N-CSR 1 form.htm ANNUAL REPORT form
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549

FORM N-CSR 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT 
INVESTMENT COMPANIES

Investment Company Act file number 811-2653

DREYFUS BOND FUNDS, INC.
(Exact name of Registrant as specified in charter) 

c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
(Address of principal executive offices) (Zip code) 
 
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and address of agent for service)

Registrant's telephone number, including area code:    (212) 922-6000 
Date of fiscal year end:    8/31     
Date of reporting period:    8/31/04     

FORM N-CSR
Item 1.    Reports to Stockholders. 

Dreyfus     
Municipal    Bond 
Fund     

  ANNUAL REPORT August 31, 2004

The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.

Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value

Contents
 
    THE FUND 
2    Letter from the Chairman 
3    Discussion of Fund Performance 
6    Fund Performance 
7    Understanding Your Fund’s Expenses 
7    Comparing Your Fund’s Expenses 
With Those of Other Funds
8    Statement of Investments 
21    Statement of Assets and Liabilities 
22    Statement of Operations 
23    Statement of Changes in Net Assets 
24    Financial Highlights 
25    Notes to Financial Statements 
31    Report of Independent Registered 
       Public Accounting Firm 
32    Important Tax Information 
33    Board Members Information 
35    Officers of the Fund 
FOR MORE INFORMATION
    Back Cover 

Dreyfus Municipal 
Bond Fund 

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

This annual report for Dreyfus Municipal Bond Fund covers the 12-month period from September 1, 2003, through August 31, 2004. 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, Paul Disdier.

The U.S. economy alternated between signs of strength and weakness during the reporting period, causing heightened volatility in the municipal bond market. Although the Federal Reserve Board twice raised short-term interest rates toward the end of the reporting period, municipal bond prices have generally held up better than many analysts expected, as investors apparently have revised their economic expectations in response to the situation in Iraq, higher energy prices and some disappointing labor statistics.

Recent market volatility and the move to a less accommodative monetary policy may be signaling the beginning of a new phase in the economic cycle.At times such as these, when market conditions are in a period of transition, we believe it is especially important for you to stay in close contact with your financial advisor, who can help you position your portfolio in a way that is designed to respond to the challenges and opportunities of today’s changing investment environment.

Thank you for your continued confidence and support.

The Dreyfus Corporation
September 15, 2004
2

DISCUSSION OF FUND PERFORMANCE

Paul Disdier, Senior Portfolio Manager

How did Dreyfus Municipal Bond Fund perform relative to its benchmark?

For the 12-month period ended August 31, 2004, the fund achieved a total return of 7.20% .1The Lehman Brothers Municipal Bond Index (the “Index”), the fund’s benchmark, achieved a total return of 7.11% for the same period.2 In addition, the average total return for all funds reported in the Lipper General Municipal Debt Funds category was 6.44% .3

Municipal bond prices rose in the closing months of 2003 as the market recovered from a sharp sell-off during the previous summer, but tax-exempt securities made little headway over the first eight months of 2004.The fund produced a higher return than its Index and Lipper category average, primarily due to its duration management and yield-curve positioning strategies, which enabled the fund to take full advantage of market rallies during periods of economic uncertainty.

What is the fund’s investment approach?

The fund seeks to maximize current income exempt from federal income tax to the extent consistent with the preservation of capital.

To pursue this goal, the fund normally invests substantially all of its net assets in municipal bonds that provide income exempt from federal income tax.The fund will invest at least 75% of its assets in municipal bonds rated A or better or the unrated equivalent as determined by Dreyfus. The fund may invest up to 25% of its assets in municipal bonds rated below A or the unrated equivalent as determined by Dreyfus, including bonds rated below investment-grade quality (“high-yield” or “junk” bonds).The dollar-weighted average maturity of the fund’s portfolio is not restricted, but normally exceeds 10 years.

The portfolio manager may buy and sell bonds based on credit quality, market outlook and yield potential. In selecting municipal bonds for investment, the portfolio manager may assess the current interest-rate

The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)

environment and the municipal bond’s potential volatility in different rate environments.The portfolio manager focuses on bonds with the potential to offer attractive current income or that are trading at attractive market prices.A portion of the fund’s assets may be allocated to “discount” bonds, which are bonds that sell at a price below their face value, or to “premium” bonds, which are bonds that sell at a price above their face value.The fund’s allocation to either discount bonds or premium bonds will change along with the portfolio manager’s changing views of the current interest-rate and market environment. The portfolio manager also may look to select bonds that are most likely to obtain attractive prices when sold.

What other factors influenced the fund’s performance?

The reporting period began in the wake of one of the most severe six-week declines in the municipal bond market’s history, and bond prices gradually recovered over the next four months as U.S. labor markets remained sluggish and inflation remained low. Because we had positioned the fund for a market recovery in the wake of the previous summer’s decline, the fund posted above-average returns during the first half of the reporting period.

Soon after 2004 began, however, many investors began to look forward to stronger economic growth and became concerned that long-dormant inflationary pressures might resurface, which they believed would hurt bond prices. Our analysis of economic and market conditions resulted in a generally neutral average duration position and a more intent focus on intermediate-term bonds, where we believed values were most attractive.This strategy held back the fund’s performance over the short term, when stronger economic data and unexpected employment gains caused bond prices to fall in the early spring. Bonds in the intermediate-term part of the maturity spectrum were particularly hard-hit as non-traditional institutional investors and hedge funds attempted to profit from heightened price volatility.

Soon thereafter, however, new data showed that economic growth was weaker than many expected, and the market generally rallied through

4

the summer. Because it was positioned for a rally, the fund’s performance strengthened through the end of the reporting period.

What is the fund’s current strategy?

Although the Federal Reserve Board began raising short-term interest rates in late June, new data released toward the end of the reporting period indicated that the U.S. economy remained sluggish. In addition, given the impact of higher energy prices and a softer economic picture, we became less concerned about significant hikes in the federal funds rate and other short-term interest rates.Accordingly, we adopted a somewhat more constructive investment posture, extending the fund’s average duration to a range we considered slightly longer than industry averages. In addition, we shifted the fund’s focus from bonds in the intermediate-term range toward those with maturities of approximately 20 years. This change was designed to capture higher yields from longer-term securities and to position the fund for potential capital appreciation over time. Finally, we increased the fund’s holdings of higher-yielding bonds that seemed to us to be attractively valued, including bonds issued by hospitals, industrial development agencies and the state of California.

September 15, 2004

1 Total return includes reinvestment of dividends and any capital gains paid. Past performance is no guarantee of future results. Share price, yield and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Income may be subject to state and local taxes, and some income may be subject to the federal alternative minimum tax (AMT) for certain investors. Capital gains, if any, are fully taxable. Return figures provided reflect the absorption of fund expenses by The Dreyfus Corporation pursuant to an undertaking in effect through November 30, 2004, at which time it may be extended, terminated or modified. Had these expenses not been absorbed, the fund’s return would have been lower.

2 SOURCE: LIPPER INC. — Reflects reinvestment of dividends and, where applicable, capital gain distributions.The Lehman Brothers Municipal Bond Index is a widely accepted, unmanaged total return performance benchmark for the long-term, investment-grade, tax-exempt bond market. Index returns do not reflect fees and expenses associated with operating a mutual fund.

3 SOURCE: Lipper Inc.

The Fund 5
FUND PERFORMANCE
Average Annual Total Returns    as of 8/31/04         
    1 Year    5 Years    10 Years 
Fund    7.20%    5.21%    5.07% 

† Source: Lipper Inc.

Past performance is not predictive of future performance.The fund’s performance shown in the graph and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The above graph compares a $10,000 investment made in Dreyfus Municipal Bond Fund on 8/31/94 to a $10,000 investment made in the Lehman Brothers Municipal Bond Index (the “Index”) on that date.All dividends and capital gain distributions are reinvested.

The fund invests primarily in municipal securities and its performance shown in the line graph takes into account fees and expenses.The Index, unlike the fund, is an unmanaged total return performance benchmark for the long-term, investment-grade, tax-exempt bond market, calculated by using municipal bonds selected to be representative of the municipal market overall.The Index does not take into account charges, fees and other expenses which can contribute to the Index potentially outperforming the fund. 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.

6

UNDERSTANDING YOUR FUND’S EXPENSES

As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Municipal Bond Fund from March 1, 2004 to August 31, 2004. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

Expenses and Value of a $1,000 Investment 
assuming actual returns for the six months ended August 31, 2004 
 
Expenses paid per $1,000 †    $ 3.38 
Ending value (after expenses)    $1,004.40 

COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS

Using the SEC’s method to compare expenses

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.

Expenses and Value of a $1,000 Investment 
assuming a hypothetical 5% annualized return for the six months ended August 31, 2004 
 
Expenses paid per $1,000 †    $ 3.40 
Ending value (after expenses)    $1,021.77 

† Expenses are equal to the fund’s annualized expense ratio of .67%, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

The Fund 7
STATEMENT OF INVESTMENTS
August 31, 2004
    Principal     
Long-Term Municipal Investments—98.7%    Amount ($)    Value ($) 
Alabama—3.1%         
Alabama Housing Finance Authority, SFMR:         
   6.45%, 10/1/2025    1,935,000    1,986,277 
   6.10%, 10/1/2027    3,815,000    3,961,954 
Alabama Industrial Development Authority, SWDR         
   (Pine City Fiber Co.) 6.45%, 12/1/2023    4,900,000    4,924,598 
Alabama Public School and College Authority:         
   9.175%, 7/1/2015    11,760,000 a,b    14,567,465 
   (Capital Improvement)         
       5.50%, 7/1/2019    29,250,000    32,566,657 
Courtland Industrial Development Board, EIR         
   (International Paper Co.)         
   6.25%, 8/1/2025    8,000,000    8,380,640 
Alaska—1.8%         
Alaska, General Purpose         
   5.25%, 8/1/2009 (Insured; FSA)    11,720,000    13,070,613 
Alaska Energy Authority, Power Revenue (Bradley Lake)     
   6%, 7/1/2017 (Insured; FSA)    5,730,000    6,842,537 
Alaska Housing Finance Corp.         
   9.895%, 12/1/2019    10,000,000 a,b    10,953,200 
Anchorage, Electric Utility Revenue         
   6.50%, 12/1/2015 (Insured; MBIA)    6,135,000    7,674,701 
Arizona—2.3%         
Maricopa County Pollution Control Corp., PCR         
   (Southern California Edison Co.)         
   2.90%, 3/2/2009    14,500,000    14,198,400 
The Industrial Development Authority of the County of     
Apache, PCR (Tucson Electric Power Co. Project):         
       5.85%, 3/1/2028    7,750,000    7,671,957 
       5.875%, 3/1/2033    28,570,000    28,162,020 
California—10.4%         
California:         
   Economic Recovery:         
       5%, 7/1/2016    14,500,000    15,515,290 
       5%, 7/1/2017    15,000,000    15,985,200 
   GO:         
       1.98%, 2/3/2005    10,000,000    10,000,000 
       5.50%, 4/1/2028    11,260,000    11,994,715 
       5.50%, 4/1/2030    5,000,000    5,311,500 

8
    Principal     
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
California (continued)         
California Department of Water Resource, Revenue:         
   Power Supply:         
       5.25%, 5/1/2011 (Insured; FSA)    12,000,000    13,464,240 
       5.125%, 5/1/2019 (Insured; FGIC)    21,090,000    22,689,255 
       5.125%, 5/1/2019    20,500,000    21,810,770 
   Water (Central Valley Project):         
       5%, 12/1/2010    12,120,000    13,531,859 
       5.50%, 12/1/2016    7,670,000    8,654,828 
California Public Works Board, LR:         
   (Department of Mental Health-Coalinga)         
       5.125%, 6/1/2029    7,000,000    7,052,850 
   (Various University of California Projects)         
       5.50%, 6/1/2014    9,750,000    11,040,120 
California Statewide Communities         
   Development Authority (Kaiser Permanente)         
   2.30%, 4/1/2034    10,000,000    9,989,100 
Chula Vista, Industrial Development Revenue         
   (San Diego Gas and Electric)         
   5.50%, 12/1/2021    10,000,000    10,535,000 
Golden State Tobacco Securitization Corp.,         
   Enhanced Tobacco Settlement Asset—Backed Bonds:         
       5.50%, 6/1/2033 (Insured; FGIC)    14,000,000    14,987,700 
       5.50%, 6/1/2043    28,495,000    29,278,897 
Colorado—.1%         
Denver Convention Center Hotel Authority,         
   Convention Center Hotel, Senior Revenue         
   5%, 12/1/2033    2,250,000    2,280,622 
Connecticut—1.3%         
Connecticut Resource Recovery Authority         
   (American Fuel Co. Project)         
   6.45%, 11/15/2022    7,325,000    7,500,067 
Mashantucket Western Pequot Tribe,         
   Special Revenue:         
6.40%, 9/1/2011 (Prerefunded 9/1/2007)    9,170,000 b,c    10,264,256 
       6.40%, 9/1/2011    9,330,000 b    10,008,198 
Delaware—.2%         
Delaware Housing Authority, Senior SFMR         
   6.45%, 1/1/2026    3,210,000    3,230,640 

The Fund 9

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal         
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
District of Columbia—.5%             
District of Columbia Tobacco Settlement Financing Corp.             
   6.50%, 5/15/2033    11,750,000        10,579,935 
Florida—4.0%             
Florida Board of Education             
   Capital Outlay (Public Education)             
   5.50%, 6/1/2016    12,000,000        13,346,160 
Florida Department of Environmental Protection, Revenue         
   5.75%, 7/1/2013 (Insured; FGIC)    10,270,000        11,768,393 
Florida Division Bond Finance Department, General             
   Services Revenue (Environmental             
   Protection-Preservation 2000)             
   5.50%, 7/1/2008 (Insured; FSA)    9,500,000        10,570,270 
Gainesville Utilities System, Revenue             
   5%, 10/1/2009 (Insured; FSA)    6,295,000        6,957,801 
Orange County, Health Facilities Authority, Revenue             
   (Orlando Regional Healthcare)             
   6%, 12/1/2028    2,090,000        2,211,722 
Orlando Utilities Commission,             
   Water and Electric Revenue             
   6.75%, 10/1/2017    15,875,000        20,034,885 
Palm Beach County, Public Improvement Revenue             
   (Convention Center Project)             
   5%, 11/1/2011 (Insured; FGIC)    10,000,000        10,948,400 
Tampa, Utility Tax and Special Revenue             
   5.75%, 10/1/2013 (Insured; AMBAC)    9,100,000        10,692,773 
Georgia—3.4%             
Chatham County Hospital Authority,             
   Revenue Improvement             
   (Memorial Health University)             
   5.75%, 1/1/2029    4,000,000        4,168,240 
Fulton County Facilities Corp., COP             
   (Fulton County, Georgia Public Purpose Project)             
   5.50%, 11/1/2018 (Insured; AMBAC)    11,630,000        13,023,390 
Georgia:             
   5.80%, 11/1/2014 (Prerefunded 11/1/2009)    19,580,000    c    22,837,329 
   5.80%, 11/1/2015 (Prerefunded 11/1/2009)    20,000,000    c    23,327,200 
Milledgeville-Baldwin County Development             
   Authority, Revenue (Georgia College and             
   State University Foundation)             
   5.625%, 9/1/2030    4,000,000        4,110,760 
 
 
 
10             

    Principal     
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
Georgia (continued)         
Private Colleges and Universities Authority, Revenue         
   (Mercer University Project)         
   5.75%, 10/1/2031    6,000,000    6,216,420 
Hawaii—.8%         
Hawaii 5.80%, 9/1/2015 (Insured; FSA)         
   (Prerefunded 9/1/2009)    14,000,000 c    16,143,260 
Idaho—.7%         
Idaho Housing Agency, Multi-Family Housing         
   6.70%, 7/1/2024    10,050,000    10,260,648 
Power County Industrial Development Corp.,         
   SWDR (FMC Corp. Project)         
   6.45%, 8/1/2032    4,750,000    4,874,925 
Illinois—4.2%         
Cook County 5.50%, 11/15/2012 (Insured; FGIC)         
   (Prerefunded 5/15/2011)    12,000,000 c    13,712,280 
Illinois Development Finance Authority, PCR         
   (Central Illinois Public Service Co.)         
   6.375%, 1/1/2028    16,450,000    16,465,627 
Illinois Educational Facilities Authority, Revenue         
   (Illinois Institute of Technology)         
   6.875%, 12/1/2015 (Insured; AGIC)    7,250,000    7,479,753 
Illinois Finance Authority, Revenue         
   (Northwestern Memorial Hospital)         
   5.50%, 8/15/2043    22,310,000    22,882,028 
Illinois Health Facilities Authority, Revenue         
   (Advocate Health Care Network)         
   6.125%, 11/15/2022    10,000,000    11,075,800 
Illinois Housing Development Authority:         
   Multi-Family Housing (Lawndale Redevelopment Project)     
       6.90%, 12/1/2026 (Insured; FHA)    8,750,000    9,055,200 
   (Multi-Family Program) 6.75%, 9/1/2021    8,750,000    8,825,163 
Indiana—.6%         
Indiana Transportation Finance Authority,         
   Highway Revenue         
   5.75%, 12/1/2021 (Insured; FGIC)    10,000,000    11,881,200 
Iowa—.1%         
Iowa Finance Authority, SFMR         
   (Mortgage Backed Securities Program)         
   6.65%, 7/1/2028    2,745,000    2,810,715 

The Fund 11

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal     
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
Kansas—1.0%         
Wichita, Hospital Revenue Facilities Improvement         
   (Christi Health System)         
   5.50%, 11/15/2026    7,000,000    7,220,780 
Wyandotte County Kansas City, Unified Government         
   Utility System Revenue 5.60%, 9/1/2023    12,010,000    13,717,342 
Kentucky—.7%         
City of Ashland, Sewage and Solid Waste Revenue         
   (Ashland Inc. Project) 7.125%, 2/1/2022    5,170,000    5,333,217 
Mount Sterling, LR (Kentucky League Cities Funding)         
   6.10%, 3/1/2018    7,955,000    9,492,224 
Louisiana—.7%         
Parish of West Feliciana, PCR (Gulf States Utilities-I)         
   7.70%, 12/1/2014    14,000,000    14,173,460 
Maryland—.7%         
Community Development Administration, Department of         
   Housing and Community Development State of Maryland     
   10.095%, 7/1/2039    5,000,000 a,b    5,388,650 
Maryland Economic Development Corp, Student Housing         
   Revenue (Frostburg State University Project)         
   6.25%, 10/1/2033    8,580,000    8,937,014 
Massachusetts—2.7%         
Massachusetts 10.233%, 2/1/2015    10,000,000 a,b    13,110,700 
Massachusetts Housing Finance Agency, Revenue:         
   Housing:         
       6.50%, 7/1/2025 (Insured; AMBAC)    3,580,000    3,686,505 
       6.60%, 1/1/2037 (Insured; AMBAC)    6,135,000    6,310,645 
   Single Family Housing:         
       7.125%, 6/1/2025    2,810,000    2,812,754 
       6.65%, 12/1/2027    1,755,000    1,806,246 
Massachusetts Municipal Wholesale Electric Co.,         
Power Supply System Revenue (Nuclear Project         
   Number 4 Issue):         
       5%, 7/1/2007 (Insured; MBIA)    12,755,000    13,765,068 
       5.25%, 7/1/2013 (Insured; MBIA)    10,000,000    11,179,700 
Massachusetts Special Obligation         
   Dedicated Tax, Revenue         
   5.25%, 1/1/2024 (Insured; FGIC)    5,000,000    5,328,050 
Michigan—3.7%         
The Economic Development Corp. of the County of Gratiot,     
   Limited Obligation EDR (Danly Die Set Project)         
   7.625%, 4/1/2007    3,200,000    3,182,016 
 
 
12         

    Principal         
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
Michigan (continued)             
Michigan Building Authority, Revenue             
   (Facilities Program):             
       5%, 10/15/2007 (Insured; FSA)    6,000,000        6,520,380 
       5%, 10/15/2008 (Insured; FSA)    5,000,000        5,488,050 
       5%, 10/15/2009 (Insured; FSA)    20,000,000        22,104,600 
Michigan Hospital Finance Authority:             
   HR (Genesys Health System Obligated Group):             
8.125%, 10/1/2021 (Prerefunded 10/1/2005)    15,000,000    c    16,347,000 
7.50%, 10/1/2027 (Prerefunded 10/1/2005)    15,300,000    c    16,278,282 
   Revenue (Oakwood Obligated Group)             
       5.50%, 11/1/2016    8,165,000        8,757,616 
Minnesota—.9%             
Minneapolis and Saint Paul Metropolitan Airports             
Commission, Airport Revenue 5.75%, 1/1/2032             
   (Insured; FGIC)    5,000,000        5,528,500 
Minnesota Housing Finance Agency,             
   Single Family Mortgage:             
       6.50%, 7/1/2024    4,530,000        4,639,581 
       6.45%, 7/1/2025    8,030,000        8,221,676 
Mississippi—1.0%             
Mississippi, Gaming Counties             
   (Highway Improvements Project)             
   5%, 10/1/2009    18,770,000        20,755,678 
Missouri—1.5%             
Missouri Board of Public Buildings             
   (Special Obligation)             
   5.50%, 10/15/2010    12,205,000        13,947,874 
Missouri Higher Education Loan Authority,             
   Student Loan Revenue 6.75%, 2/15/2009    11,500,000        11,903,075 
The City of Saint Louis, Airport Revenue             
   (Airport Development Program)             
   5.625%, 7/1/2016 (Insured; MBIA)    5,000,000        5,555,450 
Nebraska—2.5%             
Omaha Public Power District, Electric Revenue             
   5.50%, 2/1/2014    47,300,000        54,113,565 
Nevada—.3%             
Clark County, PCR (Southern California Edison Co.)             
   3.25%, 3/2/2009    5,000,000        4,960,250 
Nevada Housing Division (Single Family Program)             
   6.80%, 4/1/2027    2,400,000        2,417,832 

The Fund 13

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal     
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
New Hampshire—1.5%         
Business Finance Authority of the State         
   of New Hampshire, PCR (Public Service Co.)         
   6%, 5/1/2021    15,500,000    17,163,925 
New Hampshire Housing Finance Authority:         
   Multi-Family Housing:         
7.55%, 7/1/2013 (Prerefunded 1/1/2005)    2,590,000 c    2,894,014 
       7.55%, 7/1/2013    1,490,000    1,648,521 
       (Mariners Village Project)         
           6.60%, 1/1/2038 (Insured; FHA)    7,365,000    7,536,752 
   Single Family Residential Mortgage         
       6.85%, 1/1/2025    2,185,000    2,190,615 
New Jersey—6.3%         
New Jersey Economic Development Authority,         
   PCR (Public Service Electric and Gas Co. Project)         
   6.40%, 5/1/2032 (Insured; MBIA)    32,040,000    32,930,712 
New Jersey Transit Corp., COP         
   Federal Transit Administration Grants         
   5.75%, 9/15/2014 (Insured; AMBAC)         
   (Prerefunded 9/15/2010)    15,000,000 c    17,343,450 
New Jersey Transportation Trust Fund Authority:         
   10.221%, 6/15/2012    12,330,000 a,b    16,904,307 
   (Transportation System):         
       5.50%, 12/15/2013 (Insured; FSA)    15,900,000    18,250,179 
       5.75%, 6/15/2018    7,750,000    9,081,683 
       5.75%, 6/15/2020    12,645,000    14,817,537 
New Jersey Turnpike Authority, Turnpike Revenue         
   9.698%, 1/1/2017    15,000,000 a,b    18,573,750 
Tobacco Settlement Financing Corp. of New Jersey         
   7%, 6/1/2041    8,320,000    8,034,125 
New Mexico—.5%         
New Mexico Finance Authority,         
   State Transportation Revenue         
   (Senior Lien)         
   5.25%, 6/15/2020 (Insured; MBIA)    8,000,000    8,758,800 
New Mexico Mortgage Financing Authority         
   6.80%, 1/1/2026    2,385,000    2,501,173 
New York—16.1%         
Long Island Power Authority,         
   Electric System Revenue:         
       5.50%, 12/1/2012 (Insured; FSA)    10,000,000    11,594,300 
       5.50%, 12/1/2013 (Insured; FSA)    25,860,000    30,088,627 
 
 
14         

    Principal     
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
New York (continued)         
Metropolitan Transportation Authority:         
   Revenue         
       5.50%, 11/15/2014 (Insured; AMBAC)    18,000,000    20,908,440 
   State Service Contract:         
       5.75%, 1/1/2016    7,000,000    8,103,620 
       5.75%, 1/1/2018    17,025,000    19,801,437 
Nassau County Industrial Development Agency, IDR         
   (KeySpan-Glenwood Energy Center, LLC Project)         
   5.25%, 6/1/2027    10,000,000    10,154,100 
New York City:         
   6.375%, 8/15/2011 (Prerefunded 8/15/2005)    24,720,000 c    26,118,410 
   5.50%, 5/15/2015 (Insured; MBIA)    11,180,000    12,441,104 
   5.75%, 3/1/2018    14,185,000    15,894,860 
   5.25%, 8/15/2024    18,500,000    19,413,715 
New York City Transitional Finance Authority, Revenue:         
   9.187%, 11/1/2018    14,550,000 a,b    17,986,565 
   (Future Tax Secured):         
5.75%, 2/15/2015 (Prerefunded 2/15/2010)    5,100,000 c    5,900,037 
       5.75%, 2/15/2015    11,910,000    13,490,457 
New York State 5%, 4/15/2009    10,020,000    11,014,886 
New York State Dormitory Authority, Revenue:         
   (City University):         
       5.25%, 7/1/2009    10,000,000    11,159,800 
       7.50%, 7/1/2010    5,000,000    5,781,350 
   (State University Educational Facilities)         
       5.50%, 5/15/2013 (Insured; FGIC)    20,350,000    23,364,039 
New York State Environmental Facilities Corp.,         
   State Clean Water and Drinking Water Revolving Funds         
   Revenue (New York City Municipal Water Finance         
   Authority Projects) (Second Resolution Bonds)         
   5.50%, 6/15/2017    7,100,000    8,309,272 
New York State Thruway Authority         
   Service Contract Revenue         
   (Local Highway and Bridge)         
   5.50%, 4/1/2013    37,000,000    41,484,400 
Tobacco Settlement Financing Corp. of New York,         
   Asset Backed Revenue         
   5.25%, 6/1/2022 (Insured; AMBAC)    10,000,000    10,682,300 
Triborough Bridge and Tunnel Authority,         
   Revenues (General Purpose)         
   5.50%, 1/1/2032    20,000,000    21,372,000 

The Fund 15

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal     
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
North Carolina—2.4%         
Charlotte 5.25%, 2/1/2015    9,380,000    10,325,692 
Mecklenburg County 5.50%, 4/1/2009    14,670,000    16,513,579 
North Carolina Eastern Municipal Power Agency,         
   Power System Revenue:         
       5.50%, 1/1/2011    10,000,000    10,963,100 
       5.50%, 1/1/2012    10,000,000    10,981,300 
North Carolina Housing Finance Agency,         
   Single Family Revenue 6.50%, 9/1/2026    2,810,000    2,883,060 
Ohio—.4%         
Cincinnati, City School District (Classroom Facilities         
   Construction and Improvement)         
   5%, 12/1/2009 (Insured; FSA)    7,610,000    8,428,836 
Oklahoma—1.2%         
Claremore Industrial and Redevelopment Authority,         
   EDR (Yuba Project)         
   8.375%, 7/1/2011    7,500,000    7,514,925 
Grand River Dam Authority, Revenue         
   5%, 6/1/2012 (Insured; FSA)    16,500,000    18,397,500 
Oregon—.2%         
Klamath Falls, Electric Revenue         
   (Senior Lien-Klamath Cogen)         
   6%, 1/1/2025    5,000,000    4,921,650 
Pennsylvania—.5%         
Delaware County Industrial Development Authority,         
   Water Facilities Revenue         
   (Philadelphia Suburban Water)         
   6.35%, 8/15/2025 (Insured; FGIC)    10,000,000    10,587,200 
Rhode Island—.0%         
Rhode Island Housing and Mortgage Finance Corp.         
   (Homeownership Opportunity)         
   6.50%, 4/1/2027    300,000    300,357 
South Carolina—1.7%         
Greenville County School District,         
   Installment Purchase Revenue         
   (Building Equity Sooner for Tomorrow)         
   5.875%, 12/1/2019    4,000,000    4,494,160 
Piedmont Municipal Power Agency, Electric Revenue         
   6.60%, 1/1/2021    8,980,000    8,992,931 

16
    Principal     
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
South Carolina (continued)         
Securing Assets For Education, Installment Purchase         
   Revenue (The School District of Berkeley County,         
   South Carolina Project)         
   5%, 12/1/2028    16,405,000    16,419,436 
South Carolina Housing Finance and Development         
   Authority, Mortgage Revenue:         
       6.75%, 7/1/2026    2,220,000    2,266,465 
       6.70%, 7/1/2027    3,440,000    3,540,620 
Tennessee—.1%         
Knox County Health, Educational and Housing Facilities         
   Board, Hospital Facilities Revenue         
   (Baptist Health System East Tennessee)         
   6.50%, 4/15/2031    1,985,000    1,902,603 
Texas—8.6%         
Alliance Airport Authority Inc., Special Facilities Revenue         
   (Federal Express Corp. Project) 6.375%, 4/1/2021    34,070,000    35,664,817 
Austin Convention Enterprises Inc.,         
   Convention Center Hotel, Second Tier Revenue         
   5.75%, 1/1/2032    18,000,000    17,851,320 
Brazos River Authority, PCR (TXU Electric Co. Project):         
   5.75%, 11/1/2011    14,290,000    14,768,715 
   6.75%, 10/1/2038    8,000,000    8,423,760 
Cities of Dallas and Fort Worth,         
   Dallas/Fort Worth International Airport, Revenue:         
       Facilities Improvement Corp.         
           (Bombardier Inc.)         
                 6.15%, 1/1/2016    5,000,000    4,970,100 
       Joint Improvement:         
           5.75%, 11/1/2014 (Insured; FGIC)    15,070,000    16,653,857 
           5.75%, 11/1/2015 (Insured; FGIC)    10,000,000    11,189,500 
Harris County Hospital District, Mortgage Revenue:         
   7.40%, 2/15/2010 (Insured; AMBAC)    2,820,000    3,110,488 
   7.40%, 2/15/2010 (Insured; AMBAC)    4,320,000    4,941,950 
Harris County-Houston Sports Authority,         
   Third Lien Revenue:         
Zero Coupon, 11/15/2033 (Insured; MBIA)    23,245,000    4,451,185 
Zero Coupon, 11/15/2035 (Insured; MBIA)    14,500,000    2,426,575 
Houston, Utilities System Revenue,         
   First Lien 5.25%, 5/15/2021 (Insured; FSA)    18,075,000    19,551,366 

The Fund 17

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal     
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
Texas (continued)         
Tarrant County Health Facilities Development Corp.,         
   Health System Revenue         
   (Texas Health Resources System)         
   5.75%, 2/15/2014 (Insured; MBIA)    9,470,000    10,899,970 
Texas:         
   10.995%, 12/1/2020    7,605,000 a,b    8,266,179 
   GO (Veterans Housing Assistance Fund)         
       7%, 12/1/2025    7,915,000    8,099,657 
Texas Turnpike Authority,         
   Central Texas Turnpike System Revenue,         
First Tier 5.75%, 8/15/2038 (Insured; AMBAC)    12,000,000    13,236,360 
Utah—.4%         
Carbon County, SWDR (Sunnyside Cogeneration)         
   7.10%, 8/15/2023    8,540,000    8,303,527 
Vermont—.0%         
Vermont Housing Finance Agency         
   (Single Family Housing) 6.875%, 5/1/2025    260,000    261,833 
Virginia—.9%         
Virginia Commonwealth Transportation Board,         
   Federal Highway Reimbursement Notes         
   5%, 10/1/2009    18,020,000    19,944,356 
Washington—2.2%         
Bellevue 5.50%, 12/1/2039 (Insured; MBIA)    12,000,000    12,834,360 
Seattle, Municipal Light and         
   Power Revenue, Improvement:         
       5.50%, 3/1/2013 (Insured; FSA)    11,585,000    13,062,898 
       5.50%, 3/1/2016 (Insured; FSA)    15,400,000    17,110,632 
Tumwater Office Properties, LR         
   (Washington State Office Building)         
   5%, 7/1/2028    5,110,000    5,168,254 
Wisconsin—2.4%         
Badger Tobacco Asset Securitization Corp.,         
   Tobacco Settlement Asset-Backed Bonds         
   7%, 6/1/2028    25,000,000    24,953,250 
Wisconsin:         
   6.25%, 5/1/2009    9,555,000    11,012,138 
   5.25%, 5/1/2019 (Insured; FSA)    10,220,000    11,163,613 
Wisconsin Health and Educational Facilities Authority,         
Revenue (FH Healthcare Development Inc. Project)         
   6.25%, 11/15/2028    5,000,000    5,282,950 
 
 
18         

    Principal         
Long-Term Municipal Investments (continued)    Amount ($)    Value ($) 
Wyoming—.6%             
Sweetwater County, SWDR (FMC Corp. Project)             
   6.90%, 9/1/2024    13,225,000        13,461,066 
U.S. Related—3.5%             
Puerto Rico Highway and Transportation Authority,             
   Transportation Revenue:             
       5%, 7/1/2008    5,105,000        5,560,774 
       6%, 7/1/2039 (Prerefunded 7/1/2010)    20,050,000    c    23,514,440 
Puerto Rico Housing Finance Authority,             
   Capital Fund Program:             
       5%, 12/1/2018    14,840,000        15,829,234 
       5%, 12/1/2019    6,000,000        6,371,520 
       5%, 12/1/2020    5,000,000        5,282,050 
Puerto Rico Infrastructure Financing Authority,             
   Special Obligation             
   5.50%, 10/1/2032    7,000,000        7,567,490 
Puerto Rico Public Finance Corp.             
   (Commonwealth Appropriation):             
       6%, 8/1/2016 (Insured; AGC)    805,000        967,691 
       6%, 8/1/2016 (Insured; AGC)    8,695,000        10,425,044 
Total Long-Term Municipal Investments             
   (cost $2,002,363,994)            2,115,039,778 
 
Short-Term Municipal Investments—.7%             
Tennessee—.5%             
Blount County Public Building Authority, VRDN             
(Local Government Public Improvement) 1.35%    9,000,000    d    9,000,000 
Montgomery County Public Building Authority,             
   Pooled Financing Revenue, VRDN             
   (Tennessee County Loan Pool)             
   1.37% (LOC; Bank of America)    2,820,000    d    2,820,000 
Utah—.2%             
Weber County, HR, VRDN             
   (IHC Health Services) 1.35%    4,000,000    d    4,000,000 
Total Short-Term Municipal Investments             
   (cost $15,820,000)            15,820,000 
 
Total Investments (cost $2,018,183,994)    99.4%        2,130,859,778 
Cash and Receivables (Net)    .6%        12,444,862 
Net Assets    100.0%        2,143,304,640 

The Fund 19

S T A T E M E N T O F I N V E S T M E N T S (continued)

Summary of Abbreviations         
 
AGC    ACE Guaranty Corporation    GO    General Obligation 
AGIC    Asset Guaranty Insurance    HR    Hospital Revenue 
       Company    IDR    Industrial Development Revenue 
AMBAC    American Municipal Bond    LOC    Letter of Credit 
    Assurance Corporation    LR    Lease Revenue 
COP    Certificate of Participation    MBIA    Municipal Bond Investors 
EDR    Economic Development Revenue    Assurance Insurance 
EIR    Environment Improvement        Corporation 
       Revenue    PCR    Pollution Control Revenue 
FGIC    Financial Guaranty Insurance    SFMR    Single Family Mortgage Revenue 
       Company    SWDR    Solid Waste Disposal Revenue 
FHA    Federal Housing Administration    VRDN    Variable Rate Demand Notes 
FSA    Financial Security Assurance         
 
 
 
Summary of Combined Ratings (Unaudited)     
 
Fitch    or Moody’s or    Standard & Poor’s    Value (%) 
AAA                     Aaa    AAA    44.0 
AA                     Aa    AA    26.0 
A                     A    A    15.1 
BBB                     Baa    BBB    8.7 
BB                     Ba    BB    3.7 
F1    MIG1/P1    SP1/A1    .7 
Not Rated e    Not Rated e    Not Rated e    1.8 
            100.0 

a    Inverse floater security—the interest rate is subject to change periodically. 
b    Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in 
    transactions exempt from registration, normally to qualified institutional buyers.At August 31, 2004, these securities 
    amounted to $126,023,270 or 5.9% of net assets. 
c    Bonds which are prerefunded are collateralized by U.S. Government securities which are held in escrow and are used 
    to pay principal and interest on the municipal issue and to retire the bonds in full at the earliest refunding date. 
d    Securities payable on demand.Variable interest rate—subject to periodic change. 
e    Securities which, while not rated by Fitch, Moody’s and Standard & Poor’s, have been determined by the Manager to 
    be of comparable quality to those rated securities in which the fund may invest. 
See notes to financial statements. 

20

STATEMENT OF ASSETS AND LIABILITIES

August 31, 2004

    Cost    Value 
Assets ($):         
Investments in securities—See Statement of Investments    2,018,183,994    2,130,859,778 
Interest receivable        30,679,554 
Receivable for shares of Common Stock subscribed        19,734 
Prepaid expenses        27,680 
        2,161,586,746 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)        1,108,300 
Cash overdraft due to Custodian        2,528,819 
Payable for investment securities purchased        13,641,185 
Payable for shares of Common Stock redeemed        882,777 
Accrued expenses        121,025 
        18,282,106 
Net Assets ($)        2,143,304,640 
Composition of Net Assets ($):         
Paid-in capital        2,167,192,521 
Accumulated net realized gain (loss) on investments        (136,563,665) 
Accumulated net unrealized appreciation         
   (depreciation) on investments        112,675,784 
Net Assets ($)        2,143,304,640 
Shares Outstanding         
(600 million shares of $.001 par value Common Stock authorized)    181,035,829 
Net Asset Value, offering and redemption price per share ($)    11.84 

See notes to financial statements.
The Fund 21
STATEMENT OF OPERATIONS
Year Ended August 31, 2004
Investment Income ($):     
Interest Income    106,988,774 
Expenses:     
Management fee—Note 3(a)    13,396,456 
Shareholder servicing costs—Note 3(b)    2,171,816 
Directors’ fees and expenses—Note 3(c)    154,077 
Custodian fees    113,382 
Auditing fees    40,197 
Registration fees    33,508 
Prospectus and shareholders’ reports    21,105 
Loan commitment fees—Note 2    19,896 
Miscellaneous    66,988 
Total Expenses    16,017,425 
Less—reduction in management fee     
   due to undertaking—Note 3(a)    (922,108) 
Less—reduction in custody fees     
   due to earnings credits—Note 1(b)    (15,919) 
Net Expenses    15,079,398 
Investment Income—Net    91,909,376 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    8,127,353 
Net unrealized appreciation (depreciation) on investments    55,071,384 
Net Realized and Unrealized Gain (Loss) on Investments    63,198,737 
Net Increase in Net Assets Resulting from Operations    155,108,113 

See notes to financial statements.
22

STATEMENT OF CHANGES IN NET ASSETS

                                   Year Ended August 31, 
    2004    2003 
Operations ($):         
Investment income—net    91,909,376    109,958,181 
Net realized gain (loss) on investments    8,127,353    (55,565,129) 
Net unrealized appreciation         
   (depreciation) on investments    55,071,384    (2,739,425) 
Net Increase (Decrease) in Net Assets         
   Resulting from Operations    155,108,113    51,653,627 
Dividends to Shareholders from ($):         
Investment income—net    (92,331,573)    (109,455,844) 
Net realized gain on investments    —    (314,026) 
Total Dividends    (92,331,573)    (109,769,870) 
Capital Stock Transactions ($):         
Net proceeds from shares sold    85,175,632    543,378,112 
Dividends reinvested    58,745,554    69,121,337 
Cost of shares redeemed    (376,390,495)    (738,584,924) 
Increase (Decrease) in Net Assets         
   from Capital Stock Transactions    (232,469,309)    (126,085,475) 
Total Increase (Decrease) in Net Assets    (169,692,769)    (184,201,718) 
Net Assets ($):         
Beginning of Period    2,312,997,409    2,497,199,127 
End of Period    2,143,304,640    2,312,997,409 
Undistributed investment income—net    —    545,107 
Capital Share Transactions (Shares):         
Shares sold    7,236,792    46,381,935 
Shares issued for dividends reinvested    4,990,122    5,867,135 
Shares redeemed    (32,090,388)    (62,626,678) 
Net Increase (Decrease) in Shares Outstanding    (19,863,474)    (10,377,608) 

See notes to financial statements.
The Fund 23
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,     
    2004    2003    2002a    2001    2000 
Per Share Data ($):                     
Net asset value,                     
   beginning of period    11.51    11.82    12.32    11.68    11.70 
Investment Operations:                     
Investment income—net    .48b    .54b    .61b    .61    .60 
Net realized and unrealized                     
gain (loss) on investments    .34    (.31)    (.50)    .64    (.02) 
Total from Investment Operations    .82    .23    .11    1.25    .58 
Distributions:                     
Dividends from investment                     
   income—net    (.49)    (.54)    (.61)    (.61)    (.60) 
Net asset value, end of period    11.84    11.51    11.82    12.32    11.68 
Total Return (%)    7.20    1.91    .99    11.00    5.28 
Ratios/Supplemental Data (%):                     
Ratio of total expenses                     
   to average net assets    .72    .72    .71    .72    .77 
Ratio of net expense                     
   to average net assets    .68    .72    .71    .72    .76 
Ratio of net investment income                     
   to average net assets    4.12    4.56    5.14    5.11    5.32 
Portfolio Turnover Rate    47.77    61.20    49.25    42.71    40.51 
Net Assets, end of period                     
   ($ x 1,000)    2,143,305    2,312,997    2,497,199    2,670,674    2,599,644 

a    As required, effective September 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting 
    Guide for Investment Companies and began amortizing discount or permium on a scientific basis for debt securities on 
    a daily basis.The effect of this change for the period ended August 31, 2002 was to increase net investment income per 
    share and decrease net realized and unrealized gain (loss) on investments by less than $.01 and increase the ratio of 
    net investment income to average net assets from 5.13% to 5.14%. Per share data and ratios/supplemental data for 
    periods prior to September 1, 2001 have not been restated to reflect this change in presentation. 
b    Based on average shares outstanding at each month end. 
See notes to financial statements. 

24

NOTES TO FINANCIAL STATEMENTS

NOTE 1—Significant Accounting Policies:

Dreyfus Municipal Bond Fund (the “fund”) is a separate diversified series of Dreyfus Bond Funds, Inc. (the “Company”) which is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified open-end management investment company and operates as a series company currently offering two series, including the fund. The fund’s investment objective is to provide investors with as high a level of current income exempt from federal income tax as is consistent with the preservation of capital. The Dreyfus Corporation (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. The Manager is a wholly-owned subsidiary of Mellon Financial Corporation (“Mellon Financial”). Dreyfus Service Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares which are sold to the public without a sales charge.

The fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.

The fund enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements

(a) Portfolio valuation: Investments in securities (excluding options and financial futures on municipal and U.S.Treasury securities) are valued each business day by an independent pricing service (the “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

The Fund 25
NOTES TO FINANCIAL STATEMENTS (continued)
26

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 municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities 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 on each business day.

(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, adjusted for amortization of discount and premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date.

The fund has an arrangement with the custodian bank whereby the fund receives earnings credits from the custodian when positive cash balances are maintained, which are used to offset custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.

(c) 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 of 1986, as amended (the “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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S generally accepted accounting principles.

(d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.

At August 31, 2004, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $136,563,665 and unrealized appreciation $112,740,314.

The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to August 31, 2004. If not applied, $13,170,822 of the carryover expires in fiscal 2008, $27,718,137 expires in fiscal 2009, $11,793,725 expires in fiscal 2010, $34,182,166 expires in fiscal 2011 and $49,698,815 expires in fiscal 2012.

The tax character of distributions paid to shareholders during the fiscal periods ended August 31, 2004 and August 31, 2003, were as follows: tax exempt income $92,331,573 and $109,455,844 and ordinary income $0 and $314,026, respectively.

During the period ended August 31, 2004, as a result of permanent book to tax differences primarily due to the tax treatment for amortization adjustments, the fund decreased accumulated undistributed investment income-net by $122,910, increased accumulated net realized gain (loss) on investments by $63,626 and increased paid-in capital by $59,284. Net assets were not affected by this reclassification.

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $350 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 commit-

The Fund 27
NOTES TO FINANCIAL STATEMENTS (continued)

ment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended August 31, 2004, the fund did not borrow under the Facility.

NOTE 3—Management Fee and Other Transactions with Affiliates:

(a) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .60 of 1% of the value of the fund’s average daily net assets and is payable monthly. The Manager had undertaken from November 1, 2003 through November 30, 2004, to waive receipt of 5 basis points of management fee. The reduction in management fee, pursuant to the undertaking, amounted to $922,108 during the period ended August 31, 2004.

(b) Under the Shareholder Services Plan, the fund reimburses the Distributor an amount not to exceed an annual rate of .25 of 1% of the value of the fund’s average daily net assets for certain allocated expenses of providing personal services and/or maintaining shareholder accounts.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended August 31, 2004, the fund was charged $1,221,610 pursuant to the Shareholder Services Plan.

The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended August 31, 2004, the fund was charged $689,080 pursuant to the transfer agency agreement.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $1,084,710 and transfer agency per account fees $114,025, which are

28

offset against an expense reimbursement currently in effect in the amount of $90,435.

(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

(d) A .10% redemption fee is charged and retained by the fund on shares redeemed within thirty days of their issuance, including redemptions made through the use of the fund’s exchange privilege. During the period ended August 31, 2004, redemption fees charged and retained by the fund amounted to $18,885.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended August 31, 2004, amounted to $1,029,889,955 and $1,129,264,124, respectively.

At August 31, 2004, the cost of investments for federal income tax purposes was $2,018,119,464; accordingly, accumulated net unrealized appreciation on investments was $112,740,314, consisting of $116,655,187 gross unrealized appreciation and $3,914,873 gross unrealized depreciation.

NOTE 5—Legal Matters:

Two class actions have been filed against Mellon Financial,Mellon Bank, N.A., Dreyfus, Founders Asset Management LLC and the directors of all or substantially all of the Dreyfus funds, on behalf of a purported class and derivatively on behalf of said funds, alleging violations of the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the common law. The complaints alleged, among other things, (i) that 12b-1 fees and directed brokerage were improperly used to pay brokers to recommend Dreyfus funds over other funds, (ii) that such payments were not disclosed to investors, (iii) that economies of

The Fund 29
NOTES TO FINANCIAL STATEMENTS (continued)

scale and soft-dollar benefits were not passed on to investors,and (iv) that 12b-1 fees charged to certain funds that were closed to new investors were also improper.The complaints sought compensatory and punitive damages, rescission of the advisory contracts and an accounting and restitution of any unlawful fees, as well as an award of attorneys fees and litigation expenses. On April 22, 2004, the actions were consolidated under the caption In re Dreyfus Mutual Funds Fee Litigation,and a consolidated amended complaint was filed on September 13, 2004.While adding new parties and claims under state and federal law, the allegations in the consolidated amended complaint essentially track the allegations in the prior complaints pertaining to 12b-1 fees, directed brokerage, soft dollars and revenue sharing.Dreyfus and the funds believe the allegations to be totally without merit and intend to defend the action vigorously.

Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the defendants in the future. Neither Dreyfus nor the Dreyfus funds believe that any of the pending actions will have a material adverse effect on the Dreyfus funds or Dreyfus’ ability to perform its contracts with the Dreyfus funds.

30

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  Shareholders and Board of Directors
Dreyfus Municipal Bond Fund

We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Municipal Bond Fund (one of the funds comprising Dreyfus Bond Funds, Inc.) as of August 31, 2004, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and financial highlights for each of the years indicated therein.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 the standards of the Public Company Accounting Oversight Board (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 and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2004 by correspondence with the custodian and broker. 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 Municipal Bond Fund at August 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with U.S. generally accepted accounting principles.

  New York, New York
October 14, 2004

The Fund 31

IMPORTANT TAX INFORMATION (Unaudited)

In accordance with federal tax law, the fund hereby designates all the dividends paid from investment income-net during its fiscal year ended August 31, 2004 as “exempt-interest dividends” (not generally subject to regular federal income tax).

As required by federal tax law rules, shareholders will receive notification of their portion of the fund’s taxable ordinary dividends (if any) and capital gains distributions (if any) paid for the 2004 calendar year on Form 1099-DIV which will be mailed by January 31, 2005.

32

BOARD MEMBERS INFORMATION (Unaudited)

Joseph S. DiMartino (60)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
• Corporate Director and Trustee
Other Board Memberships and Affiliations:
  • The Muscular Dystrophy Association, Director
  • Levcor International, Inc., an apparel fabric processor, Director
  • Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director
  • The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director

No. of Portfolios for which Board Member Serves: 186 ———————

David W. Burke (68) Board Member (1994)

Principal Occupation During Past 5 Years:

• Corporate Director and Trustee.

Other Board Memberships and Affiliations:

  • John F. Kennedy Library Foundation, Director
  • U.S.S. Constitution Museum, Director

No. of Portfolios for which Board Member Serves: 83 ———————

William Hodding Carter III (69) Board Member (1988)

Principal Occupation During Past 5 Years:

• President and Chief Executive Officer of the John S.and James L.Knight Foundation (1998-present)

Other Board Memberships and Affiliations:

  • Independent Sector, Director
  • The Century Foundation, Director
  • The Enterprise Corporation of the Delta, Director
  • Foundation of the Mid-South, Director

No. of Portfolios for which Board Member Serves: 11 ———————

Ehud Houminer (64) Board Member (1994)

Principal Occupation During Past 5 Years:

  • Executive-in-Residence at the Columbia Business School, Columbia University
  • Principal of Lear,Yavitz and Associates, a management consulting firm (1996 to 2001)
Other Board Memberships and Affiliations:
  • Avnet Inc., an electronics distributor, Director
  • International Advisory Board to the MBA Program School of Management, Ben Gurion University, Chairman
  • Explore Charter School, Brooklyn, NY, Chairman
No. of Portfolios for which Board Member Serves: 30
The Fund 33

BOARD MEMBERS INFORMATION (Unaudited) (continued)

Richard C. Leone (64)
Board Member (1987)
Principal Occupation During Past 5 Years:
  • President of The Century Foundation (formerly,The Twentieth Century Fund, Inc.), a tax exempt research foundation engaged in the study of economic, foreign policy and domestic issues

No. of Portfolios for which Board Member Serves: 11 ———————

Hans C. Mautner (66) Board Member (1987)

Principal Occupation During Past 5 Years:

  • President—International Division and an Advisory Director of Simon Property Group, a real estate investment company (1998-present)
  • Director and Vice Chairman of Simon Property Group (1998-2003)
  • Chairman and Chief Executive Officer of Simon Global Limited (1999-present)
Other Board Memberships and Affiliations:
  • Capital and Regional PLC, a British co-investing real estate asset manager, Director
  • Member - Board of Managers of: Mezzacappa Long/Short Fund LLC Mezzacappa Multi- Strategy Fund LLC Mezzacappa Multi-Strategy Plus Fund LLC

No. of Portfolios for which Board Member Serves: 11 ———————

Robin A. Pringle (40) Board Member (1995)

Principal Occupation During Past 5 Years:

  • Senior Vice President of Mentor/National Mentoring Partnership, a national non-profit organization that is leading the movement to connect America’s young people with caring adult mentors

No. of Portfolios for which Board Member Serves: 11 ———————

John E. Zuccotti (67) Board Member (1987)

Principal Occupation During Past 5 Years:

• Chairman of Brookfield Financial Properties, Inc.

No. of Portfolios for which Board Member Serves: 11 ———————

Once elected all Board Members serve for an indefinite term.The address of the Board Members and Officers is in c/o The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166.Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-554-4611.

34

OFFICERS OF THE FUND (Unaudited)

STEPHEN E. CANTER, President since    JOHN B. HAMMALIAN, Secretary since 
March 2000.    March 2000. 
   Chairman of the Board, Chief Executive       Associate General Counsel of the Manager, 
   Officer and Chief Operating Officer of the       and an officer of 37 investment companies 
   Manager, and an officer of 97 investment       (comprised of 46 portfolios) managed by the 
   companies (comprised of 190 portfolios)       Manager. He is 41 years old and has been an 
   managed by the Manager. Mr. Canter also is a       employee of the Manager since February 1991. 
 
   Board member and, where applicable, an    STEVEN F. NEWMAN, Assistant Secretary 
   Executive Committee Member of the other    since March 2000. 
   investment management subsidiaries of Mellon     
   Financial Corporation, each of which is an       Associate General Counsel and Assistant 
   affiliate of the Manager. He is 59 years old and       Secretary of the Manager, and an officer of 98 
   has been an employee of the Manager since       investment companies (comprised of 206 
   May 1995.       portfolios) managed by the Manager. He is 55 
       years old and has been an employee of the 
STEPHEN R. BYERS, Executive Vice       Manager since July 1980. 
President since October 2002.     
    MICHAEL A. ROSENBERG, Assistant 
   Chief Investment Officer,Vice Chairman and a    Secretary since March 2000. 
   Director of the Manager, and an officer of 97     
   investment companies (comprised of 190       Associate General Counsel of the Manager, 
   portfolios) managed by the Manager. Mr. Byers       and an officer of 95 investment companies 
   also is an officer, director or an Executive       (comprised of 199 portfolios) managed by the 
   Committee Member of certain other       Manager. He is 44 years old and has been an 
   investment management subsidiaries of Mellon       employee of the Manager since October 1991. 
   Financial Corporation, each of which is an    JAMES WINDELS, Treasurer since 
   affiliate of the Manager. He is 50 years old and    November 2001. 
   has been an employee of the Manager since     
   January 2000. Prior to joining the Manager, he       Director – Mutual Fund Accounting of the 
   served as an Executive Vice President-Capital       Manager, and an officer of 98 investment 
   Markets, Chief Financial Officer and Treasurer       companies (comprised of 206 portfolios) 
   at Gruntal & Co., L.L.C.       managed by the Manager. He is 45 years old 
       and has been an employee of the Manager 
MARK N. JACOBS, Vice President since       since April 1985. 
March 2000.     
   Executive Vice President, Secretary and     
   General Counsel of the Manager, and an     
   officer of 98 investment companies (comprised     
   of 206 portfolios) managed by the Manager.     
   He is 58 years old and has been an employee     
   of the Manager since June 1977.     

The Fund 35

OFFICERS OF THE FUND (Unaudited) (continued)

GREGORY S. GRUBER, Assistant    WILLIAM GERMENIS, Anti-Money 
Treasurer since March 2000.    Laundering Compliance Officer since 
   Senior Accounting Manager – Municipal Bond    August 2002. 
   Funds of the Manager, and an officer of 30       Vice President and Anti-Money Laundering 
   investment companies (comprised of 59       Compliance Officer of the Distributor, and the 
   portfolios) managed by the Manager. He is 45       Anti-Money Laundering Compliance Officer 
   years old and has been an employee of the       of 93 investment companies (comprised of 201 
   Manager since August 1981.       portfolios) managed by the Manager. He is 33 
 
ERIK D. NAVILOFF, Assistant Treasurer       years old and has been an employee of the 
since January 2002.       Distributor since October 1998. 
   Senior Accounting Manager – Taxable Fixed     
   Income Funds of the Manager, and an officer     
   of 19 investment companies (comprised of 74     
   portfolios) managed by the Manager. He is 36     
   years old and has been an employee of the     
   Manager since November 1992.     
 
KENNETH J. SANDGREN, Assistant     
Treasurer since November 2001.     
   Mutual Funds Tax Director of the Manager,     
   and an officer of 98 investment companies     
   (comprised of 206 portfolios) managed by the     
   Manager. He is 50 years old and has been an     
   employee of the Manager since June 1993.     

36

For More    Information 
 
Dreyfus                                   Transfer Agent & 
Municipal Bond Fund                                   Dividend Disbursing Agent 
200 Park Avenue                                   Dreyfus Transfer, Inc. 
New York, NY 10166                                   200 Park Avenue 
Manager                                   New York, NY 10166 
The Dreyfus Corporation                                   Distributor 
200 Park Avenue                                   Dreyfus Service Corporation 
New York, NY 10166                                   200 Park Avenue 
Custodian                                   New York, NY 10166 
The Bank of New York     
One Wall Street     
New York, NY 10286     
 
 
Telephone 1-800-645-6561     

Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 E-mail Send your request to info@dreyfus.com Internet Information can be viewed online or downloaded at: http://www.dreyfus.com A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the 12-month period ended June 30, 2004, is available through the fund’s website at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-645-6561.

Beginning with the fund’s fiscal quarter ending November 30, 2004, the fund will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

© 2004 Dreyfus Service Corporation

Dreyfus Premier 
High Income Fund 

  ANNUAL REPORT August 31, 2004

The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.

Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value

Contents
 
    THE FUND 
2    Letter from the Chairman 
3    Discussion of Fund Performance 
6    Fund Performance 
8    Understanding Your Fund’s Expenses 
8    Comparing Your Fund’s Expenses 
With Those of Other Funds
9    Statement of Investments 
26    Statement of Assets and Liabilities 
27    Statement of Operations 
28    Statement of Changes in Net Assets 
30    Financial Highlights 
34    Notes to Financial Statements 
42    Report of Independent Registered 
       Public Accounting Firm 
43    Important Tax Information 
44    Board Members Information 
46    Officers of the Fund 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus Premier
High Income Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

This annual report for Dreyfus Premier High Income Fund covers the 12-month period from September 1, 2003, through August 31, 2004. Inside, you’ll find valuable information about how the fund was managed during the reporting period, including a discussion with portfolio managers Mark Shenkman, Frank Whitley, Mark Flanagan and Robert Stricker of Shenkman Capital Management, Inc., the fund’s sub-investment adviser.

Strong economic performance during the closing months of 2003 contributed to a generally robust high-yield bond market. While returns for most fixed income and equity sectors have been mixed in 2004, high-yield bonds achieved strong relative returns. Investors apparently have revised their economic expectations in response to the situation in Iraq, higher energy prices and rising interest rates. Accordingly, they appear to be turning attention from among the lowest-rated high-yield securities toward high-yield bonds at the upper end of the credit-quality spectrum. Toward the end of the reporting period, the Federal Reserve Board twice raised short-term rates in what many analysts believe is the beginning of a series of increases designed to forestall potential inflationary pressures.

For many investors, the move to a less accommodative monetary policy marks the beginning of a new phase in the economic cycle.At times such as these, when market conditions are in a period of transition, we believe it is especially important for you to stay in close contact with your financial advisor, who can help you position your portfolio in a way that is designed to respond to the challenges and opportunities of today’s changing investment environment.

Thank you for your continued confidence and support.

Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
September 15, 2004
2

DISCUSSION OF FUND PERFORMANCE

Mark Shenkman, Frank Whitley, Mark Flanagan and Robert Stricker, Portfolio Managers Shenkman Capital Management, Inc., Sub-Investment Adviser

How did Dreyfus Premier High Income Fund perform relative to its benchmark?

During the 12-month reporting period ended August 31, 2004, the fund achieved total returns of 10.40% for Class A shares, 9.83% for Class B shares, 9.53% for Class C shares and 10.75% for Class R shares.1 For the same period, the fund’s benchmark, the CSFB High Yield Index (the “Index”), produced a 14.67% total return.2

High-yield corporate bonds generally performed well, especially early in the reporting period, as investors looked forward to stronger economic growth. However, among high-yield bonds, lower-rated bonds generally produced higher returns than higher-rated securities during the early stages of the economic recovery. Because the fund emphasizes relatively higher credit quality high-yield bonds, it under-performed its benchmark for the reporting period.

What is the fund’s investment approach?

The fund seeks to maximize total return consistent with capital preservation and prudent risk management. To pursue its goal, the fund normally invests at least 80% of its assets in high-yield bonds rated below investment grade.The high-yield securities in which the fund invests may include corporate debt securities, structured notes, zero-coupon securities and debt securities issued by states or local governments and their agencies, authorities and other instrumentali-ties.The fund may invest up to 20% of its assets in investment-grade corporate bonds, U.S. government securities, bank certificates of deposit, fixed time deposits and bankers’ acceptances.

When choosing securities for the fund, we generally look for issuers that we believe have positive credit momentum and the potential for credit-rating upgrades. Using bottom-up, fundamental analysis, we seek to maximize returns and minimize default risk through broad diversification, direct communication with management and monitoring all

The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)

issuers on a systematic basis.We also avoid or de-emphasize investing in industries or issuers that we believe have a high risk of default.

What other factors influenced the fund’s performance?

During the closing months of 2003, high-yield bonds were influenced largely by technical supply-and-demand factors that benefited deeply discounted, lower-rated credits more than higher-rated bonds. As economic conditions improved, default rates declined and investors became more comfortable assuming the risks of lower-rated bonds, especially those whose prices had been most severely hurt during the previous economic downturn.

In early 2004, the market began to make a transition from a technically driven market to a more fundamentally driven one, in which the financial health and future prospects of individual companies became the main determinants of high-yield bond prices.As a result, the fund’s relative performance began to improve, partially offsetting earlier weakness. Throughout the reporting period, however, the average price of the fund’s portfolio had been consistently higher than that of the Index, given our focus on better quality credits, which hurt the fund’s relative performance overall.

Throughout the reporting period,we continued to find what we believed to be attractive opportunities for income and potential capital appreciation in the bonds of companies that met our disciplined investment criteria. Indeed, we are pleased that, after thorough credit analysis, none of the fund’s holdings defaulted on principal or interest payments during the reporting period, and the full complement of interest income was available to compound over time on shareholders’ behalf. In our view, avoiding defaults and the compounding of interest income are two of the keys to successful investing in high-yield bonds over the longer term.

In this changing market environment, the fund received particularly attractive results from the health care and gaming industries, which historically have been characterized by stable cash flows compared to other areas. In addition, the fund benefited from its utilities holdings, which gained value as some of the industry’s leading players refinanced their balance sheets. Similarly, because retail sales benefited from the stronger economy, the traditionally volatile retail industry contributed positively to the fund’s performance during the reporting period. In con-

4

trast, the fund avoided bonds issued by fundamentally troubled airlines, which continued to be hurt by security concerns and high fuel prices. Finally, some of the fund’s holdings gained value when their issuers completed initial public offerings of equity securities, and others redeemed their bonds at a premium after they were acquired by larger companies.

While the Federal Reserve has raised short-term interest rates two times during the second half of the reporting period, both the fund and the high-yield bond market have generally not been influenced by higher interest rates. Also, 10-Year Treasury yields have remained remarkably unchanged during this period. While higher interest rates historically have tended to erode bond prices, high-yield corporate bonds generally have been less vulnerable to such risks than U.S. government securities.

What is the fund’s current strategy?

We have continued to employ extensive credit analysis in our investment process, focusing primarily on companies that are leaders in a diverse range of markets and industries. Of the eight primary economic and market factors that we believe influence high-yield bonds, six currently appear to be positive — U.S. economic growth, market liquidity, corporate development and cash flow, default rates, new issue supply and the balance of supply-and-demand — and one factor is mixed (yield spread). Interest rates are the only market factor that we feel is a negative factor going forward. Accordingly, we have continued to position the fund to capture the potential benefits of what we believe to be a fundamentally attractive investment environment for high-yield bonds.

September 15, 2004

1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charges imposed on redemptions in the case of Class B and Class C shares. Had these charges been reflected, returns would have been lower. 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: CREDIT SUISSE FIRST BOSTON — Reflects reinvestment of dividends and, where applicable, capital gain distributions.The CSFB High Yield Index is designed to mirror the investable universe of the U.S. dollar-denominated high-yield debt market.The index consists of corporate debt issues, including cash-pay, zero-coupon, stepped-rate and pay-in-kind (PIK) bonds that are publicly registered in the U.S. or issued under Rule 144A with registration rights, rated BB or lower, with minimum outstanding par values of $75 million.

The Fund 5

† Source: Credit Suisse First Boston

Past performance is not predictive of future performance.

The above graph compares a $10,000 investment made in Class A, Class B, Class C and Class R shares of Dreyfus Premier High Income Fund on 1/31/03 (inception date) to a $10,000 investment made in the CSFB High Yield Index (the “Index”) on that date.All dividends and capital gain distributions are reinvested.

The fund’s performance shown in the line graph takes into account the maximum initial sales charge on Class A shares, the maximum contingent deferred sales charge on Class B shares and all other applicable fees and expenses on all classes. The Index is designed to mirror the investible universe of the U.S. dollar-denominated high-yield debt market.The Index consists of corporate debt issues, including cash-pay, zero-coupon, stepped-rate and pay-in-kind (PIK) bonds that are publicly registered in the U.S. or issued under Rule 144A with registration rights, rated BB or lower, with minimum outstanding par values of $75 million.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.

6
Average Annual Total Returns as of 8/31/04         
 
    Inception        From 
    Date    1 Year    Inception 
Class A shares             
with maximum sales charge (4.5%)    1/31/03     5.44%    9.48% 
without sales charge    1/31/03    10.40%    12.70% 
Class B shares             
with applicable redemption charge †    1/31/03     5.83%    9.77% 
without redemption    1/31/03     9.83%    12.14% 
Class C shares             
with applicable redemption charge ††    1/31/03     8.53%    11.80% 
without redemption    1/31/03     9.53%    11.80% 
Class R shares    1/31/03    10.75%    13.09% 

Past performance is not predictive of future performance.The fund’s performance shown in the graph and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

†    The maximum contingent deferred sales charge for Class B shares is 4%.After six years Class B shares convert to 
    Class A shares. 
††    The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the 
    date of purchase. 

The Fund 7

UNDERSTANDING YOUR FUND’S EXPENSES

As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Premier High Income Fund from March 1, 2004 to August 31, 2004. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

Expenses and Value of a $1,000 Investment             
assuming actual returns for the six months ended August 31, 2004         
    Class A    Class B    Class C    Class R 
Expenses paid per $1,000 †    $ 5.85    $ 8.79    $ 9.84    $ 4.53 
Ending value (after expenses)    $1,023.00    $1,020.20    $1,018.40    $1,025.20 

COMPARING YOUR FUND’S EXPENSES 
WITH THOSE OF OTHER FUNDS 

Using the SEC’s method to compare expenses

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.

Expenses and Value of a $1,000 Investment             
assuming a hypothetical 5% annualized return for the six months ended August 31, 2004 
    Class A    Class B    Class C    Class R 
Expenses paid per $1,000 †    $ 5.84    $ 8.77    $ 9.83    $ 4.52 
Ending value (after expenses)    $1,019.36    $1,016.44    $1,015.38    $1,020.66 

† Expenses are equal to the fund’s annualized expense ratio of 1.15% for Class A, 1.73% for Class B, 1.94% for Class C and .89% for Class R; multiplied by the average account value over the period, multiplied by 184 / 366 (to reflect the one-half year period).

8
STATEMENT OF INVESTMENTS
August 31, 2004
    Principal         
Bonds and Notes—91.4%    Amount ($)    Value ($) 
Aerospace—3.9%             
Alliant Techsystems,             
   Conv. Sr. Sub. Notes, 2.75%, 2024    650,000        667,875 
Aviall,             
   Sr. Notes, 7.625%, 2011    2,075,000        2,225,437 
BE Aerospace:             
   Sr. Sub. Notes, 9.5%, 2008    2,500,000        2,562,500 
   Sr. Sub. Notes, Ser. B, 8%, 2008    750,000        734,062 
Communications & Power Industries,             
   Sr. Sub. Notes, 8%, 2012    1,000,000        1,012,500 
DRS Technologies,             
   Sr. Sub. Notes, 6.875%, 2013    300,000        310,500 
Esterline Technologies,             
   Sr. Sub. Notes, 7.75%, 2013    1,000,000        1,067,500 
Hexcel:             
   Sr. Secured Notes, 9.875%, 2008    500,000        560,000 
   Sr. Sub. Notes, 9.75%, 2009    2,250,000        2,370,938 
Sequa:             
   Sr. Notes, 9%, 2009    100,000        109,500 
   Sr. Notes, Ser. B, 8.875%, 2008    1,900,000        2,056,750 
TD Funding,             
   Notes, 8.375%, 2011    1,750,000        1,859,375 
Titan,             
   Notes, 8%, 2011    750,000        778,125 
            16,315,062 
Automotive—2.6%             
Accuride,             
   Sr. Sub. Notes, Ser. B, 9.25%, 2008    2,750,000        2,839,375 
American Axle & Manufacturing,             
   Conv. Notes, 2%, 2024    1,500,000    a    1,423,125 
Delco Remy International:             
   Sr. Sub. Notes, 9.375%, 2012    1,500,000        1,533,750 
   Sr. Sub. Notes, 11%, 2009    500,000        537,500 
Dura Operating,             
   Sr. Notes, Ser. B, 8.625%, 2012    1,200,000        1,251,000 
Keystone Automotive Operations,             
   Sr. Sub. Notes, 9.75%, 2013    250,000        270,625 
TRW Automotive,             
   Sr. Notes, 9.375%, 2013    357,000        413,228 
Tenneco Automotive,             
   Sr. Sub. Notes, Ser. B, 11.625%, 2009    1,500,000        1,608,750 

The Fund 9

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Automotive (continued)             
United Components,             
Sr. Sub. Notes, 9.375%, 2013    1,000,000        1,065,000 
            10,942,353 
Broadcasting—3.8%             
Allbritton Communications,             
Sr. Sub. Notes, 7.75%, 2012    2,775,000        2,837,437 
Citadel Broadcasting,             
Conv. Sub. Notes, 1.875%, 2011    1,750,000    a    1,522,500 
Corus Entertainment,             
Sr. Sub. Notes, 8.75%, 2012    250,000        274,375 
Emmis Operating,             
Sr. Sub. Notes, 6.875%, 2012    500,000        503,925 
Entravision Communications,             
Sr. Sub. Notes, 8.125%, 2009    1,425,000        1,510,500 
LIN Television,             
   Sr. Sub. Notes, 6.5%, 2013    1,000,000        990,000 
Nexstar Finance,             
   Sr. Sub. Notes, 7%, 2014    1,700,000        1,661,750 
Salem Communications,             
Sr. Sub. Notes, 7.75%, 2010    1,000,000        1,045,000 
Sinclair Broadcast,             
   Sr. Sub. Notes, 8%, 2012    3,500,000        3,631,250 
Susquehanna Media,             
Sr. Sub. Notes, 7.375%, 2013    1,750,000        1,811,250 
            15,787,987 
Building Materials—2.7%             
Atrium Cos.,             
Sr. Sub. Notes, Ser. B, 10.5%, 2009    450,000        474,750 
Euramax International,             
   Sr. Sub. Notes, 8.5%, 2011    1,600,000        1,704,000 
Interface:             
   Notes, 7.3%, 2008    1,200,000        1,194,000 
   Sr. Notes, 10.375%, 2010    1,000,000        1,130,000 
   Sr. Sub. Notes, 9.5%, 2014    1,000,000        1,030,000 
Jacuzzi Brands,             
Sr. Secured Notes, 9.625%, 2010    2,350,000        2,602,625 
Nortek,             
   Sr. Sub. Notes, 8.5%, 2014    1,250,000    a    1,309,375 

10
    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Building Materials (continued)             
Ply Gem Industries,             
   Sr. Sub. Notes, 9%, 2012    1,750,000    a    1,767,500 
            11,212,250 
Cable/Media—4.3%             
Cablevision Systems,             
   Sr. Notes, 8%, 2012    4,500,000    a    4,635,000 
Charter Communications II,             
   Sr. Notes, 10.25%, 2010    3,000,000        3,105,000 
EchoStar Communications,             
Conv. Sub. Notes, 5.75%, 2008    3,000,000        3,060,000 
Insight Midwest/Capital:             
   Sr. Notes, 9.75%, 2009    800,000        844,000 
   Sr. Notes, 10.5%, 2010    800,000        870,000 
Mediacom/Capital:             
   Sr. Notes, 9.5%, 2013    750,000        738,750 
Sr. Notes, Ser. B, 8.5%, 2008    1,100,000        1,102,750 
Mediacom Communications,             
Conv. Sr. Notes, 5.25%, 2006    1,750,000        1,658,125 
PanAmSat,             
   Sr. Notes, 9%, 2014    1,000,000    a    1,047,500 
Videotron LTEE,             
   Sr. Notes, 6.875%, 2014    250,000        253,750 
Warner Music,             
Sr. Sub. Notes, 7.375%, 2014    750,000    a    750,000 
            18,064,875 
Chemicals/Plastics—4.2%             
Borden U.S. Finance/Nova Scotia,             
Sr. Secured Notes, 9%, 2014    1,500,000    a    1,552,500 
Equistar Chemical/Funding:             
Sr. Notes, 10.125%, 2008    1,000,000        1,117,500 
Sr. Notes, 10.625%, 2011    1,750,000        1,977,500 
Hercules,             
Sr. Sub. Notes, 6.75%, 2029    250,000    a    249,375 
Huntsman:             
   Notes, 11.625%, 2010    2,000,000        2,250,000 
Sr. Sub. Notes, 10.125%, 2009    1,500,000        1,552,500 
Innophos,             
Sr. Sub. Notes, 8.875%, 2014    850,000    a    888,250 

The Fund 11

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Chemicals/Plastics (continued)             
Koppers,             
   Notes, 9.875%, 2013    1,500,000        1,657,500 
Lyondell Chemicals:             
   Notes, 9.5%, 2008    1,000,000        1,073,750 
Sr. Secured Notes, 9.5%, 2008    500,000        536,875 
Sr. Secured Notes, 10.5%, 2013    1,500,000        1,695,000 
Sub. Notes, 10.875%, 2009    1,000,000        1,056,250 
Nalco,             
Sr. Sub. Notes, 8.875%, 2013    1,500,000    a    1,625,625 
Rockwood Specialties,             
Sr. Sub. Notes, 10.625%, 2011    500,000        547,500 
            17,780,125 
Consumer Durables—2.3%             
American Achievement,             
Sr. Sub. Notes, 8.25%, 2012    1,500,000    a    1,537,500 
General Binding,             
Sr. Sub. Notes, 9.375%, 2008    500,000        513,750 
Jarden,             
Sr. Sub. Notes, 9.75%, 2012    900,000        990,000 
K2,             
   Sr. Notes, 7.375%, 2014    750,000    a    780,000 
Samsonite,             
Sr. Sub. Notes, 8.875%, 2011    1,000,000    a    1,035,000 
Sealy Mattress,             
Sr. Sub. Notes, 8.25%, 2014    2,000,000    a    2,075,000 
Simmons,             
Sr. Sub. Notes, 7.875%, 2014    2,500,000    a    2,587,500 
            9,518,750 
Consumer Non-Durables—2.0%             
Central Garden & Pet,             
Sr. Sub. Notes, 9.125%, 2013    100,000        109,500 
Chattem,             
   Sr. Sub. Notes, 7%, 2014    1,000,000        995,000 
Elizabeth Arden,             
   Notes, 7.75%, 2014    1,000,000        1,040,000 
FTD,             
   Sr. Notes, 7.75%, 2014    1,000,000        980,000 
Hines Nurseries,             
   Notes, 10.25%, 2011    1,000,000        1,055,000 
 
 
12             

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Consumer Non-Durables (continued)             
Jafra Cosmetics/Distributors,             
   Sr. Sub. Notes, 10.75%, 2011    2,005,000        2,300,738 
Playtex Products,             
   Sr. Sub. Notes, 9.375%, 2011    1,000,000        1,021,250 
Prestige Brands,             
   Sr. Sub. Notes, 9.25%, 2012    1,000,000    a    1,000,000 
            8,501,488 
Ecological Pollution Control—1.7%             
Allied Waste:             
   Secured Notes, 6.125%, 2014    1,250,000        1,171,875 
Sr. Notes, Ser. B, 7.375%, 2014    2,500,000        2,440,625 
Casella Waste Systems,             
   Sr. Sub. Notes, 9.75%, 2013    500,000        538,750 
IESI,             
   Sr. Sub. Notes, 10.25%, 2012    1,000,000        1,085,000 
MSW Energy/Finance:             
   Notes, Ser. B, 7.375%, 2010    1,000,000        1,045,000 
Sr. Secured Notes, Ser. B, 8.5%, 2010    500,000        547,500 
Synagro Technologies,             
   Sr. Sub. Notes, 9.5%, 2009    500,000        530,000 
            7,358,750 
Entertainment/Leisure—3.0%             
AMC Entertainment,             
   Sr. Sub. Notes, 9.5%, 2011    720,000        738,000 
AMF Bowling Worldwide,             
   Sr. Sub. Notes, 10%, 2010    1,450,000    a    1,515,250 
Intrawest,             
   Sr. Notes, 7.5%, 2013    3,250,000        3,315,000 
LCE Acquisition,             
   Sr. Sub. Notes, 9%, 2014    1,000,000    a    1,020,000 
Marquee,             
   Sr. Notes, 8.625%, 2012    950,000    a    997,500 
NCL,             
   Sr. Notes, 10.625%, 2014    1,000,000    a    1,035,000 
Royal Caribbean Cruises:             
   Debs., 7.25%, 2018    1,200,000        1,236,000 
   Debs., 7.5%, 2027    250,000        251,875 
   Sr. Notes, 8%, 2010    1,000,000        1,116,250 

The Fund 13

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Entertainment/Leisure (continued)             
Town Sports International,             
   Sr. Notes, 9.625%, 2011    750,000        763,125 
Vail Resorts,             
Sr. Sub. Notes, 6.75%, 2014    500,000        496,250 
            12,484,250 
Food & Beverages—4.5%             
Del Monte:             
Sr. Sub. Notes, 8.625%, 2012    975,000        1,089,562 
Sr. Sub. Notes, Ser. B, 9.25%, 2011    500,000        557,500 
Dole Foods:             
   Notes, 7.25%, 2010    1,400,000        1,414,000 
   Sr. Notes, 8.875%, 2011    1,075,000        1,155,625 
Ingles Markets,             
Sr. Sub. Notes, 8.875%, 2011    1,500,000        1,597,500 
Land O Lakes,             
   Sr. Notes, 8.75%, 2011    1,000,000        940,000 
Le-Natures,             
   Sr. Sub. Notes, 10%, 2013    1,000,000    a    1,050,000 
Michael Foods,             
   Sr. Sub. Notes, 8%, 2013    1,750,000        1,841,875 
Nash Finch,             
Sr. Sub. Notes, Ser. B, 8.5%, 2008    1,000,000        1,017,500 
Pathmark Stores,             
Sr. Sub. Notes, 8.75%, 2012    2,750,000        2,777,500 
Pinnacle Foods,             
Sr. Sub. Notes, 8.25%, 2013    3,000,000    a    2,872,500 
Seminis Vegetable Seeds,             
Sr. Sub. Notes, 10.25%, 2013    500,000        557,500 
Stater Brothers,             
   Sr. Notes, 8.125%, 2012    1,550,000    a    1,619,750 
Swift & Co.,             
Sr. Sub. Notes, 12.5%, 2010    500,000        546,250 
            19,037,062 
Gaming—5.9%             
American Casino & Entertainment,             
Sr. Secured Notes, 7.85%, 2012    2,000,000    a    2,085,000 
Argosy Gaming:             
   Sr. Sub. Notes, 7%, 2014    1,000,000        1,025,000 
   Sr. Sub. Notes, 9%, 2011    550,000        616,000 
Aztar,             
Sr. Sub. Notes, 7.875%, 2014    1,000,000    a    1,031,250 
14             

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Gaming (continued)             
Boyd Gaming:             
   Sr. Sub. Notes, 6.75%, 2014    1,000,000        1,007,500 
   Sr. Sub. Notes, 7.75%, 2012    1,000,000        1,061,250 
Hard Rock Hotel,             
   Notes, 8.875%, 2013    1,750,000        1,868,125 
Inn of the Mountain Gods,             
   Sr. Notes, 12%, 2010    650,000        737,750 
Isle of Capri Casinos,             
   Sr. Sub. Notes, 7%, 2014    2,850,000        2,835,750 
Kerzner International:             
Conv. Sub. Notes, 2.375%, 2024    1,000,000    a    988,750 
Sr. Sub. Notes, 8.875%, 2011    1,000,000        1,102,500 
Mandalay Resort,             
Sr. Sub. Notes, 9.375%, 2010    500,000        567,500 
Mohegan Tribal Gaming Authority:             
Sr. Sub. Notes, 7.125%, 2014    1,000,000    a    1,032,500 
   Sr. Sub. Notes, 8%, 2012    700,000        771,750 
Penn National Gaming,             
Sr. Sub. Notes, 6.875%, 2011    1,450,000        1,479,000 
Pinnacle Entertainment,             
   Sr. Sub. Notes, 8.25%, 2012    3,000,000        3,030,000 
Seneca Gaming,             
   Sr. Notes, 7.25%, 2012    1,000,000    a    1,023,750 
Station Casinos,             
Sr. Sub. Notes, 6.875%, 2016    2,500,000        2,509,375 
            24,772,750 
Health Care—6.6%             
Alliance Imaging,             
Sr. Sub. Notes, 10.375%, 2011    1,500,000        1,616,250 
Beverly Enterprises,             
Sr. Sub. Notes, 7.875%, 2014    750,000    a    781,875 
Concentra Operating,             
Sr. Sub. Notes, 9.125%, 2012    1,000,000    a    1,078,750 
Extendicare Health Services,             
   Sr. Notes, 9.5%, 2010    250,000        280,625 
Fisher Scientific International,             
   Sr. Sub. Notes, 8%, 2013    500,000        557,500 
Genesis Healthcare,             
   Sr. Sub. Notes, 8%, 2013    2,500,000        2,681,250 
Insight Health Services,             
Sr. Sub. Notes, Ser. B, 9.875%, 2011    1,500,000        1,526,250 

The Fund 15

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Health Care (continued)             
Kinetic Concepts,             
Sr. Sub. Notes, 7.375%, 2013    787,000        822,415 
MedEx,             
Sr. Sub. Notes, 8.875%, 2013    2,250,000        2,463,750 
Medquest,             
Notes, Ser. B, 11.875%, 2012    500,000        567,500 
NeighborCare,             
Sr. Sub. Notes, 6.875%, 2013    900,000        945,000 
Omega Healthcare Investors,             
   Sr. Notes, 7%, 2014    950,000    a    935,750 
Province Healthcare,             
Sr. Sub. Notes, 7.5%, 2013    2,400,000        2,700,000 
Psychiatric Solutions,             
Sr. Sub. Notes, 10.625%, 2013    500,000        565,000 
Select Medical,             
Sr. Sub. Notes, 7.5%, 2013    1,400,000        1,466,500 
Sybron Dental Specialties,             
Sr. Sub. Notes, 8.125%, 2012    250,000        270,625 
Triad Hospitals,             
   Sr. Sub. Notes, 7%, 2013    3,500,000        3,539,375 
VWR International,             
   Sr. Sub. Notes, 8%, 2014    2,000,000    a    2,075,000 
Vanguard Health Systems,             
Sr. Sub. Notes, 9.75%, 2011    1,400,000        1,631,000 
WH Holdings/Capital,             
   Sr. Notes, 9.5%, 2011    1,350,000        1,451,250 
            27,955,665 
Home Building—.3%             
K. Hovnanian Enterprises,             
Sr. Sub. Notes, 7.75%, 2013    1,000,000        1,063,750 
Industrial—1.7%             
Blount:             
Sr. Sub. Notes, 8.875%, 2012    1,000,000        1,050,000 
Sr. Sub. Notes, 13%, 2009    1,250,000        1,339,062 
MAAX,             
Sr. Sub. Notes, 9.75%, 2012    500,000    a    530,000 
Mueller,             
Sr. Sub. Notes, 10%, 2012    2,000,000    a    2,165,000 
Polypore,             
Sr. Sub. Notes, 8.75%, 2012    1,000,000    a    1,055,000 
 
16             

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Industrial (continued)             
Terex,             
Sr. Sub. Notes, 7.375%, 2014    600,000        615,000 
Trimas,             
   Notes, 9.875%, 2012    250,000        266,250 
            7,020,312 
Leasing—1.8%             
H&E Equipment/Finance,             
   Notes, 11.125%, 2012    1,650,000        1,691,250 
Mobile Mini,             
   Sr. Notes, 9.5%, 2013    2,000,000        2,230,000 
United Rentals:             
   Sr. Sub. Notes, 7%, 2014    1,030,000        916,700 
Sr. Sub. Notes, 7.75%, 2013    1,500,000        1,402,500 
Williams Scotsman,             
   Sr. Notes, 9.875%, 2007    1,500,000        1,485,000 
            7,725,450 
Lodging/Hotels—2.2%             
Felcor Lodging:             
   Sr. Notes, 5.84%, 2011    1,000,000    a,b    1,010,000 
   Sr. Notes, 9%, 2011    750,000        821,250 
Felcor Suites,             
   Sr. Notes, 7.625%, 2007    500,000        523,750 
Gaylord Entertainment,             
   Sr. Notes, 8%, 2013    3,000,000        3,127,500 
HMH Properties:             
   Sr. Secured Notes,             
   Ser. B, 7.875%, 2008    534,000        552,690 
Host Marriott,             
   Sr. Notes, 7.125%, 2013    2,000,000        2,045,000 
La Quinta Properties,             
   Sr. Notes, 8.875%, 2011    200,000        223,000 
Meristar Hospitality,             
   Sr. Notes, 9.125%, 2011    850,000        879,750 
            9,182,940 
Mining/Metals—1.1%             
Alpha Natural Resources,             
   Sr. Notes, 10%, 2012    2,000,000    a    2,200,000 
Arch Western Finance,             
   Sr. Notes, 7.5%, 2013    750,000    a    780,000 

The Fund 17

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Mining/Metals (continued)             
Foundation PA Coal,             
   Sr. Notes, 7.25%, 2014    1,500,000    a    1,586,250 
            4,566,250 
Oil & Gas—4.7%             
Belden & Blake,             
Sr. Secured Notes, 8.75%, 2012    2,250,000    a    2,356,875 
Chesapeake Energy,             
   Sr. Notes, 7.75%, 2015    500,000        538,750 
Citgo Petroleum,             
   Sr. Notes, 11.375%, 2011    750,000        879,375 
Compton Petroleum,             
   Sr. Notes, 9.9%, 2009    1,330,000        1,476,300 
Comstock Resources,             
   Sr. Notes, 6.875%, 2012    1,000,000        1,010,000 
Continental Resources,             
Sr. Sub. Notes, 10.25%, 2008    400,000        415,500 
Denbury Resources,             
   Notes, 7.5%, 2013    1,150,000        1,213,250 
Encore Acquisition,             
Sr. Sub. Notes, 6.25%, 2014    750,000        738,750 
Exco Resources,             
   Notes, 7.25%, 2011    2,000,000        2,110,000 
Grey Wolf:             
   Conv. Notes, 3.75%, 2023    250,000        240,938 
Conv. Sr. Notes, 1.55%, 2024    1,250,000    a,b    1,273,438 
GulfMark Offshore,             
   Sr. Notes, 7.75%, 2014    1,000,000    a    997,500 
Hornbeck Offshore Services,             
   Sr. Notes, 10.625%, 2008    500,000        552,500 
Houston Exploration,             
   Sr. Sub. Notes, 7%, 2013    1,000,000        1,035,000 
Plains E&P,             
Sr. Sub. Notes, Ser. B, 8.75%, 2012    250,000        280,000 
Premcor Refining,             
Sr. Sub. Notes, 7.75%, 2012    1,500,000        1,608,750 
Pride International,             
Conv. Sr. Notes, 3.25%, 2033    1,500,000        1,590,000 
Transmontaigne,             
Sr. Sub. Notes, 9.125%, 2010    1,250,000        1,393,750 
            19,710,676 
 
18             

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Packaging/Consumer—3.0%             
AEP Industries,             
   Sr. Sub. Notes, 9.875%, 2007    1,500,000        1,537,500 
Crown Cork & Seal:             
   Debs., 7.375%, 2026    500,000        442,500 
   Debs., 8%, 2023    750,000        701,250 
Graham Packaging/Capital,             
   Sr. Sub. Notes, Ser. B, 8.75%, 2008    2,700,000        2,787,750 
Graphic Packaging International:             
   Sr. Notes, 8.5%, 2011    1,050,000        1,170,750 
   Sr. Sub. Notes, 9.5%, 2013    1,250,000        1,406,250 
Owens-Brockway Glass Container,             
   Sr. Notes, 8.25%, 2013    4,500,000        4,770,000 
            12,816,000 
Paper—3.5%             
Abitibi-Consolidated,             
   Notes, 6%, 2013    500,000        461,250 
Ainsworth Lumber,             
   Sr. Notes, 6.75%, 2014    1,500,000    a    1,477,500 
Caraustar Industries:             
   Notes, 7.375%, 2009    700,000        731,500 
   Sr. Sub. Notes, 9.875%, 2011    2,400,000        2,550,000 
Georgia-Pacific:             
   Sr. Notes, 8%, 2014    1,000,000        1,142,500 
   Sr. Notes, 8%, 2024    1,000,000        1,082,500 
Jefferson Smurfit:             
   Sr. Notes, 7.5%, 2013    1,500,000        1,575,000 
   Sr. Notes, 9.625%, 2012    2,000,000        2,260,000 
Norske Skog Canada,             
   Sr. Notes, 7.375%, 2014    1,500,000        1,533,750 
Smurfit Capital Funding,             
   Debs., 7.5%, 2025    500,000        482,500 
Stone Container,             
   Sr. Notes, 8.375%, 2012    1,500,000        1,657,500 
            14,954,000 
Publishing—4.6%             
Advanstar Communications:             
   Secured Notes, 10.75%, 2010    650,000        719,875 
   Sr. Sub. Notes, Ser. B, 12%, 2011    900,000        960,750 
CBD Media/Finance,             
   Sr. Sub. Notes, 8.625%, 2011    1,500,000        1,593,750 

The Fund 19

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Publishing (continued)             
Canwest Media,             
Sr. Notes, Ser. B, 7.625%, 2013    1,000,000        1,070,000 
Cenveo:             
   Sr. Notes, 9.625%, 2012    750,000        826,875 
Sr. Sub. Notes, 7.875%, 2013    1,500,000        1,436,250 
Dex Media,             
   Notes, 8%, 2013    2,000,000    a    2,085,000 
Dex Media West/Finance,             
Sr. Sub. Notes, Ser. B, 9.875%, 2013    488,000        563,640 
Houghton Mifflin,             
Sr. Sub. Notes, 9.875%, 2013    1,400,000        1,468,250 
Liberty Group Operating,             
Sr. Sub. Notes, 9.375%, 2008    3,000,000        3,033,750 
Morris Publishing,             
   Notes, 7%, 2013    1,000,000        995,000 
PRIMEDIA,             
   Sr. Notes, 8.875%, 2011    700,000        689,500 
Quebecor Media,             
Sr. Discount Notes, 0/13.75%, 2011    1,250,000    c    1,193,750 
Vertis,             
Sr. Secured Notes, 9.75%, 2009    1,000,000        1,090,000 
Von Hoffmann,             
   Sr. Notes, 10.25%, 2009    820,000        916,350 
Yell Finance,             
Sr. Discount Notes, 0/13.5%, 2011    650,000    c    624,000 
            19,266,740 
Restaurants—.6%             
Buffets,             
Sr. Sub. Notes, 11.25%, 2010    950,000        1,002,250 
Dominos,             
   Sr. Sub. Notes, 8.25%, 2011    1,458,000        1,567,350 
            2,569,600 
Retail—4.2%             
CSK Auto,             
   Sr. Notes, 7%, 2014    1,000,000        960,000 
Couche-Tard U.S./Finance,             
   Sr. Sub. Notes, 7.5%, 2013    1,250,000        1,325,000 
Dillards,             
   Notes, 7.15%, 2007    1,000,000        1,047,500 
 
 
20             

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Retail (continued)             
Finlay Fine Jewelry,             
   Sr. Notes, 8.375%, 2012    750,000    a    802,500 
General Nutrition Center,             
   Sr. Sub. Notes, 8.5%, 2010    1,500,000    a    1,507,500 
Jean Coutu:             
   Sr. Notes, 7.625%, 2012    500,000    a    517,500 
   Sr. Sub. Notes, 8.5%, 2014    1,000,000    a    1,012,500 
Jo-Ann Stores,             
   Sr. Sub. Notes, 7.5%, 2012    1,250,000        1,278,125 
Pantry,             
   Sr. Sub. Notes, 7.75%, 2014    2,000,000        2,015,000 
Petro Stopping Centers/Financial,             
   Secured Notes, 9%, 2012    1,500,000        1,567,500 
Rent-A-Center,             
Sr. Sub. Notes, Ser. B, 7.5%, 2010    1,500,000        1,590,000 
Rite Aid:             
   Debs., 7.7%, 2027    1,250,000        1,093,750 
Sr. Secured Notes, 8.125%, 2010    1,250,000        1,318,750 
Saks,             
Sr. Sub. Notes, 7.375%, 2019    1,750,000        1,767,500 
            17,803,125 
Services—4.5%             
Affinity,             
   Sr. Sub. Notes, 9%, 2012    1,050,000        1,102,500 
Alderwoods,             
   Sr. Notes, 7.75%, 2012    1,000,000    a    1,045,000 
Buhrmann U.S.,             
   Sr. Sub. Notes, 8.25%, 2014    2,000,000    a    2,015,000 
Coinmach,             
   Sr. Notes, 9%, 2010    450,000        457,875 
Corrections Corporation of America,             
   Sr. Notes, 7.5%, 2011    3,300,000        3,489,750 
Iron Mountain:             
Sr. Sub. Notes, 6.625%, 2016    1,500,000        1,417,500 
   Sr. Sub. Notes, 7.75%, 2015    400,000        418,000 
JohnsonDiversey,             
Sr. Discount Notes, 0/10.67%, 2013    1,500,000    c    1,226,250 
LodgeNet Entertainment,             
   Sr. Sub. Debs., 9.5%, 2013    1,800,000        1,975,500 

The Fund 21

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Services (continued)             
Monitronics International,             
Sr. Sub. Notes, 11.75%, 2010    1,000,000    a    1,086,250 
Nebraska Book,             
Sr. Sub. Notes, 8.625%, 2012    2,500,000        2,500,000 
Wesco Distribution,             
Sr. Sub. Notes, Ser. B, 9.125%, 2008    2,000,000        2,070,000 
            18,803,625 
Technology—2.2%             
Activant Solutions,             
   Sr. Notes, 10.5%, 2011    1,250,000        1,306,250 
Amkor Technologies,             
Conv. Sub. Notes, 5.75%, 2006    750,000        698,438 
Avnet,             
   Conv. Sr. Notes, 2%, 2034    1,000,000        928,750 
Da-Lite Screen,             
   Sr. Notes, 9.5%, 2011    1,500,000    a    1,582,500 
Lucent Technologies:             
   Notes, 5.5%, 2008    500,000        483,750 
   Notes, 7.25%, 2006    1,000,000        1,047,500 
UGS,             
   Sr. Sub. Notes, 10%, 2012    1,000,000    a    1,095,000 
Xerox,             
   Sr. Notes, 7.625%, 2013    1,000,000        1,067,500 
Xerox Capital Trust I,             
   Capital Securities, 8%, 2027    1,000,000        962,500 
            9,172,188 
Telecommunications—3.9%             
American Tower,             
   Sr. Notes, 9.375%, 2009    4,000,000        4,290,000 
Centennial Cell Communications,             
   Sr. Notes, 10.125%, 2013    500,000        516,250 
Cincinnati Bell,             
   Sr. Notes, 7.25%, 2013    1,000,000        945,000 
Crown Castle International,             
   Sr. Notes, 7.5%, 2013    500,000        502,500 
Eircom Funding,             
   Notes, 8.25%, 2013    1,500,000        1,627,500 
MCI,             
   Sr. Notes, 5.908%, 2007    1,500,000        1,479,375 
 
 
22             

    Principal         
Bonds and Notes (continued)    Amount ($)    Value ($) 
Telecommunications (continued)             
Nextel Communications,             
   Sr. Notes, 7.375%, 2015    3,000,000        3,150,000 
Qwest Communications International,             
   Sr. Notes, 7.5%, 2014    2,350,000    a    2,103,250 
Rural Cellular,             
Sr. Secured Notes, 8.25%, 2012    1,000,000    a    1,022,500 
Spectrasite,             
   Sr. Notes, 8.25%, 2010    750,000        787,500 
            16,423,875 
Textiles/Apparel—1.2%             
Levi Strauss & Co.,             
   Sr. Notes, 12.25%, 2012    1,400,000        1,459,500 
Oxford Industries,             
   Sr. Notes, 8.875%, 2011    750,000    a    806,250 
Perry Ellis International,             
Sr. Sub. Notes, Ser. B, 8.875%, 2013    500,000        527,500 
Phillips Van-Heusen:             
   Sr. Notes, 7.25%, 2011    500,000        518,750 
   Sr. Notes, 8.125%, 2013    1,500,000        1,601,250 
            4,913,250 
Utilities—4.4%             
AES:             
   Sr. Notes, 7.75%, 2014    1,500,000        1,518,750 
   Sr. Notes, 9.5%, 2009    250,000        279,375 
Allegheny Energy Supply:             
   Bonds, 8.25%, 2012    500,000    a    532,500 
   Notes, 7.8%, 2011    1,500,000        1,575,000 
Dynegy,             
   Sr. Notes, 6.875%, 2011    1,250,000        1,168,750 
Edison Mission Energy,             
   Sr. Notes, 7.73%, 2009    2,750,000        2,894,375 
El Paso:             
   Notes, 7.75%, 2010    2,000,000        1,932,500 
   Sr. Notes, 7.875%, 2012    1,000,000        967,500 
NRG Energy,             
   Sr. Secured Notes, 8%, 2013    1,500,000    a    1,582,500 
Semco Energy,             
   Sr. Notes, 7.75%, 2013    1,000,000        1,055,000 

The Fund 23

S T A T E M E N T O F I N V E S T M E N T S (continued)

    Principal     
Bonds and Notes (continued)    Amount ($)    Value ($) 
Utilities (continued)         
Southern Star Central,         
Sr. Secured Notes, 8.5%, 2010    750,000    825,000 
Tennessee Gas Pipeline,         
   Debs., 7.5%, 2017    1,500,000    1,546,875 
Williams Cos.,         
   Notes, 7.625%, 2019    2,500,000    2,712,500 
        18,590,625 
Total Bonds and Notes         
   (cost $372,916,182)        384,313,773 
 
Preferred Stocks—1.1%    Shares    Value ($) 
Oil & Gas—.2%         
Chesapeake Energy,         
   Cum. Conv., $ 1.03    1,000 a    1,043,750 
Paper—.2%         
Smurfit-Stone Container,         
Ser. A, Cum. Conv., $ 1.75    40,000    1,005,000 
Telecommunications—.5%         
Crown Castle International,         
   Cum. Conv., $ 1.563    44,000    2,029,500 
Utilities—.2%         
Calpine Capital Trust:         
   Conv., $ 1.438    10,000    490,000 
   Cum. Conv., $ 1.375    5,000    240,000 
        730,000 
Total Preferred Stocks         
   (cost $4,235,578)        4,808,250 

24
Other Investments—4.9%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Preferred Plus Money         
   Market Fund         
   (cost $20,568,000)    20,568,000 d    20,568,000 
Total Investments (cost $397,719,760)    97.4%    409,690,023 
Cash and Receivables (Net)    2.6%    11,011,175 
Net Assets    100.0%    420,701,198 

a Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in 
transactions exempt from registration, normally to qualified institutional buyers.At August 31, 2004, these securities 
   amounted to $82,199,438 or 19.5% of net assets. 
b Variable rate security—interest rate subject to periodic change. 
c Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity. 
d Investment in affiliated money market mutual fund. 

Portfolio Summary †             
 
    Value (%)        Value (%) 
Health Care    6.6    Utilities    4.4 
Gaming    5.9    Cable/Media    4.3 
Money Market Investments    4.9    Chemicals/Plastics    4.2 
Oil & Gas    4.7    Retail    4.2 
Publishing    4.6    Other    44.6 
Food & Beverages    4.5         
Services    4.5        97.4 

† Based on net assets.

See notes to financial statements.

The Fund 25

STATEMENT OF ASSETS AND LIABILITIES

August 31, 2004

            Cost    Value 
Assets ($):                 
Investments in securities—See Statement of Investments:         
   Unaffiliated issuers            377,151,760    389,122,023 
   Affiliated issuers            20,568,000    20,568,000 
Cash                4,627,480 
Dividends and interest receivable                7,764,432 
Receivable for shares of Common Stock subscribed        875,792 
Receivable for investment securities sold            873,781 
Prepaid expenses                12,883 
                423,844,391 
Liabilities ($):                 
Due to The Dreyfus Corporation and affiliates—Note 3(c)        501,777 
Payable for investment securities purchased            2,226,418 
Payable for shares of Common Stock redeemed            282,010 
Accrued expenses                132,988 
                3,143,193 
Net Assets ($)                420,701,198 
Composition of Net Assets ($):                 
Paid-in capital                409,052,848 
Accumulated undistributed investment income—net        2,469,620 
Accumulated net realized gain (loss) on investments        (2,791,533) 
Accumulated net unrealized appreciation             
(depreciation) on investments                11,970,263 
Net Assets ($)                420,701,198 
 
 
Net Asset Value Per Share                 
    Class A    Class B    Class C    Class R 
Net Assets ($)    184,674,496    69,572,625    155,188,688    11,265,389 
Shares Outstanding    13,332,997    5,027,350    11,234,520    811,777 
Net Asset Value Per Share ($)    13.85    13.84    13.81    13.88 

See notes to financial statements.
26
STATEMENT OF OPERATIONS
Year Ended August 31, 2004
Investment Income ($):     
Income:     
Interest    28,338,057 
Cash dividends:     
   Unaffiliated issuers    239,648 
   Affiliated issuers    161,411 
Total Income    28,739,116 
Expenses:     
Management fee—Note 3(a)    2,776,875 
Distribution fees—Note 3(b)    1,278,422 
Shareholder servicing costs—Note 3(c)    1,244,241 
Registration fees    166,867 
Professional fees    68,669 
Prospectus and shareholders’ reports    42,358 
Custodian fees—Note 3(c)    35,333 
Directors’ fees and expenses—Note 3(d)    31,514 
Miscellaneous    41,107 
Total Expenses    5,685,386 
Less—expense reimbursement from The Dreyfus Corporation     
   due to undertaking—Note 3(a)    (47,160) 
Less—reduction in custody fees     
   due to earnings credits—Note 1(b)    (5,805) 
Net Expenses    5,632,421 
Investment Income—Net    23,106,695 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    (1,721,640) 
Net unrealized appreciation (depreciation) on investments    9,149,527 
Net Realized and Unrealized Gain (Loss) on Investments    7,427,887 
Net Increase in Net Assets Resulting from Operations    30,534,582 

See notes to financial statements.
The Fund 27

STATEMENT OF CHANGES IN NET ASSETS

                               Year Ended August 31, 
    2004    2003 a 
Operations ($):         
Investment income—net    23,106,695    3,696,450 
Net realized gain (loss) on investments    (1,721,640)    (666,715) 
Net unrealized appreciation         
   (depreciation) on investments    9,149,527    2,820,736 
Net Increase (Decrease) in Net Assets         
   Resulting from Operations    30,534,582    5,850,471 
Dividends to Shareholders from ($):         
Investment income—net:         
Class A shares    (11,324,959)    (1,359,110) 
Class B shares    (3,695,052)    (481,034) 
Class C shares    (7,348,141)    (708,104) 
Class R shares    (285,877)    (3,797) 
Total Dividends    (22,654,029)    (2,552,045) 
Capital Stock Transactions ($):         
Net proceeds from shares sold:         
Class A shares    150,807,247    125,951,139 
Class B shares    31,788,716    49,254,903 
Class C shares    96,003,225    77,065,981 
Class R shares    12,665,028    2,523,615 
Dividends reinvested:         
Class A shares    7,249,919    977,748 
Class B shares    1,911,708    251,694 
Class C shares    3,092,298    267,757 
Class R shares    175,060    3,797 
Cost of shares redeemed:         
Class A shares    (94,524,848)    (10,930,411) 
Class B shares    (11,251,572)    (4,807,298) 
Class C shares    (22,441,129)    (2,120,050) 
Class R shares    (3,840,027)    (552,281) 
Increase (Decrease) in Net Assets from         
   Capital Stock Transactions    171,635,625    237,886,594 
Total Increase (Decrease) in Net Assets    179,516,178    241,185,020 
Net Assets ($):         
Beginning of Period    241,185,020    — 
End of Period    420,701,198    241,185,020 
Undistributed investment income—net    2,469,620    1,267,416 
 
 
28         

                           Year Ended August 31, 
    2004    2003 a 
Capital Share Transactions:         
Class A b         
Shares sold    10,928,343    9,537,075 
Shares issued for dividends reinvested    528,411    73,770 
Shares redeemed    (6,914,083)    (820,519) 
Net Increase (Decrease) in Shares Outstanding    4,542,671    8,790,326 
Class B b         
Shares sold    2,309,911    3,738,190 
Shares issued for dividends reinvested    139,430    19,018 
Shares redeemed    (817,624)    (361,575) 
Net Increase (Decrease) in Shares Outstanding    1,631,717    3,395,633 
Class C         
Shares sold    6,967,475    5,824,305 
Shares issued for dividends reinvested    225,871    20,231 
Shares redeemed    (1,643,033)    (160,329) 
Net Increase (Decrease) in Shares Outstanding    5,550,313    5,684,207 
Class R         
Shares sold    923,696    194,102 
Shares issued for dividends reinvested    12,804    296 
Shares redeemed    (277,359)    (41,762) 
Net Increase (Decrease) in Shares Outstanding    659,141    152,636 

a From January 31, 2003 (commencement of operations) to August 31, 2003. b During the period ended August 31, 2004, 39,315 Class B shares representing $540,340 were automatically converted to 39,303 Class A shares and during the period ended August 31, 2003, 10,447 Class B shares representing $138,184 were automatically converted to 10,446 Class A shares.

See notes to financial statements.

The Fund 29
  FINANCIAL HIGHLIGHTS

The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.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, 
Class A Shares    2004    2003 a 
Per Share Data ($):         
Net asset value, beginning of period    13.39    12.50 
Investment Operations:         
Investment income—net b    .92    .48 
Net realized and unrealized         
   gain (loss) on investments    .45    .70 
Total from Investment Operations    1.37    1.18 
Distributions:         
Dividends from investment income—net    (.91)    (.29) 
Net asset value, end of period    13.85    13.39 
Total Return (%) c    10.40    9.55d 
Ratios/Supplemental Data (%):         
Ratio of total expenses to average net assets    1.18    1.33e 
Ratio of net expenses to average net assets    1.16    1.25e 
Ratio of net investment income         
   to average net assets    6.60    6.31e 
Portfolio Turnover Rate    62.65    21.71d 
Net Assets, end of period ($ x 1,000)    184,674    117,731 

a    From January 31, 2003 (commencement of operations) to August 31, 2003. 
b    Based on average shares outstanding at each month end. 
c    Exclusive of sales charge. 
d    Not annualized. 
e    Annualized. 
See notes to financial statements. 

30

    Year Ended August 31, 
Class B Shares    2004    2003 a 
Per Share Data ($):         
Net asset value, beginning of period    13.38    12.50 
Investment Operations:         
Investment income—net b    .84    .44 
Net realized and unrealized         
   gain (loss) on investments    .45    .70 
Total from Investment Operations    1.29    1.14 
Distributions:         
Dividends from investment income—net    (.83)    (.26) 
Net asset value, end of period    13.84    13.38 
Total Return (%) c    9.83    9.24d 
Ratios/Supplemental Data (%):         
Ratio of total expenses to average net assets    1.72    1.88e 
Ratio of net expenses to average net assets    1.71    1.75e 
Ratio of net investment income         
   to average net assets    6.06    5.77e 
Portfolio Turnover Rate    62.65    21.71d 
Net Assets, end of period ($ x 1,000)    69,573    45,444 

a    From January 31, 2003 (commencement of operations) to August 31, 2003. 
b    Based on average shares outstanding at each month end. 
c    Exclusive of sales charge. 
d    Not annualized. 
e    Annualized. 
See notes to financial statements. 

The Fund 31

  FINANCIAL HIGHLIGHTS (continued)
    Year Ended August 31, 
Class C Shares    2004    2003 a 
Per Share Data ($):         
Net asset value, beginning of period    13.36    12.50 
Investment Operations:         
Investment income—net b    .81    .43 
Net realized and unrealized         
   gain (loss) on investments    .45    .68 
Total from Investment Operations    1.26    1.11 
Distributions:         
Dividends from investment income—net    (.81)    (.25) 
Net asset value, end of period    13.81    13.36 
Total Return (%) c    9.53    9.00d 
Ratios/Supplemental Data (%):         
Ratio of total expenses to average net assets    1.96    2.11e 
Ratio of net expenses to average net assets    1.94    2.00e 
Ratio of net investment income         
   to average net assets    5.82    5.64e 
Portfolio Turnover Rate    62.65    21.71d 
Net Assets, end of period ($ x 1,000)    155,189    75,962 

a    From January 31, 2003 (commencement of operations) to August 31, 2003. 
b    Based on average shares outstanding at each month end. 
c    Exclusive of sales charge. 
d    Not annualized. 
e    Annualized. 
See notes to financial statements. 

  32
    Year Ended August 31, 
Class R Shares    2004    2003 a 
Per Share Data ($):         
Net asset value, beginning of period    13.42    12.50 
Investment Operations:         
Investment income—net b    .94    .42 
Net realized and unrealized         
   gain (loss) on investments    .46    .80 
Total from Investment Operations    1.40    1.22 
Distributions:         
Dividends from investment income—net    (.94)    (.30) 
Net asset value, end of period    13.88    13.42 
Total Return (%)    10.75    9.80c 
Ratios/Supplemental Data (%):         
Ratio of total expenses to average net assets    .90    1.35d 
Ratio of net expenses to average net assets    .90    1.00d 
Ratio of net investment income         
   to average net assets    6.92    6.11d 
Portfolio Turnover Rate    62.65    21.71c 
Net Assets, end of period ($ x 1,000)    11,265    2,048 

a    From January 31, 2003 (commencement of operations) to August 31, 2003. 
b    Based on average shares outstanding at each month end. 
c    Not annualized. 
d    Annualized. 
See notes to financial statements. 

The Fund 33

NOTES TO FINANCIAL STATEMENTS

34

NOTE 1—Significant Accounting Policies:

Dreyfus Premier High Income Fund (the “fund”) is a separate diversified series of Dreyfus Bond 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 two series, including the fund.The fund’s investment objective is to maximize total return consistent with capital preservation and prudent risk management.The Dreyfus Corporation (“Dreyfus”) serves as the fund’s investment adviser. Dreyfus is a wholly-owned subsidiary of Mellon Financial Corporation (“Mellon Financial”). Shenkman Capital Management, Inc. (“Shenkman”) serves as the fund’s sub-investment adviser.

Dreyfus Service Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class B, Class C and Class R. Class A shares are subject to a sales charge imposed at the time of purchase. Class B shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class B share redemptions made within six years of purchase and automatically convert to Class A shares after six years. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase and Class R shares are sold at net asset value per share only to institutional investors.Other differences between the classes include the services offered to and the expenses borne by each class, the minimum initial investment and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.

The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.

The fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.

The fund enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.

(a) Portfolio valuation: Investments in securities (excluding short-term investments, other than U.S.Treasury Bills), are valued each business day by an independent pricing service (the “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 valued 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 fund’s Board of Directors. Restricted securities, as well as securities or other assets for which recent market quotations are not readily available, that are not valued by a pricing service approved by the fund’s Board of Directors, or are determined by the fund not to reflect accurately fair value (such as when an event occurs after the close of the exchange on which the security is principally traded and that is determined by the fund to have changed the value of the security), are valued at fair value as determined in good faith under the direction of the Board of Directors. The factors that may be consid-

The Fund 35
NOTES TO FINANCIAL STATEMENTS (continued)

ered when fair valuing a security include fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. Short-term investments, excluding U.S. Treasury Bills, 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 and premium on investments, is recognized on the accrual basis.

The fund has an arrangement with the custodian bank whereby the fund receives earnings credits from the custodian when positive cash balances are maintained, which are used to offset custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.

(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus as defined as “affiliated” in the Act.

(d) Dividends to shareholders: Dividends payable to shareholders are recorded by the fund on the ex-dividend date.The fund declares and pays dividends from investment income-net 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 of 1986, as amended (the “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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles.

On August 31, 2004, the Board of Directors declared a cash dividend per share of $.080 for Class A, $.074 for Class B, $.071 for Class C and $.083 for Class R from undistributed investment income-net, payable

36

on September 1, 2004 (ex-dividend date) to shareholders of record as of the close of business on August 31, 2004.

(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.

At August 31, 2004, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $2,469,620, accumulated capital losses $591,715 and unrealized appreciation $11,479,642. In addition, the fund had $2,178,568 of capital losses realized after October 31, 2003, which were deferred for tax purposes to the first day of the following fiscal year.

The accumulated capital loss carryover is available to be applied against future net securities profits,if any,realized subsequent to August 31,2004. If not applied, the carryover expires in fiscal 2012.

The tax character of distributions paid to shareholders during the fiscal periods ended August 31, 2004 and August 31, 2003, respectively, were as follows:ordinary income $22,654,029 and $2,552,045.

During the period ended August 31, 2004, as a result of permanent book to tax differences primarily due to the tax treatment for amortization of premiums, the fund increased accumulated undistributed investment income-net by $749,538, decreased net realized gain (loss) on investments by $386,032 and decreased paid-in capital by $363,506. Net assets were not affected by this reclassification.

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $350 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

The Fund 37
NOTES TO FINANCIAL STATEMENTS (continued)

based on prevailing market rates in effect at the time of borrowings. During the period ended August 31, 2004, the fund did not borrow under the Facility.

NOTE 3—Management Fee and Other Transactions With Affiliates:

(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .75 of 1% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has undertaken from September 1, 2003 through January 1, 2004, to reduce the management fee paid by the fund or assume excess expenses of the fund, to the extent that, if the fund’s aggregate expenses, exclusive of taxes, brokerage fees, Rule 12b-1 distribution fees, shareholder services plan fees and extraordinary expenses, exceed an annual rate of 1% of the value of the fund’s average daily net assets.The reduction in management fee, pursuant to the undertaking, amounted to $47,160 during the period ended August 31, 2004.

Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Shenkman, Dreyfus pays Shenkman a fee payable monthly at the annual rate of .30 of 1% of the value of the fund’s average daily net assets.

During the period ended August 31, 2004, the Distributor retained $151,207 from commissions earned on sales of the fund’s Class A shares, and $154,297 and $67,127 from contingent deferred sales charges on redemptions of the fund’s Class B and C shares, respectively.

(b) Under the Distribution Plan (the “Plan”) adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended August 31, 2004, Class B and Class C shares were charged $309,986 and $968,436, respectively, pursuant to the Plan.

(c) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of

38

their average daily net assets for the provision of certain services.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts.The Distributor may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended August 31, 2004, Class A, Class B and Class C shares were charged $436,225, $154,993 and $322,812, respectively, pursuant to the Shareholder Services Plan.

The fund compensates Dreyfus Transfer,Inc.,a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended August 31, 2004, the fund was charged $124,432 pursuant to the transfer agency agreement.

The fund compensates Mellon Bank, N.A., an affiliate of Dreyfus, under a custody agreement to provide custodial services for the fund. During the period ended August 31, 2004, the fund was charged $35,333 pursuant to the custody agreement.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consists of: management fees $262,789, Rule 12b-1 distribution plan fees $126,666, shareholder services plan fees $85,216, custodian fees $4,356 and transfer agency per account fees $22,750.

(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

(e) Pursuant to an exemptive order from the Securities and Exchange Commission, the fund may invest its available cash in affiliated money market mutual funds. Management fees of the underlying money market mutual funds have been waived by Dreyfus.

The Fund 39
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended August 31, 2004, amounted to $381,531,660 and $216,972,144, respectively.

At August 31, 2004, the cost of investments for federal income tax purposes was $398,210,381; accordingly, accumulated net unrealized appreciation on investments was $11,479,642, consisting of $13,461,790 gross unrealized appreciation and $1,982,148 gross unrealized depreciation.

NOTE 5—Legal Matters:

Two class actions have been filed against Mellon Financial,Mellon Bank, N.A., Dreyfus, Founders Asset Management LLC and the directors of all or substantially all of the Dreyfus funds, on behalf of a purported class and derivatively on behalf of said funds, alleging violations of the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the common law. The complaints alleged, among other things, (i) that 12b-1 fees and directed brokerage were improperly used to pay brokers to recommend Dreyfus funds over other funds, (ii) that such payments were not disclosed to investors, (iii) that economies of scale and soft-dollar benefits were not passed on to investors,and (iv) that 12b-1 fees charged to certain funds that were closed to new investors were also improper.The complaints sought compensatory and punitive damages, rescission of the advisory contracts and an accounting and restitution of any unlawful fees, as well as an award of attorneys fees and litigation expenses. On April 22, 2004, the actions were consolidated under the caption In re Dreyfus Mutual Funds Fee Litigation,and a consolidated amended complaint was filed on September 13, 2004.While adding new parties and claims under state and federal law, the allegations

40

in the consolidated amended complaint essentially track the allegations in the prior complaints pertaining to 12b-1 fees, directed brokerage, soft dollars and revenue sharing.Dreyfus and the funds believe the allegations to be totally without merit and intend to defend the action vigorously.

Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the defendants in the future. Neither Dreyfus nor the Dreyfus funds believe that any of the pending actions will have a material adverse effect on the Dreyfus funds or Dreyfus’ ability to perform its contracts with the Dreyfus funds.

The Fund 41

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors
Dreyfus Premier High Income Fund

We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier High Income Fund (one of the funds comprising Dreyfus Bond Funds, Inc.) as of August 31, 2004, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and financial highlights for each of the periods indicated therein.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 the standards of the Public Company Accounting Oversight Board (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 and financial highlights. Our procedures included verification by examination of securities held by the custodian as of August 31, 2004 and confirmation of securities not held by the custodian by correspondence with others.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 Premier High Income Fund at August 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.

New York, New York
October 14, 2004
42

IMPORTANT TAX INFORMATION (Unaudited)

The fund designates 0.95% of the ordinary dividends paid during the fiscal year ended August 31, 2004 as qualifying for the corporate dividends received deduction. Shareholders will receive notification in January 2005 of the percentage applicable to the preparation of their 2004 income tax return.

The Fund 43

BOARD MEMBERS INFORMATION (Unaudited)

Joseph S. DiMartino (60)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
• Corporate Director and Trustee
Other Board Memberships and Affiliations:
  • The Muscular Dystrophy Association, Director
  • Levcor International, Inc., an apparel fabric processor, Director
  • Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director
  • The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director

No. of Portfolios for which Board Member Serves: 186 ———————

David W. Burke (68) Board Member (1994)

Principal Occupation During Past 5 Years:

• Corporate Director and Trustee.

Other Board Memberships and Affiliations:

  • John F. Kennedy Library Foundation, Director
  • U.S.S. Constitution Museum, Director

No. of Portfolios for which Board Member Serves: 83 ———————

William Hodding Carter III (69) Board Member (1988)

Principal Occupation During Past 5 Years:

• President and Chief Executive Officer of the John S. and James L. Knight Foundation (1998-present)

Other Board Memberships and Affiliations:

  • Independent Sector, Director
  • The Century Foundation, Director
  • The Enterprise Corporation of the Delta, Director
  • Foundation of the Mid-South, Director

No. of Portfolios for which Board Member Serves: 11 ———————

Ehud Houminer (64) Board Member (1994)

Principal Occupation During Past 5 Years:

  • Executive-in-Residence at the Columbia Business School, Columbia University
  • Principal of Lear,Yavitz and Associates, a management consulting firm (1996 to 2001)
Other Board Memberships and Affiliations:
  • Avnet Inc., an electronics distributor, Director
  • International Advisory Board to the MBA Program School of Management, Ben Gurion University, Chairman
  • Explore Charter School, Brooklyn, NY, Chairman
No. of Portfolios for which Board Member Serves: 30
44
Richard C. Leone (64)
Board Member (1976)
Principal Occupation During Past 5 Years:
  • President of The Century Foundation (formerly,The Twentieth Century Fund, Inc.), a tax exempt research foundation engaged in the study of economic, foreign policy and domestic issues
No. of Portfolios for which Board Member Serves: 11
———————
Hans C. Mautner (66)
Board Member (1978)
Principal Occupation During Past 5 Years:
  • President—International Division and an Advisory Director of Simon Property Group, a real estate investment company (1998-present)
  • Director and Vice Chairman of Simon Property Group (1998-2003)
  • Chairman and Chief Executive Officer of Simon Global Limited (1999-present)
Other Board Memberships and Affiliations:
  • Capital and Regional PLC, a British co-investing real estate asset manager, Director
  • Member - Board of Managers of:
  Mezzacappa Long/Short Fund LLC
Mezzacappa Multi-Strategy Fund LLC
Mezzacappa Multi-Strategy Plus Fund LLC
No. of Portfolios for which Board Member Serves: 11
———————
Robin A. Pringle (40)
Board Member (1995)
Principal Occupation During Past 5 Years:
  • Senior Vice President of Mentor/National Mentoring Partnership, a national non-profit organiza- tion that is leading the movement to connect America’s young people with caring adult mentors
No. of Portfolios for which Board Member Serves: 11
———————
John E. Zuccotti (67)
Board Member (1977)

Principal Occupation During Past 5 Years:

• Chairman of Brookfield Financial Properties, Inc.

No. of Portfolios for which Board Member Serves: 11
———————

Once elected all Board Members serve for an indefinite term.The address of the Board Members and Officers is in c/o The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166.Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-554-4611.

The Fund 45

OFFICERS OF THE FUND (Unaudited)

STEPHEN E. CANTER, President since    JOHN B. HAMMALIAN, Secretary since 
March 2000.    March 2000. 
   Chairman of the Board, Chief Executive       Associate General Counsel of Dreyfus, and an 
   Officer and Chief Operating Officer of       officer of 37 investment companies (comprised 
   Dreyfus, and an officer of 97 investment       of 46 portfolios) managed by Dreyfus. He is 41 
   companies (comprised of 190 portfolios)       years old and has been an employee of Dreyfus 
   managed by Dreyfus. Mr. Canter also is a       since February 1991. 
 
   Board member and, where applicable, an    STEVEN F. NEWMAN, Assistant Secretary 
   Executive Committee Member of the other    since March 2000. 
   investment management subsidiaries of Mellon     
   Financial Corporation, each of which is an       Associate General Counsel and Assistant 
   affiliate of Dreyfus. He is 59 years old and has       Secretary of Dreyfus, and an officer of 98 
   been an employee of Dreyfus since May 1995.       investment companies (comprised of 206 
       portfolios) managed by Dreyfus. He is 55 years 
STEPHEN R. BYERS, Executive Vice       old and has been an employee of Dreyfus since 
President since November 2002.       July 1980. 
 
   Chief Investment Officer,Vice Chairman and a    MICHAEL A. ROSENBERG, Assistant 
   director of Dreyfus, and an officer of 97    Secretary since March 2000. 
   investment companies (comprised of 190     
   portfolios) managed by Dreyfus. Mr. Byers also       Associate General Counsel of Dreyfus, and an 
   is an officer, director or an Executive       officer of 95 investment companies (comprised 
   Committee Member of certain other       of 199 portfolios) managed by Dreyfus. He is 
   investment management subsidiaries of Mellon       44 years old and has been an employee of 
   Financial Corporation, each of which is an       Dreyfus since October 1991. 
   affiliate of Dreyfus. He is 50 years old and has    JAMES WINDELS, Treasurer since 
   been an employee of Dreyfus since January    November 2001. 
   2000. Prior to joining Dreyfus, he served as an     
   Executive Vice President-Capital Markets,       Director – Mutual Fund Accounting of 
   Chief Financial Officer and Treasurer at       Dreyfus, and an officer of 98 investment 
   Gruntal & Co., L.L.C.       companies (comprised of 206 portfolios) 
       managed by Dreyfus. He is 45 years old and 
MARK N. JACOBS, Vice President since       has been an employee of Dreyfus since April 
March 2000.       1985. 
   Executive Vice President, Secretary and     
   General Counsel of Dreyfus, and an officer of     
   98 investment companies (comprised of 206     
   portfolios) managed by Dreyfus. He is 58 years     
   old and has been an employee of Dreyfus since     
   June 1977.     

46

GREGORY S. GRUBER, Assistant    WILLIAM GERMENIS, Anti-Money 
Treasurer since March 2000.    Laundering Compliance Officer since 
   Senior Accounting Manager – Municipal Bond    October 2002. 
   Funds of Dreyfus, and an officer of 30       Vice President and Anti-Money Laundering 
   investment companies (comprised of 59       Compliance Officer of the Distributor, and the 
   portfolios) managed by Dreyfus. He is 45 years       Anti-Money Laundering Compliance Officer 
   old and has been an employee of Dreyfus since       of 93 investment companies (comprised of 201 
   August 1981.       portfolios) managed by Dreyfus. He is 33 years 
 
ERIK D. NAVILOFF, Assistant Treasurer       old and has been an employee of the 
since January 2003.       Distributor since October 1998. 
   Senior Accounting Manager – Taxable Fixed     
   Income Funds of Dreyfus, and an officer of 19     
   investment companies (comprised of 74     
   portfolios) managed by Dreyfus. He is 36 years     
   old and has been an employee of Dreyfus since     
   November 1992.     
 
KENNETH J. SANDGREN, Assistant     
Treasurer since November 2001.     
   Mutual Funds Tax Director of Dreyfus, and an     
   officer of 98 investment companies (comprised     
   of 206 portfolios) managed by Dreyfus. He is     
   50 years old and has been an employee of     
   Dreyfus since June 1993.     

The Fund 47

NOTES

For More Information

Dreyfus Premier    Custodian 
 
High Income Fund     
    Mellon Bank, N.A. 
200 Park Avenue     
    One Mellon Bank Center 
New York, NY 10166     
    Pittsburgh, PA 15258 
 
 
Investment Adviser    Transfer Agent & 
 
The Dreyfus Corporation    Dividend Disbursing Agent 
 
200 Park Avenue     
    Dreyfus Transfer, Inc. 
New York, NY 10166     
    200 Park Avenue 
 
Sub-Investment Adviser    New York, NY 10166 
 
Shenkman Capital Management, Inc.    Distributor 
 
461 Fifth Avenue     
    Dreyfus Service Corporation 
New York, NY 10017     
    200 Park Avenue 
 
    New York, NY 10166 

Telephone Call your financial representative or 1-800-554-4611

Mail    The Dreyfus Premier Family of Funds 
    144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the 12-month period ended June 30, 2004, is available through the fund’s website at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-645-6561.

Beginning with the fund’s fiscal quarter ending November 30, 2004, the fund will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

© 2004 Dreyfus Service Corporation

Item 2.    Code of Ethics. 
 
The Registrant has adopted a code of ethics that applies to the Registrant's principal executive 
officer, principal financial officer, principal accounting officer or controller, or persons performing similar 
functions. There have been no amendments to, or waivers in connection with, the Code of Ethics during the 
period covered by this Report. 
 
Item 3.    Audit Committee Financial Expert. 
 
The Registrant's Board has determined that Richard C. Leone, a member of the Audit Committee of 
the Board, is an audit committee financial expert as defined by the Securities and Exchange Commission (the 
"SEC"). Mr. Leone is "independent" as defined by the SEC for purposes of audit committee financial expert 
determinations.     
 
Item 4.    Principal Accountant Fees and Services 
 
(a) Audit Fees.    The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for 
professional services rendered by the Registrant's principal accountant (the "Auditor") for the audit of the 
Registrant's annual financial statements, or services that are normally provided by the Auditor in connection 
with the statutory and regulatory filings or engagements for the Reporting Periods, were $ 64,400 in 2003 
and $ 67,620 in 2004. 
 
(b) Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related 
services by the Auditor that are reasonably related to the performance of the audit of the Registrant's 
financial statements and are not reported under paragraph (a) of this Item 4 were $ 4,500 in 2003 and $ 4,500 
in 2004. These services consisted of security counts required by Rule 17f-2 under the Investment Company 
Act of 1940, as amended. 
 
The aggregate fees billed in the Reporting Periods for non-audit assurance and related services by the 
Auditor to the Registrant's investment adviser (not including any sub-investment adviser whose role is 
primarily portfolio management and is subcontracted with or overseen by another investment adviser), and 
any entity controlling, controlled by or under common control with the investment adviser that provides 
ongoing services to the Registrant ("Service Affiliates"), that were reasonably related to the performance of 
the annual audit of the Service Affiliate, which required pre-approval by the Audit Committee were $ 85,000 
in 2003 and $ 218, 500 in 2004. 

Note: For the second paragraph in each of (b) through (d) of this Item 4, certain of such services were not pre-approved prior to May 6, 2003, when such services were required to be pre-approved. On and after May 6, 2003, 100% of all services provided by the Auditor were pre-approved as required. For comparative purposes, the fees shown assume that all such services were pre-approved, including services that were not pre-approved prior to the compliance date of the pre-approval requirement.

(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning ("Tax Services") were $ 4,432 in 2003 and $ 7,659 in 2004. [These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or

-2-

administrative developments, (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held, and (iv) determination of Passive Foreign Investment Companies.]

The aggregate fees billed in the Reporting Periods for Tax Services by the Auditor to Service Affiliates which required pre-approval by the Audit Committee were $ -0- in 2003 and $ -0- in 2004.

(d) All Other Fees. The aggregate fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, were $_-0-_ in 2003 and $_-0-_in 2004. These services consisted of a review of the Registrant's anti-money laundering program.

The aggregate fees billed in the Reporting Periods for Non-Audit Services by the Auditor to Service Affiliates, other than the services reported in paragraphs (b) and (c) of this Item, which required pre-approval by the Audit Committee were $_-0- in 2003 and $ -0- in 2004.

Audit Committee Pre-Approval Policies and Procedures. The Registrant's Audit Committee has established policies and procedures (the "Policy") for pre-approval (within specified fee limits) of the Auditor's engagements for non-audit services to the Registrant and Service Affiliates without specific case-by-case consideration. Pre-approval considerations include whether the proposed services are compatible with maintaining the Auditor's independence. Pre-approvals pursuant to the Policy are considered annually.

Non-Audit Fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the Reporting Periods were $ 78, 250 in 2003 and $557,202 in 2004.

Auditor Independence. The Registrant's Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates which were not pre-approved (not requiring pre-approval) is compatible with maintaining the Auditor's independence.

Item 5.    Audit Committee of Listed Registrants. 
    Not applicable.    [CLOSED-END FUNDS ONLY] 
Item 6.    Schedule of Investments. 
    Not applicable.     
Item 7.    Disclosure of Proxy Voting Policies and Procedures for Closed-End Management 
    Investment Companies. 
    Not applicable.    [CLOSED-END FUNDS ONLY] 
Item 8.    Purchases of Equity Securities by Closed-End Management Investment Companies and 
    Affiliated Purchasers. 
    Not applicable.    [CLOSED-END FUNDS ONLY] 
Item 9.    Submission of Matters to a Vote of Security Holders. 

The Registrant has a Nominating Committee (the "Committee"), which is responsible for selecting and nominating persons for election or appointment by the Registrant's Board as Board members. The Committee has adopted a Nominating Committee Charter (the "Charter"). Pursuant to the Charter, the Committee will consider recommendations for nominees from shareholders submitted to the Secretary of the

-3-

Registrant, c/o The Dreyfus Corporation Legal Department, 200 Park Avenue, 8th Floor West, New York, New York 10166. A nomination submission must include information regarding the recommended nominee as specified in the Charter. This information includes all information relating to a recommended nominee that is required to be disclosed in solicitations or proxy statements for the election of Board members, as well as information sufficient to evaluate the factors to be considered by the Committee, including character and integrity, business and professional experience, and whether the person has the ability to apply sound and independent business judgment and would act in the interests of the Registrant and its shareholders. Nomination submissions are required to be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the Committee.

Item 10.    Controls and Procedures. 

(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the Registrant's most recently ended fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

Item 11.    Exhibits. 

(a)(1)    Code of ethics referred to in Item 2. 
(a)(2)    Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) 
under the Investment Company Act of 1940. 
(a)(3)    Not applicable. 
(b)    Certification of principal executive and principal financial officers as required by Rule 30a-2(b) 
under the Investment Company Act of 1940. 

-4-
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

  DREYFUS BOND FUNDS, INC.
By:    /s/ Stephen E. Canter 
    Stephen E. Canter 
    President 
 
Date:    October 28, 2004 
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 
1940, this Report has been signed below by the following persons on behalf of the Registrant and in the 
capacities and on the dates indicated. 
 
By:    /s/ Stephen E. Canter 
    Stephen E. Canter 
    Chief Executive Officer 
 
Date:    October 28, 2004 
 
By:    /s/ James Windels 
    James Windels 
    Chief Financial Officer 
 
Date:    October 28, 2004 

                                                                           EXHIBIT INDEX 
(a)(1)    Code of ethics referred to in Item 2. 
(a)(2)    Certifications of principal executive and principal financial officers as required by Rule 30a- 
2(a) under the Investment Company Act of 1940. (EX-99.CERT) 
(b)    Certification of principal executive and principal financial officers as required by Rule 30a- 
2(b) under the Investment Company Act of 1940. (EX-99.906CERT) 

-5-