost $107,030,840).......................................... 99.9% $108,928,303
------- -------------
------- -------------
CASH AND RECEIVABLES (NET)..................................................... .1% $ 77,150
------- -------------
------- -------------
NET ASSETS..................................................................... 100.0% $109,005,453
------- -------------
------- -------------
</TABLE>
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- -------------------------------------------------------------------------------
Notes to Statement of Investments:
- -------------------------------------------------------------------------------
(a) Reflects date security can be redeemed at holders' option; the stated
maturity date is 2/15/2036.
(b) Reflects notional face.
(c) Variable rate securities--interest rate subject to periodic change.
(d) Reflects date security can be redeemed at holders' option; the stated
maturity date is 8/15/2026.
(e) Reflects date security can be redeemed at holders' option; the stated
maturity date is 10/15/2009.
(f) Reflects first date security can be redeemed at holders' option; the stated
maturity is 7/22/2026.
(g) Inverse floater security--interest rate subject to periodic change.
(h) Purchased on a forward commitment basis.
(i) Partially purchased on a forward commitment basis.
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1997
<TABLE>
<CAPTION>
Cost Value
------------ ------------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $107,030,840 $108,928,303
Cash............................................. 469,061
Receivable for investment securities sold........ 929,495
Receivable for shares of Capital Stock subscribed 260,000
Interest receivable.............................. 1,305,979
------------
111,892,838
------------
LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 49,625
Payable for investment securities purchased...... 2,837,760
------------
2,887,385
------------
NET ASSETS..................................................................... $109,005,453
------------
------------
REPRESENTED BY: Paid-in capital.................................. $107,216,361
Accumulated net realized gain (loss) on investments (108,371)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 3......................... 1,897,463
------------
NET ASSETS..................................................................... $109,005,453
------------
------------
NET ASSET VALUE PER SHARE
-------------------------
Institutional Retail
Shares Shares
------------- ------------
Net Assets................................................................ $317,303 $108,688,150
Shares Outstanding........................................................ 25,347 8,683,016
NET ASSET VALUE PER SHARE................................................. $12.52 $12.52
------ ------
------ ------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- --------------------------------------------------------------------
Statement of Operations Year Ended October 31, 1997
<TABLE>
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Interest................................... $5,294,546
Cash dividend.............................. 19,250
----------
Total Income............................. $5,313,796
EXPENSES: Management fee--Note 2(a).................. 426,110
Loan commitment fees--Note 4............... 781
Distribution fees (Institutional shares)--Note 2(b) 337
----------
Total Expenses........................... 427,228
----------
INVESTMENT INCOME--NET................................................... 4,886,568
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3:
Net realized gain (loss) on investments.... $ 536,132
Net unrealized appreciation (depreciation)
on investments........................... 1,317,452
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................... 1,853,584
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $6,740,152
----------
----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- --------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996(1,2)
---------------- ---------------------
<S> <C> <C>
OPERATIONS:
Investment income--net................................................. $ 4,886,568 $ 1,947,306
Net realized gain (loss) on investments................................ 536,132 (644,503)
Net unrealized appreciation (depreciation) on investments.............. 1,317,452 580,011
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations.. 6,740,152 1,882,814
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net
Institutional shares................................................ (8,096) (65,938)
Retail shares....................................................... (4,880,158) (1,879,682)
------------ ------------
Total Dividends.................................................. (4,888,254) (1,945,620)
------------ ------------
CAPITAL STOCK TRANSACTIONS--Note 5:
Net proceeds from shares sold:
Institutional shares................................................ 219,869 1,871,917
Retail shares....................................................... 54,972,784 62,800,824
Dividends reinvested:..................................................
Institutional shares................................................ 4,985 54,374
Retail shares....................................................... 2,057,870 966,635
Cost of shares redeemed:...............................................
Institutional shares................................................ (40,510) (1,739,591)
Retail shares....................................................... (8,653,765) (5,299,031)
------------ ------------
Increase (Decrease) in Net Assets from Capital Stock Transactions 48,561,233 58,655,128
------------ ------------
Total Increase (Decrease) in Net Assets....................... 50,413,131 58,592,322
NET ASSETS:
Beginning of Period.................................................... 58,592,322 --
------------ ------------
End of Period.......................................................... $109,005,453 $ 58,592,322
------------ ------------
------------ ------------
Undistributed investment income--net...................................... -- $ 1,686
------------ ------------
Shares Shares
------------ ------------
CAPITAL SHARE TRANSACTIONS--Note 5:
INSTITUTIONAL SHARES
--------------------
Shares sold............................................................ 17,954 149,686
Shares issued for dividends reinvested................................. 405 4,407
Shares redeemed........................................................ (3,304) (143,801)
------------ ------------
Net Increase (Decrease) in Shares Outstanding.................... 15,055 10,292
------------ ------------
------------ ------------
RETAIL SHARES
-------------
Shares sold............................................................ 4,463,067 5,108,674
Shares issued for dividends reinvested................................. 167,445 79,631
Shares redeemed........................................................ (702,920) (432,881)
------------ ------------
Net Increase (Decrease) in Shares Outstanding.................... 3,927,592 4,755,424
------------ ------------
------------ ------------
<FN>
- ----------------
(1) From November 1, 1995 (commencement of operations) to October 31, 1996.
(2) Effective July 15, 1996, Investor Class shares were redesignated as
Institutional shares and Class R shares were redesignated as Retail shares.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- -----------------------------------------------------------------------
Financial Highlights
Contained below is per share operating performance data for a share of
Capital Stock outstanding, total investment return, ratios to average net assets
and other supplemental data for each period indicated. This information has been
derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Institutional Shares Retail Shares
------------------------- -------------------------
Year Ended October 31, Year Ended October 31,
------------------------- -------------------------
PER SHARE DATA: 1997 1996(1,2) 1997 1996(1,2)
------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....... $12.29 $12.50 $12.29 $12.50
------ ------ ------ ------
Investment Operations:
Investment income--net..................... .74 .71 .77 .74
Net realized and unrealized gain (loss)
on investments.......................... .23 (.21) .23 (.21)
------ ------ ------ ------
Total from Investment Operations........... .97 .50 1.00 .53
------ ------ ------ ------
Distributions:
Dividends from investment income--net...... (.74) (.71) (.77) (.74)
------ ------ ------ ------
Net asset value, end of period............. $12.52 $12.29 $12.52 $12.29
------ ------ ------ ------
------ ------ ------ ------
TOTAL INVESTMENT RETURN....................... 8.21% 4.18% 8.49% 4.45%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.... .80% .79% .55% .55%
Ratio of net investment income
to average net assets................... 6.01% 5.61% 6.31% 6.29%
Portfolio Turnover Rate.................... 143.91% 198.16% 143.91% 198.16%
Net Assets, end of period (000's Omitted).. $317 $126 $108,688 $58,466
<FN>
- ----------------------
(1) From November 1, 1995 (commencement of operations) to October 31, 1996.
(2) Effective July 15, 1996, Investor Class shares were redesignated as
Institutional shares and Class R shares were redesignated as Retail shares.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Disciplined Intermediate Bond Fund (the "Fund") is a series of The
Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering seventeen
series including the Fund. The Fund's investment objective is to outperform the
Lehman Brothers Aggregate Bond Index, while maintaining a similar level of risk,
by investing primarily in domestic and foreign investment-grade debt securities
and by actively managing bond market and maturity exposure. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager is
a direct subsidiary of Mellon Bank, N.A.
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
is authorized to issue 100 million of $.001 par value Capital Stock in each of
the following classes of shares: Institutional and Retail. Institutional shares
are offered only to the clients of banks, securities brokers or dealers and
other financial institutions (collectively, Service Agents) that have entered
into selling agreements with the Fund's distributor. Retail shares are offered
to any investor. Other differences between the two classes include the services
offered to and the expenses borne by each class.
Investment income, net of expenses (other than class specific expenses) and
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (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) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a 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. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis.
(C) REPURCHASE AGREEMENTS: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian and sub-custodian, takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the Fund's holding
period. The value of the collateral is at least equal, at all times, to the
total amount of the repurchase obligation, including interest. In the event of a
counter party default, the Fund has the right to use the collateral to offset
losses incurred. There is potential loss to
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Dreyfus Disciplined Intermediate Bond Fund
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NOTES TO FINANCIAL STATEMENTS (continued)
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) DIVIDENDS 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 $82,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to October 31, 1997. If not
applied, the carryover expires in fiscal 2004. 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 .55% of the value of the Fund's average daily net assets. Out of
its fee, the Manager pays all of the expenses of the Fund except brokerage fees,
taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses,
fees and expenses of non-interested Directors (including counsel fees) and
extraordinary expenses. In addition, the Manager is required to reduce its fee
in an amount equal to the Fund's allocable portion of fees and expenses of the
non-interested Directors (including counsel). Each director receives $27,000 per
year, $1,000 for each Board meeting attended and $750 for each Audit Committee
meeting attended and is reimbursed for travel and out-of-pocket expenses. The
Chairman of the Board receives an additional annual fee of $25,000 per year.
These fees pertain to the following funds: The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Tax-Free Municipal Funds, and The Dreyfus/Laurel Funds Trust.
Amounts required to be paid by the Company directly to the non-interested
Directors, that would be applied to offset a portion of the management fee
payable to the Manager, are in fact paid directly by the Manager to the
non-interested Directors.
(B) DISTRIBUTION PLAN: Under the Distribution Plan (the "Plan") adopted
pursuant to Rule 12b-1 under the Act, the Fund may pay annually up to .25% of
the value of the average daily net assets attributable to its Institutional
shares to compensate the Distributor and Dreyfus Service Corporation, an
affiliate of the Manager, for shareholder servicing activities and the
Distributor for activities primarily intended to result in the sale of
Institutional shares. The Retail shares bear no distribution fee. During the
period ended October 31, 1997, the Fund was charged $337 for the Institutional
shares pursuant to the Plan.
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Dreyfus Disciplined Intermediate Bond Fund
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NOTES TO FINANCIAL STATEMENTS (continued)
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of majority of those Directors
who are not "interested persons" of the Company and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan.
NOTE 3--Securities Transactions:
The aggregate amount of purchase and sales (including paydowns) of investment
securities, excluding short-term securities, during the period ended October 31,
1997 amounted to $154,089,914 and $106,556,082, respectively.
At October 31, 1997, accumulated net unrealized appreciation on
investments was $1,897,463 consisting of $1,910,108 gross unrealized
appreciation and $12,645 gross unrealized depreciation.
At October 31, 1997, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
NOTE 4--Bank Line of Credit:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings. For the period ended October
31, 1997, the Fund did not borrow under the Facility.
NOTE 5--Acquisition of Common Trust Asset:
On March 22, 1996, the Fund acquired all of the assets of the TBC Pooled
Employee Fixed Income Fund, a trust advised by a subsidiary of Mellon Bank, N.A.
The acquisition was accomplished by an exchange of 773,272 Retail shares of the
Fund's Capital Stock for cash, securities and assumption of liabilities of the
trust totaling $9,472,581 which is included in net proceeds from shares sold on
the Statement of Changes in Net Assets.
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Dreyfus Disciplined Intermediate Bond Fund
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Report of Independent Auditors
THE BOARD OF DIRECTORS AND SHAREHOLDERS
THE DREYFUS/LAUREL FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Disciplined Intermediate Bond
Fund of The Dreyfus/Laurel Funds, Inc. as of October 31, 1997, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the two-year period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of securities owned
as of October 31, 1997, by correspondence with the custodian. As to securities
purchased and sold, but not received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Disciplined Intermediate Bond Fund of The Dreyfus/Laurel Funds, Inc. as
of October 31, 1997, the results of its operations for the year then ended,
changes in its net assets for each of the years in the two-year period then
ended and its financial highlights for each of the years in the two-year period
then ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
December 17, 1997
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Dreyfus Disciplined Intermediate Bond Fund
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Important Tax Information (Unaudited)
In accordance with Federal tax law, the Fund hereby designates 0.39% of the
ordinary dividends paid during the fiscal year ended October 31, 1997 as
qualifying for the corporate dividends received deduction. Shareholders will
receive notification in January 1998 of the percentage applicable to the
preparation of their 1997 income tax returns.
<PAGE>
Dreyfus Disciplined Intermediate
Bond Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 302/702AR9710
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND INVESTOR
SHARES AND RESTRICTED SHARES AND THE LEHMAN BROTHERS
AGGREGATE BOND INDEX
EXHIBIT A:
DREYFUS DREYFUS
DISCIPLINED DISCIPLINED LEHMAN
INTERMEDIATE INTERMEDIATE BROTHERS
PERIOD BOND FUND BOND FUND AGGREGATE
(INVESTOR (RESTRICTED BOND
SHARES) SHARES) INDEX*
11/1/95 10,000 10,000 10,000
1/31/96 10,296 10,302 10,361
4/30/96 9,937 9,950 10,053
7/31/96 10,042 10,061 10,195
10/31/96 10,418 10,445 10,585
1/31/97 10,516 10,559 10,699
4/30/97 10,562 10,612 10,765
7/31/97 11,079 11,137 11,292
10/31/97 11,273 11,331 11,526
* Source: Lehman Brothers
