N-CSR 1 form.htm FORM NCSR 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 811-5270 
 
    The Dreyfus/Laurel 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:    10/31 
 
Date of reporting period:    04/30/2006 

The following N-CSR relates only to the Registrant's series listed below and does not affect Dreyfus Premier Core Equity Fund, a series of the Registrant with a fiscal year end of August 31. A separate N-CSR will be filed for that series as appropriate.

Dreyfus Bond Market Index Fund
Dreyfus Premier Midcap Stock Fund
Dreyfus Disciplined Stock Fund
Dreyfus Premier Large Company Stock Fund
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Dreyfus Money Market Reserves
Dreyfus Municipal Reserves
Dreyfus Premier Tax Managed Growth Fund
Dreyfus BASIC S&P 500 Stock Index Fund
Dreyfus U.S. Treasury Reserves
Dreyfus Premier Balanced Fund
Dreyfus Premier Limited Term Income Fund
Dreyfus Premier Small Cap Value Fund

FORM N-CSR

Item 1. Reports to Stockholders.

  Dreyfus
BASIC S&P 500
Stock Index Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
23    Statement of Financial Futures 
24    Statement of Assets and Liabilities 
25    Statement of Operations 
26    Statement of Changes in Net Assets 
27    Financial Highlights 
28    Notes to Financial Statements 
34    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus BASIC
S&P 500 Stock Index Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus BASIC S&P 500 Stock Index Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.As always, we urge you to discuss with your financial advisor the potential implications of these possibilities on your investments.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Tom Durante, CFA, Portfolio Manager

How did Dreyfus BASIC S&P 500 Stock Index Fund perform relative to its benchmark?

For the six-month period ended April 30, 2006, the fund produced a total return of 9.55% .1 The Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"), the fund's benchmark, produced a 9.64% return for the same period.2,3

We attribute the market's performance to continued U.S. economic growth and strong corporate profits. These factors handily offset the negative influences of rising interest rates and volatile energy prices. The difference in returns between the fund and the S&P 500 Index was primarily the result of transaction costs and other operating expenses that are not reflected by the S&P 500 Index.

What is the fund's investment approach?

The fund seeks to match the total return of the S&P 500 Index. To pursue this goal, the fund generally invests in all 500 stocks in the S&P 500 Index in proportion to their weighting in the S&P 500 Index. Often considered a barometer for the stock market in general, the S&P 500 Index is made up of 500 widely held common stocks across 10 economic sectors.The S&P 500 Index is dominated by large-cap, blue-chip stocks that comprise nearly 75% of total U.S. market capitalization.

However, it is important to note that the S&P 500 Index is not composed of the 500 largest companies; rather, it is designed to reflect the industries of the U.S. economy. Each stock is weighted by its market capitalization; that is, larger companies have greater representation in the S&P 500 Index than smaller ones. The fund may also use stock index futures as a substitute for the sale or purchase of stocks.

As an index fund, the fund uses a passive management approach; all investment decisions are made based on the composition of the S&P 500 Index.The fund does not attempt to manage market volatility.

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

What other factors influenced the fund's performance?

When the reporting period began, many investors had become concerned that higher short-term interest rates and rising energy prices might erode consumer spending and reduce the rate of U.S. economic growth. However, higher fuel and borrowing costs have so far failed to dampen consumer confidence. Instead, business investment has accelerated, inflationary pressures have remained subdued and corporate earnings have risen, helping to support higher stock prices. What's more, many large-cap companies have benefited from significant overseas operations in the growing global economy.

Among the greatest contributors to the S&P 500 Index for the reporting period were banks and asset management firms within the financials sector. Banks were buoyed by a healthy economy and low default loan rates, while brokerage firms benefited from a higher volume of U.S. stock market trading, increased mergers-and-acquisitions activity and well-diversified international businesses.

Other positive contributors to the S&P 500 Index's performance included the producer goods area, which consists of a variety of metals and mining, industrial parts, chemicals, heavy machinery and defense companies. Stocks in these areas flourished as the global economy continued to expand and demand intensified for the raw materials and other industrial goods required to build the industrial infrastructures of a number of developing nations. Similarly, the S&P 500 Index received strong contributions from the energy sector, as increased demand from China, India and other emerging markets for a limited supply of crude oil and natural gas helped propel energy stock prices higher. Integrated energy producers and oil services providers fared especially well, followed by oil refiners and exploration and production companies. A wave of mergers-and-acquisitions activity also benefited several integrated energy producers.

4

On the other hand, some Internet companies in the information technology area produced generally disappointing results, largely due to increased competition and aggressive spending on the latest software, services and products needed to attract customers to their websites. In the health care sector, HMOs also detracted from the S&P 500 Index's returns. While these stocks as a group have enjoyed favorable returns for some time now, they were hurt during the reporting period by enrollment delays related to the new Medicare prescription drug program. Finally, in the consumer cyclicals area, automobile manufacturers continued to suffer from "legacy costs," including high wages for labor, steep health care expenditures and generous pensions.

What is the fund's current strategy?

As an index fund, our strategy is to attempt to replicate the returns of the S&P 500 Index. Accordingly, the percentage of the fund's assets invested in each industry group closely approximated its representation in the S&P 500 Index. In our view, an investment in a broadly diversified index fund, such as Dreyfus BASIC S&P 500 Stock Index Fund, may help investors in their efforts to manage stock market risk by limiting the impact on the overall portfolio of unexpected losses in any single industry group or holding.

May 15, 2006

1 Total return includes reinvestment of dividends and any capital gains paid. Past performance is no
guarantee of future results. Share price and investment return fluctuate such that upon redemption,
fund shares may be worth more or less than their original cost.
2 SOURCE: LIPPER INC. — Reflects reinvestment of dividends daily and, where applicable,
capital gain distributions.The Standard & Poor's 500 Composite Stock Price Index is a widely
accepted, unmanaged index of U.S. stock market performance.
3 "Standard & Poor's®,""S&P®,""Standard & Poor's 500" and "S&P 500®" are trademarks of
The McGraw-Hill Companies, Inc., and have been licensed for use by the fund.The fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in the fund.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 BASIC S&P 500 Stock Index Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006 
 
Expenses paid per $1,000 †    $ 1.04 
Ending value (after expenses)    $1,095.50 

  COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
 
Expenses paid per $1,000 †    $ 1.00 
Ending value (after expenses)    $1,023.80 

† Expenses are equal to the fund's annualized expense ratio of .20%; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

  6
STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
Common Stocks—97.0%    Shares    Value ($) 
Consumer Cyclical—7.9%         
Albertson's    46,886    1,187,622 
Autonation    18,600 a    418,872 
AutoZone    7,000 a    655,270 
Bed Bath & Beyond    35,700 a    1,369,095 
Best Buy    51,650    2,926,489 
Big Lots    14,600 a,b    210,970 
Brunswick    12,050    472,601 
Circuit City Stores    19,386    557,347 
Coach    48,700 a    1,608,074 
Cooper Tire & Rubber    7,853    99,733 
Costco Wholesale    60,200    3,276,686 
CVS    103,936    3,088,978 
Darden Restaurants    16,750    663,300 
Dillard's, Cl. A    7,800    203,424 
Dollar General    40,246 b    702,695 
Eastman Kodak    36,550 b    985,388 
Family Dollar Stores    19,700    492,500 
Federated Department Stores    34,630    2,695,945 
Ford Motor    237,011 b    1,647,226 
Gap    72,950    1,319,665 
General Motors    71,850 b    1,643,928 
Genuine Parts    22,000    960,300 
Goodyear Tire & Rubber    22,500 a,b    315,000 
Harley-Davidson    34,650    1,761,606 
Harman International Industries    8,300    730,317 
Harrah's Entertainment    23,394    1,909,886 
Hasbro    22,675    446,924 
Hilton Hotels    41,850    1,127,439 
Home Depot    270,100    10,785,093 
International Game Technology    42,900    1,627,197 
JC Penney    29,550    1,934,343 
Johnson Controls    24,656    2,010,697 
Jones Apparel Group    14,500    498,075 
Kohl's    43,800 a    2,445,792 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Consumer Cyclical (continued)         
Kroger    92,200    1,867,972 
Limited Brands    44,300    1,135,852 
Liz Claiborne    13,400    523,270 
Lowe's Cos.    99,400    6,267,170 
Marriott International, Cl. A    20,650    1,508,895 
Mattel    49,450    800,101 
McDonald's    159,800    5,524,286 
Navistar International    7,800 a    205,764 
Nike, Cl. B    24,050    1,968,252 
Nordstrom    27,800    1,065,574 
Office Depot    37,550 a    1,523,779 
OfficeMax    9,014    348,842 
Paccar    21,474    1,544,625 
RadioShack    17,252 b    293,284 
Safeway    57,150    1,436,179 
Sears Holdings    12,641 a    1,816,385 
Southwest Airlines    89,993    1,459,686 
Staples    92,600    2,445,566 
Starbucks    97,000 a    3,615,190 
Starwood Hotels & Resorts    27,450    1,575,081 
Supervalu    17,300 b    501,873 
Target    111,750    5,933,925 
Tiffany & Co.    18,100    631,509 
TJX Cos.    58,550    1,412,811 
VF    11,250    688,387 
Wal-Mart Stores    317,600    14,301,528 
Walgreen    128,700    5,396,391 
Wendy's International    14,497    895,625 
Whirlpool    9,881 b    886,820 
Whole Foods Market    17,700 b    1,086,426 
Yum! Brands    35,060    1,811,901 
        123,251,426 
Consumer Staples—7.1%         
Alberto-Culver    9,616    432,431 
Altria Group    265,300    19,409,348 
Anheuser-Busch Cos.    98,700    4,400,046 

8

Common Stocks (continued)    Shares        Value ($) 
Consumer Staples (continued)             
Archer-Daniels-Midland    83,135        3,021,126 
Avon Products    57,272        1,867,640 
Brown-Forman, Cl. B    10,600        789,700 
Campbell Soup    23,450        753,683 
Clorox    19,050        1,222,629 
Coca-Cola    261,900        10,989,324 
Coca-Cola Enterprises    38,550        752,881 
Colgate-Palmolive    65,500        3,872,360 
ConAgra Foods    65,982        1,496,472 
Constellation Brands, Cl. A    25,100    a    619,970 
Dean Foods    17,300    a    685,253 
Estee Lauder Cos., Cl. A    15,100        560,512 
Fortune Brands    18,621        1,495,266 
General Mills    45,300        2,235,102 
Hershey    22,800        1,216,152 
HJ Heinz    42,550        1,766,250 
Kellogg    31,950        1,479,604 
Kimberly-Clark    58,600        3,429,858 
McCormick & Co.    16,900        588,627 
Molson Coors Brewing, Cl. B    7,265    b    536,593 
Newell Rubbermaid    34,878    b    956,355 
Pactiv    18,250    a    444,205 
Pepsi Bottling Group    17,200        552,120 
PepsiCo    210,620        12,266,509 
Procter & Gamble    418,177        24,342,083 
Reynolds American    10,850    b    1,189,702 
Sara Lee    96,600        1,726,242 
Sysco    78,708        2,352,582 
Tyson Foods, Cl. A    32,000        467,200 
UST    20,800    b    913,744 
WM Wrigley, Jr.    28,188        1,326,786 
            110,158,355 
Energy—9.9%             
Amerada Hess    10,150        1,454,190 
Anadarko Petroleum    29,275        3,068,605 
Apache    42,026        2,985,527 

The Fund 9

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Energy (continued)         
Baker Hughes    43,470    3,513,680 
BJ Services    41,200    1,567,660 
Centerpoint Energy    39,444 b    474,117 
Chesapeake Energy    47,500    1,504,800 
Chevron    283,064    17,272,565 
ConocoPhillips    209,981    14,047,729 
Devon Energy    56,200    3,378,182 
El Paso    83,836    1,082,323 
EOG Resources    30,800    2,163,084 
Exxon Mobil    776,356    48,972,536 
Halliburton    65,600    5,126,640 
Hugoton Royalty Trust    2,751    76,079 
Kerr-McGee    14,739    1,471,837 
KeySpan    22,200    896,436 
Kinder Morgan    13,400    1,179,468 
Marathon Oil    46,585    3,696,986 
Murphy Oil    21,000    1,053,780 
Nabors Industries    40,200 a    1,500,666 
National Oilwell Varco    22,200 a    1,531,134 
Nicor    5,650 b    223,796 
NiSource    34,650 b    731,461 
Noble    17,450    1,377,503 
Occidental Petroleum    54,800    5,630,152 
Peoples Energy    4,920 b    178,744 
Rowan Cos.    13,860    614,414 
Schlumberger    150,200    10,384,828 
Sempra Energy    32,842    1,511,389 
Sunoco    16,936    1,372,493 
Transocean    41,450 a    3,360,351 
Valero Energy    79,100    5,120,934 
Weatherford International    44,300 a    2,344,799 
Williams Cos.    75,600    1,657,908 
XTO Energy    46,166    1,955,130 
        154,481,926 

  10
Common Stocks (continued)    Shares    Value ($) 
Health Care—11.7%         
Abbott Laboratories    195,650    8,362,081 
Aetna    72,108    2,776,158 
Allergan    19,250    1,977,360 
AmerisourceBergen    26,600    1,147,790 
Amgen    148,566 a    10,057,918 
Applera—Applied Biosystems Group    23,300    671,972 
Barr Pharmaceuticals    13,400 a    811,370 
Bausch & Lomb    6,914 b    338,440 
Baxter International    82,400    3,106,480 
Becton, Dickinson & Co.    31,400    1,979,456 
Biogen Idec    43,740 a    1,961,739 
Biomet    31,475 b    1,170,241 
Boston Scientific    147,604 a    3,430,310 
Bristol-Myers Squibb    249,100    6,322,158 
Cardinal Health    53,650    3,613,327 
Caremark Rx    57,000    2,596,350 
Cigna    15,400    1,647,800 
Coventry Health Care    20,400 a    1,013,268 
CR Bard    13,200    982,872 
Eli Lilly & Co.    143,650    7,601,958 
Express Scripts    18,600 a    1,453,404 
Fisher Scientific International    15,700 a    1,107,635 
Forest Laboratories    41,400 a    1,671,732 
Genzyme    33,050 a    2,021,338 
Gilead Sciences    58,800 a    3,381,000 
HCA    51,850 b    2,275,696 
Health Management Associates, Cl. A    30,550    632,690 
Hospira    20,445 a    788,155 
Humana    20,750 a    937,485 
Johnson & Johnson    378,396    22,177,790 
King Pharmaceuticals    30,750 a    534,743 
Laboratory Corp. of America Holdings    15,900 a    907,890 
Manor Care    10,050    440,692 
McKesson    38,904    1,890,345 

The Fund 11

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Health Care (continued)         
Medco Health Solutions    38,669 a    2,058,351 
Medimmune    32,450 a    1,021,201 
Medtronic    153,500    7,693,420 
Merck & Co.    278,050    9,570,481 
Millipore    6,650 a    490,637 
Mylan Laboratories    27,800    607,152 
Patterson Cos.    17,600 a,b    573,408 
PerkinElmer    16,582    355,518 
Pfizer    935,440    23,694,695 
Quest Diagnostics    20,700    1,153,611 
Schering-Plough    188,100    3,634,092 
St. Jude Medical    46,600 a    1,839,768 
Stryker    37,100    1,623,125 
Tenet Healthcare    59,750 a    497,120 
Thermo Electron    20,600 a    793,924 
UnitedHealth Group    172,400    8,575,176 
Waters    13,400 a    607,288 
Watson Pharmaceuticals    12,950 a    368,298 
WellPoint    83,900 a    5,956,900 
Wyeth    170,850    8,315,269 
Zimmer Holdings    31,520 a    1,982,608 
        183,201,685 
Interest Sensitive—24.0%         
ACE    41,000    2,277,140 
Aflac    63,300    3,009,282 
Allstate    81,950    4,629,355 
AMBAC Financial Group    13,400    1,103,624 
American Express    157,300    8,464,313 
American International Group    329,996    21,532,239 
Ameriprise Financial    31,880    1,563,395 
AmSouth Bancorp    43,950    1,271,913 
AON    40,950    1,716,214 
Apartment Investment & Management, Cl. A    12,300    549,687 
Archstone-Smith Trust    27,100    1,324,648 
Bank of America    590,484    29,476,961 
Bank of New York    98,028    3,445,684 

12

Common Stocks (continued)    Shares        Value ($) 
Interest Sensitive (continued)             
BB & T    68,100    b    2,924,214 
Bear Stearns Cos.    15,198        2,165,867 
Boston Properties    11,400        1,006,278 
Capital One Financial    38,300        3,318,312 
Charles Schwab    131,150        2,347,585 
Chubb    50,800        2,618,232 
Cincinnati Financial    22,137        943,922 
CIT Group    25,400        1,371,854 
Citigroup    634,526        31,694,574 
Comerica    20,700        1,177,209 
Compass Bancshares    15,700        862,872 
Countrywide Financial    76,698        3,118,541 
E*Trade Financial    53,100    a    1,321,128 
Equity Office Properties Trust    47,200    b    1,524,560 
Equity Residential    36,950    b    1,657,946 
Fannie Mae    123,050        6,226,330 
Federated Investors, Cl. B    10,750        377,325 
Fifth Third Bancorp    70,591    b    2,853,288 
First Horizon National    16,000    b    678,720 
Franklin Resources    19,400        1,806,528 
Freddie Mac    87,850        5,364,121 
General Electric    1,325,150        45,836,938 
Genworth Financial, Cl. A    47,900        1,590,280 
Golden West Financial    32,600        2,342,962 
Goldman Sachs Group    55,450        8,888,080 
H & R Block    41,700    b    952,011 
Hartford Financial Services Group    38,500        3,539,305 
Huntington Bancshares/OH    31,576        762,560 
Janus Capital Group    27,300        531,258 
JPMorgan Chase & Co.    443,148        20,110,056 
Keycorp    51,550        1,970,241 
Kimco Realty    27,100        1,006,223 
Legg Mason    15,700        1,860,136 
Lehman Brothers Holdings    34,350        5,192,002 
Lincoln National    36,250        2,105,400 
Loews    17,300        1,836,395 

The Fund 13

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Interest Sensitive (continued)         
M&T Bank    10,100    1,205,940 
Marsh & McLennan Cos.    69,500    2,131,565 
Marshall & Ilsley    28,150    1,287,018 
MBIA    17,000 b    1,013,710 
Mellon Financial    52,700    1,983,101 
Merrill Lynch & Co.    116,750    8,903,355 
MetLife    96,400 b    5,022,440 
MGIC Investment    11,150    788,305 
Morgan Stanley    136,560    8,780,808 
National City    69,600    2,568,240 
North Fork Bancorporation    60,425    1,820,605 
Northern Trust    23,550    1,386,859 
Plum Creek Timber    23,400    849,420 
PNC Financial Services Group    37,150    2,655,110 
Principal Financial Group    35,550    1,824,070 
Progressive    25,000    2,713,250 
Prologis    31,000    1,556,820 
Prudential Financial    62,950    4,918,283 
Public Storage    10,500 b    807,240 
Regions Financial    57,986    2,117,069 
Safeco    15,700    814,830 
Simon Property Group    23,250 b    1,903,710 
SLM    53,050    2,805,284 
Sovereign Bancorp    45,400 b    1,006,518 
St. Paul Travelers Cos.    88,427    3,893,441 
State Street    42,300    2,763,036 
SunTrust Banks    47,100    3,642,243 
Synovus Financial    39,800    1,114,400 
T Rowe Price Group    16,750    1,410,182 
Torchmark    13,216    794,414 
UnumProvident    37,972 b    771,211 
US Bancorp    228,957    7,198,408 
Vornado Realty Trust    15,100    1,444,164 
Wachovia    206,290    12,346,456 
Washington Mutual    126,044 b    5,679,543 

  14
Common Stocks (continued)    Shares    Value ($) 
Interest Sensitive (continued)         
Wells Fargo & Co.    213,080    14,636,465 
XL Capital, Cl. A    22,200    1,462,758 
Zions Bancorporation    13,250 b    1,100,147 
        373,368,126 
Producer Goods—10.8%         
3M    96,000    8,201,280 
Air Products & Chemicals    28,350    1,942,542 
Alcoa    110,838    3,744,108 
Allegheny Technologies    11,033    765,028 
American Power Conversion    21,850    485,944 
American Standard Cos.    22,650 b    985,955 
Ashland    9,100    598,962 
Avery Dennison    14,092    880,750 
Ball    13,300    531,734 
Bemis    13,400    421,564 
Black & Decker    9,850    922,059 
Boeing    101,744    8,490,537 
Burlington Northern Santa Fe    47,417    3,771,074 
Caterpillar    85,300    6,460,622 
Centex    15,628    868,917 
Cooper Industries, Cl. A    11,700    1,069,965 
CSX    27,850    1,907,447 
Cummins    5,947    621,462 
Deere & Co.    30,100 b    2,642,178 
Dover    25,800    1,283,550 
Dow Chemical    123,013    4,995,558 
DR Horton    34,600    1,038,692 
Eastman Chemical    10,426    566,653 
Eaton    18,942    1,451,904 
Ecolab    23,150    875,070 
EI Du Pont de Nemours & Co.    116,994    5,159,435 
Emerson Electric    52,300    4,442,885 
Engelhard    15,700    603,037 
FedEx    38,592    4,443,097 
Fluor    11,039    1,025,633 

The Fund 15

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Producer Goods (continued)         
Freeport-McMoRan Copper & Gold, Cl. B    23,400    1,511,172 
General Dynamics    50,900    3,340,058 
Goodrich    15,700    698,650 
Hercules    14,450 a    205,335 
Honeywell International    105,600    4,488,000 
Illinois Tool Works    26,050    2,675,335 
Ingersoll-Rand, Cl. A    41,600    1,820,000 
International Flavors & Fragrances    10,000    353,300 
International Paper    62,638    2,276,891 
ITT Industries    23,500    1,321,405 
KB Home    9,800 b    603,386 
L-3 Communications Holdings    15,400    1,258,180 
Leggett & Platt    23,200    615,496 
Lennar, Cl. A    17,400    955,782 
Lockheed Martin    45,550    3,457,245 
Louisiana-Pacific    13,500    372,330 
Masco    52,918    1,688,084 
MeadWestvaco    23,046    657,041 
Molex    18,125    672,800 
Monsanto    34,288    2,859,619 
Newmont Mining    56,824    3,316,249 
Norfolk Southern    52,400    2,829,600 
Northrop Grumman    44,612    2,984,543 
Nucor    19,800    2,154,636 
Pall    15,953 b    481,462 
Parker Hannifin    15,190    1,231,150 
Phelps Dodge    25,850    2,228,012 
PPG Industries    21,021 b    1,410,930 
Praxair    41,000    2,301,330 
Pulte Homes    27,192    1,015,621 
Raytheon    56,700    2,510,109 
Rockwell Automation    22,500    1,630,350 
Rockwell Collins    21,900    1,252,680 
Rohm & Haas    18,355    928,763 
Sealed Air    10,381    559,017 

  16
Common Stocks (continued)    Shares        Value ($) 
Producer Goods (continued)             
Sherwin-Williams    14,200        723,348 
Sigma-Aldrich    8,500        583,185 
Snap-On    7,450    b    309,175 
Stanley Works    9,177        479,498 
Temple-Inland    14,200        659,448 
Textron    16,850        1,515,658 
Tyco International    256,182        6,750,396 
Union Pacific    33,650        3,069,217 
United Parcel Service, Cl. B    138,850        11,256,570 
United States Steel    13,850    b    948,725 
United Technologies    129,056        8,106,007 
Vulcan Materials    12,750        1,083,240 
Weyerhaeuser    30,900        2,177,523 
WW Grainger    9,700        746,124 
            168,270,317 
Services—6.0%             
Affiliated Computer Services, Cl. A    14,900    a    830,824 
Allied Waste Industries    30,800    a    436,128 
Alltel    49,350        3,176,660 
Apollo Group, Cl. A    17,900    a    978,056 
Automatic Data Processing    73,650        3,246,492 
Carnival    55,200        2,584,464 
CBS, Cl. B    98,200        2,501,154 
Cendant    128,186        2,234,282 
Cintas    17,500        734,650 
Clear Channel Communications    65,750        1,875,848 
Comcast, Cl. A    271,896    a    8,415,181 
Computer Sciences    23,750    a    1,390,563 
Convergys    17,750    a    345,593 
Dow Jones & Co.    7,550    b    279,124 
Electronic Data Systems    65,450        1,772,386 
Equifax    16,450        633,983 
EW Scripps, Cl. A    10,800        497,664 
First Data    97,572        4,653,209 
Fiserv    23,450    a    1,057,126 

The Fund 17

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Services (continued)         
Gannett    30,250    1,663,750 
IMS Health    25,300 b    687,654 
Interpublic Group of Cos.    54,700 a,b    524,026 
Knight-Ridder    8,550 b    530,100 
McGraw-Hill Cos.    46,700    2,599,322 
Meredith    5,360    265,856 
Monster Worldwide    16,050 a    921,270 
Moody's    30,900    1,916,109 
New York Times, Cl. A    18,486 b    458,268 
News, Cl. A    305,200    5,237,232 
Omnicom Group    22,750    2,047,728 
Paychex    42,475    1,715,565 
Robert Half International    21,850    923,600 
RR Donnelley & Sons    27,600    929,844 
Ryder System    7,750    404,163 
Sabre Holdings, Cl. A    16,726    386,203 
Sprint Nextel    377,203    9,354,634 
Time Warner    572,800    9,966,720 
Tribune    33,241    958,338 
Unisys    43,500 a    271,440 
Univision Communications, Cl. A    28,450 a,b    1,015,381 
Viacom, Cl. B    98,200 a    3,911,306 
Walt Disney    244,800    6,844,608 
Waste Management    70,242    2,631,265 
        93,807,769 
Technology—14.5%         
ADC Telecommunications    14,850 a,b    332,492 
Adobe Systems    76,300    2,990,960 
Advanced Micro Devices    61,100 a    1,976,585 
Agilent Technologies    54,508 a    2,094,197 
Altera    45,700 a    998,088 
Amazon.Com    39,200 a    1,380,232 
Analog Devices    46,500    1,763,280 
Andrew    20,400 a,b    215,832 
Apple Computer    108,300 a    7,623,237 
Applied Materials    201,750    3,621,413 

18

Common Stocks (continued)    Shares    Value ($) 
Technology (continued)         
Applied Micro Circuits    37,700 a    138,359 
Autodesk    29,300 a,b    1,231,772 
Avaya    53,068 a    636,816 
BMC Software    27,050 a,b    582,657 
Broadcom, Cl. A    55,975 a    2,301,132 
CA    58,049    1,472,123 
Ciena    74,000 a,b    302,660 
Cisco Systems    781,950 a    16,381,853 
Citrix Systems    22,650 a    904,188 
Compuware    48,650 a    373,632 
Comverse Technology    25,650 a    580,973 
Corning    196,500 a    5,429,295 
Danaher    30,200    1,936,122 
Dell    299,200 a    7,839,040 
eBay    146,600 a    5,044,506 
Electronic Arts    38,600 a    2,192,480 
EMC/Massachusetts    302,200 a    4,082,722 
Freescale Semiconductor, Cl. B    52,213 a    1,653,586 
Gateway    33,900 a    74,580 
Google, Cl. A    25,800 a    10,782,852 
Hewlett-Packard    359,565    11,675,076 
Intel    747,900    14,943,042 
International Business Machines    199,300    16,410,362 
Intuit    22,450 a    1,216,117 
Jabil Circuit    22,200 a    865,578 
JDS Uniphase    213,100 a,b    743,719 
KLA-Tencor    25,400    1,223,264 
Lexmark International, Cl. A    13,800 a    672,060 
Linear Technology    38,900 b    1,380,950 
LSI Logic    49,832 a    530,711 
Lucent Technologies    568,171 a,b    1,585,197 
Maxim Integrated Products    40,750    1,436,845 
Micron Technology    85,450 a,b    1,450,087 
Microsoft    1,129,750    27,283,463 
Motorola    317,806    6,785,158 
National Semiconductor    42,900    1,286,142 

The Fund 19

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Technology (continued)         
NCR    23,100 a    910,140 
Network Appliance    47,550 a    1,762,679 
Novell    49,500 a    406,890 
Novellus Systems    16,950 a,b    418,665 
Nvidia    43,600 a    1,273,992 
Oracle    479,050 a    6,989,340 
Parametric Technology    14,240 a    212,746 
Pitney Bowes    28,856    1,207,624 
PMC-Sierra    23,750 a    295,213 
QLogic    20,500 a    426,605 
Qualcomm    210,600    10,812,204 
SanDisk    23,400 a    1,493,622 
Sanmina-SCI    68,150 a    353,699 
Solectron    116,250 a    465,000 
Sun Microsystems    440,000 a,b    2,200,000 
Symantec    132,666 a    2,173,069 
Symbol Technologies    32,154    342,440 
Tektronix    10,368    366,198 
Tellabs    57,250 a    907,413 
Teradyne    25,150 a    424,029 
Texas Instruments    203,500    7,063,485 
VeriSign    31,100 a    731,472 
Xerox    118,398 a    1,662,308 
Xilinx    43,800    1,211,946 
Yahoo!    160,400 a    5,257,912 
        225,794,126 
Utilities—5.1%         
AES    83,400 a    1,415,298 
Allegheny Energy    20,700 a    737,541 
Ameren    26,050    1,312,139 
American Electric Power    50,090    1,676,011 
AT & T    493,244    12,927,925 
BellSouth    228,600    7,722,108 
CenturyTel    14,700    554,190 
Citizens Communications    41,800 b    555,104 

  20
Common Stocks (continued)    Shares    Value ($) 
Utilities (continued)         
CMS Energy    28,050 a    373,626 
Consolidated Edison    31,200 b    1,345,344 
Constellation Energy Group    22,650    1,243,938 
Dominion Resources/VA    44,134    3,304,313 
DTE Energy    22,600 b    921,628 
Duke Energy    157,880 b    4,597,466 
Dynegy, Cl. A    38,550 a,b    191,594 
Edison International    41,400    1,672,974 
Entergy    26,450    1,849,913 
Exelon    84,874    4,583,196 
FirstEnergy    41,931    2,126,321 
FPL Group    51,300 b    2,031,480 
PG & E    43,900    1,748,976 
Pinnacle West Capital    12,600    505,260 
PPL    48,300    1,402,632 
Progress Energy    32,024    1,370,627 
Public Service Enterprise Group    31,850    1,996,995 
Qwest Communications International    197,174 a    1,323,038 
Southern    94,250    3,037,678 
TECO Energy    26,500    423,470 
TXU    58,840    2,920,229 
Verizon Communications    372,092    12,290,199 
Xcel Energy    51,380 b    967,999 
        79,129,212 
Total Common Stocks         
(cost $1,078,912,940)        1,511,462,942 

    Principal     
Short-Term Investments—.2%    Amount ($)    Value ($) 
U.S. Treasury Bills:         
4.48%, 6/15/06    200,000 c    198,870 
4.53%, 5/11/06    300,000 c    299,634 
4.53%, 6/8/06    200,000 c    199,050 
4.57%, 7/20/06    2,050,000 c    2,029,172 
Total Short-Term Investments         
(cost $2,726,728)        2,726,726 

The Fund 21

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Other Investment—2.7%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Preferred Plus Money Market Fund     
(cost $41,447,000)    41,447,000 d    41,447,000 
 
Investment of Cash Collateral         
for Securities Loaned—3.0%         
Registered Investment Company;         
Dreyfus Institutional Cash Advantage Fund         
(cost $47,436,427)    47,436,427 d    47,436,427 
Total Investments (cost $1,170,523,095)    102.9%    1,603,073,095 
Liabilities, Less Cash and Receivables    (2.9%)    (45,563,382) 
Net Assets    100.0%    1,557,509,713 

  a Non-income producing security.
b All or a portion of these securities are on loan. At April 30, 2006, the total market value of the fund's securities on
loan is $47,441,553 and the total market value of the collateral held by the fund is $49,158,362, consisting of
cash collateral of $47,436,427 and U.S. Government and agency securities valued at $1,721,935.
c Partially held by a broker as collateral for open financial futures positions.
d Investment in affiliated money market mutual fund.
Portfolio Summary (Unaudited) †         
 
    Value (%)        Value (%) 
Interest Sensitive    24.0    Services    6.0 
Technology    14.5    Short-Term/Money     
Health Care    11.7    Market Investments    5.9 
Producer Goods    10.8    Utilities    5.1 
Energy    9.9    Financial Futures    .0 
Consumer Cyclical    7.9         
Consumer Staples    7.1        102.9 

  † Based on net assets.
See notes to financial statements.

22

  STATEMENT OF FINANCIAL FUTURES
April 30, 2006 (Unaudited)

See notes to financial statements.

The Fund 23

  STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—See Statement         
of Investments (including securities on loan,     
valued at $47,441,553)—Note 1(b):         
Unaffiliated issuers    1,081,639,668    1,514,189,668 
Affiliated issuers    88,883,427    88,883,427 
Cash        539,230 
Dividends and interest receivable        1,977,801 
Receivable for shares of Capital Stock subscribed    261,975 
Receivable for futures variation margin—Note 4    26,735 
        1,605,878,836 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(a)    253,430 
Liability for securities loaned—Note 1(b)        47,436,427 
Payable for shares of Capital Stock redeemed    679,266 
        48,369,123 
Net Assets ($)        1,557,509,713 
Composition of Net Assets ($):         
Paid-in capital        1,298,657,704 
Accumulated undistributed investment income—net    7,876,726 
Accumulated net realized gain (loss) on investments    (182,105,967) 
Accumulated net unrealized appreciation         
(depreciation) on investments (including $531,250     
net unrealized appreciation on financial futures)    433,081,250 
Net Assets ($)        1,557,509,713 
Shares Outstanding         
(150 million shares of $.001 par value Capital Stock authorized)    56,959,191 
Net Asset Value, offering and redemption price per share ($)    27.34 

See notes to financial statements.

  24
  STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Income:     
Cash dividends:     
Unaffiliated issuers    14,487,449 
Affiliated issuers    168,593 
Interest    366,475 
Income from securities lending    52,034 
Total Income    15,074,551 
Expenses:     
Management fee—Note 3(a)    1,486,026 
Loan commitment fees—Note 2    8,806 
Total Expenses    1,494,832 
Investment Income—Net    13,579,719 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    33,245,822 
Net realized gain (loss) on financial futures    1,383,710 
Net Realized Gain (Loss)    34,629,532 
Net unrealized appreciation (depreciation)     
on investments (including $728,425 net     
unrealized appreciation on financial futures)    85,250,482 
Net Realized and Unrealized Gain (Loss) on Investments    119,880,014 
Net Increase in Net Assets Resulting from Operations    133,459,733 

See notes to financial statements.

The Fund 25

STATEMENT OF CHANGES IN NET ASSETS

See notes to financial statements.

  26

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.

a Based on average shares outstanding at each month end.
b Not annualized.
See notes to financial statements.

The Fund 27

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus BASIC S&P 500 Stock Index Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series including the fund.The fund's investment objective is to replicate the total return of the Standard & Poor's 500 Composite Stock Price Index primarily through investments in equity securities.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.

(a) Portfolio valuation: Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available, are valued at the official closing price or, if there is no official closing price that day, at the last sale price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Investments in registered investment companies are valued at their net asset value. When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by

28

events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR's and futures contracts. For other securities that are fair valued by the Board of Directors, certain factors may be considered such as: 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. Financial futures are valued at the last sales price.

(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, accretion of discount and amortization of premium on investments is recognized on the accrual basis.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of the Manager, the fund may lend securities to qualified institutions. It is the fund's policy, that at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager.The fund is entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction.Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

The Fund 29

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counter party default, the fund has the right to use the collateral to offset losses incurred. There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights. The Manager, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

(c) Affiliated issuers: Investments in other investment companies advised by the Manager are defined as "affiliated" in the Act.

(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid on a quarterly basis. 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.

30

(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The fund has an unused capital loss carryover of $184,622,702 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, $32,219,795 of the carryover expires in fiscal 2009, $62,001,872 expires in fiscal 2010, $45,030,585 expires in fiscal 2011 and $45,370,450 expires in fiscal 2012.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 was as follows: ordinary income $27,305,892. The tax character of current year distributions will be determined at the end of the current fiscal year.

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 based on prevailing market rates in effect at the time of borrowing. During the period ended April 30, 2006, the fund did not borrow under the Facility.

NOTE 3—Investment Management Fee And Other Transactions with Affiliates:

(a) Pursuant to an Investment Management agreement with the Manager, the Manager provides or arranges for one or more third and/or affiliated parties to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The

The Fund 31

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .20% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds, and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

32

The component of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $253,430.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities and financial futures, during the period ended April 30, 2006, amounted to $47,685,502 and $72,381,719, respectively.

The fund may invest in financial futures contracts in order to gain exposure to or protect against changes in the market. The fund is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments in financial futures require the fund to "mark to market" on a daily basis, which reflects the change in the market value of the contract at the close of each day's trading. Typically, variation margin payments are received or made to reflect daily unrealized gains or losses.When the contracts are closed, the fund recognizes a realized gain or loss.These investments require initial margin deposits with a broker, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Contracts open at April 30, 2006, are set forth in the Statement of Financial Futures.

At April 30, 2006, accumulated net unrealized appreciation on investments was $432,550,000, consisting of $529,735,606 gross unrealized appreciation and $97,185,606 gross unrealized depreciation.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

The Fund 33

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and

2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of funds that are passively managed and commit by prospectus language to replicate the Standard and Poor's(r) Composite 500 Stock Index, includ-

34

ing reinvested dividends ("S&P 500 Index funds") (the "Performance Group") and to a larger universe of funds, consisting of all retail and institutional S&P 500 Index funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was higher than the Performance Group and Performance Universe medians for each of the periods.The Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, and noted that they were generally consistent with the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. Noting the fund's "unitary fee structure", the Board members noted that the fund's management fee and expense ratio were lower than their respective Expense Group and Expense Universe medians.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds"), and by other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund (collectively with the Similar Funds, the "Similar Accounts").The Manager's representatives explained the nature of the Similar Accounts and the differences, from the Manager's perspective, in providing services to such Similar Accounts as compared to managing and providing services to the

The Fund 35

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S
INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

fund. The Manager's representatives also reviewed the costs associated with distribution through intermediaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee"structure.The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund's management fee.The Board acknowledged that differences in fees paid by the Similar Accounts seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors. The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's

36

assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • The Board was satisfied with the fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the management of the fund had been adequately considered by the Manager in con- nection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

The Fund 37

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

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, 2005, is available 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.

© 2006 Dreyfus Service Corporation 0713SA0406

  Dreyfus
Bond Market
Index Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
28    Statement of Assets and Liabilities 
29    Statement of Operations 
30    Statement of Changes in Net Assets 
32    Financial Highlights 
34    Notes to Financial Statements 
40    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus
Bond Market Index Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Bond Market Index Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board (the "Fed") has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the bond market is more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase interest rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year. As always, we urge you to discuss with your financial advisor the potential implications of these possibilities on your investments.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Laurie Carroll, Portfolio Manager

How did Dreyfus Bond Market Index Fund perform relative to its benchmark?

For the six-month period ended April 30, 2006, the fund achieved total returns of 0.31% for its Investor shares and 0.44% for its BASIC shares.1 The fund's benchmark, the Lehman Brothers U.S.Aggregate Index (the "Index"), achieved a total return of 0.56% for the same period.2

During the reporting period, most sectors of the U.S. bond market were challenged by strong economic growth, rising interest rates and renewed inflation concerns. However, these factors were partly offset by the positive effects of robust overseas demand for U.S. government securities, low volatility in the mortgage-backed securities market and a generally favorable business environment for corporate bond issuers. We attribute the difference between the fund's and benchmark's returns to fees and expenses that are not reflected in the Index.

What is the fund's investment approach?

The fund seeks to match the total return of the Index.To pursue this goal, the fund normally invests at least 80% of its assets in bonds that are included in the Index. To maintain liquidity, the fund may invest up to 20% of its assets in various short-term, fixed-income securities and money market instruments.

While the fund seeks to mirror the returns of the Index, it does not hold the same number of bonds. Instead, the fund holds approximately 350 securities as compared to 6,500 securities in the Index. The fund's average duration — a measure of sensitivity to changing interest rates — generally remains neutral to the Index.As of April 30, 2006, the average duration of the fund was approximately 4.73 years.

What other factors influenced the fund's performance?

The bond market's performance was influenced during the reporting period by sustained economic expansion, rising short-term interest

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

rates and strong corporate earnings. While GDP growth during the fourth quarter of 2005 proved to be somewhat sluggish, the economy rebounded sharply in the first quarter of 2006, fueled largely by a rebound in corporate spending, employment gains and rising consumer confidence. Because fixed-income investors grew concerned that a strong economy might cause the Federal Reserve Board (the "Fed") to raise short-term interest rates more than previously expected, they grew more cautious, and bond prices fell. Indeed, the Fed raised the overnight federal funds rate during each of four meetings of the Federal Open Market Committee over the reporting period, driving it from 3.75% to 4.75% .The Fed acted again soon after the end of the reporting period, implementing its sixteenth consecutive increase since June 2004, hiking the federal funds rate to 5%.

In addition, while most measures of inflation generally have remained low, investors appeared to become more concerned about a possible reacceleration of inflation when energy and other commodity prices soared to new highs in the spring of 2006. As a result, longer-term bond yields began to rise faster than shorter-term bond yields, eroding prices at the longer end of the market's maturity range. U.S. government securities and other interest rate-sensitive areas of the bond market were particularly vulnerable to these adverse influences. However, robust demand from overseas investors helped limit price declines, and higher yields among U.S. government agency securities helped them outperform U.S.Treasury securities.

Mortgage-backed securities, which comprise approximately one-third of the Index, produced some of the overall bond market's better returns due to persistently low levels of market volatility. An orderly slowdown in the U.S. housing market, lower mortgage refinancing volumes and robust demand from banks and overseas investors helped contain market volatility in the rising interest-rate environment. Commercial mortgage-backed securities also performed well, primarily due to low default rates, strong corporate earnings and sound business fundamentals in most industries. Rising corporate earnings and

4

low default rates, as well as greater mergers-and-acquisitions activity, also helped support bond prices in the investment-grade corporate bond market, which generally produced higher returns than U.S. Treasury securities.

Another noteworthy development during the reporting period was the reintroduction of the 30-year bond by the U.S. Treasury in February 2006. 30-year Treasury bonds were last issued in 2001, when they were discontinued in light of the then-prevailing federal budget surplus.While the results of early trading have been mixed, the longer-term influence of 30-year securities on the overall bond market has not yet been determined.

What is the fund's current strategy?

As always, we intend to continue to employ our strategy of closely monitoring the Index in an attempt to replicate its return.Accordingly, as of April 30, 2006, approximately 35% of the fund's assets were invested in mortgage-backed securities, 25% were allocated to U.S. Treasury securities, 24% to corporate bonds and asset-backed securities, 10% to U.S. government agency bonds and 6% to securitized assets. In addition, the majority of the fund's corporate securities were BBB-rated as of the reporting period's end, which is closely aligned with the overall credit quality of the Index.

May 15, 2006

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.
2 SOURCE: LIPPER INC. — Reflects reinvestment of dividends and, where applicable, capital
gain distributions.The Lehman Brothers U.S. Aggregate Index is a widely accepted, unmanaged
total return index of corporate, U.S. government and U.S. government agency debt instruments,
mortgage-backed securities and asset-backed securities with an average maturity of 1-10 years.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Bond Market Index Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006     
    Investor Shares    BASIC Shares 
Expenses paid per $1,000 †    $ 1.99    $ .75 
Ending value (after expenses)    $1,003.10    $1,004.40 

COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
    Investor Shares    BASIC Shares 
Expenses paid per $1,000 †    $ 2.01    $ .75 
Ending value (after expenses)    $1,022.81    $1,024.05 

† Expenses are equal to the fund's annualized expense ratio of .40% for Investor shares and .15% for Basic shares; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

6
  STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
    Coupon    Maturity    Principal     
Bonds and Notes—99.1%    Rate (%)    Date    Amount ($)    Value ($) 
Aerospace & Defense—.5%                 
Boeing,                 
Debs.    7.25    6/15/25    150,000    169,940 
Boeing,                 
Debs.    8.10    11/15/06    25,000    25,363 
Northrop Grumman,                 
Debs.    7.75    3/1/16    540,000    615,673 
Raytheon,                 
Sr. Notes    6.75    8/15/07    550,000    557,383 
United Technologies,                 
Sr. Notes    4.88    5/1/15    500,000    472,125 
United Technologies,                 
Debs.    8.75    3/1/21    50,000    64,013 
                1,904,497 
Agricultural—.1%                 
Archer-Daniels-Midland,                 
Debs.    7.13    3/1/13    300,000    324,568 
Airlines—.0%                 
Continental Airlines,                 
Pass-Through Certificates,                 
Ser. 974A    6.90    7/2/19    163,859    165,811 
Asset-Backed Ctfs./                 
Automobile Receivables—.5%             
BMW Vehicle Owner Trust,                 
Ser. 2005-A, Cl. A4    4.28    2/25/10    1,800,000    1,771,117 
Honda Auto Receivables Owner             
Trust, Ser. 2006-1, Cl. A3    5.07    2/18/10    350,000    349,259 
                2,120,376 
Asset-Backed Ctfs./Credit Cards—.4%             
Bank One Issuance Trust,                 
Ser. 2004-A1, Cl. A1    3.45    10/17/11    950,000    907,533 
Capital One Master Trust,                 
Ser. 2001-5, Cl. A    5.30    6/15/09    400,000    400,280 
Citibank Credit Card Issuance                 
Trust, Ser. 2005-A4, Cl. A4    4.40    6/20/14    500,000    472,947 
                1,780,760 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Asset-Backed Ctfs./                 
Home Equity Loans—.4%                 
California Infrastructure PG&E-1,                 
Ser. 1997-1, Cl. A8    6.48    12/26/09    850,000    862,760 
Centex Home Equity,                 
Ser. 2005-C, Cl. AF5    5.05    6/25/35    200,000    189,204 
CPL Transition Funding,                 
Ser. 2002-1, Cl. A4    5.96    7/15/15    550,000    560,575 
Peco Energy Transition Trust,                 
Ser. 1999-A, Cl. A7    6.13    3/1/09    235,000    238,258 
                1,850,797 
Auto Manufacturing—.4%                 
DaimlerChrysler,                 
Notes    4.05    6/4/08    1,225,000    1,189,620 
DaimlerChrysler,                 
Notes    7.30    1/15/12    400,000    424,358 
DaimlerChrysler,                 
Debs.    7.45    3/1/27    50,000    51,743 
                1,665,721 
Banking—3.8%                 
Abbey National,                 
Sub. Notes    7.95    10/26/29    350,000    418,345 
Bank of America,                 
Bonds    5.13    11/15/14    350,000 a    336,210 
Bank of America,                 
Sub. Notes    7.80    2/15/10    1,150,000    1,238,743 
Bank of America,                 
Sub. Notes    7.80    9/15/16    160,000    183,592 
Bank of New York,                 
Sr. Notes    5.20    7/1/07    450,000    449,020 
Bank One,                 
Sub. Notes    5.90    11/15/11    500,000    506,815 
Bayerische Landesbank/New York,                 
Sub. Notes, Ser. G    5.88    12/1/08    300,000    303,752 
BB&T,                 
Sub. Notes    4.75    10/1/12    325,000    311,106 
Dresdner Bank-New York,                 
Sub. Debs.    7.25    9/15/15    145,000    158,379 
First Tennessee Bank,                 
Sub. Notes    5.65    4/1/16    250,000    243,338 

8

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Banking (continued)                 
FleetBoston Financial,                 
Sub. Notes    7.38    12/1/09    175,000    186,008 
HSBC,                 
Sub. Notes    7.50    7/15/09    200,000    211,614 
KeyBank,                 
Sub. Debs.    6.95    2/1/28    100,000    106,028 
KFW International Finance,                 
Debs.    8.00    2/15/10    35,000    38,020 
Korea Development Bank,                 
Notes    5.50    11/13/12    350,000    347,310 
Kreditanstalt fuer Wiederaufbau,                 
Gov't Gtd. Notes    3.25    7/16/07    500,000    487,820 
Kreditanstalt fuer Wiederaufbau,                 
Gov't Gtd. Notes    3.25    3/30/09    1,250,000    1,187,152 
Kreditanstalt fuer Wiederaufbau,                 
Gov't Gtd. Bonds    4.13    10/15/14    350,000 a    323,058 
Landwirtschaftliche Rentenbank,                 
Gov't Gtd. Sr. Notes, Ser. 6    3.88    9/4/08    1,175,000    1,143,562 
National City Bank of Cleveland                 
Ohio, Bonds    4.50    3/15/10    1,275,000    1,231,386 
NB Capital Trust IV,                 
Capital Securities    8.25    4/15/27    55,000    58,312 
PNC Funding,                 
Sub. Notes    5.25    11/15/15    225,000    214,754 
Royal Bank of Scotland,                 
Sub. Notes    6.38    2/1/11    410,000    423,775 
Sanwa Finance Aruba,                 
Bank Gtd. Notes    8.35    7/15/09    150,000    162,099 
SouthTrust,                 
Sub. Notes    5.80    6/15/14    500,000    494,823 
Sovereign Bancorp,                 
Sr. Notes    4.80    9/1/10    500,000 b    481,860 
State Street Bank & Trust,                 
Sub. Notes    5.25    10/15/18    200,000    189,448 
U.S. Bank,                 
Sub. Notes    6.38    8/1/11    100,000    103,824 
Union Planters,                 
Sr. Notes    4.38    12/1/10    400,000    381,946 

The Fund 9

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Banking (continued)                 
Wachovia Bank,                 
Sub. Notes    5.00    8/15/15    250,000    234,445 
Washington Mutual Bank/Henderson,             
Sub. Notes    5.13    1/15/15    400,000    376,896 
Wells Fargo & Co.,                 
Notes    5.25    12/1/07    1,600,000    1,601,186 
Wells Fargo & Co.,                 
Sub. Notes    6.38    8/1/11    420,000 a    436,254 
Wells Fargo Capital I,                 
Capital Securities    7.96    12/15/26    30,000    31,516 
Westpac Banking,                 
Sub. Notes    4.63    6/1/18    500,000    443,279 
Zions Bancorporation,                 
Sub. Notes    6.00    9/15/15    250,000    249,731 
                15,295,406 
Building & Construction—.2%                 
Masco,                 
Bonds    4.80    6/15/15    300,000 a    273,112 
Pulte Homes,                 
Sr. Notes    5.25    1/15/14    500,000    465,260 
                738,372 
Chemicals—.3%                 
Potash Corporation of                 
Saskatchewan, Notes    7.75    5/31/11    200,000    217,772 
Praxair,                 
Notes    2.75    6/15/08    900,000    854,319 
                1,072,091 
Commercial &                 
Professional Services—.3%                 
Aramark Services,                 
Notes    5.00    6/1/12    300,000    284,048 
Cendant,                 
Sr. Notes    7.38    1/15/13    200,000    219,039 
RR Donnelley & Sons,                 
Notes    4.95    5/15/10    750,000    723,567 
                1,226,654 

10

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Commercial Mortgage                 
Pass-Through Ctfs.—3.9%                 
Asset Securitization,                 
Ser. 1997-D4, Cl. A1D    7.49    4/14/29    255,819    259,991 
Banc of America Commercial                 
Mortgage, Ser. 2005-3, Cl. A4    4.67    7/10/43    1,000,000    928,013 
Bear Stearns Commercial                 
Mortgage Securities,                 
Ser. 1999-WF2, Cl. A2    7.08    7/15/31    250,000    261,018 
Chase Commercial Mortgage                 
Securities, Ser. 2000-3, Cl. A2    7.32    10/15/32    450,000    478,354 
Chase Commercial Mortgage                 
Securities, Ser. 2000-2, Cl. A2    7.63    7/15/32    250,000    270,621 
Citigroup/Deutsche Bank                 
Commercial Mortgage Trust,                 
Ser. 2005-CD1, Cl. A4    5.40    7/15/44    500,000    485,419 
CS First Boston Mortgage                 
Securities, Ser. 2002-CKP1, Cl. A3    6.44    12/15/35    675,000    704,117 
CS First Boston Mortgage                 
Securities, Ser. 1999-C1, Cl. A2    7.29    9/15/41    1,046,414    1,096,592 
GE Capital Commercial Mortgage,                 
Ser. 2002-1A, Cl. A3    6.27    12/10/35    850,000    880,790 
GMAC Commercial Mortgage                 
Securities, Ser. 1998-C2, Cl. A2    6.42    5/15/35    936,945    954,477 
GMAC Commercial Mortgage                 
Securities, Ser. 1998-C1, Cl. A2    6.70    5/15/30    166,244    169,652 
Greenwich Capital Commercial                 
Funding, Ser. 2005-GG5, Cl. A5    5.22    4/10/37    1,000,000    964,363 
GS Mortgage Securities Corp. II,                 
Ser. 2005-GG4, Cl. A3    4.61    7/10/39    775,000    737,589 
Heller Financial Commercial                 
Mortgage Asset,                 
Ser. 1999-PH1, Cl. A2    6.85    5/15/31    700,000    722,632 
J.P. Morgan Chase Commercial                 
Mortgage Securities,                 
Ser. 2004-CB8, Cl. A4    4.40    1/12/39    1,000,000    918,932 
LB Commercial Conduit Mortgage                 
Trust, Ser. 1999-C2, Cl. A2    7.33    10/15/32    200,000    210,361 

The Fund 11

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Commercial Mortgage                 
Pass-Through Ctfs. (continued)                 
LB-UBS Commercial Mortgage Trust,                 
Ser. 2005-C3, Cl. AJ    4.84    7/15/40    500,000    467,227 
LB-UBS Commercial Mortgage Trust,                 
Ser. 2004-C6, Cl. A6    5.02    8/15/29    275,000    262,872 
LB-UBS Commercial Mortgage Trust,                 
Ser. 2000-C3, Cl. A2    7.95    5/15/25    1,100,000    1,189,122 
Merrill Lynch Mortgage Trust,                 
Ser. 2003-KEY1, Cl. A4    5.24    11/12/35    500,000    486,139 
Morgan Stanley Capital I,                 
Ser. 2004-T13, Cl. A4    4.66    9/13/45    1,000,000    937,837 
Morgan Stanley Capital I,                 
Ser. 2003-HQ2, Cl. A2    4.92    3/12/35    500,000    480,082 
Salomon Brothers Mortgage                 
Securities VII, Ser. 2000-C1, Cl. A2    7.52    12/18/09    300,000    318,660 
Wachovia Bank Commercial Mortgage                 
Trust, Ser. 2005-C20, Cl. A7    5.12    7/15/42    800,000    764,843 
Wachovia Bank Commercial Mortgage                 
Trust, Ser. 2004-C11, Cl. A5    5.22    1/15/41    800,000    774,718 
                15,724,421 
Consumer Products—.2%                 
Avon Products,                 
Sr. Notes    4.20    7/15/18    250,000    210,576 
Procter & Gamble,                 
Notes    6.88    9/15/09    750,000    787,239 
                997,815 
Diversified Financial Services—4.7%             
Bear Stearns Cos.,                 
Sr. Notes    4.00    1/31/08    2,500,000    2,446,927 
Capital One Bank,                 
Notes    4.25    12/1/08    275,000    267,463 
CIT,                 
Sr. Notes    5.50    11/30/07    1,350,000    1,352,948 
Citigroup,                 
Sub. Notes    5.00    9/15/14    1,000,000    948,696 
Citigroup,                 
Notes    6.00    2/21/12    750,000    764,998 
Citigroup,                 
Debs.    6.63    1/15/28    100,000    104,365 

12

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Diversified Financial Services (continued)             
Countrywide Capital I,                 
Capital Trust Pass-Through                 
Securities    8.00    12/15/26    200,000    202,439 
Countrywide Home Loans,                 
Notes, Ser. K    5.63    5/15/07    750,000    751,796 
Credit Suisse USA,                 
Notes    5.13    1/15/14    550,000 a    526,992 
General Electric Capital,                 
Notes, Ser. A    5.00    6/15/07    650,000    648,493 
General Electric Capital,                 
Sr. Notes, Ser. A    5.00    1/8/16    375,000    355,139 
General Electric Capital,                 
Notes, Ser. A    5.45    1/15/13    650,000    645,696 
General Electric Capital,                 
Notes, Ser. A    6.75    3/15/32    200,000    216,650 
General Electric Capital,                 
Debs.    8.30    9/20/09    15,000    16,324 
Goldman Sachs,                 
Bonds    6.35    2/15/34    350,000    336,808 
Goldman Sachs,                 
Sr. Notes    6.60    1/15/12    1,000,000    1,044,609 
Goldman Sachs,                 
Notes, Ser. B    7.35    10/1/09    100,000    105,870 
HSBC Finance,                 
Notes    4.75    7/15/13    700,000    656,844 
HSBC Finance,                 
Notes    8.00    7/15/10    630,000    685,572 
International Lease Finance,                 
Sr. Notes    5.00    4/15/10    1,200,000    1,174,615 
J.P. Morgan Chase & Co.,                 
Sr. Notes    4.00    2/1/08    1,000,000 a    978,299 
J.P. Morgan Chase & Co.,                 
Sub. Notes    6.75    2/1/11    1,000,000    1,047,534 
Jefferies,                 
Sr. Notes    6.25    1/15/36    200,000 a    183,300 
Lehman Brothers,                 
Notes    6.63    1/18/12    650,000    681,528 
MBNA America Bank,                 
Sub. Notes    6.75    3/15/08    100,000    102,545 

The Fund 13

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Diversified Financial Services (continued)             
Merrill Lynch & Co.,                 
Notes, Ser. C    5.45    7/15/14    565,000    552,367 
Merrill Lynch & Co.,                 
Notes    6.88    11/15/18    150,000    162,627 
Morgan Stanley,                 
Notes    7.25    4/1/32    300,000 a    333,052 
National Rural Utilities                 
Cooperative Finance, Notes    4.38    10/1/10    600,000    575,506 
Residential Capital,                 
Sr. Notes    6.38    6/30/10    150,000    149,498 
SLM,                 
Notes, Ser. A    5.00    4/15/15    700,000    653,719 
Toyota Motor Credit,                 
Notes    4.35    12/15/10    150,000    144,844 
UBS Paine Webber,                 
Sr. Notes    6.55    4/15/08    150,000    153,379 
Unilever Capital,                 
Sr. Notes    5.90    11/15/32    250,000    239,039 
                19,210,481 
Diversified Metals & Mining—.2%                 
Alcan,                 
Debs.    7.25    3/15/31    350,000    379,153 
Alcoa,                 
Notes    6.00    1/15/12    150,000    153,250 
Falconbridge,                 
Notes    5.50    6/15/17    165,000    152,265 
Inco,                 
Bonds    7.20    9/15/32    100,000    102,807 
                787,475 
Electric Utilities—1.4%                 
Cincinnati Gas & Electric,                 
Notes    5.70    9/15/12    185,000    183,586 
Constellation Energy,                 
Notes    7.60    4/1/32    250,000    281,152 
Dominion Resources,                 
Sr. Notes    6.30    3/15/33    100,000    95,755 
Exelon,                 
Notes    4.90    6/15/15    500,000    460,651 

14

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Electric Utilities (continued)                 
FirstEnergy,                 
Sr. Notes, Ser. C    7.38    11/15/31    120,000    130,773 
Florida Power & Light,                 
First Mortgage Bonds    5.63    4/1/34    250,000    231,639 
Georgia Power,                 
Sr. Notes, Ser. J    4.88    7/15/07    400,000    397,995 
Hydro-Quebec,                 
Govt. Gtd. Notes, Ser. HH    8.50    12/1/29    200,000    265,120 
Hydro-Quebec,                 
Govt. Gtd. Debs., Ser. HK    9.38    4/15/30    20,000    28,618 
MidAmerican Energy,                 
Sr. Notes    5.88    10/1/12    350,000    350,922 
NiSource Finance,                 
Sr. Notes    5.40    7/15/14    150,000    143,629 
Ohio Power,                 
Sr. Notes, Ser. F    5.50    2/15/13    400,000    391,253 
Pacific Gas & Electric,                 
Notes    6.05    3/1/34    100,000    95,969 
PPL Electric Utilities,                 
Sr. Secured Bonds    6.25    8/15/09    300,000    306,158 
Progress Energy,                 
Sr. Notes    7.10    3/1/11    500,000    528,761 
Public Service Company of                 
Colorado, First Mortgage Bonds    7.88    10/1/12    350,000    390,895 
South Carolina Electric & Gas,                 
First Mortgage Bonds    6.63    2/1/32    200,000    212,712 
Southern California Edison,                 
Notes    6.65    4/1/29    100,000 a    102,733 
Southern Power,                 
Sr. Notes, Ser. D    4.88    7/15/15    300,000    276,497 
TXU Electric Delivery,                 
Sr. Secured Notes    7.00    5/1/32    250,000    264,282 
Virginia Electric & Power,                 
Sr. Notes, Ser. A    5.40    1/15/16    500,000    477,990 
                5,617,090 
Environmental Control—.0%                 
Waste Management,                 
Sr. Notes    7.00    7/15/28    150,000    156,116 

The Fund 15

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Food & Beverages—.7%                 
Bottling Group,                 
Notes    4.63    11/15/12    350,000    331,323 
Coca-Cola Enterprises,                 
Debs.    6.70    10/15/36    250,000    260,848 
Coca-Cola Enterprises,                 
Debs.    8.50    2/1/22    100,000    122,690 
ConAgra Foods,                 
Sr. Notes    7.00    10/1/28    350,000    354,133 
General Mills,                 
Notes    6.00    2/15/12    125,000    126,500 
H.J. Heinz,                 
Debs.    6.38    7/15/28    100,000    91,997 
Hershey,                 
Debs.    8.80    2/15/21    30,000    38,343 
Kroger,                 
Sr. Notes    7.25    6/1/09    550,000    574,695 
Nabisco,                 
Debs.    7.55    6/15/15    40,000    44,763 
Safeway,                 
Sr. Notes    5.80    8/15/12    210,000 a    207,979 
Sara Lee,                 
Notes    6.25    9/15/11    300,000    302,559 
Sysco,                 
Sr. Notes    5.38    9/21/35    350,000    314,398 
                2,770,228 
Foreign Government—2.6%                 
Asian Development Bank,                 
Sr. Notes    4.50    9/4/12    750,000    720,862 
Chile Government International                 
Bond, Bonds    5.50    1/15/13    350,000    344,925 
European Investment Bank,                 
Notes    4.63    5/15/14    500,000 a    477,386 
European Investment Bank,                 
Bonds    4.63    10/20/15    350,000    330,495 
Finland Government International                 
Bond, Bonds    6.95    2/15/26    25,000    28,547 
Inter-American Development Bank,             
Bonds    5.75    2/26/08    1,600,000    1,618,136 

  16
    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Foreign Government (continued)                 
International Bank for                 
Reconstruction &                 
Development, Notes    7.63    1/19/23    175,000    216,001 
Italy Government International                 
Bond, Notes    5.38    6/15/33    550,000    512,538 
Italy Government International                 
Bond, Debs.    6.88    9/27/23    70,000    77,437 
Malaysia Government International             
Bond, Notes    8.75    6/1/09    330,000    360,451 
Mexico Government International                 
Bond, Notes, Ser. A    6.75    9/27/34    550,000 a    560,175 
Mexico Government International                 
Bond, Notes, Ser. A    9.88    2/1/10    1,525,000    1,735,450 
Province of British Columbia                 
Canada, Bonds, Ser. USD-2    6.50    1/15/26    25,000    27,378 
Province of Manitoba Canada,                 
Debs.    8.80    1/15/20    10,000    12,870 
Province of Ontario,                 
Notes    3.63    10/21/09    1,200,000    1,137,995 
Province of Ontario,                 
Sr. Notes    5.50    10/1/08    500,000    503,310 
Province of Quebec Canada,                 
Notes    4.60    5/26/15    700,000    651,972 
Province of Quebec Canada,                 
Debs.    7.50    7/15/23    200,000    235,701 
Republic of Korea,                 
Notes    8.88    4/15/08    840,000 a    902,962 
South Africa Government                 
International Bond, Notes    6.50    6/2/14    170,000    175,525 
                10,630,116 
Health Care—.6%                 
Bristol-Myers Squibb,                 
Notes    5.75    10/1/11    250,000    251,906 
Eli Lilly & Co.,                 
Notes    7.13    6/1/25    200,000    223,101 
GlaxoSmithKline Capital,                 
Notes    4.38    4/15/14    500,000    461,052 

The Fund 17

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Health Care (continued)                 
Johnson & Johnson,                 
Debs.    4.95    5/15/33    170,000    150,078 
Merck & Co.,                 
Debs.    6.40    3/1/28    150,000    149,546 
Quest Diagnostics,                 
Sr. Notes    5.45    11/1/15    500,000    480,137 
UnitedHealth,                 
Sr. Notes    5.00    8/15/14    300,000    284,458 
WellPoint,                 
Bonds    6.80    8/1/12    300,000    317,340 
Wyeth,                 
Bonds    6.50    2/1/34    200,000    203,209 
                2,520,827 
Lodging & Entertainment—.1%                 
Harrah's Operating,                 
Sr. Notes    5.75    10/1/17    250,000    234,752 
Machinery—.2%                 
Deere & Co.,                 
Sr. Notes    6.95    4/25/14    625,000    671,847 
Manufacturing—.1%                 
Tyco International,                 
Notes    6.88    1/15/29    235,000    242,377 
Media—.7%                 
CBS,                 
Sr. Notes    5.50    5/15/33    250,000    207,550 
Clear Channel Communications,                 
Notes    4.25    5/15/09    350,000    335,250 
Comcast Cable Communications,                 
Sr. Notes    6.75    1/30/11    600,000    624,851 
Comcast Cable Communications,                 
Notes    9.46    11/15/22    304,000    379,533 
COX Communications,                 
Bonds    5.50    10/1/15    450,000    421,819 
Historic TW,                 
Debs.    6.95    1/15/28    325,000    325,316 
News America,                 
Notes    6.20    12/15/34    250,000 a    231,912 
News America,                 
Sr. Debs.    8.25    8/10/18    150,000    170,580 

18

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Media (continued)                 
Walt Disney,                 
Sr. Notes    7.00    3/1/32    150,000    162,381 
Walt Disney,                 
Sr. Debs.    7.55    7/15/93    100,000    106,495 
                2,965,687 
Oil & Gas—1.5%                 
Amerada Hess,                 
Bonds    7.88    10/1/29    125,000 a    142,792 
Anadarko Finance,                 
Sr. Notes, Ser. B    6.75    5/1/11    300,000    315,048 
Atlantic Richfield,                 
Notes    5.90    4/15/09    850,000    865,605 
Canadian Natural Resources,                 
Notes    4.90    12/1/14    350,000 a    326,821 
ChevronTexaco Capital,                 
Notes    3.50    9/17/07    500,000    488,718 
ConocoPhillips,                 
Sr. Notes    5.90    10/15/32    500,000 a    487,252 
ConocoPhillips,                 
Notes    8.75    5/25/10    200,000    223,551 
Devon Financing,                 
Debs.    7.88    9/30/31    275,000    325,761 
Duke Capital,                 
Sr. Notes    8.00    10/1/19    225,000    259,354 
EnCana,                 
Bonds    7.20    11/1/31    150,000    164,584 
Enterprise Products Operating,                 
Sr. Notes, Ser. B    5.60    10/15/14    335,000    321,389 
Kinder Morgan Finance,                 
Sr. Notes    6.40    1/5/36    275,000    264,055 
Marathon Oil,                 
Notes    5.38    6/1/07    200,000    200,144 
Pemex Project Funding Master                 
Trust, Sr. Notes    5.75    12/15/15    200,000 b    189,850 
Pemex Project Funding Master                 
Trust, Notes    7.38    12/15/14    400,000    425,000 
Sempra Energy,                 
Sr. Notes    7.95    3/1/10    500,000    538,906 

The Fund 19

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Oil & Gas (continued)                 
Transocean,                 
Notes    7.50    4/15/31    150,000    173,007 
Valero Energy,                 
Sr. Notes    7.50    4/15/32    70,000    78,670 
XTO Energy,                 
Sr. Notes    4.90    2/1/14    200,000    187,856 
                5,978,363 
Paper & Forest Products—.2%                 
International Paper,                 
Sr. Notes    6.75    9/1/11    200,000    209,121 
International Paper,                 
Notes    7.63    1/15/07    10,000    10,113 
MeadWestvaco,                 
Notes    6.85    4/1/12    500,000    515,505 
Weyerhaeuser,                 
Debs.    7.38    3/15/32    200,000    209,480 
                944,219 
Property-Casualty Insurance—1.1%             
Allstate,                 
Sr. Notes    5.55    5/9/35    175,000    156,631 
American International,                 
Notes    2.88    5/15/08    2,000,000    1,909,002 
AXA,                 
Sub. Notes    8.60    12/15/30    165,000    204,398 
Berkshire Hathaway Finance,                 
Sr. Notes    4.85    1/15/15    200,000    187,898 
GE Global Insurance,                 
Notes    7.00    2/15/26    150,000    159,840 
Lion Connecticut,                 
Debs.    7.63    8/15/26    50,000    57,552 
Marsh & McLennan Cos.,                 
Sr. Notes    5.88    8/1/33    200,000    172,225 
MetLife,                 
Sr. Notes    6.13    12/1/11    260,000    267,236 
Nationwide Financial Services,                 
Sr. Notes    6.25    11/15/11    350,000    358,618 
Progressive,                 
Sr. Notes    6.63    3/1/29    100,000    104,016 
Prudential Financial,                 
Notes, Ser. B    4.75    4/1/14    350,000    326,137 

20

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Property-Casualty Insurance (continued)             
Safeco Capital Trust I,                 
Capital Securities    8.07    7/15/37    300,000    317,049 
Torchmark,                 
Sr. Debs.    8.25    8/15/09    150,000    160,943 
                4,381,545 
Real Estate Investment Trusts—.4%             
Brandywine Operating Partnership,             
Sub. Notes    5.75    4/1/12    130,000    128,561 
EOP Operating,                 
Notes    4.75    3/15/14    300,000    275,656 
ERP Operating,                 
Notes    5.20    4/1/13    600,000 a    580,382 
iStar Financial,                 
Sr. Notes, Ser. I    5.88    3/15/16    185,000    178,531 
Simon Property,                 
Notes    6.35    8/28/12    400,000    411,699 
                1,574,829 
Retail—.4%                 
Federated Department Stores,                 
Debs.    7.45    7/15/17    350,000    379,454 
JC Penney,                 
Sr. Notes    8.00    3/1/10    350,000    376,021 
May Department Stores,                 
Notes    6.70    7/15/34    200,000 a    198,844 
Target,                 
Sr. Notes    7.00    7/15/31    125,000 a    139,731 
Wal-Mart Stores,                 
Bonds    5.25    9/1/35    400,000    352,561 
                1,446,611 
State Government—.1%                 
State of Illinois,                 
Bonds    5.10    6/1/33    450,000    404,095 
Technology—.4%                 
First Data,                 
Sr. Notes    5.63    11/1/11    250,000    250,464 
Hewlett-Packard,                 
Sr. Notes    5.50    7/1/07    150,000    150,296 
IBM,                 
Debs., Ser. A    7.50    6/15/13    75,000    83,610 

The Fund 21

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Technology (continued)                 
IBM,                 
Debs.    8.38    11/1/19    300,000    366,055 
Oracle & Ozark,                 
Notes    5.00    1/15/11    1,000,000 b    975,620 
                1,826,045 
Telecommunications—2.1%                 
America Movil,                 
Notes    6.38    3/1/35    100,000    92,155 
AT&T,                 
Sr. Notes    5.88    8/15/12    775,000    778,997 
BellSouth Telecommunications,                 
Debs.    6.38    6/1/28    550,000    533,201 
British Telecommunications,                 
Bonds    8.88    12/15/30    150,000 c    190,140 
Cisco Systems,                 
Notes    5.50    2/22/16    500,000    488,309 
Deutsche Telekom International                 
Finance, Bonds    8.25    6/15/30    300,000 c    357,242 
France Telecom,                 
Notes    8.50    3/1/31    220,000 c    271,925 
Motorola,                 
Debs.    7.50    5/15/25    150,000    167,649 
New Cingular Wireless Services,                 
Sr. Notes    7.88    3/1/11    475,000    520,379 
New Cingular Wireless Services,                 
Notes    8.13    5/1/12    250,000    280,231 
Pacific-Bell,                 
Debs.    7.13    3/15/26    310,000    321,200 
Royal KPN,                 
Sr. Notes    8.38    10/1/30    250,000    271,632 
Sprint Capital,                 
Sr. Bonds    7.63    1/30/11    1,800,000    1,944,526 
360 Communications,                 
Sr. Notes    7.60    4/1/09    200,000    210,846 
Telecom Italia Capital,                 
Notes    6.38    11/15/33    400,000 a    375,653 
Telefonica Europe,                 
Notes    7.75    9/15/10    200,000    214,938 
Verizon Global Funding,                 
Sr. Notes    7.25    12/1/10    500,000    530,460 

22

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Telecommunications (continued)                 
Verizon Global Funding,                 
Sr. Notes    7.75    12/1/30    200,000    221,241 
Verizon New Jersey,                 
Debs.    8.00    6/1/22    25,000    26,786 
Vodafone,                 
Sr. Notes    7.75    2/15/10    580,000    620,346 
                8,417,856 
Transportation—.2%                 
Burlington Northern Santa Fe,                 
Debs.    7.00    12/15/25    100,000    108,224 
Canadian National Railway,                 
Notes    6.90    7/15/28    100,000    109,777 
FedEx,                 
Notes    9.65    6/15/12    225,000    268,550 
Norfolk Southern,                 
Sr. Notes    5.59    5/17/25    10,000    9,307 
Norfolk Southern,                 
Sr. Notes    7.80    5/15/27    250,000    293,515 
Union Pacific,                 
Debs.    6.63    2/1/29    200,000    207,782 
United Parcel Service of America,                 
Sr. Notes    8.38    4/1/30    10,000 c    12,830 
                1,009,985 
U.S. Government Agencies—10.3%             
Federal Farm Credit Bank,                 
Bonds    2.63    9/17/07    1,500,000    1,451,168 
Federal Home Loan Bank System,                 
Bonds    3.63    1/15/08    1,000,000    975,563 
Federal Home Loan Bank System,                 
Bonds    3.88    1/15/10    1,500,000    1,434,342 
Federal Home Loan Bank System,                 
Bonds    4.38    9/17/10    1,650,000    1,595,055 
Federal Home Loan Bank System,                 
Bonds, Ser. 432    4.50    9/16/13    1,000,000    951,697 
Federal Home Loan Bank System,                 
Bonds    4.63    1/18/08    3,000,000    2,974,920 
Federal Home Loan Bank System,                 
Sr. Notes, Ser. 100    5.80    9/2/08    3,850,000    3,894,914 
Federal Home Loan Mortgage Corp.,             
Notes    3.50    9/15/07    4,600,000    4,504,513 

The Fund 23

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
U.S. Government Agencies (continued)             
Federal Home Loan Mortgage Corp.,                 
Notes    3.63    9/15/08    1,000,000    966,782 
Federal Home Loan Mortgage Corp.,                 
Notes    4.00    12/15/09    2,350,000    2,260,242 
Federal Home Loan Mortgage Corp.,                 
Notes    4.38    7/17/15    1,850,000    1,723,534 
Federal Home Loan Mortgage Corp.,                 
Notes    4.75    1/18/11    1,250,000    1,224,179 
Federal Home Loan Mortgage Corp.,                 
Notes    5.13    7/15/12    1,000,000    991,430 
Federal Home Loan Mortgage Corp.,                 
Notes    5.50    9/15/11    500,000    505,225 
Federal Home Loan Mortgage Corp.,                 
Notes    5.50    8/20/19    500,000    485,064 
Federal Home Loan Mortgage Corp.,                 
Sub. Notes    5.88    3/21/11    650,000    661,988 
Federal Home Loan Mortgage Corp.,                 
Notes    6.25    7/15/32    650,000    712,863 
Federal National Mortgage                 
Association, Notes    5.25    1/15/09    5,525,000    5,541,796 
Federal National Mortgage                 
Association, Sub. Notes    5.25    8/1/12    1,000,000    984,889 
Federal National Mortgage                 
Association, Notes    5.38    11/15/11    1,250,000    1,255,846 
Federal National Mortgage Association,             
Notes    5.50    3/15/11    1,200,000    1,212,272 
Federal National Mortgage                 
Association, Bonds    6.25    5/15/29    1,900,000    2,073,367 
Federal National Mortgage                 
Association, Notes    7.25    1/15/10    1,450,000    1,550,027 
Financing,                 
Bonds    8.60    9/26/19    40,000    51,514 
Financing,                 
Bonds, Ser. E    9.65    11/2/18    510,000    700,062 
Tennessee Valley Authority,                 
Notes, Ser. C    4.75    8/1/13    750,000    723,906 
Tennessee Valley Authority,                 
Bonds, Ser. C    6.00    3/15/13    450,000    468,767 
                41,875,925 

24

    Principal     
Bonds and Notes (continued)    Amount ($)    Value ($) 
U.S. Government Agencies/Mortgage-Backed—35.1%     
Federal Home Loan Mortgage Corp.:         
4.00%, 9/1/08—9/1/18    1,572,099    1,470,300 
4.50%, 5/1/10—9/1/35    8,362,066    7,916,146 
5.00%, 11/1/07—12/1/35    19,276,546    18,415,411 
5.50%, 9/1/09—2/1/36    15,186,159    14,805,826 
6.00%, 12/1/13—3/1/36    6,358,883    6,362,060 
6.50%, 3/1/11—11/1/33    2,175,258    2,218,617 
7.00%, 9/1/11—7/1/34    768,015    790,199 
7.50%, 7/1/10—11/1/33    432,700    451,005 
8.00%, 5/1/26—10/1/31    154,527    164,426 
8.50%, 6/1/30    5,078    5,469 
Federal National Mortgage Association:         
5.00%    1,750,000 d    1,655,378 
5.50%    2,000,000 d    1,942,500 
4.00%, 9/1/18—10/1/20    2,199,281    2,051,334 
4.50%, 4/1/18—8/1/35    6,981,792    6,592,709 
5.00%, 5/1/10—2/1/36    22,674,150    21,647,633 
5.50%, 1/1/17—4/1/36    25,097,589    24,478,625 
6.00%, 6/1/11—2/1/36    9,356,505    9,352,664 
6.50%, 1/1/11—1/1/34    3,931,457    4,016,830 
7.00%, 8/1/08—5/1/36    1,676,996    1,725,008 
7.50%, 8/1/15—3/1/32    410,549    427,804 
8.00%, 5/1/27—10/1/30    68,874    73,380 
8.50%, 2/1/25    8,974    9,667 
9.00%, 10/1/30    8,019    8,779 
Government National Mortgage Association I:     
6.00%    1,000,000 d    1,004,060 
4.50%, 6/15/19—8/15/33    1,158,293    1,100,247 
5.00%, 3/15/18—9/15/35    3,818,057    3,670,340 
5.50%, 2/15/33—1/15/36    5,493,686    5,397,827 
6.00%, 4/15/17—10/15/34    2,951,295    2,966,687 
6.50%, 9/15/08—11/15/33    1,052,799    1,083,953 
7.00%, 10/15/11—8/15/32    439,447    456,184 
7.50%, 12/15/26—10/15/32    216,583    227,645 
8.00%, 8/15/24—3/15/32    89,981    96,236 
8.50%, 10/15/26    20,222    21,789 
9.00%, 2/15/22—2/15/23    26,880    29,130 
        142,635,868 
U.S. Government Securities—25.0%         
U.S. Treasury Bonds:         
4.50%, 2/15/36    350,000    314,645 
5.38%, 2/15/31    1,560,000    1,583,884 

The Fund 25

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Principal     
Bonds and Notes (continued)    Amount ($)    Value ($) 
U.S. Government Securities (continued)     
U.S. Treasury Bonds (continued):         
5.50%, 8/15/28    2,750,000    2,820,015 
6.25%, 5/15/30    700,000    791,322 
7.13%, 2/15/23    5,250,000    6,300,787 
7.25%, 5/15/16    2,000,000    2,331,560 
7.88%, 2/15/21    3,130,000    3,955,037 
8.75%, 5/15/20    1,475,000    1,980,763 
8.88%, 8/15/17    4,160,000    5,464,534 
9.00%, 11/15/18    650,000    873,895 
11.25%, 2/15/15    25,000    35,851 
12.00%, 8/15/13    1,445,000    1,666,085 
12.50%, 8/15/14    40,000    49,173 
14.00%, 11/15/11    30,000    31,461 
U.S. Treasury Notes:         
3.00%, 11/15/07    7,400,000 a    7,195,908 
3.25%, 8/15/07    2,000,000 a    1,959,520 
3.88%, 5/15/10    7,220,000 a    6,951,488 
4.00%, 2/15/14    9,200,000 a    8,597,336 
4.00%, 2/15/15    1,750,000 a    1,622,033 
4.38%, 8/15/12    6,525,000 a    6,319,058 
4.75%, 11/15/08    5,100,000 a    5,086,026 
4.75%, 3/31/11    1,800,000 a    1,786,360 
5.00%, 8/15/11    4,350,000 a    4,368,314 
5.63%, 5/15/08    6,400,000 a    6,493,248 
6.00%, 8/15/09    9,275,000 a    9,587,289 
6.13%, 8/15/07    9,900,000 a    10,050,777 
6.50%, 2/15/10    3,350,000 a    3,533,714 
        101,750,083 
Total Bonds and Notes         
(cost $414,922,834)        402,919,709 
 
 
Other Investment—1.2%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Preferred         
Plus Money Market Fund         
(cost $4,735,000)    4,735,000 e    4,735,000 

  26
Investment of Cash Collateral         
for Securities Loaned—19.7%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Cash         
Advantage Plus Fund         
(cost $79,999,413)    79,999,413 e    79,999,413 
Total Investments (cost $499,657,247)    120.0%    487,654,122 
Liabilities, Less Cash and Receivables    (20.0%)    (81,223,884) 
Net Assets    100.0%    406,430,238 

a All or a portion of these securities are on loan. At April 30, 2006, the total market value of the fund's securities on
loan is $79,126,045 and the total market value of the collateral held by the fund is $81,564,063, consisting of
cash collateral of $79,999,413 and U.S. Government and Agency securities valued at $1,564,650.
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 April 30, 2006, these securities
amounted to $1,647,330 or .4% of net assets.
c Variable rate security—interest rate subject to periodic change.
d Purchased on a forward commitment basis.
e Investment in affiliated money market mutual fund.
Portfolio Summary (Unaudited) †         
 
    Value (%)        Value (%) 
U.S. Government & Agencies    35.3    Asset/Mortgage-Backed    5.2 
U.S. Government Agencies/        Foreign Government    2.6 
Mortgage-Backed    35.1    State Government    .1 
Money Market Investments    20.9         
Corporate Bonds    20.8        120.0 

  † Based on net assets.
See notes to financial statements.

The Fund 27

STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—See Statement of         
Investments (including securities on loan,         
valued at $79,126,045)—Note 1(b):         
Unaffiliated issuers    414,922,834    402,919,709 
Affiliated issuers    84,734,413    84,734,413 
Cash        225,859 
Receivable for investment securities sold        7,221,176 
Dividends and interest receivable        4,179,779 
Receivable for shares of Capital Stock subscribed    541,706 
        499,822,642 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    93,794 
Liability for securities on loan—Note 1(b)        79,999,413 
Payable for investment securities purchased        12,907,118 
Payable for shares of Capital Stock redeemed        392,079 
        93,392,404 
Net Assets ($)        406,430,238 
Composition of Net Assets ($):         
Paid-in capital        420,443,103 
Accumulated distributions in excess of investment income—net    (129,720) 
Accumulated net realized gain (loss) on investments    (1,880,020) 
Accumulated net unrealized appreciation         
(depreciation) on investments        (12,003,125) 
Net Assets ($)        406,430,238 

Net Asset Value Per Share         
    Investor Shares    BASIC Shares 
Net Assets ($)    216,504,436    189,925,802 
Shares Outstanding    22,036,817    19,322,271 
Net Asset Value Per Share ($)    9.82    9.83 

See notes to financial statements.

28

  STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Income:     
Interest    9,655,878 
Cash dividends;     
Affiliated issuers    20,728 
Income on securities lending    16,911 
Total Income    9,693,517 
Expenses:     
Management fee—Note 3(a)    301,794 
Distribution fee (Investor Shares)—Note 3(b)    267,115 
Loan commitment fees—Note 2    2,408 
Total Expenses    571,317 
Investment Income—Net    9,122,200 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    (1,048,432) 
Net unrealized appreciation (depreciation) on investments    (6,531,825) 
Net Realized and Unrealized Gain (Loss) on Investments    (7,580,257) 
Net Increase in Net Assets Resulting from Operations    1,541,943 

See notes to financial statements.

The Fund 29

STATEMENT OF CHANGES IN NET ASSETS

  30

See notes to financial statements.

The Fund 31

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.

  a As required, effective November 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began accreting discount on fixed income securities on a scientific basis and
including paydown gains and losses in interest income.The effect of these changes for the period ended October 31,
2002 was to decrease net investment income per share and increase net realized and unrealized gain (loss) on
investments per share by $.01 and decrease the ratio of net investment income to average net assets from 5.11% to
5.04%. Per share data and ratios/supplemental data for periods prior to November 1, 2001 have not been restated
to reflect these changes in presentation.
b Based on average shares outstanding at each month end.
c Amount represents less than $.01.
d Not annualized.
e Annualized.

See notes to financial statements.

32

  a As required, effective November 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began accreting discount on fixed income securities on a scientific basis and
including paydown gains and losses in interest income.The effect of these changes for the period ended October 31,
2002 was to decrease net investment income per share and increase net realized and unrealized gain (loss) on
investments per share by $.01 and decrease the ratio of net investment income to average net assets from 5.40% to
5.32%. Per share data and ratios/supplemental data for periods prior to November 1, 2001 have not been restated
to reflect these changes in presentation.
b Based on average shares outstanding at each month end.
c Amount represents less than $.01.
d Not annualized.
e Annualized.

See notes to financial statements.

The Fund 33

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Bond Market Index Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series, including the fund.The fund's investment objective is to seek to replicate the total return of the Lehman Brothers Aggregate Bond Index. 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. The fund is authorized to issue 150 million shares of $.001 par value Capital Stock.The fund is currently authorized to issue two classes of shares: Investor (50 million shares authorized) and BASIC (100 million shares authorized). BASIC shares and Investor shares are offered to any investor. Differences between the two classes include the services offered to and the expenses borne by each class, as well as their minimum purchase and account balance requirements. 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 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.

(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

34

(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. Investments in registered investment companies are valued at their net asset value. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Directors. 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 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 considered 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. Investments in registered investment companies are valued at their net asset value.

(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, including where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of the Manager, the fund may lend securities to qualified institu-tions.It is the fund's policy,that at origination,all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least

The Fund 35

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

100% of the market value of securities on loan is maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager.The fund is entitled to receive all income on securities loaned,in addition to income earned as a result of the lending transaction. Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counter party default, the fund has the right to use the collateral to offset losses incurred.There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights.The Manager, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

(c) Affiliated issuers: Investments in other investment companies advised by the Manager are defined as "affiliated" in the Act.

(d) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net; such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code").To the extent that net realized capital gain can be offset by capital loss carry-

36

overs, 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.

(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The fund has an unused capital loss carryover of $953,347 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, the carryover expires in fiscal 2013.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were as follows: ordinary income $17,189,456 and long-term capital gains $469,474.The tax character of current year distributions will be determined at the end of the current fiscal year.

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 at rates based on prevailing market rates in effect at the time of borrowing. For the period ended April 30, 2006, the fund did not borrow under the Facility.

NOTE 3—Investment Management Fee and Other Transactions With Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, cus-

The Fund 37

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

tody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .15% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, service fees, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to the Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

38

(b) Under the fund's Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Investor shares may pay annually up to .25% of the value of the average daily net assets to compensate the Distributor for shareholder servicing activities primarily intended to result in the sale of Investor shares.The BASIC shares bear no distribution fee. During the period ended April 30, 2006, the Investor shares were charged $267,115 pursuant to the Plan.

Under its terms, the Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation or in any agreement related to the Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $49,462 and Rule 12b-1 distribution plan fees $44,332.

(c) The Company and the Manager have received an exemptive order from the SEC which, among other things, permits the fund to use cash collateral received in connection with lending the fund's securities and other uninvested cash to purchase shares of one or more registered money markt mutual funds advised by the Manager in excess of the limitations imposed by the Act.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities, during the period ended April 30, 2006, amounted to $91,551,456 and $73,398,775, respectively.

At April 30, 2006, accumulated net unrealized depreciation on investments was $12,003,125, consisting of $978,502 gross unrealized appreciation and $12,981,627 gross unrealized depreciation.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

The Fund 39

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and 2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services. The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

40

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of index funds that are benchmarked against the Lehman Brothers U.S.Aggregate Index (the "Performance Group") and to a larger universe of funds, consisting of all retail and institutional intermediate U.S. government funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons. The Board noted that the fund's yield performance for the past six one-year periods ended November 30th (2000-2005) was higher than the Performance Group and Performance Universe medians, and was below the Performance Group and variously above and below the Performance Universe medians for the prior four one-year periods ended November 30th (1996-1999). The Board members noted that the fund's total return performance for various periods ended November 30, 2005 was higher than the Performance Group and Performance Universe medians for each of the periods. The Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, which were generally consistent with the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each

The Fund 41

***********************************
  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
F U N D ' S M A N A G E M E N T A G R E E M E N T ( U n a u d i t e d ) ( c o n t i n u e d )

selected and provided by Lipper. Noting the fund's "unitary fee structure", the Board members noted that the fund's management fee and expense ratio were lower than their respective Expense Group and Expense Universe medians.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds"), and by other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund (the "Adviser Accounts" and, collectively with the Similar Funds, the "Similar Accounts").The Manager's representatives explained the nature of the Similar Accounts and the differences, from the Manager's perspective, in providing services to such Similar Accounts as compared to managing and providing services to the fund.The Manager's representatives also reviewed the costs associated with distribution through inter-mediaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure.The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund's management fee. The Board acknowledged that differences in fees paid by the Similar Accounts seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual

42

fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors. The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.

The Fund 43

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE F U N D ' S M A N A G E M E N T A G R E E M E N T ( U n a u d i t e d ) ( c o n t i n u e d )

  • The Board was satisfied with the fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

44

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

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, 2005, is available 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.

© 2006 Dreyfus Service Corporation 0310SA0406

  Dreyfus
Municipal Reserves

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
14    Statement of Assets and Liabilities 
15    Statement of Operations 
16    Statement of Changes in Net Assets 
17    Financial Highlights 
19    Notes to Financial Statements 
24    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus
Municipal Reserves

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Municipal Reserves, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board (the "Fed") has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase interest rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

J. Christopher Nicholl, Portfolio Manager

How did Dreyfus Municipal Reserves perform during the period?

For the six-month period ended April 30, 2006, the fund produced annualized yields of 2.58% for its Class R shares and 2.38% for its Investor shares. Taking into account the effects of compounding, the fund produced annualized effective yields of 2.61% and 2.41% for its Class R shares and Investor shares, respectively. 1

Yields of tax-exempt money market securities continued to rise along with short-term interest rates in a growing U.S. economy during the reporting period.

What is the fund's investment approach?

The fund seeks a high level of current income, consistent with stability of principal, that is exempt from federal income tax.To pursue its goal, the fund invests at least 80% of its assets in tax-exempt municipal obligations, including short-term municipal debt securities. Among these are municipal notes, short-term municipal bonds, tax-exempt commercial paper and municipal leases.The fund reserves the right to invest up to 20% of total assets in taxable money market securities, such as U.S. government obligations, U.S. and foreign bank and corporate obligations and commercial paper.

The fund also may invest in high quality short-term structured notes, which are derivative instruments whose value is tied to underlying municipal obligations.

What other factors influenced the fund's performance?

As it has since June 2004, the Federal Reserve Board (the "Fed") continued to raise short-term interest rates throughout the reporting period in an ongoing effort to fight potential inflationary pressures in a growing economy. By the end of the reporting period, the overnight rate was 4.75%, and on May 10, just after the end of the reporting period, the Fed acted again, raising the rate to 5%, marking the sixteenth consecutive rate hike.

The Fund

3

DISCUSSION OF FUND PERFORMANCE (continued)

Although the U.S. economy grew at an unexpectedly weak 1.7% annualized rate during the fourth quarter of 2005, most investors attributed the lethargic showing to temporary factors. Subsequently, investors were encouraged by strong employment data released over the first four months of 2006, including a steady drop in the unemployment rate, which was a 4.7% by the end of the reporting period. In addition, measures of consumer confidence and retail sales improved, more than offsetting concerns regarding a slowing housing market, and U.S. GDP expanded at an estimated 4.8% annualized rate during the first quarter of 2006. These statistics appeared to confirm that rising interest rates and resurgent energy prices apparently have not yet dampened ongoing strength in broad sectors of the economy.

Tax-exempt money market instruments also were affected by supply-and-demand influences.While robust issuance in California caused the supply of municipal money market securities to rise compared to the same period one year earlier, there was less need among most states and municipalities for short-term borrowing to cover budget shortfalls in the recovering economy. At the same time, investor demand remained robust, due to strong demand from individual and corporate investors.

These and other supply-and-demand forces caused yields of shorter-dated money market securities to rise more sharply than longer-dated securities.Yield differences along the tax-exempt money market yield curve narrowed over the reporting period, resulting in little difference in the yields provided by securities with maturities over six months. Therefore, investors continued to focus primarily on instruments maturing in six months or less.

In this environment, we set the fund's weighted average maturity in a range we considered slightly longer than industry averages.We focused primarily on variable-rate demand notes on which yields are reset

4

daily or weekly.To achieve a modestly long weighted average maturity, we complemented these floating-rate holdings with commercial paper and, to a lesser extent, municipal notes and seasoned municipal bonds with maturities between two and four months. Our focus on this maturity range enabled the fund to capture similar yields of those of longer-term money market securities, but with less risk.

What is the fund's current strategy?

When the Fed raised short-term interest rates to 5% on May 10, it indicated in its accompanying statement that the extent and timing of any further moves is likely to depend on incoming economic data.A substantial slowdown in economic growth could preclude further rate increases, but a significant increase in global commodity prices or other inflationary pressures might prompt the Fed to tighten more aggressively.

In this more uncertain environment, we have adopted a more neutral weighted average maturity while continuing to look for opportunities in the lower half of the money market maturity range. In our judgment, this strategy should help the fund earn competitive levels of current income while maintaining the fund's liquidity needs in response to any potential change in then-prevailing market conditions.

May 15, 2006

An investment in the fund is not insured or guaranteed by the FDIC or any other government
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
1 Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past
performance is no guarantee of future results.Yields fluctuate. 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.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Reserves from November 1, 2005 to April 30, 2006. 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 April 30, 2006     
    Investor Shares    Class R Shares 
Expenses paid per $1,000 †    $ 3.54    $ 2.55 
Ending value (after expenses)    $1,011.90    $1,012.90 

COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
    Investor Shares    Class R Shares 
Expenses paid per $1,000 †    $ 3.56    $ 2.56 
Ending value (after expenses)    $1,021.27    $1,022.27 

† Expenses are equal to the fund's annualized expense ratio of .71% for Investor Shares and .51% for Class R shares; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

6
STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
Short-Term    Coupon    Maturity    Principal     
Investments—99.8%    Rate (%)    Date    Amount ($)    Value ($) 
Alabama—1.9%                 
Port City Medical Clinic Board,                 
Health Care Facilities Revenue                 
(Infirmary Health Systems)                 
(Insured; AMBAC and Liquidity                 
Facility: Bank of Nova Scotia                 
and KBC Bank)    3.78    5/7/06    2,000,000 a    2,000,000 
Alaska—1.9%                 
Alaska Industrial Development                 
Authority, Health Care                 
Facilities Revenue (Providence                 
Medical Office Building) (LOC;                 
KBC Bank)    3.20    5/7/06    1,965,000 a    1,965,000 
California—3.8%                 
California Department of Water                 
Resources, Power Supply                 
Revenue (LOC; Landesbank                 
Hessen-Thuringen Girozentrale)    3.66    5/7/06    4,000,000 a    4,000,000 
Colorado—2.2%                 
Castlewood Ranch Metropolitan                 
District, GO Notes, Refunding                 
(LOC; U.S. Bank NA)    3.45    12/1/06    1,700,000    1,700,000 
Colorado Educational and Cultural                 
Facilities Authority, Revenue                 
(National Jewish Federation                 
Bond Program) (LOC; National                 
City Bank)    3.81    5/1/06    600,000 a    600,000 
District of Columbia—.9%                 
District of Columbia,                 
CP (Liquidity Facility;                 
JPMorgan Chase Bank)    3.20    5/2/06    1,000,000    1,000,000 
Georgia—3.1%                 
De Kalb County Development                 
Authority, Private Schools                 
Revenue (Marist School Inc.                 
Project) (LOC; SunTrust Bank)    3.80    5/7/06    3,300,000 a    3,300,000 
Illinois—20.1%                 
Cook County,                 
GO (Putters Program) (Insured;                 
AMBAC)    3.84    5/7/06    3,000,000 a    3,000,000 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Short-Term    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Illinois (continued)                 
Illinois Educational Facilities                 
Authority, Recreational                 
Revenue (Shedd Aquarium                 
Society) (LOC; Bank One)    3.82    5/7/06    1,100,000 a    1,100,000 
Illinois Educational Facilities                 
Authority, Revenue, CP (LOC;                 
Northern Trust Co.)    3.53    6/13/06    3,000,000    3,000,000 
Illinois Health Facilities                 
Authority, Revenue (Memorial                 
Medical Center) (LOC; KBC Bank)    3.80    5/7/06    2,400,000 a    2,400,000 
Illinois Health Facilities                 
Authority, Revenue (Rush                 
Presbyterian Saint Luke's                 
Medical Center) (LOC; Northern                 
Trust Co.)    3.83    5/7/06    3,800,000 a    3,800,000 
Illinois Student Assistance                 
Commission, Student Loan                 
Revenue (LOC; Bank One)    3.90    5/7/06    2,000,000 a    2,000,000 
Jackson-Union Counties Regional                 
Port District, Port Facilities                 
Revenue, Refunding (Enron                 
Transportation Services) (LOC;                 
Wachovia Bank)    3.79    5/7/06    2,400,000 a    2,400,000 
Regional Transportation Authority,                 
Refunding (Liquidity Facility; DEPFA             
Bank PLC)    3.82    5/7/06    3,600,000 a    3,600,000 
Indiana—7.2%                 
Seymour,                 
EDR (Pedcor Investments                 
Project) (LOC; FHLB)    3.84    5/7/06    3,835,000 a    3,835,000 
Wabash,                 
EDR (Wabash Alloys Project)                 
(LOC; Bank of America)    3.91    5/7/06    3,750,000 a    3,750,000 
Louisiana—1.9%                 
Plaquemines Port Harbor and                 
Terminal District, Port Facilities                 
Revenue (International                 
Marine Terminals Project)                 
(LOC; KBC Bank)    3.42    3/15/07    2,000,000    2,000,000 

  8
Short-Term    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Massachusetts—7.4%                 
Easton,                 
GO Notes, BAN    3.47    6/9/06    2,000,000    2,000,486 
Massachusetts,                 
GO (Central Artery/Ted                 
Williams Tunnel Infrastructure                 
Loan Act) (Liquidity Facility;                 
Landesbank Baden-Wurttemberg)    3.80    5/1/06    2,300,000 a    2,300,000 
Massachusetts Health and                 
Educational Facilities                 
Authority, Revenue (Capital                 
Asset Program Issue) (LOC;                 
Citizens Bank of Massachusetts)    3.75    5/7/06    3,500,000 a    3,500,000 
Michigan—.9%                 
Michigan Building Authority,                 
Revenue, CP (LOC: State Street                 
Bank and Trust Co. and The                 
Bank of New York)    3.48    6/8/06    1,000,000    1,000,000 
Mississippi—1.2%                 
Jackson County,                 
Port Facility Revenue, Refunding                 
(Chevron USA. Inc. Project)    3.79    5/1/06    1,300,000 a    1,300,000 
Nebraska—3.8%                 
Lancaster County Hospital                 
Authority Number 1, Health                 
Facilities Revenue (Immanuel                 
Health Systems-Williamsburg                 
Project) (LOC; ABN-AMRO)    3.83    5/1/06    4,000,000 a    4,000,000 
Nevada—2.9%                 
Clark County,                 
Highway Revenue, CP (LOC;                 
Landesbank Hessen-Thuringen                 
Girozentrale)    3.62    6/12/06    3,100,000    3,100,000 
New Mexico—2.6%                 
Santa Fe,                 
Gross Receipts Tax Revenue                 
(Wastewater Systems) (LOC; BNP                 
Paribas)    3.84    5/7/06    2,700,000 a    2,700,000 

The Fund 9

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Short-Term    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 
New York—13.4%                 
New York City,                 
GO Notes (LOC; Bayerische                 
Landesbank)    3.77    5/7/06    3,000,000 a    3,000,000 
New York City,                 
GO Notes (LOC; State Street                 
Bank and Trust Co.)    3.77    5/1/06    1,200,000 a    1,200,000 
New York City,                 
GO Notes (LOC; Westdeutsche                 
Landesbank)    3.77    5/1/06    4,000,000 a    4,000,000 
New York City Municipal Water                 
Finance Authority, Water and                 
Sewer System Revenue (Insured;             
FGIC)    3.77    5/1/06    3,100,000 a    3,100,000 
Triborough Bridge and Tunnel                 
Authority, Special Obligation                 
Revenue (Insured; FSA and                 
Liquidity Facility; JPMorgan                 
Chase Bank)    3.77    5/7/06    2,800,000 a    2,800,000 
Ohio—.6%                 
Hamilton County,                 
Hospital Facilities Revenue                 
(Health Alliance) (Insured;                 
MBIA and Liquidity Facility;                 
Credit Sussie First Boston)    3.71    5/7/06    600,000 a    600,000 
Pennsylvania—3.6%                 
Delaware County Industrial                 
Development Authority, PCR                 
(PECO Energy Co. Project)                 
(LOC; Wachovia Bank)    3.80    5/1/06    3,000,000 a    3,000,000 
Luzerne County Convention Center             
Authority, Hotel Room Rent Tax             
Revenue (LOC; Wachovia Bank)    3.80    5/7/06    800,000 a    800,000 
South Carolina—2.9%                 
Spartanburg County School District             
Number 1, GO Notes, BAN    5.18    11/16/06    3,000,000    3,033,285 
Tennessee—3.8%                 
Tennessee School Bond Authority,             
CP    3.65    7/12/06    4,000,000    4,000,000 

  10
Short-Term    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Texas—2.9%                 
Texas,                 
TRAN    4.50    8/31/06    3,000,000    3,014,600 
Washington—4.6%                 
Washington Housing Finance                 
Commission, MFMR (Wandering                 
Creek Project) (Insured; FHLMC                 
and Liquidity Facility; FHLMC)    3.89    5/7/06    4,000,000 a    4,000,000 
Washington Housing Finance                 
Commission, Nonprofit Revenue                 
(Tacoma Art Museum Project)                 
(LOC; Northern Trust Co.)    3.79    5/1/06    800,000 a    800,000 
Washington Public Power Supply                 
System Project Number 2,                 
Electric Revenue, Refunding                 
(Insured; MBIA and Liquidity                 
Facility; Credit Sussie First                 
Boston)    3.78    5/7/06    100,000 a    100,000 
Wisconsin—6.2%                 
University of Wisconsin Hospitals                 
and Clinics Authority, Health                 
Care Facilities Revenue                 
(Insured; MBIA and Liquidity                 
Facility; U.S. Bank NA)    3.82    5/7/06    4,000,000 a    4,000,000 
Wisconsin Health and Education                 
Facilities Authority, Revenue                 
(Wheaton Franciscan Services                 
Inc.) (LOC; Citibank NA)    3.80    5/7/06    2,500,000 a    2,500,000 
 
Total Investments (cost $105,298,371)            99.8%    105,298,371 
Cash and Receivables (Net)            .2%    261,837 
Net Assets            100.0%    105,560,208 

a Securities payable on demand.Variable interest rate—subject to periodic change.

The Fund 11

STATEMENT OF INVESTMENTS (Unaudited) (continued)

  12
Summary of Combined Ratings (Unaudited)     
 
Fitch    or    Moody's    or    Standard & Poor's    Value (%)† 
F1+,F1        VMIG1,MIG1,P1        SP1+,SP1,A1+,A1    96.2 
AAA,AA,Ab        Aaa,Aa,Ab        AAA,AA,Ab    3.8 
                    100.0 

† Based on total investments.
b Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers.
See notes to financial statements.

The Fund 13

STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—See Statement of Investments    105,298,371    105,298,371 
Cash        186,795 
Interest receivable        514,714 
        105,999,880 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)        42,802 
Dividends payable        247,807 
Payable for shares of Common Stock redeemed        88,430 
Bank loan payable—Note 2        60,000 
Interest payable—Note 2        633 
        439,672 
Net Assets ($)        105,560,208 
Composition of Net Assets ($):         
Paid-in capital        105,562,995 
Accumulated net realized gain (loss) on investments        (2,787) 
Net Assets ($)        105,560,208 
 
 
Net Asset Value Per Share         
    Investor Shares    Class R Shares 
Net Assets ($)    27,092,909    78,467,299 
Shares Outstanding    27,094,664    78,470,044 
Net Asset Value Per Share ($)    1.00    1.00 

See notes to financial statements.

  14
  STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Interest Income    1,462,419 
Expenses:     
Management fee—Note 3(a)    235,757 
Distribution fees (Investor Shares)—Note 3(b)    21,936 
Interest expense—Note 2    6,560 
Total Expenses    264,253 
Investment Income—Net, representing net increase     
in net assets resulting from operations    1,198,166 

See notes to financial statements.

The Fund 15

STATEMENT OF CHANGES IN NET ASSETS

See notes to financial statements.

16

FINANCIAL HIGHLIGHTS

The following tables describe the performance for each share class for the fiscal periods indicated. All information 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.

a Annualized
See notes to financial statements.

The Fund 17

FINANCIAL HIGHLIGHTS (continued)

a Annualized
See notes to financial statements.

18

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Municipal Reserves (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series including the fund. The fund's investment objective is to seek income, consistent with stability of principal, that is exempt from federal income tax.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.The fund is authorized to issue 1 billion shares of $.001 par value Capital Stock in each of the following classes of shares: Investor and Class R. Investor shares are sold primarily to retail investors and bear a distribution fee. Class R shares are sold primarily to bank trust departments and other financial service providers (including Mellon and its affiliates) acting on behalf of customers having a qualified trust or investment account or relationship at such institution, and bear no distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution fee and voting rights on matters affecting a single class. Income, expenses (other than expense 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 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.

(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Directors to represent the fair value of the fund's investments.

The Fund 19

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

It is the fund's policy to maintain a continuous net asset value per share of $1.00 for the fund; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.

(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 accretion of discount and amortization of premium on investments, is earned from settlement date and is recognized on the accrual basis. Cost of investments represents amortized cost.

(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.

(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.

The fund has an unused capital loss carryover of $2,787 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, the carryover expires in fiscal 2011.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were all tax exempt income.The tax character of current year distributions will be determined at the end of the current fiscal year.

20

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowing.

The average amount of borrowings outstanding under the line of credit during the period ended April 30, 2006 was approximately $272,500 with a related weighted average annualized interest rate of 4.85% .

NOTE 3—Investment Management Fee and Other Transactions With Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .50% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company,The Dreyfus/Laurel Tax-Free Municipal Funds and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds")

The Fund 21

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board Meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

(b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Investor shares may pay annually up to .25% of the value of the average daily net assets (currently limited by the Company's Board of Directors to .20%) attributable to its Investor shares to compensate the Distributor for shareholder servicing activities and activities primarily intended to result in the sale of Investor shares. During the period ended April 30, 2006, Investor shares were charged $21,936 pursuant to the Plan.

22

Under its terms, the Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not interested persons of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $38,528 and Rule 12b-1 distribution plan fees $4,274.

The Fund 23

  INFORMATION ABOUT THE REVIEW AND
APPROVAL OF THE FUND'S I N V E S T M E N T
MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and

2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services. The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of

24

retail, no-load tax-exempt money market funds (the "Performance Group") and to a larger universe of funds, consisting of all retail tax-exempt money market funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was generally at or below the Performance Group median and lower than the Performance Universe median for each of the periods.The Board noted the rank of the fund's total return within the Performance Group for each period and discussed that when the fund's performance was below median there was a spread of only a few basis points between the fund's performance and median performance.The Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, which showed improvement over the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. The Board members noted that the fund was the only fund in the Expense Group with a "unitary fee" structure. The Board members noted that the fund's expense ratio, including Rule 12b-1 fees, was lower than the Expense Group median but higher than the Expense Universe median, and excluding Rule 12b-1 or other service fees, was lower than the Expense Group and Expense Universe medians.

The Fund 25

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds").They also noted that there were no other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund.The Manager's representatives also reviewed the costs associated with distribution through interme-diaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure. The Board members considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund's management fee. The Board acknowledged that differences in fees paid by the Similar Funds seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if

26

the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • The Board was generally satisfied with the fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.

The Fund 27

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

28

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2005, is available on the SEC's website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.

© 2006 Dreyfus Service Corporation 0324SA0406

  Dreyfus Disciplined
Stock Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
11    Statement of Assets and Liabilities 
12    Statement of Operations 
13    Statement of Changes in Net Assets 
14    Financial Highlights 
15    Notes to Financial Statements 
21    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus
Disciplined Stock Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Disciplined Stock Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.As always, we urge you to discuss with your financial advisor the potential implications of these possibilities on your investments.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

  Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Sean Fitzgibbon, Portfolio Manager

How did Dreyfus Disciplined Stock Fund perform relative to its benchmark?

For the six-month period ended April 30, 2006, the fund produced a total return of 10.82% .1 For the same period, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"), the fund's benchmark, produced a total return of 9.63% .2

We attribute the market's rise primarily to sustained U.S. and global economic growth, which enabled a wide range of companies to deliver stronger-than-expected earnings. The fund outperformed its benchmark, primarily on the strength of its stock selection strategy in the market's more robust sectors, including the financials, industrials and energy areas.

What is the fund's investment approach?

The fund seeks capital appreciation.To pursue its goal, the fund normally invests at least 80% of its assets in stocks of large-cap companies.

The fund invests in a diversified portfolio of large-cap companies that we believe meet our standards for value and growth. The fund invests in growth and value stocks, which are chosen through a disciplined investment process that combines computer-modeling techniques, fundamental analysis and risk management.The fund's investment process is designed to provide investors with investment exposure to sector weightings and risk characteristics generally similar to those of the S&P 500 Index.

In addition to identifying what we believe are attractive investment opportunities, our approach has been designed to manage the risks associated with modifying the fund's sector and industry exposure often in an effort to capitalize on those sectors and industries currently in favor.We do not believe that the advantages of attempting to rotate in and out of various industry sectors outweigh the risks of such moves.

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

Instead, our goal is to minimize these risks by being fully invested and remaining industry and sector neutral in relation to the S&P 500 Index.

The result is a broadly diversified portfolio of carefully selected stocks. At the end of the reporting period, the fund held positions in approximately 93 stocks across 9 economic sectors. Our 10 largest holdings accounted for approximately 27% of the portfolio, so that the fund's performance was not overly dependent on any one stock but was determined by a large number of securities.

What other factors influenced the fund's performance?

While favorable economic conditions lifted most market sectors, the financials, industrials and energy areas proved to be particularly well-positioned in an expanding economy during the reporting period. Strong security selections enabled the fund to outperform its benchmark in each of these sectors.

In the financials group, we de-emphasized interest rate-sensitive banks and insurers, focusing instead on brokerage and asset management firms, such as E*TRADE Financial, Goldman Sachs Group and Lehman Brothers Holdings, that benefited from greater activity in the capital markets. Among industrial companies, we targeted businesses positioned to help emerging nations develop their industrial infrastructures, including Caterpillar, Eaton and Emerson Electric. In the energy area, we emphasized oilfield service companies, such as Weatherford International and GlobalSantaFe, that we believed would benefit from higher commodity prices.The fund also produced above-average returns in the consumer cyclicals area, mainly by avoiding the struggling automobile industry.

However, investments in other sectors provided mixed results. Good individual stock selections in the technology sector, such as communications semiconductor maker Broadcom, slightly enhanced performance compared to the benchmark. In the health care area, one of market's weaker sectors, gains in life science companies Thermo Electron and Fisher Scientific International helped offset declines in other holdings, such as biotechnology firm Amgen. On the other hand, the fund's

4

lighter-than-average exposure to the telecommunications services sector prevented it from participating fully in the area's recent gains. Finally, in the consumer staples area, a pullback in food and tobacco giant Altria Group, one of the fund's better performers during the prior reporting period, undermined returns.

What is the fund's current strategy?

As of the end of April 2006, we have continued to find attractive investment opportunities among large-cap stocks, which generally offered reasonable valuations compared to smaller-cap stocks. However, we remain cautious with regard to the potential impact of high energy prices and rising interest rates on consumer spending. Accordingly, we have shifted the fund's emphasis in consumer-related areas away from retailers and toward providers of consumer staples, which historically have provided steadier growth.At the same time, uncertainty regarding the future of oil and gas prices led us to trim the fund's energy exposure to a position that is in line with the benchmark.

We have found relatively few opportunities among telecommunications services companies, which face a challenging competitive environment. Within the financials sector, we have continued to focus on capital markets-oriented businesses, maintaining relatively light exposure to the more interest rate-sensitive areas,such as banks and insurance.In other sectors, we have invested in individual companies and industries that appear well-positioned for an environment of more modest economic growth.

May 15, 2006

1 Total return includes reinvestment of dividends and any capital gains paid. Past performance is no
guarantee of future results. Share price and investment return fluctuate such that upon redemption,
fund shares may be worth more or less than their original cost. Return figures provided reflect the
absorption of certain fund expenses by The Dreyfus Corporation in effect through April 4, 2007,
at which time it may be extended, terminated or modified. Had these expenses not been absorbed,
the fund's returns would have been lower.
2 SOURCE: LIPPER, INC. — Reflects the monthly reinvestment of dividends and, where
applicable, capital gain distributions.The Standard & Poor's 500 Composite Stock Price Index is
a widely accepted, unmanaged index of U.S. stock market performance.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Disciplined Stock Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006 
 
Expenses paid per $1,000 †    $ 4.70 
Ending value (after expenses)    $1,108.20 

  COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
 
Expenses paid per $1,000 †    $    4.51 
Ending value (after expenses)    $1,020.33 

† Expenses are equal to the fund's annualized expense ratio of .90%; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

  6
STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
Common Stocks—100.1%    Shares    Value ($) 
Consumer Discretionary—11.0%         
Advance Auto Parts    159,790    6,426,754 
Cendant    562,150    9,798,274 
Circuit City Stores    169,770    4,880,888 
Coach    138,760 a    4,581,855 
Hilton Hotels    430,720    11,603,597 
Home Depot    220,060    8,786,996 
JC Penney    142,850    9,350,961 
McDonald's    330,390    11,421,582 
Omnicom Group    59,790    5,381,698 
Target    279,430    14,837,733 
Time Warner    531,660    9,250,884 
Walt Disney    351,550    9,829,338 
        106,150,560 
Consumer Staples—10.0%         
Altria Group    434,770    31,807,773 
Cadbury Schweppes, ADR    360,930 b    14,422,763 
CVS    352,490    10,476,003 
Kroger    352,920 a    7,150,159 
PepsiCo    212,470    12,374,253 
Procter & Gamble    350,079    20,378,098 
        96,609,049 
Energy—10.1%         
Chevron    129,510    7,902,700 
ConocoPhillips    231,840    15,510,096 
Devon Energy    202,532    12,174,199 
Exxon Mobil    560,240    35,339,939 
GlobalSantaFe    95,840    5,866,366 
Marathon Oil    64,850    5,146,496 
Weatherford International    289,200 a    15,307,356 
        97,247,152 
Financial—23.1%         
Accenture, Cl. A    166,140    4,829,690 
Allstate    111,590    6,303,719 
American International Group    140,130    9,143,482 
Bank of America    602,250    30,064,320 
Capital One Financial    55,890    4,842,310 
Chubb    117,820    6,072,443 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Financial (continued)         
CIT Group    184,920    9,987,529 
Citigroup    347,280    17,346,636 
E*Trade Financial    345,770 a    8,602,758 
Hartford Financial Services Group    111,590    10,258,469 
JPMorgan Chase & Co.    721,550    32,743,939 
Lehman Brothers Holdings    44,500    6,726,175 
Merrill Lynch & Co.    201,170    15,341,224 
Morgan Stanley    176,230    11,331,589 
PNC Financial Services Group    84,830    6,062,800 
Prudential Financial    164,370    12,842,228 
Wachovia    363,980    21,784,203 
WR Berkley    43,390    1,623,654 
Zions Bancorporation    82,540    6,853,296 
        222,760,464 
Health Care—11.9%         
AmerisourceBergen    202,680    8,745,642 
Amgen    168,590 a    11,413,543 
Barr Pharmaceuticals    113,240 a    6,856,682 
Becton, Dickinson & Co.    76,210    4,804,278 
Fisher Scientific International    141,000 a    9,947,550 
IMS Health    185,090 b    5,030,746 
Johnson & Johnson    225,030    13,189,008 
Medtronic    162,900 b    8,164,548 
Novartis, ADR    181,990    10,466,245 
Pfizer    330,034    8,359,761 
Thermo Electron    131,620 a    5,072,635 
WellPoint    149,370 a    10,605,270 
Wyeth    249,770    12,156,306 
        114,812,214 
Industrial—12.3%         
Burlington Northern Santa Fe    123,660    9,834,680 
Eaton    74,000    5,672,100 
Emerson Electric    180,090    15,298,646 
Empresa Brasileira de Aeronautica, ADR    148,980    5,784,893 
General Electric    832,300    28,789,257 
Ingersoll-Rand, Cl. A    112,820    4,935,875 
Lockheed Martin    109,480    8,309,532 
Nabors Industries    144,300 a    5,386,719 

8

Common Stocks (continued)    Shares    Value ($) 
Industrial (continued)         
Norfolk Southern    160,080    8,644,320 
Rockwell Automation    66,720    4,834,531 
Textron    51,740    4,654,013 
United Technologies    182,730    11,477,271 
US Airways Group    103,280 a    4,467,893 
        118,089,730 
Information Technology—14.0%         
Amphenol, Cl. A    113,730    6,573,594 
Autodesk    139,740 a    5,874,670 
Broadcom, Cl. A    148,685 a    6,112,440 
Cisco Systems    998,070 a    20,909,567 
Citrix Systems    127,300 a    5,081,816 
Hewlett-Packard    497,770    16,162,592 
International Business Machines    192,600    15,858,684 
Microsoft    1,074,610    25,951,832 
NCR    137,420 a    5,414,348 
Qualcomm    316,560    16,252,190 
Texas Instruments    295,820    10,267,912 
        134,459,645 
Materials—2.9%         
Air Products & Chemicals    75,560    5,177,371 
Dow Chemical    115,680    4,697,765 
EI Du Pont de Nemours & Co.    89,970    3,967,677 
Energizer Holdings    75,780 a    3,876,147 
PPG Industries    45,960    3,084,835 
Smurfit-Stone Container    204,480 a    2,648,016 
Steel Dynamics    78,870    4,924,643 
        28,376,454 
Utilities—4.8%         
AT & T    303,800    7,962,598 
Constellation Energy Group    131,360    7,214,291 
Mettler-Toledo International    78,260 a    5,071,248 
PG & E    354,050    14,105,352 
Sempra Energy    260,080    11,968,882 
        46,322,371 
Total Common Stocks         
(cost $806,611,022)        964,827,639 

The Fund 9

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Other Investments—.2%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Preferred Plus Money Market Fund     
(cost $1,932,000)    1,932,000 c    1,932,000 
 
Investment of Cash Collateral         
for Securities Loaned—1.0%         
Registered Investment Company;         
Dreyfus Institutional Cash Advantage Fund         
(cost $10,144,570)    10,144,570 c    10,144,570 
Total Investments (cost $818,687,592)    101.3%    976,904,209 
Liabilities, Less Cash and Receivables    (1.3%)    (12,817,697) 
Net Assets    100.0%    964,086,512 

ADR—American Depository Receipts
a Non-income producing security.
b All or a portion of these securities are on loan. At April 30, 2006, the total market value of the fund's securities on
loan is $9,887,889 and the total market value of the collateral held by the fund is $10,144,570.
c Investment in affiliated money market mutual fund.
Portfolio Summary    (Unaudited)†         
 
    Value (%)        Value (%) 
Financial    23.1    Consumer Staples    10.0 
Information Technology    14.0    Utilities    4.8 
Industrial    12.3    Materials    2.9 
Health Care    11.9    Money Market Investments    1.2 
Consumer Discretionary    11.0         
Energy    10.1        101.3 

† Based on net assets.
See notes to financial statements.

10

  STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—See Statement         
of Investments (including securities on loan,     
valued at $9,887,889)—Note 1 (b):         
Unaffiliated issuers    806,611,022    964,827,639 
Affiliated issuers    12,076,570    12,076,570 
Cash        727,996 
Receivable for investment securities sold        5,109,358 
Dividends and interest receivable        880,268 
Receivable for shares of Capital Stock subscribed    23,835 
        983,645,666 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    754,168 
Liability for securities on loan—Note 1(c)        10,144,570 
Payable for investment securities purchased    7,831,355 
Payable for shares of Capital Stock redeemed    827,742 
Interest payable—Note 2        1,319 
        19,559,154 
Net Assets ($)        964,086,512 
Composition of Net Assets ($):         
Paid-in capital        745,728,405 
Accumulated undistributed investment income—net    2,113,444 
Accumulated net realized gain (loss) on investments    58,028,046 
Accumulated net unrealized appreciation         
(depreciation) on investments        158,216,617 
Net Assets ($)        964,086,512 
Shares Outstanding         
(165 million shares of $.001 par value Capital Stock authorized)    26,908,713 
Net Asset Value, offering and redemption price per share ($)    35.83 

See notes to financial statements.

The Fund 11

  STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Income:     
Cash dividends (net of $24,908 foreign taxes withheld at source)    9,434,955 
Interest    81,198 
Income from securities lending    11,410 
Total Income    9,527,563 
Expenses:     
Management fee—Note 3(a)    4,432,781 
Distribution fees—Note 3(b)    492,531 
Loan commitment fees—Note 2    6,413 
Interest expense—Note 2    3,619 
Total Expenses    4,935,344 
Less—reduction in management fee     
due to undertaking—Note 3(a)    (456,987) 
Net Expenses    4,478,357 
Investment Income—Net    5,049,206 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    88,996,884 a 
Net unrealized appreciation (depreciation) on investments    10,368,413 
Net Realized and Unrealized Gain (Loss) on Investments    99,365,297 
Net Increase in Net Assets Resulting from Operations    104,414,503 

  a On November 30, 2005, the fund had a redemption-in-kind with total proceeds in the amount of $108,823,950.
The net realized gain of the transaction of $18,302,417 will not be realized for tax purposes.
See notes to financial statements.
  12

STATEMENT OF CHANGES IN NET ASSETS

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Operations ($):         
Investment income—net    5,049,206    12,464,115 
Net realized gain (loss) on investments    88,996,884    174,300,681 
Net unrealized appreciation         
(depreciation) on investments    10,368,413    (75,561,955) 
Net Increase (Decrease) in Net Assets         
Resulting from Operations    104,414,503    111,202,841 
Dividends to Shareholders from ($):         
Investment income—net    (5,959,812)    (12,094,805) 
Capital Stock Transactions ($):         
Net proceeds from shares sold    23,293,580    37,753,554 
Dividends reinvested    5,502,554    11,217,917 
Cost of shares redeemed    (239,102,306)    (317,485,159) 
Increase (Decrease) in Net Assets         
from Capital Stock Transactions    (210,306,172)    (268,513,688) 
Total Increase (Decrease) in Net Assets    (111,851,481)    (169,405,652) 
Net Assets ($):         
Beginning of Period    1,075,937,993    1,245,343,645 
End of Period    964,086,512    1,075,937,993 
Undistributed investment income—net    2,113,444    3,024,050 
Capital Share Transactions (Shares):         
Shares sold    673,051    1,185,850 
Shares issued for dividends reinvested    163,169    356,546 
Shares redeemed    (7,009,853)    (9,947,373) 
Net Increase (Decrease) in Shares Outstanding    (6,173,633)    (8,404,977) 

See notes to financial statements.

The Fund 13

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.

a Based on average shares outstanding at each month end.
b Not annualized.
See notes to financial statements.

14

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Disciplined Stock Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series, including the fund.The fund's investment objective is to seek capital appre-ciation.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.

(a) Portfolio valuation: Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available, are valued at the official closing price or, if there is no official closing price that day, at the last sale price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Investments in registered investment companies are valued at their NAV.When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before

The Fund 15

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

the fund calculates its NAV, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR's and futures contracts. For other securities that are fair valued by the Board of Directors, certain factors may be considered such as: 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.

(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, accretion of discount and amortization of premium on investments is recognized on the accrual basis.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of the Manager, the fund may lend securities to qualified institutions. It is the fund's policy, that at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager.The fund is entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction.Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund

16

to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counterparty default, the fund has the right to use the collateral to offset losses incurred. There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights. The Manager, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

(c) Affiliated issuers: Investments in other investment companies advised by the Manager are defined as "affiliated" in the Act.

(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid on a quarterly basis. 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.

(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The Fund 17

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

The fund has an unused capital loss carryover of $29,648,391 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, $22,663,398 of the carryover expires in fiscal 2010 and $6,984,993 expires in fiscal 2011.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005, were as follows: ordinary income $12,094,805. The tax character of current year distributions will be determined at the end of the current fiscal year.

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 at rates based on prevailing market rates in effect at the time of borrowing.

The average daily amount of borrowings outstanding under the Facility during the period ended April 30, 2006 was approximately $146,400, with a related weighted average annualized interest rate of 4.99% .

NOTE 3—Investment Management Fee and Other Transactions With Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .90% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, fees and expenses of non-

18

interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds, and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts).With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

The Manager has agreed to waive receipt of a portion of the fund's management fee, in the amount of .10% of the value of the fund's average daily net assets from November 1, 2005 through April 4, 2006. Effective April 5, 2006, the Manager has agreed to waive receipt of a portion of the fund's management fee, in the amount of .05% of the value of the fund's average daily net assets, until April 4, 2007. The reduction in management fee, pursuant to the undertaking, amounted to $456,987 during the period ended April 30, 2006.

The Fund 19

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

(b) Distribution plan: Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, the fund may pay annually up to .10% of the value of the fund's average daily net assets to compensate Mellon and the Manager for shareholder servicing activities and the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of fund shares. During the period ended April 30, 2006, the fund was charged $492,531 pursuant to the Plan.

Under its terms, the Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $713,336 and Rule 12b-1 distribution plan fees $79,017, which are offset against an expense reimbursement currently in effect in the amount of $38,185.

(c) The Company and the Manager have received an exemptive order from the SEC which, among other things, permits the fund to use cash collateral received in connection with lending the fund's securities and other uninvested cash to purchase shares of one or more registered money market mutual funds advised by the Manager in excess of the limitations imposed by the Act.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2006, amounted to $393,890,745 and $598,514,846, respectively.

At April 30, 2006, accumulated net unrealized appreciation on investments was $158,216,617, consisting of $166,161,659 gross unrealized appreciation and $7,945,042 gross unrealized depreciation.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

20

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and

2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services. The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of retail, no-load large-cap core funds (the "Performance Group") and to a larger universe of funds, consisting of all retail and institutional

The Fund 21

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S
INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)
22

large-cap core funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was variously above and below the Performance Group and Performance Universe medians for the peri-ods.A representative of the Manager noted the portfolio management change in October 2004, when Sean Fitzgibbon became the fund's primary portfolio manager, and that the fund's total return performance for the one- and two-year periods ended November 30, 2005 was higher than the Performance Group and Performance Universe medians.A representative of the Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, which were generally consistent with the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper.The Board noted that the fund was the only fund in the Expense Group with a "unitary fee" structure. The Board also noted that the Manager was voluntarily waiving a portion of its management fee in the amount of 0.10% of the value of the fund's average daily net assets until April 4, 2006, and that the fund's expense ratio was lower than the Expense Group and Expense Universe medians with the voluntary waiver, above the Expense Group median and generally at the Expense Universe median without the voluntary waiver. Representatives of the Manager and the Board members agreed that the Manager's voluntary waiver of a portion of the fund's management fee would be reduced to 0.05% of the value of the fund's average

daily net assets and continue until April 4, 2007, representing 5.6% of the contractual management fee.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds"), and by other accounts managed by the Manager or its affiliates with similar investment objectives,policies and strategies as the fund (collectively with the Similar Funds, the "Similar Accounts").The Manager's representatives explained the nature of the Similar Accounts and the differences, from the Manager's perspective, in providing services to such Similar Accounts as compared to managing and providing services to the fund. The Manager's representatives also reviewed the costs associated with distribution through intermediaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee"structure.The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund's management fee.The Board acknowledged that differences in fees paid by the Similar Accounts seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of,individual funds and the entire Dreyfus mutual fund com-plex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board

The Fund 23

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted the Manager's soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • The Board was satisfied with the trend of improvement in fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager, particularly given the Manager's continuation of a portion of the fee waiver, was reasonable in light of the services provided, comparative performance, expense and advisory fee information, costs of the ser- vices provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.

24

  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

The Fund 25

For More Information

  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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

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, 2005, is available 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.

© 2006 Dreyfus Service Corporation 0728SA0406

  Dreyfus Institutional
Government Money
Market Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
9    Statement of Assets and Liabilities 
10    Statement of Operations 
11    Statement of Changes in Net Assets 
12    Financial Highlights 
13    Notes to Financial Statements 
18    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus Institutional
Government Money Market Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Institutional Government Money Market Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board (the "Fed") has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase interest rates further, maintain them at current levels or reduce them to stimulate future growth. We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

  Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Patricia A. Larkin, Senior Portfolio Manager

How did Dreyfus Institutional Government Money Market Fund perform during the period?

For the six-month period ended April 30, 2006, Dreyfus Institutional Government Money Market Fund produced a 4.07% annualized yield and, after taking into account the effects of compounding, an annualized effective yield of 4.14% .1

What is the fund's investment approach?

The fund seeks a high level of current income consistent with stability of principal and conservative investment risk. To pursue its goal, the fund normally invests at least 80% of its assets in money market instruments issued or guaranteed by the U.S. government and its agencies and instrumentalities.The fund may also invest in repurchase agreements, including tri-party repurchase agreements.

What other factors influenced the fund's performance?

When the reporting period began, the financial markets had already begun to recover from the aftermath of the Gulf Coast hurricanes. Although oil prices had spiked to more than $70 per barrel, the Federal Reserve Board (the "Fed") defied many analysts' expectations and, instead of pausing to assess the hurricanes' damage to the U.S. economy, implemented its eleventh consecutive rate hike since June 2004, increasing the federal funds rate to 3.75% at its September meeting.

By the time the Fed next raised interest rates in early November, the move was widely expected, especially after the announcement that U.S. GDP had expanded at a 4.3% annualized rate during the third quarter of 2005. December saw the creation of 108,000 new jobs and a decline in the unemployment rate to 4.9%, further evidence that the U.S. economy remained on solid footing. However, when the Fed implemented its final rate increase of 2005 at its December meeting to

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

4.25%, a change in the language in its announcement of the increase convinced some analysts that the credit tightening campaign might be nearing completion.A lower-than-expected GDP growth rate of 1.7% for the fourth quarter of 2005 appeared to lend credence to this view.

Fears of an economic slowdown soon dissipated in January, however, when the unemployment rate slid to 4.7%, a multi-year low.As expected, the Fed raised the federal funds rate to 4.5% at its January meeting, indicating in its statement that "some further policy firming may be needed…."This language was widely viewed as an attempt to give the new Fed Chairman, Ben Bernanke, flexibility to set his own course.

The employment report for February showed a better-than-expected increase of 243,000 workers, helping to alleviate any lingering concerns that the Gulf Coast hurricanes and high energy prices might trigger an economic slowdown. In addition, despite higher short-term interest rates and new signs of sustained economic growth, longer-term interest rates remained surprisingly stable, causing the Treasury yield curve to flatten substantially. At times during the first quarter of 2006, the yield curve inverted, a phenomenon that in the past had been considered a harbinger of recession.

By the end of March, however, it has become apparent that fears of a slowdown probably were overblown, and the inversion of the yield curve was more likely a result of robust demand for U.S. Treasury securities from overseas investors seeking competitive yields from high-quality notes and bonds. Accordingly, few investors were surprised when the Fed implemented its fifteenth consecutive increase in the federal funds rate, driving it to 4.75% in late March. Indeed, it later was announced that the initial estimate of annualized first-quarter GDP growth was a robust 4.8% .

The U.S. Treasury securities yield curve began to steepen in April when new economic data suggested that the economy might be stronger than many analysts previously expected. Despite some

4

slowing in the housing market, low unemployment, strong consumer confidence and brisk retail sales suggested that the economy continued to grow at a relatively brisk pace.

In this environment, most investors have focused primarily on securities at the shorter-end of the money market maturity spectrum. We have maintained a similar strategy, generally keeping the fund's weighted average maturity shorter than industry averages.

What is the fund's current strategy?

On May 10, after the close of the reporting period, the Fed raised the federal funds rate to 5% and indicated that economic growth was expected to moderate to a more sustainable pace. In addition, several members of the Federal Open Market Committee have indicated that they feel monetary policy is now in the neutral range, and further changes in interest rates are likely to depend on prevailing economic data. A substantial slowdown in economic growth could preclude further rate increases, but additional gains in global commodity prices might make the Fed more inclined to tighten more aggressively to forestall inflationary pressures. Accordingly, while we have maintained the fund's relatively short weighted average maturity, we are prepared to adjust our strategy when we become convinced that short-term interest rates have peaked.

May 15, 2006

An investment in the fund is not insured or guaranteed by the FDIC or any other government
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
1 Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past
performance is no guarantee of future results.Yields fluctuate.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Institutional Government Money Market Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006 
 
Expenses paid per $1,000 †    $ 1.50 
Ending value (after expenses)    $1,020.30 

  COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
 
Expenses paid per $1,000 †    $ 1.51 
Ending value (after expenses)    $1,023.31 

† Expenses are equal to the fund's annualized expense ratio of .30%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

6

STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
    Annualized         
    Yield on         
    Date of    Principal     
U.S. Government Agencies—68.4%    Purchase (%)    Amount ($)    Value ($) 
Federal Home Loan Bank System             
5/10/06    4.65    10,000,000 a    9,999,898 
5/17/06    4.72    40,000,000    39,916,445 
6/14/06    4.81    40,000,000    39,766,800 
Federal National Mortgage Association             
6/21/06    4.80    30,000,000    29,798,550 
Total U.S. Government Agencies             
(cost $119,481,693)            119,481,693 
 
 
Repurchase Agreements—32.2%             
Barclays Financial LLC             
dated 4/28/2006, due 5/1/2006             
in the amount of $13,004,983             
(fully collateralized by $12,699,000             
U.S. Treasury Notes, 6%,             
due 8/15/2009,             
value $13,260,724)    4.60    13,000,000    13,000,000 
Citigroup Global Markets Holdings Inc.             
dated 4/28/2006, due 5/1/2006             
in the amount of $21,008,330             
(fully collateralized by $21,085,000             
Federal Home Loan Bank System,             
Bonds, 4.80%, due 5/2/2008,             
value $21,421,657)    4.76    21,000,000    21,000,000 
Credit Suisse (USA) Inc.             
dated 4/28/2006, due 5/1/2006             
in the amount of $21,008,243             
(fully collateralized by $22,045,000             
U.S. Treasury Notes, 3.625%,             
due 7/15/2009,             
value $21,423,206)    4.71    21,000,000    21,000,000 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Annualized         
    Yield on         
    Date of    Principal     
Repurchase Agreements (continued)    Purchase (%)    Amount ($)    Value ($) 
Goldman, Sachs & Co.             
dated 4/28/2006, due 5/1/2006             
in the amount of $1,300,503             
(fully collateralized by $1,327,000             
U.S. Treasury Notes, 2.875%,             
due 11/30/2006, value $1,326,441)    4.64    1,300,000    1,300,000 
Total Repurchase Agreements             
(cost $56,300,000)            56,300,000 
 
Total Investments (cost $175,781,693)        100.6%    175,781,693 
 
Liabilities, Less Cash and Receivables        (.6%)    (1,019,788) 
 
Net Assets        100.0%    174,761,905 

a Variable rate security—interest rate subject to periodic change.

Portfolio Summary (Unaudited) †         
    Value (%)        Value (%) 
U.S. Government Agencies    68.4    Repurchase Agreements    32.2 
            100.6 

† Based on net assets.
See notes to financial statements.

8

STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—         
See Statement of Investments (including         
Repurchase Agreements of $56,300,000)—Note 1(b)    175,781,693    175,781,693 
Interest receivable        124,391 
        175,906,084 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)        32,964 
Cash overdraft due to Custodian        479,066 
Dividend payable        632,149 
        1,144,179 
Net Assets ($)        174,761,905 
Composition of Net Assets ($):         
Paid-in capital        174,802,789 
Accumulated net realized gain (loss) on investments        (40,884) 
Net Assets ($)        174,761,905 
Shares Outstanding         
(2 billion shares of $.001 par value Capital Stock authorized)    174,802,789 
Net Asset Value, offering and redemption price per share ($)    1.00 

See notes to financial statements.

The Fund 9

  STATEMENT OF OPERATIONS
Six Month Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Interest Income    4,029,600 
Expenses:     
Management fee—Note 3(a)    138,530 
Shareholder servicing costs—Note 3(b)    138,530 
Total Expenses    277,060 
Investment Income—Net    3,752,540 
Net Realized Gain (Loss) on Investments—Note 1(b) ($)    1,747 
Net Increase in Net Assets Resulting from Operations    3,754,287 

See notes to financial statements.

  10

STATEMENT OF CHANGES IN NET ASSETS

See notes to financial statements.

The Fund 11

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.

a Annualized.
See notes to financial statements.

12

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Institutional Government Money Market Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series including the fund.The fund's investment objective is to seek a high level of current income consistent with stability of principal and conservative investment risk by investing principally in high quality money market instruments issued or guaranteed by the U.S. Government and its agencies and instrumentalities. 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.

(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Directors to represent the fair value of the fund's investments.

It is the fund's policy to maintain a continuous net asset value per share of $1.00 for the fund; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.

(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

The Fund 13

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Cost of investments represents amortized cost.

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counter party default, the fund has the right to use the collateral to offset losses incurred.There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights.The Manager, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

(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.

(d) 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.

14

The fund has an unused capital loss carryover of $42,631 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, $10,982 of the carryover expires in fiscal 2006 and $31,649 expires in fiscal 2007.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005, were all ordinary income.The tax character of current year distributions will be determined at the end of the current fiscal year.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2006, the fund did not borrow under the line of credit.

NOTE 3—Investment Management Fee and Other Transactions with Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .15% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, shareholder servicing fees and expenses, fees and expenses of non-interested

The Fund 15

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out of pocket expenses.With respect to the Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts).With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

(b) Under the Shareholder Servicing Plan (the "Plan"), the fund may pay up to .15% of the value of the average daily net assets annually to compensate certain banks, brokers, dealers or other financial institutions for shareholder services. During the period ended April 30, 2006, the fund was charged $138,530 pursuant to the Plan.

16

Under its terms, the Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $16,482 and shareholder services plan fees $16,482.

The Fund 17

  INFORMATION ABOUT THE REVIEW AND
APPROVAL OF THE FUND'S I N V E S T M E N T
MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and

2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of institutional U.S. Government money market funds (the "Performance

18

Group") and to a larger universe of funds, consisting of all institutional U.S. Government money market funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was generally higher than the Performance Group and Performance Universe medians for each of the periods. The Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, which were generally consistent with the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. Noting the fund's "unitary fee structure", the Board members noted that the fund's management fee and expense ratio were lower than their respective Expense Group and Expense Universe medians.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds").They also noted that there were no other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund.The Manager's representatives also reviewed the costs associated with distribution through interme-diaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's per-

The Fund 19

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S
INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

formance and the services provided, noting the fund's "unitary fee" structure. The Board members considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund's management fee. The Board acknowledged that differences in fees paid by the Similar Funds seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex. The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable. The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors. The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the

20

profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • The Board was satisfied with the fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

The Fund 21

For More    Information 
 
Dreyfus Institutional    Transfer Agent & 
Government Money    Dividend Disbursing Agent 
Market Fund    Dreyfus Transfer, Inc. 
200 Park Avenue    200 Park Avenue 
New York, NY 10166    New York, NY 10166 
Manager    Distributor 
The Dreyfus Corporation    Dreyfus Service Corporation 
200 Park Avenue    200 Park Avenue 
New York, NY 10166    New York, NY 10166 
Custodian     
Mellon Bank, N.A.     
One Mellon Bank Center     
Pittsburgh, PA 15258     

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2005, is available on the SEC's website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.

© 2006 Dreyfus Service Corporation 0919SA0406

  Dreyfus
Institutional Prime
Money Market Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
10    Statement of Assets and Liabilities 
11    Statement of Operations 
12    Statement of Changes in Net Assets 
13    Financial Highlights 
14    Notes to Financial Statements 
19    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus Institutional
Prime Money Market Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Institutional Prime Money Market Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board (the "Fed") has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase interest rates further, maintain them at current levels or reduce them to stimulate future growth. We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

  Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Patricia A. Larkin, Senior Portfolio Manager

How did Dreyfus Institutional Prime Money Market Fund perform during the period?

For the six-month period ended April 30, 2006, Dreyfus Institutional Prime Money Market Fund produced a 4.13% annualized yield and, after taking into account the effects of compounding, an annualized effective yield of 4.21% .1

What is the fund's investment approach?

The fund seeks a high level of current income consistent with the stability of principal.To pursue its goal, the fund invests in a diversified portfolio of high-quality, short-term debt securities, including: securities issued or guaranteed by the U.S. government or its agencies and instrumentalities; certificates of deposit, time deposits, bankers' acceptances and other short-term securities issued by U.S. or foreign banks or their subsidiaries or branches; repurchase agreements, including tri-party repurchase agreements; asset-backed securities; domestic and dollar-denominated foreign commercial paper, and other short-term corporate obligations, including those with floating or variable rates of interest.

What other factors influenced the fund's performance?

When the reporting period began, the financial markets had already begun to recover from the aftermath of the Gulf Coast hurricanes. Although oil prices had spiked to more than $70 per barrel, the Federal Reserve Board (the "Fed") defied many analysts' expectations and, instead of pausing to assess the hurricanes' damage to the U.S. economy, implemented its eleventh consecutive rate hike since June 2004, increasing the federal funds rate to 3.75% at its September meeting.

By the time the Fed next raised interest rates in early November, the move was widely expected, especially after the announcement that U.S. GDP had expanded at a 4.3% annualized rate during the third

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

quarter of 2005. December saw a decline in the unemployment rate to 4.9%, confirming that the U.S. economy remained on solid footing. However, when the Fed raised rates to 4.25% at its December meeting, a change in the language of its accompanying announcement convinced many investors that the credit tightening campaign might be nearing completion.A lower-than-expected GDP growth rate of 1.7% for the fourth quarter of 2005 appeared to lend credence to this view.

Fears of an economic slowdown soon dissipated in January, however, when the unemployment rate slid to 4.7%, a multi-year low.As expected, the Fed raised the federal funds rate to 4.5% at its January meeting, indicating in its statement that "some further policy firming may be needed…."This language was widely viewed as an attempt to give the new Fed Chairman, Ben Bernanke, flexibility to set his own course.

The employment report for February showed a better-than-expected increase of 243,000 workers, helping to alleviate any lingering concerns that the Gulf Coast hurricanes and high energy prices might trigger an economic slowdown. In addition, despite new signs of sustained economic growth, longer-term interest rates remained surprisingly stable, causing the Treasury yield curve to flatten substantially. At times during the first quarter of 2006, the yield curve inverted, a phenomenon that in the past had been considered a harbinger of recession.

By the end of March, however, it had become apparent that fears of a slowdown were overblown, and the inversion of the yield curve was more likely a result of robust demand for U.S.Treasury securities from overseas investors.Accordingly, few investors were surprised when the Fed implemented its fifteenth consecutive increase in the federal funds rate, driving it to 4.75% in late March. Indeed, it later was announced that the initial estimate of annualized first-quarter GDP growth was a robust 4.8% .

The U.S. Treasury securities yield curve began to steepen in April when new economic data suggested that the economy might be stronger than many analysts previously expected. Despite some

4

slowing in the housing market, low unemployment, strong consumer confidence and brisk retail sales suggested that the economy continued to grow at a relatively brisk pace.

In this environment, most investors have focused primarily on securities at the shorter-end of the money market maturity spectrum. We have maintained a similar strategy, generally keeping the fund's weighted average maturity shorter than industry averages.

What is the fund's current strategy?

On May 10, after the close of the reporting period, the Fed raised the federal funds rate to 5% and indicated that economic growth was expected to moderate to a more sustainable pace. In addition, several members of the Federal Open Market Committee have indicated that they feel monetary policy is now in the neutral range, and further changes in interest rates are likely to depend on prevailing economic data. A substantial slowdown in economic growth could preclude further rate increases, but additional gains in global commodity prices might make the Fed more inclined to tighten more aggressively to forestall inflationary pressures. Accordingly, while we have maintained the fund's relatively short weighted average maturity, we are prepared to adjust our strategy when we become convinced that short-term interest rates have peaked.

May 15, 2006

An investment in the fund is not insured or guaranteed by the FDIC or any other government
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
1 Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past
performance is no guarantee of future results.Yields fluctuate.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Institutional Prime Money Market Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006 
 
Expenses paid per $1,000 †    $ 1.50 
Ending value (after expenses)    $1,020.70 

  COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
 
Expenses paid per $1,000 †    $ 1.51 
Ending value (after expenses)    $1,023.31 

† Expenses are equal to the fund's annualized expense ratio of .30%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

  6
STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
    Principal     
Negotiable Bank Certificates of Deposit—5.9%    Amount ($)    Value ($) 
Bank of the West         
4.93%, 6/30/06    10,000,000    10,000,000 
First Tennessee Bank N.A. Memphis         
4.90%, 6/28/06    10,000,000    10,000,000 
Total Negotiable Bank Certificates Of Deposit         
(cost $20,000,000)        20,000,000 
 
Commercial Paper—56.7%         
Abbey National North America LLC         
4.79%, 5/8/06    10,000,000    9,990,735 
Bank of America Corp.         
5.02%, 6/28/06    10,000,000    9,919,815 
CBA (Delaware) Finance Inc.         
4.92%, 6/30/06    10,000,000    9,919,000 
Cullinan Finance Ltd.         
4.93%, 6/29/06    15,000,000 a    14,880,279 
Daimler Chrysler Revolving Auto Conduit LLC         
4.93%, 6/28/06    15,000,000    14,882,308 
Deutsche Bank Financial LLC         
4.82%, 5/1/06    10,000,000    10,000,000 
Dexia Delaware LLC         
4.92%, 6/27/06    7,100,000    7,045,366 
HBOS Treasury Services PLC         
4.92%, 6/30/06    10,000,000    9,919,000 
HSH Nordbank AG         
4.93%, 6/30/06    15,000,000 a    14,878,250 
Intesa Funding LLC         
4.78%, 5/9/06    10,000,000    9,989,422 
Landesbank Baden-Wuerttemberg         
4.79%, 5/8/06    10,000,000    9,990,725 
Mont Blanc Capital Corp.         
4.79%, 5/8/06    10,000,000 a    9,990,725 
Prudential Funding LLC         
4.83%, 5/1/06    10,000,000    10,000,000 
Societe Generale N.A. Inc.         
4.92%, 6/30/06    10,000,000    9,919,083 
Solitaire Funding Ltd.         
4.93%, 6/22/06    10,000,000 a    9,929,656 
UBS Finance Delaware LLC         
4.82%, 5/1/06    10,000,000    10,000,000 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Principal     
Commercial Paper (continued)    Amount ($)    Value ($) 
Variable Funding Capital Company, LLC         
4.78%, 5/8/06    10,000,000 a    9,990,744 
Yorktown Capital, LLC         
4.79%, 5/8/06    10,000,000 a    9,990,725 
Total Commercial Paper         
(cost $191,235,833)        191,235,833 
 
 
Corporate Notes—3.0%         
Wells Fargo & Co.         
4.81%, 6/12/06         
(cost $10,001,582)    10,000,000 b    10,001,582 
 
 
Short-Term Bank Notes—3.0%         
Washington Mutual Bank         
4.96%, 5/26/06         
(cost $10,000,000)    10,000,000 b    10,000,000 
 
 
Time Deposits—3.0%         
Key Bank U.S.A., N.A. (Grand Cayman)         
4.85%, 5/1/06         
(cost $10,000,000)    10,000,000    10,000,000 
 
 
Repurchase Agreements—28.8%         
Citigroup Global Markets Holdings Inc.         
4.76%, dated 4/28/2006, due 5/1/2006 in the     
amount of $40,015,867 (fully collateralized     
by $40,160,000 Federal Home Loan Bank     
System, Bonds, 4.80%, due 5/2/2008,     
value $40,801,221)    40,000,000    40,000,000 
Credit Suisse (USA) Inc.         
4.78%, dated 4/28/2006, due 5/1/2006 in the     
amount of $40,015,933 (fully collateralized     
by $75,209,000 U.S. Treasury Strips,         
due 8/15/2011-8/15/2022, value         
$40,801,387)    40,000,000    40,000,000 

8
    Principal     
Repurchase Agreements (continued)    Amount ($)    Value ($) 
Goldman, Sachs & Co.         
4.70%, dated 4/28/2006, due 5/1/2006 in the     
amount of $17,006,658 (fully collateralized         
by $17,305,000 Federal Home Loan Bank         
System, Bonds, 5.375%, due 2/23/2011,         
value $17,343,155)    17,000,000    17,000,000 
Total Repurchase Agreements         
(cost $97,000,000)        97,000,000 
 
Total Investments (cost $338,237,415)    100.4%    338,237,415 
 
Liabilities, Less Cash and Receivables    (.4%)    (1,194,086) 
 
Net Assets    100.0%    337,043,329 

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 April 30, 2006, these securities
amounted to $69,660,379 or 20.7% of net assets.
b Variable rate security—interest rate subject to periodic change.
Portfolio Summary (Unaudited) †         
 
    Value (%)        Value (%) 
Banking    50.9    Asset-Backed/Structured     
Repurchase Agreements    28.8    Investment Vehicles    4.4 
Asset-Backed/Multi-Seller Programs    5.9    Asset-Backed Certificates    3.0 
Asset Backed/Single Seller    4.4    Insurance    3.0 
            100.4 

† Based on net assets.
See notes to financial statements.

The Fund 9

  STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—See Statement of         
Investments (including Repurchase Agreements         
of $97,000,000)—Note 1(b)    338,237,415    338,237,415 
Interest receivable        204,696 
        338,442,111 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    66,730 
Cash overdraft due to Custodian        10,988 
Dividend payable        1,321,064 
        1,398,782 
Net Assets ($)        337,043,329 
Composition of Net Assets ($):         
Paid-in capital        337,043,540 
Accumulated net realized gain (loss) on investments        (211) 
Net Assets ($)        337,043,329 
Shares Outstanding         
(2 billion shares of $.001 par value Capital Stock authorized)    337,043,540 
Net Asset Value, offering and redemption price per share ($)    1.00 

See notes to financial statements.

  10
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Interest Income    7,035,725 
Expenses:     
Management fee—Note 3(a)    237,347 
Shareholder servicing costs—Note 3(b)    237,346 
Total Expenses    474,693 
Investment Income—Net, representing net increase in     
net assets resulting from operations    6,561,032 

See notes to financial statements.

The Fund 11

STATEMENT OF CHANGES IN NET ASSETS

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Operations ($):         
Investment income—net    6,561,032    10,338,944 
Net realized gain (loss) on investments    —    (211) 
Net Increase (Decrease) in Net Assets         
Resulting from Operations    6,561,032    10,338,733 
Dividends to Shareholders from ($):         
Investment income—net    (6,561,032)    (10,344,206) 
Capital Stock Transactions ($1.00 per share):     
Net proceeds from shares sold    1,200,737,939    3,044,637,478 
Dividends reinvested    344,594    793,476 
Cost of shares redeemed    (1,168,815,819)    (3,233,102,830) 
Increase (Decrease) in Net Assets         
from Capital Stock Transactions    32,266,714    (187,671,876) 
Total Increase (Decrease) in Net Assets    32,266,714    (187,677,349) 
Net Assets ($):         
Beginning of Period    304,776,615    492,453,964 
End of Period    337,043,329    304,776,615 

See notes to financial statements.

  12

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.

a Annualized.
See notes to financial statements.

The Fund 13

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Institutional Prime Money Market Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company"), which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series including the fund.The fund's investment objective is to seek a high level of current income consistent with stability of principal. The Dreyfus Corporation (the "Manager") 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.

(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Directors to represent the fair value of the fund's investments.

It is the fund's policy to maintain a continuous net asset value per share of $1.00 for the fund; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.

(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 accretion of discount and amortization of premium on investments, is earned from settlement date and is recognized on the accrual basis. Cost of investments represents amortized cost.

14

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counterparty default, the fund has the right to use the collateral to offset losses incurred. There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights. The Manager, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

(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, if any, it is the policy of the fund not to distribute such gain.

(d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The Fund 15

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

The fund has an unused capital loss carryover of $211 available to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, the carryover expires in fiscal 2013.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were all ordinary income.The tax character of current year distributions will be determined at the end of the current fiscal year.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowing. During the period ended April 30, 2006, the fund did not borrow under the line of credit.

NOTE 3—Investment Management Fee and Other Transactions with Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .15% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, shareholder servicing fees and expenses, fees and expenses of non-interested

16

Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds, and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

(b) Under the Shareholder Servicing Plan (the "Plan"), the fund may pay up to .15% of the value of the average daily net assets annually to compensate certain banks, brokers, dealers or other financial institutions for shareholder services. During the period ended April 30, 2006, the fund was charged $237,346 pursuant to the Plan.

The Fund 17

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Under its terms, the Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $33,365 and shareholder servicing plan fees $33,365.

18

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and

2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of institutional money market funds (the "Performance Group") and to a

The Fund 19

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT
MANAGEMENT AGREEMENT (Unaudited) (continued)

larger universe of funds, consisting of all institutional money market funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was higher than the Performance Group and Performance Universe medians for each of the periods.The Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, which were generally consistent with the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. Noting the fund's "unitary fee structure", the Board members noted that the fund's management fee and expense ratio were lower than their respective Expense Group and Expense Universe medians.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds").They also noted that there were no other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund.The Manager's representatives also reviewed the costs associated with distribution through interme-diaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure. The Board members considered the relevance of the fee

20

information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund's management fee. The Board acknowledged that differences in fees paid by the Similar Funds seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges deter-

The Fund 21

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT
MANAGEMENT AGREEMENT (Unaudited) (continued)

mined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the services provided by the Manager are adequate and appropriate.
  • The Board was satisfied with the fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

22

NOTES

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2005, is available on the SEC's website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.

© 2006 Dreyfus Service Corporation 0922SA0406

  Dreyfus Institutional
U.S. Treasury
Money Market Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
8    Statement of Assets and Liabilities 
9    Statement of Operations 
10    Statement of Changes in Net Assets 
11    Financial Highlights 
12    Notes to Financial Statements 
17    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

Dreyfus Institutional
U.S. Treasury Money Market Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Institutional U.S. Treasury Money Market Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board (the "Fed") has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase interest rates further, maintain them at current levels or reduce them to stimulate future growth. We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

  Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Patricia A. Larkin, Senior Portfolio Manager

How did Dreyfus Institutional U.S. Treasury Money Market Fund perform during the period?

For the six-month period ended April 30, 2006, Dreyfus Institutional U.S.Treasury Money Market Fund produced a 3.93% annualized yield and, after taking into account the effects of compounding, an annualized effective yield of 4.00% .1

What is the fund's investment approach?

The fund seeks a high level of current income consistent with stability of principal and conservative investment risk.To pursue this goal, the fund invests exclusively in a portfolio of direct obligations of U.S.Treasury as well as repurchase agreements that are secured by U.S.Treasuries.

What other factors influenced the fund's performance?

When the reporting period began, the financial markets had already begun to recover from the Gulf Coast hurricanes. Although oil prices had spiked to more than $70 per barrel, the Federal Reserve Board (the "Fed") defied many analysts' expectations and, instead of pausing to assess the hurricanes' damage to the U.S. economy, implemented its eleventh consecutive rate hike since June 2004, increasing the federal funds rate to 3.75% at its September meeting.

By the time the Fed next raised interest rates in early November, the move was widely expected, especially after the announcement that U.S. GDP had expanded at a 4.3% annualized rate during the third quarter of 2005. December saw a decline in the unemployment rate to 4.9%, confirming that the U.S. economy remained on solid footing. However, when the Fed raised rates to 4.25% at its December meeting, a change in its accompanying announcement convinced many investors that the credit tightening campaign might be nearing completion. A lower-than-expected GDP growth rate of 1.7% for the fourth quarter of 2005 appeared to lend credence to this view.

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

Fears of an economic slowdown soon dissipated in January, however, when the unemployment rate slid to 4.7%, a multi-year low. As expected, the Fed raised the federal funds rate to 4.5% at its January meeting, indicating in its statement that "some further policy firming may be needed…."

The employment report for February showed a better-than-expected increase of 243,000 workers, helping to alleviate any lingering concerns that the Gulf Coast hurricanes and high energy prices might trigger an economic slowdown. In addition, despite new signs of sustained economic growth, longer-term interest rates remained surprisingly stable, causing the Treasury yield curve to flatten substantially. At times during the first quarter of 2006, the yield curve inverted, a phenomenon that in the past had been considered a harbinger of recession.

By the end of March, however, it had become apparent that fears of a slowdown were overblown, and the inversion of the yield curve was more likely a result of robust demand for U.S.Treasury securities from overseas investors.Accordingly, few investors were surprised when the Fed implemented its fifteenth consecutive increase in the federal funds rate, driving it to 4.75% in late March. Indeed, it later was announced that the initial estimate of annualized first-quarter GDP growth was a robust 4.8% .

The U.S. Treasury securities yield curve began to steepen in April when new economic data suggested that the economy might be stronger than many analysts previously expected. Despite some slowing in the housing market, low unemployment, strong consumer confidence and brisk retail sales suggested that the economy continued to grow at a relatively brisk pace.

In this environment, most investors have focused primarily on securities at the shorter-end of the money market maturity spectrum. We have maintained a similar strategy, generally keeping the fund's weighted average maturity shorter than industry averages.

4

What is the fund's current strategy?

On May 10, after the close of the reporting period, the Fed raised the federal funds rate to 5% and indicated that economic growth was expected to moderate to a more sustainable pace. In addition, several members of the Federal Open Market Committee have indicated that they feel monetary policy is now in the neutral range, and further changes in interest rates are likely to depend on prevailing economic data. A substantial slowdown in economic growth could preclude further rate increases, but additional gains in global commodity prices might make the Fed more inclined to tighten more aggressively to forestall inflationary pressures. Accordingly, while we have maintained the fund's relatively short weighted average maturity, we are prepared to adjust our strategy when we become convinced that short-term interest rates have peaked.

May 15, 2006

An investment in the fund is not insured or guaranteed by the FDIC or any other government
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
1 Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past
performance is no guarantee of future results.Yields fluctuate.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Institutional U.S.Treasury Money Market Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006 
 
Expenses paid per $1,000 †    $ 1.50 
Ending value (after expenses)    $1,019.60 

  COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
 
Expenses paid per $1,000 †    $ 1.51 
Ending value (after expenses)    $1,023.31 

† Expenses are equal to the fund's annualized expense ratio of .30%; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

  6
  STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
    Annualized         
    Yield on         
    Date of    Principal     
U.S. Treasury Bills—39.0%    Purchase (%)    Amount ($)    Value ($) 
5/11/06             
(cost $99,878,056)    4.40    100,000,000    99,878,056 
 
 
U.S. Treasury Notes—23.4%             
5/15/06             
(cost $59,999,685)    4.52    60,000,000    59,999,685 
 
 
Repurchase Agreements—37.3%             
Citigroup Global Markets Holdings Inc.             
dated 4/28/2006, due 5/1/2006 in the             
amount of $38,014,630 (fully collateralized             
by $58,006,486 U.S. Treasury Strips, due             
8/15/2013-8/15/2017, value $38,760,000)    4.62    38,000,000    38,000,000 
Credit Suisse (USA) Inc.             
dated 4/28/2006, due 5/1/2006 in the             
amount of $38,014,915 (fully collateralized             
by $39,885,000 U.S. Treasury Notes, 3.625%,         
due 7/15/2009, value $38,760,016)    4.71    38,000,000    38,000,000 
Goldman, Sachs & Co.             
dated 4/28/2006, due 5/1/2006 in the             
amount of $19,507,540 (fully collateralized             
by $20,353,000 U.S. Treasury Bills,             
due 10/19/2006, value $19,890,376)    4.64    19,500,000    19,500,000 
Total Repurchase Agreements             
(cost $95,500,000)            95,500,000 
 
Total Investments (cost $255,377,741)        99.7%    255,377,741 
 
Cash and Receivables (Net)        .3%    678,871 
 
Net Assets        100.0%    256,056,612 

Portfolio Summary (Unaudited) †         
    Value (%)        Value (%) 
U.S. Treasury    62.4    Repurchase Agreements    37.3 
            99.7 

† Based on net assets.
See notes to financial statements.

The Fund 7

  STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities-See Statement         
of Investments (including Repurchase         
Agreements of $95,500,000)—Note1(b)    255,377,741    255,377,741 
Cash        472,318 
Interest receivable        1,317,264 
        257,167,323 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    73,470 
Dividend payable        1,037,241 
        1,110,711 
Net Assets ($)        256,056,612 
Composition of Net Assets ($):         
Paid-in capital        256,062,186 
Accumulated net realized gain (loss) on investments        (5,574) 
Net Assets ($)        256,056,612 
Shares Outstanding         
(2 billion shares of $.001 par value Capital Stock authorized)    256,062,186 
Net Asset Value, offering and redemption price per share ($)    1.00 

See notes to financial statements.

  8
STATEMENT OF OPERATIONS
Six Month Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Interest Income    5,773,527 
Expenses:     
Management fee—Note 3(a)    204,146 
Shareholder servicing costs—Note 3(b)    204,146 
Total Expenses    408,292 
Investment Income—Net    5,365,235 
Net Realized Gain (Loss) on Investments—Note 1(b) ($)    (4,518) 
Net Increase in Net Assets Resulting from Operations    5,360,717 

See notes to financial statements.

The Fund 9

STATEMENT OF CHANGES IN NET ASSETS

  See notes to financial statements.
  10

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.

  a Annualized.
See notes to financial statements.

The Fund 11

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Institutional U.S.Treasury Money Market Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series including the fund.The fund's investment objective is to seek a high level of current income consistent with stability of principal and conservative investment risk by investing in direct obligations of the U.S.Treasury and repurchase agreements secured by such oblig-ations.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.

(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Directors to represent the fair value of the fund's investments.

It is the fund's policy to maintain a continuous net asset value per share of $1.00 for the fund; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.

(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

12

income, adjusted for accretion of discount and amortization of premium on investments is earned from settlement date and recognized on the accrual basis. Cost of investments represents amortized cost.

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counter party default, the fund has the right to use the collateral to offset losses incurred.There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights.The Manager, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

(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.

(d) 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 pro-

The Fund 13

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

visions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The Fund has an unused capital loss carryover of $1,056 available to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, the carryover expires in fiscal 2012.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were all ordinary income.The tax character of current year distributions will be determined at the end of the current fiscal year.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2006, the fund did not borrow under the line of credit.

NOTE 3—Investment Management Fee and Other Transactions with Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .15% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, shareholder

14

servicing fees and expenses, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out of pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

(b) Under the Shareholder Servicing Plan (the "Plan"), the fund may pay up to .15% of the value of the average daily net assets to compensate certain banks, brokers, dealers or other financial institutions for shareholder services. During the period ended April 30, 2006, the fund was charged $204,146 pursuant to the Plan.

The Fund 15

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Under its terms, the Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $36,735 and shareholder services plan fees $36,735.

16

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and

2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels.The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of institutional U.S. Treasury money market funds (the "Performance

The Fund 17

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S
INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

Group") and to a larger universe of funds, consisting of all institutional U.S. Treasury money market funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was higher than the Performance Group and Performance Universe medians for each of the periods.The Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, which were generally consistent with the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. Noting the fund's "unitary fee structure", the Board members noted that the fund's management fee and expense ratio were lower than their respective Expense Group and Expense Universe medians.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds").They also noted that there were no other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund.The Manager's representatives also reviewed the costs associated with distribution through interme-diaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's per-

18

formance and the services provided, noting the fund's "unitary fee" structure. The Board members considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund's management fee. The Board acknowledged that differences in fees paid by the Similar Funds seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's

The Fund 19

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • The Board was satisfied with the fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

20

For More Information

Dreyfus Institutional    Transfer Agent & 
U.S. Treasury    Dividend Disbursing Agent 
Money Market Fund    Dreyfus Transfer, Inc. 
200 Park Avenue    200 Park Avenue 
New York, NY 10166    New York, NY 10166 
 
Manager    Distributor 
The Dreyfus Corporation    Dreyfus Service Corporation 
200 Park Avenue    200 Park Avenue 
New York, NY 10166    New York, NY 10166 
Custodian     
Mellon Bank, N.A.     
One Mellon Bank Center     
Pittsburgh, PA 15258     

  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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2005, is available on the SEC's website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.

© 2006 Dreyfus Service Corporation 0930SA0406

  Dreyfus
Money Market
Reserves

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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 
 
    T H E F U N D 
2    Letter from the Chairman 
3    Discussion of Fund Performance 
6    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
    With Those of Other Funds 
7    Statement of Investments 
10    Statement of Assets and Liabilities 
11    Statement of Operations 
12    Statement of Changes in Net Assets 
13    Financial Highlights 
15    Notes to Financial Statements 
20    Information About the Review 
    and Approval of the Fund's 
    Investment Management Agreement 
    F O R M O R E I N F O R M AT I O N 
    Back Cover 

  Dreyfus
Money Market Reserves

The Fund

L E T T E R F R O M T H E C H A I R M A N

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Money Market Reserves, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board (the "Fed") has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase interest rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

  Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

D I S C U S S I O N O F F U N D P E R F O R M A N C E

Patricia A. Larkin, Senior Portfolio Manager

How did Dreyfus Money Market Reserves perform during the period?

For the six-month period ended April 30, 2006, the fund's Investor shares produced an annualized yield of 3.75%, and its Class R shares produced an annualized yield of 3.95% .Taking into account the effects of compounding, the annualized effective yields for the fund's Investor shares and Class R shares were 3.81% and 4.02%, respectively.1

What is the fund's investment approach?

The fund seeks a high level of current income consistent with stability of principal.To pursue its goal, the fund invests in a diversified portfolio of high-quality, short-term debt securities, including: securities issued or guaranteed by the U.S. government or its agencies and instrumentalities; certificates of deposit, time deposits, bankers' acceptances and other short-term securities issued by domestic or foreign banks or their subsidiaries or branches; repurchase agreements; asset-backed securities; domestic and dollar-denominated foreign commercial paper and other short-term corporate obligations, including those with floating or variable rates of interest.

What other factors influenced the fund's performance?

When the reporting period began, the financial markets had already begun to recover from the aftermath of the Gulf Coast hurricanes. Although oil prices had spiked to more than $70 per barrel, the Federal Reserve Board (the "Fed") defied many analysts' expectations and, instead of pausing to assess the hurricanes' damage to the U.S. economy, implemented its eleventh consecutive rate hike since June 2004, increasing the federal funds rate to 3.75% at its September meeting.

By the time the Fed next raised interest rates in early November, the move was widely expected, especially after the announcement that U.S. GDP had expanded at a 4.3% annualized rate during the third

T h e F u n d 3

D I S C U S S I O N O F F U N D P E R F O R M A N C E (continued)

quarter of 2005. December saw a decline in the unemployment rate to 4.9%, confirming that the U.S. economy remained on solid footing. However, when the Fed raised rates to 4.25% at its December meeting, a change in the language of its accompanying announcement convinced many investors that the credit tightening campaign might be nearing completion.A lower-than-expected GDP growth rate of 1.7% for the fourth quarter of 2005 appeared to lend credence to this view.

Fears of an economic slowdown soon dissipated in January, however, when the unemployment rate slid to 4.7%, a multi-year low.As expected, the Fed raised the federal funds rate to 4.5% at its January meeting, indicating in its statement that "some further policy firming may be needed…."This language was widely viewed as an attempt to give the new Fed Chairman, Ben Bernanke, flexibility to set his own course.

The employment report for February showed a better-than-expected increase of 243,000 workers, helping to alleviate any lingering concerns that the Gulf Coast hurricanes and high energy prices might trigger an economic slowdown. In addition, despite new signs of sustained economic growth, longer-term interest rates remained surprisingly stable, causing the Treasury yield curve to flatten substantially.At times during the first quarter of 2006, the yield curve inverted, a phenomenon that in the past had been considered a harbinger of recession.

By the end of March, however, it had become apparent that fears of a slowdown were overblown, and the inversion of the yield curve was more likely a result of robust demand for U.S.Treasury securities from overseas investors.Accordingly, few investors were surprised when the Fed implemented its fifteenth consecutive increase in the federal funds rate, driving it to 4.75% in late March. Indeed, it later was announced that the initial estimate of annualized first-quarter GDP growth was a robust 4.8% .

The U.S.Treasury securities yield curve began to steepen in April when new economic data suggested that the economy might be stronger than many analysts previously expected. Despite some slowing in the housing market, low unemployment, strong consumer confidence and brisk retail sales suggested that the economy continued to grow at a relatively brisk pace.

4

In this environment, most investors have focused primarily on securities at the shorter-end of the money market maturity spectrum. We have maintained a similar strategy, generally keeping the fund's weighted average maturity shorter than industry averages.

What is the fund's current strategy?

On May 10, after the close of the reporting period, the Fed raised the federal funds rate to 5% and indicated that economic growth was expected to moderate to a more sustainable pace. In addition, several members of the Federal Open Market Committee have indicated that they feel monetary policy is now in the neutral range, and further changes in interest rates are likely to depend on prevailing economic data.A substantial slowdown in economic growth could preclude further rate increases, but additional gains in global commodity prices might make the Fed more inclined to tighten more aggressively to forestall inflationary pressures. Accordingly, while we have maintained the fund's relatively short weighted average maturity, we are prepared to adjust our strategy when we become convinced that short-term interest rates have peaked.

May 15, 2006

An investment in the fund is not insured or guaranteed by the FDIC or any other government
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
1 Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past
performance is no guarantee of future results.Yields fluctuate.

T h e F u n d 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Money Market Reserves from November 1, 2005 to April 30, 2006. 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 April 30, 2006     
    Investor Shares    Class R Shares 
Expenses paid per $1,000 †    $ 3.50    $ 2.50 
Ending value (after expenses)    $1,018.70    $1,019.70 

C O M P A R I N G Y O U R F U N D ' S E X P E N S E S
W I T H T H O S E O F O T H E R F U N D S ( U n a u d i t e d )

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 cost) 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 April 30, 2006

    Investor Shares    Class R Shares 
Expenses paid per $1,000 †    $ 3.51    $ 2.51 
Ending value (after expenses)    $1,021.32    $1,022.32 

† Expenses are equal to the fund's annualized expense ratio of .70% for Investor Shares and .50% for Class R shares; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

6
S TAT E M E N T O F I N V E S T M E N T S
A p r i l 3 0 , 2 0 0 6 ( U n a u d i t e d )

T h e F u n d 7

    Principal     
Negotiable Bank Certificates of Deposit—14.4%    Amount ($)    Value ($) 
Bank of the West         
4.92%, 6/30/06    20,000,000    20,000,000 
First Tennessee Bank N.A. Memphis         
4.90%, 6/28/06    16,000,000    16,000,000 
Washington Mutual Bank         
5.00%, 7/26/06    10,000,000 a    9,999,338 
Wells Fargo Bank, NA         
4.92%, 6/30/06    20,000,000    20,000,000 
Total Negotiable Bank Certificates of Deposit         
(cost $65,999,338)        65,999,338 
 
Commercial Paper—53.0%         
Abbey National North America LLC         
4.79%, 5/8/06    15,000,000    14,986,102 
ANZ (DE) Inc.         
4.90%, 6/23/06    16,000,000    15,886,109 
CBA (Delaware) Finance Inc.         
4.92%, 6/30/06    20,000,000    19,838,000 
Cullinan Finance Ltd.         
4.90%, 6/22/06    20,000,000 b    19,860,178 
Deutsche Bank Financial LLC         
4.82%, 5/1/06    15,000,000    15,000,000 
Goldman Sachs Group Inc.         
4.83%, 5/25/06    10,000,000    10,000,000 
HBOS Treasury Services PLC         
4.92%, 6/30/06    15,000,000    14,878,500 
HSH Nordbank AG         
4.93%, 6/30/06    5,000,000 b    4,959,417 
Intesa Funding LLC         
4.78%, 5/9/06    15,000,000    14,984,133 
Landesbank Baden-Wuerttemberg         
4.79%, 5/8/06    16,000,000    15,985,160 
Prudential Funding LLC         
4.83%, 5/1/06    15,000,000    15,000,000 
Societe Generale N.A. Inc.         
4.92%, 6/30/06    20,000,000    19,838,167 

S TAT E M E N T O F I N V E S T M E N T S ( U n a u d i t e d ) (continued)

    Principal     
Commercial Paper (continued)    Amount ($)    Value ($) 
Ticonderoga Master Funding Limited         
4.79%, 5/8/06    11,323,000 b    11,312,498 
UBS Finance Delaware LLC         
4.82%, 5/1/06    15,000,000    15,000,000 
Unicredit Delaware Inc.         
4.90%, 6/23/06    16,000,000    15,886,109 
Variable Funding Capital Company, LLC         
4.78%, 5/8/06    19,000,000 b    18,982,414 
Total Commercial Paper         
(cost $242,396,787)        242,396,787 
 
 
Short-Term Bank Note—2.2%         
Barclays Bank PLC         
4.81%, 5/11/06         
(cost $9,999,959)    10,000,000 a    9,999,959 
 
 
Repurchase Agreements—30.5%         
Citigroup Global Markets Holdings Inc.         
4.76%, dated 4/28/2006, due 5/1/2006         
in the amount of $45,017,850 (fully collateralized     
by $45,180,000 Federal Home Loan Bank, Bonds,     
4.80%, due 5/2/2008, value $45,901,374)    45,000,000    45,000,000 
Goldman, Sachs & Co.         
4.65%, dated 4/28/2006, due 5/1/2006         
in the amount of $49,519,181 (fully collateralized     
by $51,955,000 Federal Home Loan Bank, Bonds,     
3.50%-5.125%, due 4/25/2007-3/23/2010,     
value $50,491,307)    49,500,000    49,500,000 

8
    Principal     
Repurchase Agreements (continued)    Amount ($)    Value ($) 
Greenwich Capital Markets         
4.75%, dated 4/28/2006, due 5/1/2006         
in the amount of $45,017,813 (fully collateralized         
by $10,380,000 Federal Home Loan Bank System,         
Bonds, 2.30%-4.0%, due 8/30/2006-6/26/2013,         
value $9,960,992, $29,485,000 Federal Home         
Loan Bank System, Notes, 0%, due 7/26/2006,         
value $29,125,283, $970,000 Federal Home Loan         
Mortgage Corp., Debs., 0%, due 11/29/2019,         
value $450,138 and $6,160,000 Tennessee Valley         
Authority, Bonds, 6.79%, due 5/23/2012,         
value $6,364,485)    45,000,000    45,000,000 
Total Repurchase Agreements         
(cost $139,500,000)        139,500,000 
 
Total Investments (cost $457,896,084)    100.1%    457,896,084 
 
Liabilities, Less Cash and Receivables    (.1%)    (463,411) 
 
Net Assets    100.0%    457,432,673 

  a Variable rate security—interest rate subject to periodic change.
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 April 30, 2006, these securities
amounted to $55,114,507 or 12.1% of net assets.
Portfolio Summary (Unaudited) †         
 
    Value (%)        Value (%) 
Banking    59.8    Insurance    3.3 
Repurchase Agreements    30.5    Brokerage Firms    2.2 
Asset-Backed/Structured             
Investment Vehicles    4.3        100.1 

† Based on net assets.
See notes to financial statements.

T h e F u n d 9

  S TAT E M E N T O F A S S E T S A N D L I A B I L I T I E S
A p r i l 3 0 , 2 0 0 6 ( U n a u d i t e d )
    Cost    Value 
Assets ($):         
Investments in securities—         
See Statement of Investments (including         
Repurchase Agreements of $139,500,000)—Note 1(b)    457,896,084    457,896,084 
Cash        925,420 
Interest receivable        444,616 
        459,266,120 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)        233,787 
Dividend payable        1,588,974 
Payable for Capital Stock redeemed        10,686 
        1,833,447 
Net Assets ($)        457,432,673 
Composition of Net Assets ($):         
Paid-in capital        457,433,276 
Accumulated net realized gain (loss) on investments        (603) 
Net Assets ($)        457,432,673 

Net Asset Value Per Share         
    Investor Shares    Class R Shares 
Net Assets ($)    293,694,368    163,738,305 
Shares Outstanding    293,692,756    163,740,520 
Net Asset Value Per Share ($)    1.00    1.00 

See notes to financial statements.

10

S TAT E M E N T O F O P E R AT I O N S
S i x M o n t h s E n d e d A p r i l 3 0 , 2 0 0 6 ( U n a u d i t e d )
Investment Income ($):     
Interest Income    10,093,808 
Expenses:     
Management fee—Note 3(a)    1,134,310 
Distribution fees (Investor Shares)—Note 3(b)    302,036 
Total Expenses    1,436,346 
Investment Income—Net, representing net increase     
in net assets resulting from operations    8,657,462 

See notes to financial statements.

T h e F u n d 11

S TAT E M E N T O F C H A N G E S I N N E T A S S E T S

See notes to financial statements.

  12

F I N A N C I A L H I G H L I G H T S

The following tables describe the performance for each share class for the fiscal periods indicated. All information 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.

a Annualized.
See notes to financial statements.

T h e F u n d 13

F I N A N C I A L H I G H L I G H T S (continued)

  a Annualized.
See notes to financial statements.

14

N O T E S T O F I N A N C I A L S TAT E M E N T S

NOTE 1—Significant Accounting Policies:

Dreyfus Money Market Reserves (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series including the fund. The fund's investment objective is to seek a high level of current income consistent with stability of principal by investing in a diversified portfolio of high-quality, short-term debt securities.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.The fund is authorized to issue 2 billion shares of $.001 par value Capital Stock in each of the following classes of shares: Investor and Class R. Investor shares are sold primarily to retail investors and bear a distribution fee. Class R shares are sold primarily to bank trust departments and other financial service providers (including Mellon Financial and its affiliates) acting on behalf of customers having a qualified trust or investment account or relationship at such institution, and bear no distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution fee and voting rights on matters affecting a single class. 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 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.

(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Directors to represent the fair value of the fund's investments.

T h e F u n d 15

N O T E S T O F I N A N C I A L S TAT E M E N T S (continued)

It is the fund's policy to maintain a continuous net asset value per share of $1.00 for the fund; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.

(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 accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Cost of investments represents amortized cost.

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counter party default, the fund has the right to use the collateral to offset losses incurred.There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights.The Manager, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

(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

16

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.

(d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualifications is in the best interest of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The fund has an unused capital loss carryover of $603 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, the carryover expires in fiscal 2012.

The tax character of all distributions paid to shareholders during the fiscal year ended October 31, 2005 were all ordinary income.The tax character of current year distributions will be determined at the end of the current fiscal year.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2006, the fund did not borrow under the line of credit.

NOTE 3—Investment Management Fee and Other Transactions With Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, cus-

T h e F u n d 17

N O T E S T O F I N A N C I A L S TAT E M E N T S (continued)

tody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .50% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds, and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts).With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

18

(b) Under the fund's Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Investor shares may pay annually up to .25% (currently limited by the Company's Board of Directors to .20%) of the value of the average daily net assets attributable to its Investor shares to compensate the Distributor, for shareholder servicing activities and activities primarily intended to result in the sale of Investor shares. During the period ended April 30, 2006, Investor shares were charged $302,036 pursuant to the Plan.

Under its terms, the Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $184,875 and Rule 12b-1 distribution plan fees $48,912.

T h e F u n d 19

  I N F O R M AT I O N A B O U T T H E R E V I E W A N D
A P P R O VA L O F T H E F U N D ' S I N V E S T M E N T
M A N A G E M E N T A G R E E M E N T ( U n a u d i t e d )

At a meeting of the fund's Board of Directors held on February 1 and 2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of retail, no-load money market funds (the "Performance Group") and to

20

a larger universe of funds, consisting of all retail no-load money market funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was variously above and below the Performance Group median and higher than the Performance Universe median for each of the periods.The Board noted the rank of the fund's total return within the Performance Group for each period and discussed that when the fund's performance was below median there was generally a spread of only a few basis points between the fund's performance and median performance. The Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, which showed improvement over the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. The Board members noted that the fund was the only fund in the Expense Group with a "unitary fee struc-ture".The Board members noted that the fund's expense ratio, including Rule 12b-1 fees, was higher than the Expense Group and Expense Universe medians and, excluding Rule 12b-1 or other service fees, was lower than the Expense Group and Expense Universe medians.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the

T h e F u n d 21

I N F O R M AT I O N A B O U T T H E R E V I E W A N D A P P R O VA L O F T H E FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

"Similar Funds").They also noted that there were no other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund.The Manager's representatives also reviewed the costs associated with distribution through interme-diaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure. The Board members considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund's management fee. The Board acknowledged that differences in fees paid by the Similar Funds seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund's portfolio.

22

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • The Board was generally satisfied with the fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

T h e F u n d 23

  I N F O R M AT I O N A B O U T T H E R E V I E W A N D A P P R O VA L O F T H E F U N D ' S
I N V E S T M E N T M A N A G E M E N T A G R E E M E N T ( U n a u d i t e d ) (continued)

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

24

For More Information

  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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2005, is available on the SEC's website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.

© 2006 Dreyfus Service Corporation 0317SA0406

  Dreyfus Premier
Balanced Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
23    Statement of Financial Futures 
23    Statement of Options Written 
24    Statement of Assets and Liabilities 
25    Statement of Operations 
26    Statement of Changes in Net Assets 
28    Financial Highlights 
33    Notes to Financial Statements 
45    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus Premier
Balanced Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Premier Balanced Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year. As always, we urge you to discuss with your financial advisor the potential implications of these possibilities on your investments.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio managers.

Thank you for your continued confidence and support.

Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

L. Emerson Tuttle and Catherine Powers, Portfolio Managers

How did Dreyfus Premier Balanced Fund perform relative to its benchmark?

For the six-month period ended April 30, 2006, the fund produced total returns of 6.08% for Class A shares, 5.68% for Class B shares, 5.66% for Class C shares, 6.19% for Class R shares and 5.91% for Class T shares.1 In comparison, the fund's benchmark, a hybrid index composed of 60% Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") and 40% Lehman Brothers U.S. Aggregate Index ("Lehman Aggregate Index"), provided a total return of 6.00% for the same period. Separately, the S&P 500 Index and the Lehman Aggregate Index provided total returns of 9.63% and 0.56%, respectively, for the same period.2

While stocks advanced in response to continued economic growth, rising interest rates generally held bonds in check. The fund roughly matched the benchmark's performance, with gains driven primarily by stocks in the financial, energy and industrial sectors.

What is the fund's investment approach?

The fund seeks to outperform an unmanaged hybrid index,60% of which is the S&P 500 Index and 40% of which is the Lehman Aggregate Index.

The fund is a balanced fund, with an allocation under normal circumstances of approximately 60% stocks and 40% bonds, corresponding to the fund's benchmark. However, the fund is permitted to invest up to 75%, and as little as 40%, of its total assets in stocks, and up to 60%, and as little as 25%, of its total assets in bonds.

When allocating assets between stocks and bonds, we assess the relative returns and risks of each asset class, using a model that analyzes several factors, including interest-rate-adjusted price-to-earnings ratios, the valuation and volatility levels of stocks relative to bonds, and economic factors such as interest rates.

We use a valuation model and fundamental analysis to select stocks based on: value, or how a stock is priced relative to its perceived intrinsic worth;

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

growth, in this case the sustainability or growth of earnings or cash flow; and financial profile, which measures the financial health of the company.

In choosing bonds, we review economic, market and other factors, leading to valuations by sector, maturity and quality.The fund invests primarily in U.S. government securities, corporate bonds, mortgage-backed securities and asset-backed securities for its fixed-income portfolio. The average effective maturity of the fund's fixed-income portfolio normally will not exceed 10 years.

What other factors influenced the fund's performance?

Moderate economic growth and rising interest rates produced a more positive environment for stocks than bonds during the reporting period.While the fund maintained greater exposure to stocks than its benchmark, weakness in a few holdings kept the fund's total returns in line with the benchmark. Specifically, in the health care sector, weakness among biotechnology and medical device stocks hurt holdings such as Genzyme and Alcon. Disappointments in the technology sector, such as Dell and Altera, which were sold during the reporting period, further undermined returns, as did light exposure to metals and mining stocks in the materials sector.

However, the fund delivered relatively strong returns in the financials area, where top performers included commercial banks, such as Bank of America and Wachovia; diversified financial services providers, such as JPMorgan Chase & Co.; and mortgage lenders, such as Countrywide Financial. An overweighted position and good stock selections in the energy sector, such as Weatherford International and Grant Prideco, enhanced returns. Industrial holdings further boosted relative performance, including electrical equipment maker Emerson Electric and conglomerate Textron, which was sold during the reporting period.

Bond prices began to fall during the second half of the reporting period due to mounting inflation concerns in the strong economy, erasing earlier gains. U.S.Treasury securities were especially sensitive to rising interest rates, while mortgage-backed securities and corporate

4

bonds fared somewhat better. Our emphasis on corporate bonds, especially those with "triple-B" credit ratings, performed well due to investors' ample appetite for risk. However, we avoided issuers likely to weaken their balance sheets due to increased share repurchases or potentially, a leveraged buyout.The fund's relatively light exposure to mortgage-backed securities detracted modestly from performance. Although we expected mortgage-backed securities to suffer as interest rates rose, they instead benefited from unusually low market volatility.

What is the fund's current strategy?

In light of continuing economic growth and steadily increasing interest rates, we have maintained the fund's emphasis on stocks over bonds.The fund currently holds overweighted exposure to energy and health care stocks, and underweighted exposure to the consumer discretionary, technology, communications and utility sectors. We have begun to position the bond portfolio for the next phase of the credit cycle,including adopting a more index-like yield curve strategy. We have continued to emphasize corporate bonds, which we expect to benefit from strong business conditions, and de-emphasize mortgage-backed securities, which began to encounter heightened volatility late in the reporting period.

May 15, 2006

1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into
consideration the maximum initial sales charges in the case of Class A and Class T 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. Return figures
provided reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to
an agreement in effect through April 4, 2007, at which time it may be extended, terminated or
modified. Had these expenses not been absorbed, the fund's returns would have been lower.
2 SOURCE: LIPPER, INC. — Reflects reinvestment of dividends and, where applicable, capital
gain distributions.The Standard & Poor's 500 Composite Stock Price Index is a widely accepted,
unmanaged index of U.S. stock market performance.The Lehman Brothers U.S. Aggregate Index
is a widely accepted, unmanaged total return index of corporate, U.S. government and U.S.
government agency debt instruments, mortgage-backed securities and asset-backed securities with an
average maturity of 1-10 years.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Balanced Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006         
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 5.62    $ 9.43    $ 9.43    $ 4.35    $ 6.89 
Ending value (after expenses)    $1,060.80    $1,056.80    $1,056.60    $1,061.90    $1,059.10 

COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 5.51    $ 9.25    $ 9.25    $ 4.26    $ 6.76 
Ending value (after expenses)    $1,019.34    $1,015.62    $1,015.62    $1,020.58    $1,018.10 

† Expenses are equal to the fund's annualized expense ratio of 1.10% for Class A, 1.85% for Class B, 1.85% for Class C, .85% for Class R and 1.35% for Class T; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

6
  STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
Common Stocks—62.5%    Shares    Value ($) 
Agricultural—1.7%         
Altria Group    33,300    2,436,228 
Banking—4.2%         
Bank of America    68,900    3,439,488 
Wachovia    41,900    2,507,715 
        5,947,203 
Chemicals—1.7%         
Air Products & Chemicals    16,500    1,130,580 
EI Du Pont de Nemours & Co.    29,200    1,287,720 
        2,418,300 
Consumer Products—1.0%         
Procter & Gamble    24,200    1,408,682 
Diversified Financial Services—7.9%     
Affiliated Managers Group    13,500 a,b    1,367,550 
Capital One Financial    23,600    2,044,704 
Countrywide Financial    56,200    2,285,092 
JPMorgan Chase & Co.    70,800    3,212,904 
Merrill Lynch & Co.    31,300    2,386,938 
        11,297,188 
Electric Utilities—.9%         
PG & E    12,300    490,032 
Southern    23,700    763,851 
        1,253,883 
Food & Beverages—1.4%         
Cadbury Schweppes, ADR    22,600    903,096 
PepsiCo    18,300    1,065,792 
        1,968,888 
Health Care—7.2%         
Abbott Laboratories    33,300    1,423,242 
Alcon    12,800    1,301,888 
Amgen    18,400 b    1,245,680 
Caremark Rx    13,500    614,925 
Genzyme    14,700 b    899,052 
Novartis, ADR    25,500    1,466,505 
WellPoint    20,300 b    1,441,300 
Wyeth    38,100    1,854,327 
        10,246,919 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Lodging & Entertainment—1.1%         
Hilton Hotels    58,900    1,586,766 
Manufacturing—5.5%         
3M    18,200    1,554,826 
Danaher    28,600    1,833,546 
General Electric    127,900    4,424,061 
        7,812,433 
Media—.7%         
News, Cl. A    60,700    1,041,612 
Oil & Gas—8.1%         
Anadarko Petroleum    11,100    1,163,502 
Chesapeake Energy    24,700    782,496 
ConocoPhillips    19,500    1,304,550 
Exxon Mobil    65,000    4,100,200 
Grant Prideco    24,800 b    1,269,760 
Sempra Energy    16,800    773,136 
Transocean    13,000 b    1,053,910 
Weatherford International    22,300 b    1,180,339 
        11,627,893 
Property-Casualty Insurance—1.2%     
Axis Capital Holdings    57,900    1,726,578 
Retail—4.9%         
Advance Auto Parts    32,400    1,303,128 
CVS    57,100    1,697,012 
Home Depot    32,700    1,305,711 
McDonald's    28,200    974,874 
Target    31,900    1,693,890 
        6,974,615 
Technology—9.7%         
Adobe Systems    26,000 b    1,019,200 
Advanced Micro Devices    28,000 b    905,800 
Broadcom, Cl. A    24,000 b    986,640 
Citrix Systems    19,200 b    766,464 
Electronic Arts    20,100 b    1,141,680 
EMC/Massachusetts    32,900 b    444,479 
Emerson Electric    19,500    1,656,525 

  8
Common Stocks (continued)    Shares    Value ($) 
Technology (continued)         
Fisher Scientific International    11,500 b    811,325 
Google, Cl. A    1,837 b    767,756 
Intel    36,100    721,278 
International Business Machines    15,200    1,251,568 
Microchip Technology    29,700    1,106,622 
Microsoft    100,700    2,431,905 
        14,011,242 
Telecommunications—4.2%         
AT & T    46,900    1,229,249 
Cisco Systems    66,700 b    1,397,365 
Corning    27,900 b    770,877 
Motorola    20,500    437,675 
Qualcomm    27,800    1,427,252 
Verizon Communications    23,800    786,114 
        6,048,532 
Transportation—1.1%         
Burlington Northern Santa Fe    19,100    1,519,023 
Total Common Stocks         
(cost $77,815,757)        89,325,985 

    Coupon    Maturity    Principal     
Bonds and Notes—34.3%    Rate (%)    Date    Amount ($)    Value ($) 
Aerospace & Defense—.2%                 
L-3 Communications,                 
Gtd. Notes    7.63    6/15/12    120,000    124,200 
L-3 Communications,                 
Sr. Sub. Notes, Ser. B    6.38    10/15/15    30,000    29,250 
Northrop Grumman,                 
Gtd. Notes    7.13    2/15/11    75,000    79,853 
Raytheon,                 
Sr. Notes    5.50    11/15/12    65,000    64,078 
                297,381 
Agricultural—.2%                 
Altria Group,                 
Notes    7.00    11/4/13    270,000    286,751 

The Fund 9

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Asset-Backed Certificates/                 
Automobile Receivables—1.3%                 
Ford Credit Auto Owner Trust,                 
Ser. 2005-B, Cl. B    4.64    4/15/10    195,000    191,711 
WFS Financial Owner Trust,                 
Ser. 2003-3, Cl. A4    3.25    5/20/11    1,600,000    1,573,634 
WFS Financial Owner Trust,                 
Ser. 2005-2, Cl. B    4.57    11/19/12    105,000    103,230 
                1,868,575 
Asset-Backed Certificates/                 
Home Equity Loans—2.0%                 
Ameriquest Mortgage Securities,                 
Ser. 2003-11, Cl. AF6    5.14    1/25/34    175,000    172,925 
Residential Asset Mortgage                 
Products, Ser. 2003-RS8, Cl. AI4    4.22    10/25/08    1,600,000    1,594,607 
Saxon Asset Securities Trust,                 
Ser. 2004-2, Cl. AF2    4.15    8/25/35    1,081,000    1,072,122 
Soundview Home Equity Loan Trust,             
Ser. 2005-B, Cl. M3    5.83    5/25/35    75,000    73,976 
                2,913,630 
Asset-Backed Certificates/                 
Manufactured Housing—.1%                 
Green Tree Financial,                 
Ser. 1994-7, Cl. M1    9.25    3/15/20    150,248    156,505 
Auto Manufacturing—.1%                 
DaimlerChrysler NA Holding,                 
Notes    4.88    6/15/10    50,000    48,298 
DaimlerChrysler NA Holding,                 
Gtd. Notes    8.50    1/18/31    60,000    69,749 
                118,047 
Automotive, Trucks & Parts—.0%                 
Johnson Controls,                 
Sr. Notes    5.25    1/15/11    30,000    29,466 
Banking—1.4%                 
Chevy Chase Bank FSB,                 
Sub. Notes    6.88    12/1/13    105,000    108,675 
Chuo Mitsui Trust & Banking,                 
Sub. Notes    5.51    12/29/49    200,000 c,d    187,384 
Colonial Bank NA/Montgomery, AL,                 
Sub. Notes    8.00    3/15/09    40,000    41,883 

10

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Banking (continued)                 
Northern Rock,                 
Sub. Notes    5.60    4/29/49    190,000 c,d    182,963 
Rabobank Capital Funding II,                 
Bonds    5.26    12/29/49    490,000 c,d    465,577 
Resona Bank,                 
Notes    5.85    9/29/49    130,000 c,d    124,387 
Sovereign Bancorp,                 
Sr. Notes    4.80    9/1/10    140,000 c    134,921 
Sumitomo Mitsui Banking,                 
Notes    5.63    7/29/49    100,000 c,d    95,697 
USB Capital IX,                 
Gtd. Notes    6.19    3/29/49    110,000 d    108,811 
Washington Mutual,                 
Sub. Notes    4.63    4/1/14    355,000    322,316 
Wells Fargo & Co.,                 
Sub. Notes    6.38    8/1/11    95,000 a    98,676 
Zions Bancorporation,                 
Sub. Notes    6.00    9/15/15    140,000    139,849 
                2,011,139 
Building & Construction—.2%                 
American Standard,                 
Gtd. Notes    7.38    2/1/08    85,000    87,238 
American Standard,                 
Gtd. Notes    7.63    2/15/10    120,000    126,293 
                213,531 
Chemicals—.5%                 
ICI Wilmington,                 
Gtd. Notes    5.63    12/1/13    190,000    184,102 
Lubrizol,                 
Debs    6.50    10/1/34    200,000    194,561 
Lubrizol,                 
Sr. Notes    4.63    10/1/09    145,000    140,637 
RPM International,                 
Sr. Notes    4.45    10/15/09    110,000    104,917 
RPM International,                 
Bonds    6.25    12/15/13    140,000    138,111 
                762,328 

The Fund 11

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Commercial &                 
Professional Services—.2%                 
Erac USA Finance,                 
Bonds    5.60    5/1/15    90,000 c    86,341 
Erac USA Finance,                 
Notes    7.95    12/15/09    50,000 c    53,670 
RR Donnelley & Sons,                 
Notes    4.95    4/1/14    200,000    181,867 
                321,878 
Commercial Mortgage                 
Pass-Through Certificates—1.2%             
Banc of America Commercial                 
Mortgage, Ser. 2005-2, Cl. A2    4.25    7/10/43    250,000    245,540 
Calwest Industrial Trust,                 
Ser. 2002-CALW, Cl. A    6.13    2/15/17    275,000 c    283,391 
Crown Castle Towers,                 
Ser. 2005-1A, Cl. D    5.61    6/15/35    70,000 c    68,139 
Global Signal Trust,                 
Ser. 2006-1, Cl. D    6.05    2/15/36    90,000 c    89,439 
Global Signal Trust,                 
Ser. 2006-1, Cl. E    6.50    2/15/36    35,000 c    34,969 
JP Morgan Chase Commercial                 
Mortgage Securities,                 
Ser. 2005-LDP5, Cl. A2    5.20    12/15/44    200,000    198,010 
Merrill Lynch Mortgage Trust,                 
Ser. 2005-CIP1, Cl. A2    4.96    7/12/38    145,000    142,253 
Merrill Lynch Mortgage Trust,                 
Ser. 2005-CKI1, Cl. A2    5.40    11/12/37    45,000    44,692 
Morgan Stanley Capital I,                 
Ser. 2006-T21, Cl. A2    5.09    10/12/52    150,000    147,669 
Washington Mutual Asset                 
Securities, Ser. 2003-C1A, Cl. A    3.83    1/25/35    519,116 c    496,782 
                1,750,884 
Diversified Financial Services—2.2%             
Amvescap,                 
Gtd. Notes    5.38    2/27/13    180,000    172,806 
Bear Stearns Cos.,                 
Notes    4.50    10/28/10    100,000 a    96,013 
Boeing Capital,                 
Sr. Notes    7.38    9/27/10    160,000    171,545 

12

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Diversified Financial                 
Services (continued)                 
CIT Group,                 
Sr. Notes    4.75    8/15/08    135,000    133,205 
Countrywide Home Loans,                 
Gtd. Notes, Ser. L    4.00    3/22/11    80,000    74,080 
Credit Suisse USA,                 
Notes    5.13    8/15/15    135,000 a    127,721 
Glencore Funding,                 
Gtd. Notes    6.00    4/15/14    225,000 c    212,503 
Goldman Sachs Group,                 
Notes    4.50    6/15/10    140,000    134,926 
HSBC Finance Capital Trust IX,                 
Notes    5.91    11/30/35    410,000 d    396,810 
International Lease Finance,                 
Notes    4.75    1/13/12    205,000    195,051 
Jefferies Group,                 
Sr. Notes    5.50    3/15/16    210,000    197,426 
John Deere Capital,                 
Sr. Notes, Ser. D    4.40    7/15/09    90,000    87,339 
JPMorgan Chase & Co.,                 
Sub. Notes    5.13    9/15/14    260,000 a    247,732 
Lehman Brothers Holdings,                 
Notes    5.50    4/4/16    50,000 a    48,393 
MBNA,                 
Notes    6.13    3/1/13    220,000    225,578 
Mizuho JGB Investment,                 
Bonds, Ser. A    9.87    12/29/49    115,000 c,d    124,462 
Morgan Stanley,                 
Sub. Notes    4.75    4/1/14    155,000 a    143,577 
Nuveen Investments,                 
Sr. Notes    5.00    9/15/10    80,000    77,053 
Residential Capital,                 
Gtd. Notes    6.13    11/21/08    45,000    44,832 
Residential Capital,                 
Sr. Unscd. Notes    6.38    6/30/10    130,000    129,565 
Residential Capital,                 
Sub. Notes    6.90    4/17/09    135,000 c,d    135,026 
                3,175,643 

The Fund 13

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Diversified Metals & Mining—.3%                 
Falconbridge,                 
Bonds    5.38    6/1/15    20,000    18,638 
Falconbridge,                 
Notes    6.00    10/15/15    55,000    53,554 
Ispat Inland,                 
Scd. Notes    9.75    4/1/14    10,000    11,266 
Southern Copper,                 
Sr. Notes    7.50    7/27/35    110,000 a    106,975 
Teck Cominco,                 
Notes    7.00    9/15/12    150,000    158,118 
                348,551 
Electric Utilities—.6%                 
Appalachian Power,                 
Bonds, Ser. H    5.95    5/15/33    75,000    68,712 
Appalachian Power,                 
Notes    6.38    4/1/36    100,000    97,199 
Consumers Energy,                 
First Mortgage    5.00    2/15/12    235,000    225,219 
Dominion Resources/VA,                 
Sr. Unscd. Notes, Ser. E    7.20    9/15/14    185,000    197,553 
FirstEnergy,                 
Notes, Ser. B    6.45    11/15/11    85,000    87,755 
Mirant North America,                 
Sr. Notes    7.38    12/31/13    58,000 c    58,508 
Nevada Power,                 
Mortgage Notes    5.95    3/15/16    20,000 c    19,406 
Nisource Finance,                 
Gtd. Notes    5.25    9/15/17    100,000    92,439 
Sierra Pacific Power,                 
Mortgage Notes    6.25    4/15/12    60,000    60,115 
                906,906 
Environmental Control—.4%                 
Republic Services,                 
Notes    6.09    3/15/35    250,000    235,175 
Waste Management,                 
Gtd. Notes    6.88    5/15/09    75,000    77,861 
Waste Management,                 
Sr. Notes    7.00    7/15/28    175,000    182,135 
                495,171 

14

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Food & Beverages—.2%                 
HJ Heinz,                 
Notes    6.43    12/1/20    60,000 c    61,007 
Safeway,                 
Sr. Unscd. Debs    7.25    2/1/31    110,000    114,588 
Stater Brothers Holdings,                 
Sr. Notes    8.13    6/15/12    65,000    65,325 
Tyson Foods,                 
Sr. Unscd. Notes    6.60    4/1/16    50,000    49,137 
                290,057 
Foreign Government—.7%                 
Argentina Bonos,                 
Bonds    4.89    8/3/12    180,000 d    150,660 
Banco Nacional de Desenvolvimento             
Economico e Social, Unsub. Notes    5.73    6/16/08    190,000 d    187,863 
Export-Import Bank of Korea,                 
Sr. Notes    4.50    8/12/09    175,000    169,959 
Republic of Peru,                 
Bonds    8.38    5/3/16    45,000 a    49,230 
Republic of South Africa,                 
Notes    9.13    5/19/09    230,000    252,923 
United Mexican States,                 
Notes    6.63    3/3/15    130,000 a    134,940 
                945,575 
Health Care—.5%                 
Coventry Health Care,                 
Sr. Notes    5.88    1/15/12    145,000    142,825 
HCA,                 
Sr. Notes    6.95    5/1/12    130,000    131,096 
Medco Health Solutions,                 
Sr. Notes    7.25    8/15/13    50,000    53,398 
Quest Diagnostics,                 
Gtd. Notes    5.13    11/1/10    55,000    53,836 
Teva Pharmaceutical Finance,                 
Gtd. Notes    6.15    2/1/36    85,000    78,789 
UnitedHealth Group,                 
Sr. Unscd. Notes    5.38    3/15/16    135,000 a    129,789 
WellPoint,                 
Unscd. Notes    5.00    1/15/11    70,000    68,265 

The Fund 15

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Health Care (continued)                 
Wyeth,                 
Notes    6.95    3/15/11    95,000    100,286 
                758,284 
Lodging & Entertainment—.2%                 
MGM Mirage,                 
Gtd. Notes    6.00    10/1/09    65,000    64,431 
Mohegan Tribal Gaming Authority,                 
Sr. Notes    6.13    2/15/13    110,000    107,388 
Station Casinos,                 
Sr. Notes    6.00    4/1/12    130,000    127,075 
                298,894 
Media—.7%                 
British Sky Broadcasting,                 
Gtd. Notes    6.88    2/23/09    320,000    330,556 
Comcast,                 
Gtd. Notes    5.50    3/15/11    200,000    198,164 
News America Holdings,                 
Debs    7.70    10/30/25    130,000    139,603 
Time Warner,                 
Gtd. Notes    6.75    4/15/11    145,000    150,489 
Univision Communications,                 
Gtd. Notes    7.85    7/15/11    160,000    167,165 
Viacom,                 
Sr. Notes    5.75    4/30/11    45,000 c    44,735 
                1,030,712 
Oil & Gas—.5%                 
Amerada Hess,                 
Unscd. Notes    6.65    8/15/11    125,000 a    130,448 
Enterprise Products Operating,                 
Sr. Notes, Ser. B    5.60    10/15/14    220,000    211,062 
ONEOK,                 
Notes    5.20    6/15/15    65,000    61,193 
Pemex Project Funding Master                 
Trust, Gtd. Notes    5.75    12/15/15    100,000 c    94,925 
XTO Energy,                 
Sr. Notes    7.50    4/15/12    155,000    168,707 
                666,335 

  16
    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Packaging & Containers—.2%                 
Crown Americas &                 
Crown Americas                 
Capital, Sr. Notes    7.63    11/15/13    90,000 c    92,700 
Crown Americas &                 
Crown Americas                 
Capital, Sr. Notes    7.75    11/15/15    50,000 c    51,625 
Sealed Air,                 
Notes    5.63    7/15/13    100,000 c    97,300 
                241,625 
Paper & Forest Products—.3%                 
Georgia-Pacific,                 
Sr. Notes    8.00    1/15/24    130,000    130,325 
Sappi Papier Holding,                 
Gtd. Notes    6.75    6/15/12    45,000 c    42,848 
Temple-Inland,                 
Bonds    6.63    1/15/18    90,000 a    91,288 
Westvaco,                 
Unscd. Debs    7.95    2/15/31    85,000    91,839 
Weyerhaeuser,                 
Unscd. Debs    7.13    7/15/23    70,000    71,243 
                427,543 
Property-Casualty Insurance—.6%             
Ace Capital Trust II,                 
Gtd. Bonds    9.70    4/1/30    75,000    96,753 
AEGON Funding,                 
Gtd. Notes    5.75    12/15/20    140,000    135,767 
AON Capital Trust A,                 
Gtd. Notes    8.21    1/1/27    85,000    94,296 
Assurant,                 
Sr. Notes    6.75    2/15/34    125,000    125,688 
ING Groep,                 
Bonds    5.78    12/29/49    110,000 d    105,544 
MetLife,                 
Sr. Unscd. Notes    5.00    6/15/15    310,000    291,043 
Phoenix Cos.,                 
Sr. Unscd. Notes    6.68    2/16/08    55,000    55,359 
                904,450 

The Fund 17

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Real Estate Investment Trusts—1.4%             
Archstone-Smith Operating Trust,                 
Sr. Unscd. Notes    5.25    5/1/15    150,000    142,403 
Arden Realty,                 
Notes    5.25    3/1/15    125,000    120,400 
Boston Properties,                 
Sr. Notes    5.00    6/1/15    135,000    125,441 
Duke Realty,                 
Sr. Notes    5.88    8/15/12    440,000    442,823 
EOP Operating,                 
Sr. Notes    7.00    7/15/11    195,000    205,340 
ERP Operating,                 
Notes    5.13    3/15/16    80,000    74,875 
ERP Operating,                 
Notes    5.25    9/15/14    40,000    38,289 
ERP Operating,                 
Unscd. Notes    5.38    8/1/16    30,000    28,584 
Federal Realty Investment Trust,                 
Sr. Unscd. Bonds    5.65    6/1/16    75,000    72,380 
Healthcare Realty Trust,                 
Sr. Notes    5.13    4/1/14    155,000    143,744 
Mack-Cali Realty,                 
Bonds    5.80    1/15/16    110,000    105,916 
Mack-Cali Realty,                 
Notes    5.25    1/15/12    100,000    96,801 
Mack-Cali Realty,                 
Unscd. Notes    5.05    4/15/10    70,000    67,899 
National Retail Properties,                 
Sr. Unscd. Notes    6.15    12/15/15    50,000    48,655 
Regency Centers,                 
Gtd. Notes    5.25    8/1/15    45,000    42,284 
Simon Property Group,                 
Notes    4.88    8/15/10    175,000    170,235 
                1,926,069 

  18
    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Residential Mortgage                 
Pass-Through Certificates—1.4%                 
Citigroup Mortgage Loan Trust,                 
Ser. 2005-WF2, Cl. AF7    5.25    8/25/35    270,000    259,466 
First Horizon Alternative Mortgage                 
Securities, Ser. 2004-FA1, Cl. 1A1    6.25    10/25/34    1,243,736    1,245,030 
Nomura Asset Acceptance,                 
Ser. 2005-AP2, Cl. A5    4.98    5/25/35    125,000    119,881 
Nomura Asset Acceptance,                 
Ser. 2005-WF1, Cl. 2A5    5.16    3/25/35    150,000    145,037 
Washington Mutual,                 
Ser. 2005-AR4, Cl. A4B    4.68    4/25/35    200,000    195,031 
                1,964,445 
Retail—.2%                 
Darden Restaurants,                 
Sr. Unscd. Notes    6.00    8/15/35    100,000    86,557 
May Department Stores,                 
Notes    6.65    7/15/24    165,000    163,349 
Owens & Minor,                 
Gtd. Notes    6.35    4/15/16    40,000    39,721 
Yum! Brands,                 
Sr. Notes    6.25    4/15/16    35,000    35,062 
                324,689 
Technology—.0%                 
Freescale Semiconductor,                 
Sr. Notes    6.88    7/15/11    45,000    45,900 
Telecommunications—.8%                 
AT & T,                 
Notes    5.63    6/15/16    105,000    101,467 
Deutsche Telekom International                 
Finance, Gtd. Bonds    8.25    6/15/30    210,000 d    250,069 
New Cingular Wireless Services,                 
Sr. Notes    8.75    3/1/31    75,000    94,547 

The Fund 19

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Telecommunications (continued)                 
Nextel Communications,                 
Sr. Notes, Ser. F    5.95    3/15/14    85,000    83,716 
Nordic Telephone,                 
Bonds    8.25    5/1/16    50,000 c,e    65,603 
Sprint Capital,                 
Gtd. Notes    8.75    3/15/32    265,000    329,764 
Telecom Italia Capital,                 
Notes    4.88    10/1/10    120,000    115,471 
Verizon Global Funding,                 
Notes    7.75    6/15/32    75,000    82,757 
                1,123,394 
Textiles & Apparel—.1%                 
Mohawk Industries,                 
Sr. Unscd. Notes    5.75    1/15/11    105,000    104,330 
Transportation—.2%                 
Ryder System,                 
Notes    5.00    6/15/12    90,000    84,884 
Union Pacific,                 
Notes    3.88    2/15/09    200,000    192,691 
                277,575 
U.S. Government Agencies/                 
Mortgage-Backed—11.0%                 
Federal Home Loan Mortgage Corp.             
3.50%, 9/1/10            53,922    50,720 
Federal National Mortgage Association             
4.50%            2,890,000 f    2,751,800 
5.00%            2,550,000 f    2,482,515 
5.00%            4,570,000 f    4,322,900 
5.50%            3,200,000 f    3,120,750 
4.00%, 5/1/10            314,470    300,809 
5.50%, 9/1/34            186,063    181,050 
Government National Mortgage Association I             
5.50%, 4/15/33—4/15/34            941,049    924,795 
Ser. 2005-90, Cl. A, 3.76%, 9/16/28        223,250    213,435 
Ser. 2005-29, Cl. A, 4.02%, 7/16/27        164,868    158,959 
Ser. 2006-6, Cl. A, 4.05%, 10/16/23        34,803    33,719 
Ser. 2006-3, Cl. A, 4.21%, 1/16/28        273,321    264,204 

  20
    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
U.S. Government Agencies/                 
Mortgage-Backed (continued)                 
Government National Mortgage                 
Association I (continued)                 
Ser. 2006-5, Cl. A, 4.24%, 7/16/29        198,485    191,892 
Ser. 2005-32, Cl. B, 4.39%, 8/16/30        200,000    194,232 
Ser. 2005-87, Cl. A, 4.45%, 3/16/25        148,189    144,276 
Ser. 2004-39, Cl. LC, 5.50%, 12/20/29        390,000    387,916 
                15,723,972 
U.S. Government Securities—4.4%             
U.S. Treasury Bonds    4.50    2/15/36    1,617,000    1,453,659 
U.S. Treasury Bonds    6.25    5/15/30    65,000    73,480 
U.S. Treasury Inflation                 
Protected Securities    3.00    7/15/12    1,447,602 a,g    1,509,235 
U.S. Treasury Notes    2.50    5/31/06    50,000    49,922 
U.S. Treasury Notes    3.00    12/31/06    102,000    100,713 
U.S. Treasury Notes    3.50    2/15/10    125,000    119,019 
U.S. Treasury Notes    3.63    4/30/07    900,000    888,813 
U.S. Treasury Notes    4.50    2/28/11    1,595,000    1,566,341 
U.S. Treasury Notes    4.63    2/29/08    335,000    333,587 
U.S. Treasury Notes    4.75    5/15/14    224,000    219,896 
                6,314,665 
Total Bonds and Notes                 
(cost $50,325,458)                49,024,900 

    Face Amount     
    Covered by     
Options—.0%    Contracts ($)    Value ($) 
Call Options—.0%         
U.S. Treasury Notes, 4.5%,         
2/28/2011 September 2006 @ 101.07    2,000,000    1,172 
Put Options—.0%         
June 2006 5 Year Future,         
May 2006 @ 104.5    900,000    4,641 
Total Options         
(cost $7,666)        5,813 

The Fund 21

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Other Investment—10.7%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Preferred Plus Money Market Fund     
(cost $15,247,000)    15,247,000 h    15,247,000 
 
Investment of Cash Collateral         
for Securities Loaned—1.0%         
Registered Investment Company;         
Dreyfus Institutional Cash Advantage Fund         
(cost $1,515,000)    1,515,000 h    1,515,000 
Total Investments (cost $144,910,881)    108.5%    155,118,698 
Liabilities, Less Cash and Receivables    (8.5%)    (12,177,993) 
Net Assets    100.0%    142,940,705 

  ADR—American Depository Receipts.
EUR—Euro.
a All or a portion of these securities are on loan. At April 30, 2006, the total market value of the fund's securities on
loan is $2,617,649 and the total market value of the collateral held by the fund is $2,695,000, consisting of cash
collateral of $1,515,000 and U.S. Government and agency securities valued at $1,180,000.
b Non-income producing security.
c 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 April 30, 2006, these securities
amounted to $3,404,308 or 2.4% of net assets.
d Variable rate security—interest rate subject to periodic change.
e Principal amount stated in U.S. Dollars unless otherwise noted.
f Purchased on a forward commitment basis.
g Principal amount for accrual purposes is periodically adjusted based on changes in the Consumer Price Index.
h Investment in affiliated money market mutual fund.
Portfolio Summary (Unaudited)†         
 
    Value (%)        Value (%) 
U.S. Government/Agencies    15.4    Banking    5.6 
Money Market Investments    11.7    Manufacturing    5.5 
Diversified Financial Services    10.1    Retail    5.1 
Technology    9.7    Telecommunications    5.0 
Oil & Gas    8.6    Other    24.1 
Health Care    7.7        108.5 

  † Based on net assets.
See notes to financial statements.

22

  STATEMENT OF FINANCIAL FUTURES
April 30, 2006 (Unaudited)

See notes to financial statements.

  STATEMENT OF OPTIONS WRITTEN
April 30, 2006 (Unaudited)
    Face Amount     
    Covered by     
    Contracts ($)    Value ($) 
Put Options         
U.S. Treasury Notes, 4.5%, 2/28/2011     
September 2006 @ 96.164    2,000,000    (3,281) 
June 2006 5 Year Future         
May 2006 @ 104    900,000    (2,110) 
(premiums received $4,803)        (5,391) 

See notes to financial statements.

The Fund 23

  STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—         
See Statement of Investments (including securities     
on loan valued at $2,617,649)—Note 1(c):         
Unaffiliated issuers    128,148,881    138,356,698 
Affiliated issuers    16,762,000    16,762,000 
Receivable for investment securities sold        4,517,591 
Dividends and interest receivable        588,596 
Receivable for shares of Capital Stock subscribed        35,878 
Receivable for futures variation margin—Note 4        1,766 
        160,262,529 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    147,750 
Cash overdraft due to Custodian        98,278 
Payable for open mortgage-backed dollar rolls        14,763,837 
Payable for investment securities purchased        569,954 
Liability for securities on loan—Note 1(c)        1,515,000 
Payable for shares of Capital Stock redeemed        221,614 
Outstanding options written, at value (premiums         
received $4,803)—See Statement of Options Written    5,391 
        17,321,824 
Net Assets ($)        142,940,705 
Composition of Net Assets ($):         
Paid-in capital        327,576,489 
Accumulated undistributed investment income—net    181,688 
Accumulated net realized gain (loss) on investments    (195,114,946) 
Accumulated net unrealized appreciation (depreciation)     
on investments, foreign currency transactions and     
options transactions (including $90,645 net unrealized     
appreciation on financial futures)        10,297,474 
Net Assets ($)        142,940,705 

Net Asset Value Per Share                 
    Class A    Class B    Class C    Class R    Class T 
Net Assets ($)    85,602,705    23,175,388    10,581,602    23,399,525    181,485 
Shares Outstanding    6,510,298    1,765,885    803,558    1,782,110    13,788 
Net Asset Value                     
Per Share ($)    13.15    13.12    13.17    13.13    13.16 

See notes to financial statements.

24

  STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Income:     
Cash dividends (net of $995 foreign taxes withheld at source):     
Unaffiliated issuers    900,564 
Affiliated issuers    965,945 
Interest    378,574 
Income from securities lending    1,876 
Total Income    2,246,959 
Expenses:     
Management fee—Note 3(a)    775,850 
Distribution and service plan fees—Note 3(b)    306,537 
Loan commitment fees—Note 2    983 
Total Expenses    1,083,370 
Less—reduction in management fee     
due to undertaking—Note 3(a)    (116,377) 
Net Expenses    966,993 
Investment Income—Net    1,279,966 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments and foreign currency transactions    8,338,876 
Net realized gain (loss) on financial futures    48,868 
Net realized gain (loss) on forward currency exchange contracts    86,292 
Net realized gain (loss) on options transactions    8,931 
Net Realized Gain (Loss)    8,482,967 
Net unrealized appreciation (depreciation) on investments,     
foreign currency transactions and options transactions     
[including ($2,159) net unrealized (depreciation) on financial futures]    (424,449) 
Net Realized and Unrealized Gain (Loss) on Investments    8,058,518 
Net Increase in Net Assets Resulting from Operations    9,338,484 

See notes to financial statements.

The Fund 25

STATEMENT OF CHANGES IN NET ASSETS

26

a During the period ended April 30, 2006, 660,341 Class B shares representing $8,514,232 were automatically converted to 659,469 Class A shares and during the period ended October 31, 2005, 907,451 Class B shares representing $11,350,315 were automatically converted to 905,198 Class A shares.

See notes to financial statements.

The Fund 27

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.

a    Based on average shares outstanding at each month end. 
b    Exclusive of sales charge. 
c    Not annualized. 
d    The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended April 30, 2006 and 
    October 31, 2005 were 48.91% and 197.43%, respectively. 
See notes to financial statements. 

28

a Based on average shares outstanding at each month end.
b Exclusive of sales charge.
c Not annualized.
d The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended April 30, 2006 and
October 31, 2005 were 48.91% and 197.43%, respectively.

See notes to financial statements.

The Fund 29

FINANCIAL HIGHLIGHTS (continued)

  a Based on average shares outstanding at each month end.
b Exclusive of sales charge.
c Not annualized.
d The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended April 30, 2006 and
October 31, 2005 were 48.91% and 197.43%, respectively.

See notes to financial statements.

30

a Based on average shares outstanding at each month end.
b Not annualized.
c The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended April 30, 2006 and
October 31, 2005 were 48.91% and 197.43%, respectively.

See notes to financial statements.

The Fund 31

FINANCIAL HIGHLIGHTS (continued)

  a Based on average shares outstanding at each month end.
b Exclusive of sales charge.
c Not annualized.
d The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended April 30, 2006 and
October 31, 2005 were 48.91% and 197.43%, respectively.

See notes to financial statements.

32

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Premier Balanced Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series, including the fund. The fund's investment objective is to outperform a hybrid index, 60% of which is the Standard & Poor's 500 Composite Stock Price Index and 40% of which is the Lehman Brothers Aggregate Bond Index. 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.The fund is authorized to issue 50 million shares of $.001 par value Capital Stock in each of the following classes of shares: Class A, Class B, Class C and Class R and 200 million shares of $.001 par value Capital Stock of Class T shares. Class A, Class B, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear a distribution fee and /or service fee. Class A and Class T shares are sold with a front-end sales charge, while Class B and Class C shares are subject to a contingent deferred sales charge ("CDSC"). Class B shares automatically convert to Class A shares after six years. Class R shares are sold primarily to bank trust departments and other financial service providers (including Mellon and its affiliates) acting on behalf of customers having a qualified trust or an investment account or relationship at such institution and bear no distribution fee or service fee. Class R shares are offered without a front-end sales charge or CDSC. Each class of shares has identical rights and privileges, except with respect to distribution and service fees and voting rights on matters affecting a single class. 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 Fund 33

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Effective March 1, 2006, Class A shares of the fund may be purchased at net asset value ("NAV") without payment of a sales charge:

  • By qualified investors who (i) purchase Class A shares directly through the Distributor, and (ii) have, or whose spouse or minor children have, beneficially owned shares and continuously maintained an open account directly through the Distributor in a Dreyfus-managed fund, including the fund, or a Founders Asset Management LLC
    ("Founders") managed fund since on or before February 28, 2006. Founders is a wholly-owned subsidiary of the Distributor.
  • With the cash proceeds from an investor's exercise of employment- related stock options, whether invested in the fund directly or indi- rectly through an exchange from a Dreyfus-managed money market fund, provided that the proceeds are processed through an entity that has entered into an agreement with the Distributor specifically relat- ing to processing stock options. Upon establishing the account in the fund or the Dreyfus-managed money market fund, the investor and the investor's spouse and minor children become eligible to purchase Class A shares of the fund at NAV, whether or not using the proceeds of the employment-related stock options.
  • By members of qualified affinity groups who purchase Class A shares directly through the Distributor, provided that the qualified affinity group has entered into an affinity agreement with the Distributor.

Effective March 1, 2006, Class A and Class T shares of the fund may be purchased at NAV without payment of a sales charge:

  • For Dreyfus-sponsored IRA "Rollover Accounts" with the distrib- ution proceeds from qualified and non-qualified retirement plans or a Dreyfus-sponsored 403(b)(7) plan, provided that, in the case of a qualified or non-qualified retirement plan, the rollover is processed through an entity that has entered into an agreement with the Distributor specifically relating to processing rollovers. Upon estab- lishing the Dreyfus-sponsored IRA rollover account in the fund, the shareholder becomes eligible to make subsequent purchases of Class A or Class T shares of the fund at NAV in such account.

34

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.

(a) Portfolio valuation: Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available, are valued at the official closing price or, if there is no official closing price that day, at the last sales price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Investments in registered investment companies are valued at their NAV. When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its NAV, the portfolio may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR's and futures contracts. For other securities that are fair valued by the Board of Directors, certain factors may be considered such as: 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. Financial futures are valued at the last sales price.

The Fund 35

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate.

Debt securities (excluding short-term investments (other than U.S. Treasury Bills) and financial futures) 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 fund 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 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 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 considered 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. Financial futures and options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primar-

36

ily traded or at the last sales price on the national securities market on each business day. Options traded over-the-counter are priced at the mean between the bid and asked price.

(b) Foreign currency transactions: Each portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolios' books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments.

(c) 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, accretion of discount and amortization of premium on investments is recognized on the accrual basis.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of the Manager, the fund may lend securities to qualified institutions. It is the fund's policy, that at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager.The fund is entitled to

The Fund 37

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

receive all income on securities loaned, in addition to income earned as a result of the lending transaction.Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

(d) Affiliated issuers: Investments in other investment companies advised by the Manager are defined as "affiliated" in the Act.

(e) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid on a quarterly basis. 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.

(f) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The fund has an unused capital loss carryover of $202,797,476 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, $86,388,163 of the carryover expires in fiscal 2009, $72,687,006 expires in fiscal 2010 and $43,722,307 expires in fiscal 2011.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were as follows: ordinary income $4,007,666. The tax character of current year distributions will be determined at the end of the current fiscal year.

38

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 based on prevailing market rates in effect at the time of borrowing. During the period ended April 30, 2006, the fund did not borrow under the Facility.

NOTE 3—Investment Management Fee And Other Transactions With Affiliates:

(a) Pursuant to an Investment Management agreement with the Manager, the Manager provides for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of 1% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, service fees, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds, and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are con-

The Fund 39

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

ducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts).With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

The Manager had agreed from November 1, 2005 through April 4, 2007 to waive receipt of a portion of the fund's management fee, in the amount of .15% of the value of the fund's average daily net assets. The reduction in management fee pursuant to the undertaking, amounted to $116,377 during the period ended April 30, 2006.

During the period ended April 30, 2006, the Distributor retained $2,004 and $7 from commissions earned on sales of the fund's Class A and Class T shares, respectively, and $43,322 and $227 from CDSC on redemptions of the fund's Class B and Class C shares, respectively.

(b) Under separate Distribution Plans (the "Plans") adopted pursuant to Rule 12b-1 under the Act, Class A shares may pay annually up to .25% of the value of their average daily net assets to compensate the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of Class A shares. Class B, Class C and Class T shares may pay the Distributor for distributing their shares at an aggregate annual rate of .75% of the value of the average daily net assets

40

of Class B and Class C shares and .25% of the value of the average daily net assets of Class T shares.The Distributor may pay one or more agents in respect of advertising, marketing and other distribution services for Class T shares and determines the amounts, if any, to be paid to agents and the basis on which such payments are made. Class B, Class C and Class T shares are also subject to a service plan adopted pursuant to Rule 12b-1 (the "Service Plan"), under which Class B, Class C and Class T shares pay the Distributor for providing certain services to the holders of their shares a fee at the annual rate of .25% of the value of the average daily net assets of Class B, Class C and Class T shares. During the period ended April 30, 2006, Class A, Class B, Class C and Class T shares were charged $110,624, $104,637, $41,945 and $235, respectively, pursuant to their respective Plans. During the period ended April 30, 2006 Class B, Class C and Class T shares were charged $34,879, $13,982 and $235, respectively, pursuant to the Service Plan.

Under its terms, the Plans and Service Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not "interested persons" of the Company and who had no direct or indirect financial interest in the operation of or in any agreement related to the Plans or Service Plan.

The components of Due to The Dreyfus Corporation and affiliates in the statement of Assets and Liabilities consist of: management fees $119,894, Rule 12b-1 distribution plan fees $38,811 and shareholder services plan fees $7,029, which are offset against an expense reimbursement currently in effect in the amount of $17,984.

(c) The Company and the Manager have received an exemptive order from the SEC which, among other things, permits the fund to use cash collateral received in connection with lending the fund's securities and other uninvested cash to purchase shares of one or more registered money market mutual funds advised by the Manager in excess of the limitations imposed by the Act.

The Fund 41

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities, financial futures, forward currency exchange contracts and options transactions during the period ended April 30, 2006, amounted to $148,343,626 and $177,558,488, respectively, of which $74,055,244 in purchases and $74,119,320 in sales were from dollar roll transactions.

A mortgage dollar roll transaction involves a sale by the fund of mortgage related securities that it holds with an agreement by the fund to repurchase similar securities at an agreed upon price and date. The securities purchased will bear the same interest rate as those sold, but generally will be collateralized by pools of mortgages with different prepayment histories than those securities sold.

The fund may invest in financial futures contracts in order to gain exposure to or protect against changes in the market.The fund is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments in financial futures require the fund to "mark to market" on a daily basis, which reflects the change in market value of the contracts at the close of each day's trading.Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses.When the contracts are closed, the fund recognizes a realized gain or loss.These investments require initial margin deposits with a broker, which consist of cash or cash equivalents.The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Contracts open at April 30, 2006, are set forth in the Statement of Financial Futures.

The fund may purchase and write (sell) put and call options in order to gain exposure to or to protect against changes in the market.

As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund would incur a gain, to the extent of the premium, if the price of the

42

underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund would realize a loss, if the price of the financial instrument increases between those dates.

As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund would incur a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund would realize a loss, if the price of the financial instrument decreases between those dates.

The following summarizes the fund's call/put options written for the period ended April 30, 2006:

The fund enters into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future.With respect to sales of forward currency exchange contracts, the fund would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract decreases between those dates.With

The Fund 43

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

respect to purchases of forward currency exchange contracts, the fund would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract increases between those dates.The fund is also exposed to credit risk associated with counterparty nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract.At April 30, 2006, there were no forward currency exchange contracts outstanding.

At April 30, 2006, accumulated net unrealized appreciation on investments was $10,207,817, consisting of $12,687,908 gross unrealized appreciation and $2,480,091 gross unrealized depreciation.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 5—Subsequent Event:

Effective on or about June 1, 2006, the fund will no longer offer Class B shares, except in connection with dividend reinvestment and permitted exchanges of Class B shares.

On May 22, 2006, the Board of Directors approved, effective on or about July 1, 2006, to change the fund's investment objective from seeking to outperform a hybrid index, 60% of which is Standard & Poor's 500 Composite Stock Price Index and 40% of which is the Lehman Brothers Aggregate Bond Index to seek total return (consisting of capital appreciation and income).

44

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and

2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of balanced funds (the "Performance Group") and to a larger universe

The Fund 45

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

of funds, consisting of all retail and institutional balanced funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was below the Performance Group and Performance Universe medians for each of the periods.The Manager also presented the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005 and noted that while the relative total returns were generally consistent with the November 30, 2005 relative total returns, the fund's three-month relative total return had improved.

The Board members have been concerned about the fund's performance for some time and had requested that the Manager take steps to improve the fund's performance or take other action. Representatives of the Manager discussed with the Board members that the fund was unsuccessful in receiving necessary shareholder approval in connection with a proposal to merge the fund into another Dreyfus-managed fund in early 2005. They also discussed the Manager's efforts to improve the fund's total return performance, including the portfolio management changes in October 2004, when Emerson Tuttle became the primary portfolio manager of the asset allocation and equity portion of the fund, and in January 2005 when Catherine Powers and Christopher Pellegrino became the portfolio managers of the fixed income portion of the fund. The Board members noted that it had been expected to take some time for the new management to favorably affect performance yet they believed that the fund's relative performance had not shown satisfactory improvement as of December 31, 2005. Pursuant to a request from the Board, the Manager agreed to advise the Board at the next Board meeting of additional steps being taken to improve fund performance.

46

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. The Board members noted that the fund was the only fund in the Expense Group with a "unitary fee" structure.The Board members noted that the fund's expense ratio was lower than the Expense Group and Expense Universe medians.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds"), and by other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund (the "Adviser Accounts" and, collectively with the Similar Funds, the "Similar Accounts").The Manager's representatives explained the nature of the Similar Accounts and the differences, from the Manager's perspective, in providing services to such Similar Accounts as compared to managing and providing services to the fund.The Manager's representatives also reviewed the costs associated with distribution through inter-mediaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure.The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund's management fee. The Board acknowledged that differences in fees paid by the Similar Accounts seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regard-

The Fund 47

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

ing the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted the Manager's soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within the range determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations, and took the following actions:

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.

48

  • While the Board was concerned about the fund's total return per- formance, the Board believed the Manager was seeking to improve it, noting, in particular, the changes to portfolio managers in October 2004 and January 2005, and determined to continue to monitor per- formance and to renew the Management Agreement only for a six- month period, through October 4, 2006. The Board also requested that the Manager provide the Board with an update on the fund's performance and the steps the Manager will be taking to improve it at the next Board meeting.
  • The Board concluded that the fee paid by the fund to the Manager, particularly given the Manager's voluntary assumption of certain expenses of the fund, was reasonable in light of considerations described above.
  • The Board determined that there were no economies of scale to be shared with the fund and that, to the extent it were to be deter- mined, in the future, that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the Fund and its shareholders and that the Management Agreement would be renewed through October 4, 2006.

The Fund 49

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

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, 2005, is available 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.

© 2006 Dreyfus Service Corporation 0342SA0406

  Dreyfus Premier
Large Company
Stock Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
11    Statement of Assets and Liabilities 
12    Statement of Operations 
13    Statement of Changes in Net Assets 
15    Financial Highlights 
20    Notes to Financial Statements 
28    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus Premier
Large Company Stock Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Premier Large Company Stock Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.As always,we urge you to discuss with your financial advisor the potential implications of these possibilities on your investments.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation

May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Sean P. Fitzgibbon, Portfolio Manager

How did Dreyfus Premier Large Company Stock Fund perform relative to its benchmark?

For the six-month period ended April 30, 2006, the fund produced total returns of 10.68% for Class A shares, 10.27% for Class B shares, 10.27% for Class C shares, 10.86% for Class R shares and 10.56% for Class T shares.1 For the same period, the total return of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"), the fund's benchmark, was 9.63% .2

Stocks rose during the reporting period, primarily due to better-than-expected corporate earnings in a growing economy.The fund produced higher returns than its benchmark, mainly as a result of strong individual stock selections in the financials, industrials and energy sectors.

What is the fund's investment approach?

The fund seeks capital appreciation.To pursue its goal, the fund normally invests at least 80% of its assets in stocks of large-cap companies.

The fund invests in a diversified portfolio of large companies that we believe meet our strict standards for value and growth.The fund invests in growth and value stocks, which are chosen through a disciplined investment process that combines computer-modeling techniques, fundamental analysis and risk management.The fund's investment process is designed to provide investors with investment exposure to sector weightings and risk characteristics generally similar to those of the S&P 500 Index.

In addition to identifying what we believe are attractive investment opportunities, our approach has been designed to manage the risks associated with modifying the fund's sector and industry exposure often in an effort to capitalize on those sectors and industries currently in favor.We do not believe that the advantages of attempting to rotate in and out of various industry sectors outweigh the risks of such moves.

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

Instead, our goal is to minimize these risks by being fully invested and remaining industry and sector neutral in relation to the S&P 500 Index.

The result is a broadly diversified portfolio of carefully selected stocks. At the end of the reporting period, the fund held positions in approximately 94 stocks across 11 economic sectors. Our 10 largest holdings accounted for approximately 27% of the portfolio, so that the fund's performance was not overly dependent on any one stock, but was determined by a large number of securities.

What other factors influenced the fund's performance?

Broad-based economic growth supported most of the stock market's industry groups, but produced particularly strong returns in the financials, industrials and energy areas.Among financial stocks, a number of companies benefited from greater activity in the capital markets. Industrial stocks generally benefited from the development of industrial infrastructures in nations formerly considered third-world. Energy companies boosted profits as commodity prices soared due to strong global demand for a limited supply of oil and gas.

The fund's returns in each of these sectors exceeded those of its benchmark. In the financials sector, the fund emphasized brokerage and asset management companies, such as E*TRADE Financial, Goldman Sachs Group and Lehman Brothers Holdings, while de-emphasizing banks and insurers that tend to be more sensitive to changing interest rates. In the industrials area, the fund focused on companies, including Caterpillar, Eaton and Emerson Electric, that are positioned to benefit from industrialization in the emerging markets.The fund's mild emphasis on energy stocks further bolstered its returns, as did our focus on oilfield service companies, such as Weatherford International and GlobalSantaFe. Finally, among consumer cyclical stocks, the fund outperformed its benchmark by avoiding the troubled automotive industry.

In other industry groups, performance compared to the benchmark proved to be mixed. Individual stock selections in the technology sector, such as communications semiconductor maker Broadcom, added

4

modestly to the fund's relative performance. Gains in health care companies providing specialized laboratory products and services, such as Thermo Electron and Fisher Scientific International, helped offset declines in other health care holdings, such as biotechnology firm Amgen. On the other hand, the fund's relatively light exposure to telecommunications services companies prevented it from participating fully in the sector's recent gains, and a pullback in Altria Group, one of the prior reporting period's better performers, undermined returns in the consumer staples area.

What is the fund's current strategy?

We have adopted a more cautious posture regarding the potential impact of high oil prices and rising interest rates on consumer spending. As a result, we have reduced the fund's exposure to retailers and placed greater emphasis on more defensive consumer staples producers. Because of uncertainties concerning the sustainability of high oil prices, we have trimmed the fund's energy exposure to a position that is in line with the benchmark. In the financials sector, we have continued to focus on capital markets businesses while de-emphasizing more interest rate-sensitive banks and insurers. Finally, we have allocated relatively few assets to telecommunications services companies, which face an increasingly competitive environment.

May 15, 2006

1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into
consideration the maximum initial sales charges in the case of Class A and Class T 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. Return figures
provided reflect the absorption of certain fund expenses by The Dreyfus Corporation in effect
through April 4, 2007, at which time it may be extended, terminated or modified. Had these
expenses not been absorbed, the fund's returns would have been lower.
2 SOURCE: LIPPER, INC. — Reflects the monthly reinvestment of dividends and, where
applicable, capital gain distributions.The Standard & Poor's 500 Composite Stock Price Index is
a widely accepted, unmanaged index of U.S. stock market performance.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Large Company Stock Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006         
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 5.48    $ 9.38    $ 9.38    $ 4.18    $ 6.79 
Ending value (after expenses)    $1,016.80    $1,102.70    $1,102.70    $1,108.60    $1,105.60 

COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 5.26    $ 9.00    $ 9.00    $ 4.01    $ 6.51 
Ending value (after expenses)    $1,019.59    $1,015.87    $1,015.87    $1,020.83    $1,018.35 

† Expenses are equal to the fund's annualized expense ratio of 1.05% for Class A, 1.80% for Class B, 1.80% for Class C, .80% for Class R and 1.30% for Class T, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

6
STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
Common Stocks—100.0%    Shares    Value ($) 
Basic Industries—2.5%         
Air Products & Chemicals    6,490    444,695 
Dow Chemical    9,940    403,663 
EI Du Pont de Nemours & Co.    7,730    340,893 
PPG Industries    3,950    265,124 
Smurfit-Stone Container    17,570 a    227,532 
Steel Dynamics    6,780    423,343 
        2,105,250 
Capital Goods—10.4%         
Eaton    6,360    487,494 
Emerson Electric    15,470    1,314,176 
Empresa Brasileira de Aeronautica, ADR    12,800    497,024 
General Electric    71,500    2,473,185 
Ingersoll-Rand, Cl. A    9,690    423,938 
Lockheed Martin    9,400    713,460 
NCR    11,810 a    465,314 
Rockwell Automation    5,730    415,196 
Textron    4,440    399,378 
Thermo Electron    11,310 a    435,887 
United Technologies    15,700    986,117 
        8,611,169 
Consumer Non-Durables—8.6%         
Altria Group    37,350    2,732,526 
Cadbury Schweppes, ADR    31,010 b    1,239,160 
Energizer Holdings    6,550 a    335,033 
PepsiCo    18,250    1,062,880 
Procter & Gamble    30,071    1,750,433 
        7,120,032 
Consumer Services—12.8%         
Advance Auto Parts    13,730    552,221 
Cendant    48,290    841,695 
Circuit City Stores    14,670    421,763 
Coach    11,920 a    393,598 
CVS    30,280    899,922 
Hilton Hotels    37,210    1,002,437 
Home Depot    18,900    754,677 
JC Penney    12,270    803,194 
Kroger    30,320    614,283 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares        Value ($) 
Consumer Services (continued)             
McDonald's    28,380        981,096 
Omnicom Group    5,140        462,651 
Target    24,140        1,281,834 
Time Warner    45,670        794,658 
Walt Disney    30,380        849,425 
            10,653,454 
Energy—11.9%             
Chevron    11,130        679,153 
ConocoPhillips    19,920        1,332,648 
Devon Energy    17,400        1,045,914 
Exxon Mobil    48,730        3,073,888 
GlobalSantaFe    8,230        503,758 
Marathon Oil    5,570        442,035 
Nabors Industries    12,400    a    462,892 
Sempra Energy    22,340        1,028,087 
Weatherford International    24,840    a    1,314,781 
            9,883,156 
Exchange Traded—.2%             
Standard & Poor's Depository Receipts (Tr. Ser. 1)    1,190    b    156,449 
Financial—22.6%             
Allstate    9,640        544,564 
American International Group    12,037        785,414 
Bank of America    51,740        2,582,861 
Capital One Financial    4,800        415,872 
Chubb    10,120        521,585 
CIT Group    15,890        858,219 
Citigroup    29,830        1,490,009 
E*Trade Financial    29,700    a    738,936 
Hartford Financial Services Group    9,590        881,609 
JPMorgan Chase & Co.    61,990        2,813,106 
Lehman Brothers Holdings    3,820        577,393 
Merrill Lynch & Co.    17,280        1,317,773 
Morgan Stanley    15,330        985,719 
PNC Financial Services Group    7,380        527,448 
Prudential Financial    14,120        1,103,195 
Wachovia    31,270        1,871,510 

8

Common Stocks (continued)    Shares    Value ($) 
Financial (continued)         
WR Berkley    3,775    141,261 
Zions Bancorporation    7,090    588,682 
        18,745,156 
Health Care—11.3%         
AmerisourceBergen    17,410    751,242 
Amgen    14,480 a    980,296 
Barr Pharmaceuticals    9,730 a    589,152 
Becton, Dickinson & Co.    6,550    412,912 
Fisher Scientific International    12,110 a    854,360 
IMS Health    15,900    432,162 
Johnson & Johnson    19,330    1,132,931 
Medtronic    13,990    701,179 
Novartis, ADR    15,630    898,881 
Pfizer    28,353    718,181 
WellPoint    12,830 a    910,930 
Wyeth    21,460    1,044,458 
        9,426,684 
Technology—13.8%         
Accenture, Cl. A    14,270    414,829 
Amphenol, Cl. A    9,770    564,706 
Autodesk    12,000 a    504,480 
Broadcom, Cl. A    12,770 a    524,975 
Cisco Systems    85,740 a    1,796,253 
Citrix Systems    10,940 a    436,725 
Hewlett-Packard    42,760    1,388,417 
International Business Machines    16,550    1,362,727 
Microsoft    92,320    2,229,528 
Qualcomm    27,190    1,395,934 
Texas Instruments    25,410    881,981 
        11,500,555 
Transportation—2.4%         
Burlington Northern Santa Fe    10,620    844,609 
Norfolk Southern    13,750    742,500 
US Airways Group    8,870 a    383,716 
        1,970,825 

The Fund 9

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Utilities—3.5%         
AT & T    26,100    684,081 
Constellation Energy Group    11,280    619,498 
Mettler-Toledo International    6,720 a    435,456 
PG & E    30,420    1,211,933 
        2,950,968 
Total Common Stocks         
(cost $70,617,227)        83,123,698 
 
Other Investment—.2%         
Registered Investment Company;         
Dreyfus Institutional Preferred Plus Money Market Fund     
(cost $178,000)    178,000 c    178,000 
 
Investment of Cash Collateral         
for Securities Loaned—2.1%         
Registered Investment Company;         
Dreyfus Institutional Cash Advantage Plus Fund     
(cost $1,698,870)    1,698,870 c    1,698,870 
Total Investments (cost $72,494,097)    102.3%    85,000,568 
Liabilities, Less Cash and Receivables    (2.3%)    (1,895,898) 
Net Assets    100.0%    83,104,670 

  ADR—American Depository Receipts
a Non-income producing security.
b All or a portion of these securities are on loan. At April 30, 2006, the total market value of the fund's securities on
loan is $1,658,549 and the total market value of the collateral held by the fund is $1,698,870.
c Investment in affiliated money market mutual fund.
Portfolio Summary (Unaudited) †         
 
    Value (%)        Value (%) 
Financial    22.6    Utilities    3.5 
Technology    13.8    Basic Industries    2.5 
Consumer Services    12.8    Transportation    2.4 
Energy    11.9    Money Market Investments    2.3 
Health Care    11.3    Exchange Traded    .2 
Capital Goods    10.4         
Consumer Non-Durables    8.6        102.3 

† Based on net assets.
See notes to financial statements.

10

STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—See Statement         
of Investments (including securities on loan,     
valued at $1,658,549)—Note 1(b):         
Unaffiliated issuers    70,617,227    83,123,698 
Affiliated issuers    1,876,870    1,876,870 
Receivable for investment securities sold        699,745 
Dividends and interest receivable        96,620 
Receivable for shares of Capital Stock subscribed    12,888 
        85,809,821 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    88,914 
Cash overdraft due to custodian        133,230 
Liability for securities on loan—Note 1(b)        1,698,870 
Payable for investment securities purchased    677,892 
Payable for shares of Capital Stock redeemed    106,017 
Interest payable—Note 2        228 
        2,705,151 
Net Assets ($)        83,104,670 
Composition of Net Assets ($):         
Paid-in capital        115,710,554 
Accumulated undistributed investment income—net    162,583 
Accumulated net realized gain (loss) on investments    (45,274,938) 
Accumulated net unrealized appreciation         
(depreciation) on investments        12,506,471 
Net Assets ($)        83,104,670 

Net Asset Value Per Share                 
    Class A    Class B    Class C    Class R    Class T 
Net Assets ($)    44,980,044    21,217,288    7,564,355    8,788,793    554,190 
Shares Outstanding    1,954,769    968,920    345,401    377,830    24,400 
Net Asset Value                     
Per Share ($)    23.01    21.90    21.90    23.26    22.71 

See notes to financial statements.

The Fund 11

STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Income:     
Cash dividends:     
Unaffiliated issuers (net of $2,221 foreign taxes withheld at source)    812,404 
Affiliated issuers    339 
Interest    5,719 
Income from securities lending    957 
Total Income    819,419 
Expenses:     
Management fee—Note 3(a)    383,816 
Distribution and service fees—Note 3(b)    219,739 
Loan commitment fees—Note 2    528 
Interest expense—Note 2    228 
Total Expenses    604,311 
Less—reduction in management fee     
due to undertaking—Note 3(a)    (42,646) 
Net Expenses    561,665 
Investment Income—Net    257,754 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    6,192,515 
Net unrealized appreciation (depreciation) on investments    2,232,766 
Net Realized and Unrealized Gain (Loss) on Investments    8,425,281 
Net Increase in Net Assets Resulting from Operations    8,683,035 

See notes to financial statements.

12

STATEMENT OF CHANGES IN NET ASSETS

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Operations ($):         
Investment income—net    257,754    528,250 
Net realized gain (loss) on investments    6,192,515    12,660,023 
Net unrealized appreciation         
(depreciation) on investments    2,232,766    (4,743,230) 
Net Increase (Decrease) in Net Assets         
Resulting from Operations    8,683,035    8,445,043 
Dividends to Shareholders from ($):         
Investment income—net:         
Class A shares    (61,921)    (385,725) 
Class B shares    —    (331,291) 
Class C shares    —    (74,570) 
Class R shares    (33,250)    (121,684) 
Class T shares    —    (6,720) 
Total Dividends    (95,171)    (919,990) 
Capital Stock Transactions ($):         
Net proceeds from shares sold:         
Class A shares    8,065,992    14,696,718 
Class B shares    528,723    782,012 
Class C shares    48,671    449,474 
Class R shares    32,487    75,824 
Class T shares    14,930    15,222 
Dividends reinvested:         
Class A shares    53,727    333,900 
Class B shares    —    294,164 
Class C shares    —    38,412 
Class R shares    26,710    98,131 
Class T shares    —    6,268 
Cost of shares redeemed:         
Class A shares    (7,055,596)    (11,296,199) 
Class B shares    (10,989,507)    (20,497,120) 
Class C shares    (1,658,006)    (3,119,732) 
Class R shares    (866,785)    (2,266,057) 
Class T shares    (130,279)    (123,182) 
Increase (Decrease) in Net Assets         
from Capital Stock Transactions    (11,928,933)    (20,512,165) 
Total Increase (Decrease) in Net Assets    (3,341,069)    (12,987,112) 
Net Assets ($):         
Beginning of Period    86,445,739    99,432,851 
End of Period    83,104,670    86,445,739 
Undistributed investment income—net    162,583    — 

The Fund 13

STATEMENT OF CHANGES IN NET ASSETS (continued)

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Capital Share Transactions:         
Class Aa         
Shares sold    364,045    717,471 
Shares issued for dividends reinvested    2,449    16,591 
Shares redeemed    (317,378)    (550,490) 
Net Increase (Decrease) in Shares Outstanding    49,116    183,572 
Class B a         
Shares sold    25,161    40,084 
Shares issued for dividends reinvested    —    15,096 
Shares redeemed    (520,847)    (1,046,221) 
Net Increase (Decrease) in Shares Outstanding    (495,686)    (991,041) 
Class C         
Shares sold    2,299    22,965 
Shares issued for dividends reinvested    —    1,971 
Shares redeemed    (78,932)    (159,580) 
Net Increase (Decrease) in Shares Outstanding    (76,633)    (134,644) 
Class R         
Shares sold    1,437    3,660 
Shares issued for dividends reinvested    1,205    4,842 
Shares redeemed    (38,512)    (109,291) 
Net Increase (Decrease) in Shares Outstanding    (35,870)    (100,789) 
Class T         
Shares sold    680    754 
Shares issued for dividends reinvested    —    314 
Shares redeemed    (5,914)    (6,085) 
Net Increase (Decrease) in Shares Outstanding    (5,234)    (5,017) 

a During the period ended April 30, 2006, 309,602 Class B shares representing $6,534,798 were automatically
converted to 295,192 Class A shares and during the period ended October 31, 2005, 589,395 Class B shares
representing $11,568,442 were automatically converted to 564,119 Class A shares.
See notes to financial statements.
14

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.

  a Based on average shares outstanding at each month end.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.

See notes to financial statements.

The Fund 15

FINANCIAL HIGHLIGHTS (continued)

a Based on average shares outstanding at each month end.
b Exclusive of sales charge.
c Not annualized.

See notes to financial statements.

16

  a Based on average shares outstanding at each month end.
b Exclusive of sales charge.
c Not annualized.

See notes to financial statements.

The Fund 17

FINANCIAL HIGHLIGHTS (continued)

  a Based on average shares outstanding at each month end.
b Not annualized.

See notes to financial statements.

18

a Based on average shares outstanding at each month end.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.

See notes to financial statements.

The Fund 19

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Premier Large Company Stock Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series, including the fund. The fund's investment objective is to seek capital appreciation. 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.The fund is authorized to issue 450 million shares of $.001 par value Capital Stock.The fund currently offers five classes of shares: Class A (20 million shares authorized), Class B (100 million shares authorized), Class C (100 million shares authorized), Class R (30 million shares authorized) and Class T (200 million shares authorized). Class A, Class B, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear a distribution fee and/or service fee. Class A and Class T shares are sold with a front-end sales charge, while Class B and Class C shares are subject to a contingent deferred sales charge ("CDSC"). Class B shares automatically convert to Class A shares after six years. Class R shares are sold primarily to bank trust departments and other financial service providers (including Mellon Financial and its affiliates) acting on behalf of customers having a qualified trust or an investment account or relationship at such institution and bear no distribution or service fees. Class R shares are offered without a front-end sales charge or CDSC. Each class of shares has identical rights and privileges, except with respect to distribution and service fees and voting rights on matters affecting a single class. 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.

20

Effective March 1, 2006, Class A shares of the fund may be purchased at net asset value ("NAV") without payment of a sales charge:

  • By qualified investors who (i) purchase Class A shares directly through the Distributor, and (ii) have, or whose spouse or minor children have, beneficially owned shares and continuously maintained an open account directly through the Distributor in a Dreyfus-managed fund, including the fund, or a Founders Asset Management LLC
    ("Founders") managed fund since on or before February 28, 2006. Founders is a wholly-owned subsidiary of the Distributor.
  • With the cash proceeds from an investor's exercise of employment- related stock options, whether invested in the fund directly or indi- rectly through an exchange from a Dreyfus-managed money mar- ket fund, provided that the proceeds are processed through an entity that has entered into an agreement with the Distributor specifically relating to processing stock options. Upon establishing the account in the fund or the Dreyfus-managed money market fund, the investor and the investor's spouse and minor children become eligi- ble to purchase Class A shares of the fund at NAV, whether or not using the proceeds of the employment-related stock options.
  • By members of qualified affinity groups who purchase Class A shares directly through the Distributor, provided that the qualified affinity group has entered into an affinity agreement with the Distributor.

Effective March 1, 2006, Class A and Class T shares of the fund may be purchased at NAV without payment of a sales charge:

  • For Dreyfus-sponsored IRA "Rollover Accounts" with the distrib- ution proceeds from qualified and non-qualified retirement plans or a Dreyfus-sponsored 403(b)(7) plan, provided that, in the case of a qualified or non-qualified retirement plan, the rollover is processed through an entity that has entered into an agreement with the Distributor specifically relating to processing rollovers. Upon estab- lishing the Dreyfus-sponsored IRA rollover account in the fund, the shareholder becomes eligible to make subsequent purchases of Class A or Class T shares of the fund at NAV in such account.

The Fund 21

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

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.

(a) Portfolio valuation: Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available, are valued at the official closing price or, if there is no official closing price that day, at the last sale price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Investments in registered investment companies are valued at their NAV. When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its NAV, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR's and futures contracts. For other securities that are fair valued by the Board of Directors, certain factors may be considered such as: 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. Financial futures are valued at the last sales price.

(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from

22

securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of the Manager, the fund may lend securities to qualified institutions. It is the fund's policy, that at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager.The fund is entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction.Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner

(c) Affiliated issuers: Investments in other investment companies advised by the Manager are defined as "affiliated" in the Act.

(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid on a quarterly basis. 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.

(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 pro-

The Fund 23

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

visions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The fund has an unused capital loss carryover of $51,158,621 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, $6,965,882 of the carryover expires in fiscal 2009, $32,648,933 expires in fiscal 2010 and $11,543,806 expires in fiscal 2011.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were as follows: ordinary income $919,990.The tax character of current year distributions will be determined at the end of the current fiscal year.

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 based on prevailing market rates in effect at the time of borrowing.

The average daily amount of borrowings outstanding under the Facility during the period ended April 30, 2006, was approximately $8,700, with a related weighted average annualized interest rate of 5.36% .

NOTE 3—Investment Management Fee And Other Transactions With Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .90% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the

24

expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, service fees, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

The Manager has agreed to waive receipt of a portion of the fund's management fee in the amount of .10% of the value of the fund's average daily net assets from November 1, 2005 through April 4, 2007.The reduction in management fee, pursuant to the undertaking, amounted to $42,646 during the period ended April 30, 2006.

The Fund 25

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

During the period ended April 30, 2006, the Distributor retained $1,546 and $31 from commissions earned on sales of the fund's Class A and Class T shares, respectively, and $37,639 and $63 from CDSC on redemptions of the fund's Class B and C shares, respectively.

(b) Under separate Distribution Plans (the "Plans") adopted pursuant to Rule 12b-1 under the Act, Class A shares may pay annually up to .25% of their average daily net assets to compensate the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of Class A shares. Class B, Class C and Class T shares may pay the Distributor for distributing their shares at an aggregate annual rate of .75% of the value of the average daily net assets of Class B and Class C shares and .25% of the average daily net assets of Class T shares. The Distributor may pay one or more agents in respect of advertising, marketing and other distribution services for Class T shares and determines the amounts, if any, to be paid to agents and the basis on which such payments are made. Class B, Class C and Class T shares are also subject to a service plan adopted pursuant to Rule 12b-1 (the "Service Plan") under which Class B, Class C and Class T shares pay the Distributor for providing services to the holders of their shares, a fee at the annual rate of .25% of the value of the average daily net assets of Class B, Class C and Class T shares. During the period ended April 30, 2006, Class A, Class B, Class C and Class T shares were charged $53,672, $93,734, $29,707 and $740, respectively, pursuant to their respective Plans. Class B, Class C and Class T shares were charged $31,244, $9,902 and $740, respectively, pursuant to the Service Plan.

Under its terms, the Plans and Service Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those directors who are not "interested persons" of the Company and who had no direct or indirect financial interest in the operation of or in any agreement related to the Plans or Service Plan.

26

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $62,033 Rule 12b-1 distribution plan fees $27,216 and shareholder services plan fees $6,053, which are offset against an expense reimbursement currently in effect in the amount of $6,388.

(c) The Company and the Manager have received an exemptive order from the SEC which, among other things, permits the fund to use cash collateral received in connection with lending the fund's securities and other uninvested cash to purchase shares of one or more registered money market mutual funds advised by the Manager in excess of the limitations imposed by the Act.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2006, amounted to $34,918,541 and $46,602,153, respectively.

At April 30, 2006, accumulated net unrealized appreciation on investments was $12,506,471, consisting of $13,229,010 gross unrealized appreciation and $722,539 gross unrealized depreciation.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 5—Subsequent Event:

Effective on or about June 1, 2006, the fund will no longer offer Class B shares, except in connection with dividend reinvestment and permitted exchanges of Class B shares.

The Fund 27

  INFORMATION ABOUT THE REVIEW AND
APPROVAL OF THE FUND'S I N V E S T M E N T
MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and

2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance, Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of retail front-end load large-cap core funds (the "Performance Group") and to a larger universe of funds, consisting of all retail and institutional large-

28

cap core funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was above the Performance Group median for each period (except the 10-year period) and variously above and below the Performance Universe median for the periods. A representative of the Manager noted the portfolio management change in October 2004, when Sean Fitzgibbon became the fund's primary portfolio manager, and that the fund's total return performance for the one- and two-year periods ended November 30, 2005 was higher than the Performance Group and Performance Universe medians.The Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, which were generally consistent with the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper.The Board noted that the fund was the only fund in the Expense Group with a "unitary fee" structure. The Board also noted that the Manager was voluntarily waiving a portion of its management fee in the amount of 0.10% of the value of the fund's average daily net assets until April 4, 2006 (representing 11.1% of the contractual management fee), and that the fund's expense ratio was lower than the Expense Group and Expense Universe medians with or without the voluntary waiver. Representatives of the Manager and the Board members agreed that the Manager's voluntary waiver of a portion of the fund's management fee would remain at 0.10% of the value of the fund's average daily net assets and continue until April 4, 2007.

The Fund 29

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds"), and by other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund (collectively with the Similar Funds, the "Similar Accounts"). The Manager's representatives explained the nature of the Similar Accounts and the differences, from the Manager's perspective, in providing services to such Similar Accounts as compared to managing and providing services to the fund. The Manager's representatives also reviewed the costs associated with distribution through intermediaries. The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure. The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund's management fee.The Board acknowledged that differences in fees paid by the Similar Accounts seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the

30

relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted the Manager's soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • The Board was satisfied with the fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager, particularly given the Manager's continuation of the fee waiver, was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.

The Fund 31

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S
INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

32

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

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, 2005, is available 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.

© 2006 Dreyfus Service Corporation 0318SA0406

  Dreyfus Premier
Limited Term
Income Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
24    Statement of Financial Futures 
24    Statement of Options Written 
25    Statement of Assets and Liabilities 
26    Statement of Operations 
27    Statement of Changes in Net Assets 
29    Financial Highlights 
33    Notes to Financial Statements 
46    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus Premier
Limited Term Income Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Premier Limited Term Income Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board (the "Fed") has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the bond market is more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase interest rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.As always, we urge you to discuss with your financial advisor the potential implications of these possibilities on your investments.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Chris Pellegrino, CFA, Portfolio Manager

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

For the six-month period ended April 30, 2006, the fund achieved total returns of 0.20% for Class A shares, 0.05% for Class B shares, 0.03% for Class C shares and 0.41% for Class R shares.1 The fund's benchmark, the Lehman Brothers U.S.Aggregate Index (the "Index"), produced a total return of 0.56% for the same period.2

After demonstrating remarkable resilience during most of the Federal Reserve Board's (the "Fed") credit tightening campaign, bond yields began to rise, and their prices fell during the reporting period as investors became more concerned about potential inflationary pressures in the strong U.S. economy. The fund produced lower returns than the Index, primarily due to its light exposure to mortgage-backed securities. In addition, unlike the fund's returns, the Index does not reflect fund fees and expenses.

What is the fund's investment approach?

The fund's goal is to provide shareholders with as high a level of current income as is consistent with safety of principal and maintenance of liquidity. To pursue its goal, the fund invests primarily in various types of U.S. and foreign investment-grade bonds, including government bonds, mortgage-backed securities and corporate debt.

When choosing securities for the fund, we conduct extensive research into the credit history and current financial strength of investment-grade bond issuers.We also examine such factors as the long-term outlook for the industry in which the issuer operates, the economy, the bond market and the maturity of the securities. Generally speaking, bonds with longer maturities tend to offer higher yields but also can be expected to fluctuate more in price than their short-term counterparts. Although the portfolio manager may invest in individual bonds

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

with different remaining maturities, the fund's dollar-weighted average portfolio maturity will be no more than 10 years.

What other factors affected the fund's performance?

As it has since June 2004, the Fed continued its effort to forestall inflationary pressures by raising the overnight federal funds rate four times during the reporting period to 4.75% . During much of the Fed's credit tightening campaign, longer-term fixed-income securities held up remarkably well, primarily due to investors' low inflation expectations and robust demand from overseas investors. As a result, the difference between shorter- and longer-term bond yields narrowed considerably. Indeed,at times during the reporting period,shorter-term rates exceeded longer-term yields, a phenomenon known as an "inverted yield curve."

Later in the reporting period, however, longer-term yields began to rise more sharply, eroding longer-maturity bond prices, as investors became more concerned that resurgent energy prices and other inflationary pressures might cause the Fed to raise rates more than previously expected. U.S. Treasury securities proved to be especially sensitive to rising interest rates, while mortgage-backed securities and investment-grade corporate bonds fared somewhat better.

In this changing market environment, the fund benefited early in the reporting period from our "barbell" yield curve strategy, which deemphasized bonds with three- to seven-year maturities in favor of securities at the short and long ends of the market's maturity range. This strategy helped the fund participate more fully in gains as yield differences narrowed. We began to move away from this strategy in January 2006, enabling the fund to avoid the full brunt of weakness among longer-term bonds later in the reporting period.

Our emphasis on corporate bonds with credit ratings toward the lower end of the investment-grade range also helped boost the fund's returns, as lower-rated credits benefited from investors' ample appetite for risk. The fund received strong contributions from high-quality asset-backed securities, commercial mortgage-backed securities, which

4

we regarded as higher-yielding alternatives to the U.S. government agency securities represented in the Index. In addition, the fund realized positive performance from opportunistically investing in Treasury Inflation Protected Securities.

However, the fund's relatively light exposure to mortgage-backed securities detracted from performance. Although we expected mortgage-backed securities to suffer in the rising interest-rate environment, they benefited from unusually low levels of market volatility, helping them produce higher returns than U.S. Treasury securities for the reporting period.

What is the fund's current strategy?

Although the Fed raised short-term interest rates for the sixteenth consecutive time on May 10, after the reporting period's close, we believe that the end of the Fed's credit tightening campaign is in sight. Accordingly, we have begun to position the fund for the next phase of the credit cycle, including setting its average duration in a neutral position and adopting a "bulleted" yield curve strategy. We have continued to emphasize corporate bonds, which we expect to benefit from strong business conditions and healthy balance sheets, and de-emphasize mortgage-backed securities, which began to encounter heightened volatility late in the reporting period.We also have been attentive to opportunities to add to the fund's holdings of asset-backed securities. In our judgment, these are prudent strategies in today's changing market environment.

May 15, 2006

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, yield and investment return fluctuate such that upon
redemption, fund shares may be worth more or less than their original cost.
2 SOURCE: LIPPER INC. — Reflects reinvestment of dividends and, where applicable, capital
gain distributions.The Lehman Brothers U.S. Aggregate Index is a widely accepted, unmanaged
total return index of corporate, U.S. government and U.S. government agency debt instruments,
mortgage-backed securities and asset-backed securities with an average maturity of 1-10 years.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Limited Term Income Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006         
    Class A    Class B    Class C    Class R 
Expenses paid per $1,000 †    $ 4.22    $ 6.70    $ 6.70    $ 2.98 
Ending value (after expenses)    $1,002.00    $1,000.50    $1,000.30    $1,004.10 

  COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
    Class A    Class B    Class C    Class R 
Expenses paid per $1,000 †    $ 4.26    $ 6.76    $ 6.76    $ 3.01 
Ending value (after expenses)    $1,020.58    $1,018.10    $1,018.10    $1,021.82 

† Expenses are equal to the fund's annualized expense ratio of .85% for Class A, 1.35% for Class B, 1.35% for Class C and .60% for Class R, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

  6
STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
    Coupon    Maturity    Principal     
Bonds and Notes—132.6%    Rate (%)    Date    Amount ($)    Value ($) 
Agricultural—.7%                 
Altria,                 
Notes    7.00    11/4/13    280,000    297,371 
Asset-Backed Ctfs./                 
Automobile Receivables—4.4%                 
Capital One Prime Auto Receivables             
Trust, Ser. 2006-1, Cl. A1    4.87    3/15/07    208,268    208,247 
Ford Credit Auto Owner Trust,                 
Ser. 2004-A, Cl. C    4.19    7/15/09    100,000    98,416 
Ford Credit Auto Owner Trust,                 
Ser. 2005-B, Cl. B    4.64    4/15/10    225,000    221,205 
Hyundai Auto Receivables Trust,                 
Ser. 2004-A, Cl. B    3.46    8/15/11    80,000    77,834 
Hyundai Auto Receivables Trust,                 
Ser. 2006-A, Cl. A2    5.13    2/16/09    150,000    150,038 
National City Auto Receivables                 
Trust, Ser. 2004-A, Cl. A3    2.11    7/15/08    69,672    68,962 
Nissan Auto Receivables Owner                 
Trust, Ser. 2003-C, Cl. A4    2.70    12/17/07    249,645    248,024 
Nissan Auto Receivables Owner                 
Trust, Ser. 2006-A, Cl. A1    4.66    2/15/07    103,604    103,595 
USAA Auto Owner Trust,                 
Ser. 2004-1, Cl. A3    2.06    4/15/08    279,497    277,042 
Volkswagen Auto Loan Enhanced                 
Trust, Ser. 2003-1, Cl. A3    1.49    5/21/07    158    158 
WFS Financial Owner Trust,                 
Ser. 2004-4, Cl. C    3.21    5/17/12    135,668    132,716 
WFS Financial Owner Trust,                 
Ser. 2004-3, Cl. B    3.51    2/17/12    84,407    82,700 
Whole Auto Loan Trust,                 
Ser. 2003-1, Cl. A4    2.58    3/15/10    180,000    177,549 
                1,846,486 
Asset-Backed Ctfs./Credit Cards—.8%             
Capital One Multi-Asset Execution                 
Trust, Ser. 2004-C1, Cl. C1    3.40    11/16/09    325,000    320,554 
Asset-Backed Ctfs./                 
Home Equity Loans—10.9%                 
Accredited Mortgage Loan Trust,                 
Ser. 2005-1, Cl. A2A    5.06    4/25/35    32,593 a    32,613 
ACE Securities,                 
Ser. 2005-HE2, Cl. A2A    5.05    4/25/35    52,693 a    52,727 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Asset-Backed Ctfs./                 
Home Equity Loans (continued)                 
ACE Securities,                 
Ser. 2005-HE1, Cl. A2A    5.08    2/25/35    94,336 a    94,404 
Ameriquest Mortgage Securities,                 
Ser. 2003-8, Cl. AF3    4.37    10/25/33    20,882    20,817 
Ameriquest Mortgage Securities,                 
Ser. 2003-11, Cl. AF6    5.14    1/25/34    55,000    54,348 
Bayview Financial Acquisition                 
Trust, Ser. 2005-B, Cl. 1A6    5.21    4/28/39    145,000    138,750 
Bear Stearns Asset-Backed                 
Securities, Ser. 2005-HE3, Cl. 1A1    5.04    3/25/35    100,310 a    100,380 
Bear Stearns Asset-Backed                 
Securities, Ser. 2005-HE2, Cl. 1A1    5.07    2/25/35    41,926 a    41,953 
Centex Home Equity,                 
Ser. 2004-2, Cl. A1    5.13    1/25/25    14,755 a    14,764 
Countrywide Asset-Backed Ctfs.,                 
Ser. 2004-3, Cl. M3    5.83    5/25/34    25,000 a    25,108 
Credit-Based Asset Servicing                 
and Securitization,                 
Ser. 2006-CB1, Cl. AF1    5.46    1/25/36    140,505    139,983 
Credit-Based Asset Servicing                 
and Securitization,                 
Ser. 2005-CB8, Cl. AF5    5.65    12/25/35    140,000    136,575 
Credit-Based Asset Servicing                 
and Securitization,                 
Ser. 2006-CB2, Cl. AF1    5.72    12/25/36    105,209    104,887 
CS First Boston Mortgage                 
Securities, Ser. 2005-FIX1, Cl. A5    4.90    5/25/35    290,000    274,726 
First Franklin Mortgage Loan                 
Asset-Backed Ctfs.,                 
Ser. 2004-FF6, Cl. M2    6.21    7/25/34    200,000 a    204,304 
First NLC Trust,                 
Ser. 2005-3, Cl. AV2    5.19    12/25/35    175,000 a    175,176 
Merrill Lynch Mortgage Investors,                 
Ser. 2005-WMC1, Cl. A2A    5.06    9/25/35    5,496 a    5,500 
Morgan Stanley ABS Capital I,                 
Ser. 2005-WMC2, Cl. A2A    5.04    2/25/35    41,014 a    41,041 
Morgan Stanley Home Equity Loans,                 
Ser. 2006-3, Cl. A1    5.13    4/25/36    80,000 a    80,000 

8

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Asset-Backed Ctfs./                 
Home Equity Loans (continued)                 
Ownit Mortgage Loan Asset-Backed                 
Ctfs., Ser. 2006-2, Cl. A2A    5.04    1/25/37    483,265 a    483,628 
Ownit Mortgage Loan Asset-Backed                 
Ctfs., Ser. 2006-1, Cl. AF1    5.42    12/25/36    224,193    223,095 
Renaissance Home Equity Loan                 
Trust, Ser. 2006-1, Cl. AF2    5.53    5/25/36    205,000    204,585 
Residential Asset Mortgage                 
Products, Ser. 2004-RS9, Cl. AI2    3.68    8/25/26    38,597    38,446 
Residential Asset Mortgage                 
Products, Ser. 2004-RS8, Cl. AI2    3.81    1/25/26    26,374    26,295 
Residential Asset Mortgage                 
Products, Ser. 2006-NC2, Cl. A1    5.04    2/25/36    332,835 a    333,108 
Residential Asset                 
Mortgage Products,                 
Ser. 2005-EFC6, Cl. 1A1    5.05    11/25/35    273,672 a    273,881 
Residential Asset Mortgage                 
Products, Ser. 2005-RS2, Cl. AII1    5.07    2/25/35    98,227 a    98,306 
Residential Asset                 
Mortgage Products,                 
Ser. 2004-RS12, Cl. AII1    5.09    6/25/27    44,512 a    44,545 
Residential Asset Mortgage                 
Products, Ser. 2003-RS9, Cl. MI1    5.80    10/25/33    105,000    103,878 
Residential Asset Securities,                 
Ser. 2005-EMX1, Cl. AI1    5.06    3/25/35    149,057 a    149,166 
Residential Asset Securities,                 
Ser. 2004-KS10, Cl. AI1    5.13    10/25/13    978 a    978 
Residential Asset Securities,                 
Ser. 2002-KS4, Cl. AIIB    5.21    7/25/32    210,479 a    210,727 
Residential Asset Securities,                 
Ser. 2005-EMX3, Cl. M1    5.39    9/25/35    300,000 a    301,083 
Soundview Home Equity Loan Trust,             
Ser. 2005-A, Cl. M5    5.76    4/25/35    125,000 a    126,648 
Specialty Underwriting &                 
Residential Finance,                 
Ser. 2006-BC2, Cl. A2A    5.02    2/25/37    121,435 a    121,435 
Specialty Underwriting &                 
Residential Finance,                 
Ser. 2005-BC1, Cl. A1A    5.07    12/25/35    46,673 a    46,705 

The Fund 9

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Asset-Backed Ctfs./                 
Home Equity Loans (continued)                 
Specialty Underwriting &                 
Residential Finance,                 
Ser. 2004-BC4, Cl. A2A    5.11    10/25/35    31,418 a    31,439 
                4,556,004 
Asset-Backed Ctfs./                 
Manufactured Housing—.7%                 
Green Tree Financial,                 
Ser. 1994-7, Cl. M1    9.25    3/15/20    150,248    156,505 
Origen Manufactured Housing,                 
Ser. 2005-B, Cl. A2    5.25    12/15/18    120,000    118,916 
                275,421 
Auto Manufacturing—.4%                 
DaimlerChrysler,                 
Notes    4.88    6/15/10    65,000    62,787 
DaimlerChrysler,                 
Notes    7.30    1/15/12    110,000    116,699 
                179,486 
Automotive, Trucks & Parts—.2%             
Johnson Controls,                 
Sr. Notes    5.25    1/15/11    75,000    73,664 
Banking—7.0%                 
Bank of Scotland,                 
Bonds    7.00    11/29/49    60,000 a,b    61,162 
Chuo Mitsui Trust & Banking,                 
Sub. Notes    5.51    12/29/49    395,000 a,b    370,083 
Crestar Capital Trust I,                 
Capital Securities    8.16    12/15/26    120,000    126,315 
Industrial Bank of Korea,                 
Sub. Notes    4.00    5/19/14    120,000 a,b    114,208 
NB Capital Trust IV,                 
Capital Securities    8.25    4/15/27    110,000    116,625 
Popular North America,                 
Notes, Ser. F    5.24    12/12/07    215,000 a    215,157 
Resona Bank,                 
Notes    5.85    9/29/49    250,000 a,b    239,206 
Shinsei Finance Cayman,                 
Bonds    6.42    1/29/49    110,000 a,b    107,000 
Sovereign Bancorp,                 
Sr. Notes    4.80    9/1/10    145,000 b    139,739 

10

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Banking (continued)                 
Sovereign Bancorp,                 
Sr. Notes    5.10    3/1/09    35,000 a,b    35,054 
Sumitomo Mitsui Banking,                 
Notes    5.63    7/29/49    265,000 a,b    253,596 
USB Capital IX,                 
Sub. Notes    6.19    4/15/42    175,000 a    173,109 
Washington Mutual,                 
Sub. Notes    4.63    4/1/14    315,000    285,999 
Washington Mutual,                 
Notes    5.37    1/15/10    100,000 a    100,514 
Washington Mutual Preferred                 
Funding Delaware, Bonds, Ser. A-1    6.53    3/29/49    100,000 a,b    97,559 
Wells Fargo Capital,                 
Capital Securities, Ser. B    7.95    12/1/26    60,000 b    62,990 
Wells Fargo Capital,                 
Capital Securities, Ser. I    7.96    12/15/26    115,000    120,812 
Western Financial Bank,                 
Sub. Debs.    9.63    5/15/12    155,000    174,375 
Zions Bancorporation,                 
Sub. Notes    6.00    9/15/15    100,000    99,892 
                2,893,395 
Building & Construction—.1%                 
Centex,                 
Notes    4.75    1/15/08    40,000    39,451 
Chemicals—.5%                 
ICI North America,                 
Debs.    8.88    11/15/06    45,000    45,737 
ICI Wilmington,                 
Notes    4.38    12/1/08    65,000    62,623 
ICI Wilmington,                 
Notes    7.05    9/15/07    30,000    30,456 
Lubrizol,                 
Sr. Notes    4.63    10/1/09    50,000    48,495 
                187,311 
Commercial &                 
Professional Services—.6%                 
Erac USA Finance,                 
Notes    5.40    4/30/09    25,000 a,b    25,025 
Erac USA Finance,                 
Notes    7.35    6/15/08    110,000 b    113,990 

The Fund 11

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Commercial &                 
Professional Services (continued)                 
RR Donnelley & Sons,                 
Notes    4.95    4/1/14    125,000    113,667 
                252,682 
Commercial Mortgage                 
Pass-Through Ctfs.—10.2%                 
Bayview Commercial Asset Trust,                 
Ser. 2004-1, Cl. A    5.32    4/25/34    69,707 a,b    69,838 
Bayview Commercial Asset Trust,                 
Ser. 2006-1A, Cl. M6    5.60    4/25/36    123,131 a,b    123,131 
Bayview Commercial Asset Trust,                 
Ser. 2005-4A, Cl. M5    5.61    1/25/36    98,083 a,b    98,083 
Bear Stearns Commercial Mortgage                 
Securities, Ser. 2005-T18, Cl. A2    4.56    2/13/42    85,000    82,665 
Bear Stearns Commercial Mortgage                 
Securities, Ser. 2004-PWR5, Cl. A3    4.57    7/11/42    110,000    105,299 
Bear Stearns Commercial Mortgage                 
Securities, Ser. 2003-T12, Cl. A4    4.68    8/13/39    200,000    188,684 
Bear Stearns Commercial Mortgage                 
Securities, Ser. 2006-T22, Cl. A2    5.47    4/12/38    125,000    125,379 
Bear Stearns Commercial Mortgage                 
Securities, Ser. 1999-WF2, Cl. A1    6.80    7/15/31    35,709    36,068 
Calwest Industrial Trust,                 
Ser. 2002-CALW, Cl. A    6.13    2/15/17    175,000 b    180,340 
Capco America Securitization,                 
Ser. 1998-D7, Cl. A1B    6.26    10/15/30    700,000    713,220 
Credit Suisse/Morgan Stanley                 
Commercial Mortgage Ctfs.,                 
Ser. 2006-HC1A, Cl. A1    5.09    5/15/23    90,000 a,b    90,000 
Crown Castle Towers,                 
Ser. 2005-1A, Cl. D    5.61    6/15/35    65,000 b    63,272 
DLJ Commercial Mortgage,                 
Ser. 1998-CF2, Cl. A1B    6.24    11/12/31    270,000    275,112 
DLJ Commercial Mortgage,                 
Ser. 1999-CG1, Cl. A1B    6.46    3/10/32    370,000    379,450 
First Union-Lehman Brothers-Bank                 
of America Commercial Mortgage                 
Trust, Ser. 1998-C2, Cl. A2    6.56    11/18/35    257,356    261,848 
Global Signal Trust,                 
Ser. 2006-1, Cl. C    5.71    2/15/36    45,000 b    44,624 

12

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Commercial Mortgage                 
Pass-Through Ctfs. (continued)                 
Global Signal Trust,                 
Ser. 2006-1, Cl. E    6.50    2/15/36    45,000 b    44,960 
J.P. Morgan Commercial Mortgage                 
Finance, Ser. 2000-C10, Cl. A2    7.37    8/15/32    286,684    303,033 
LB Commercial Conduit Mortgage                 
Trust, Ser. 1999-C1, Cl. B    6.93    6/15/31    150,000    156,203 
Mach One Trust Commercial                 
Mortgage-Backed,                 
Ser. 2004-1A, Cl. A1    3.89    5/28/40    198,834 b    193,893 
Morgan Stanley Capital I,                 
Ser. 2006-T21, Cl. A2    5.09    10/12/52    45,000    44,301 
Morgan Stanley Capital I,                 
Ser. 1998-WFI, Cl. A2    6.55    3/15/30    237,873    240,996 
Washington Mutual Asset                 
Securities, Ser. 2003-C1A, Cl. A    3.83    1/25/35    432,902 b    414,277 
                4,234,676 
Diversified Financial Services—7.6%             
Amvescap,                 
Notes    4.50    12/15/09    120,000    115,471 
Amvescap,                 
Notes    5.38    12/15/14    150,000    142,047 
Amvescap,                 
Sr. Notes    5.90    1/15/07    130,000    130,422 
Boeing Capital,                 
Sr. Notes    7.38    9/27/10    175,000    187,627 
CIT,                 
Bonds    5.28    1/30/09    230,000 a    230,490 
Fondo LatinoAmericano de Reservas,             
Notes    3.00    8/1/06    145,000 b    144,199 
Glencore Funding,                 
Notes    6.00    4/15/14    180,000 b    170,002 
Goldman Sachs,                 
Sr. Notes    5.00    1/15/11    160,000 c    156,228 
HSBC Finance,                 
Notes    6.75    5/15/11    55,000    57,704 
International Lease Finance,                 
Notes    4.75    1/13/12    145,000    137,963 
Jefferies,                 
Sr. Notes    7.75    3/15/12    250,000    271,241 

The Fund 13

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Diversified Financial                 
Services (continued)                 
John Deere Capital,                 
Notes, Ser. D    4.88    10/15/10    290,000    282,667 
Lehman Brothers,                 
Notes    5.50    4/4/16    185,000 c    179,052 
Merrill Lynch & Co.,                 
Notes, Ser. C    4.79    8/4/10    140,000 c    136,050 
Mizuho JGB Investment,                 
Bonds, Ser. A    9.87    12/29/49    105,000 a,b    113,640 
MUFG Capital Finance Tier 1,                 
Sr. Sub. Notes    6.35    3/15/49    100,000 a    98,168 
Pemex Finance,                 
Notes, Ser. 2000-1, Cl. A1    9.03    2/15/11    110,000    118,771 
Pemex Finance,                 
Bonds, Ser. 1999-2, Cl. A1    9.69    8/15/09    70,000    75,100 
Residential Capital,                 
Sr. Notes    6.07    11/21/08    320,000 a    322,047 
Tokai Preferred Capital,                 
Bonds, Ser. A    9.98    12/29/49    105,000 a,b    113,827 
                3,182,716 
Diversified Metals & Mining—.6%                 
BHP Billiton Finance USA,                 
Notes    5.00    12/15/10    120,000    117,679 
Falconbridge,                 
Bonds    5.38    6/1/15    25,000    23,297 
Falconbridge,                 
Notes    6.00    10/15/15    105,000    102,240 
                243,216 
Electric Utilities—4.6%                 
Alabama Power,                 
Sr. Notes, Ser. X    3.13    5/1/08    140,000    134,168 
Consolidated Edison Company of New             
York, Debs., Ser. 2002-B    4.88    2/1/13    200,000    190,807 
Dominion Resources,                 
Sr. Notes, Ser. D    5.26    9/28/07    245,000 a    245,278 
Duke Energy,                 
Sr. Notes    5.63    11/30/12    50,000    49,756 
FirstEnergy,                 
Sr. Notes, Ser. B    6.45    11/15/11    115,000    118,728 

14

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Electric Utilities (continued)                 
FPL Group Capital,                 
Debs., Ser. B    5.55    2/16/08    90,000    90,137 
Niagara Mohawk Power,                 
First Mortgage Bonds    7.75    5/15/06    300,000    300,250 
NiSource Finance,                 
Sr. Notes    3.20    11/1/06    40,000    39,573 
NiSource Finance,                 
Sr. Notes    5.34    11/23/09    45,000 a    45,194 
NiSource Finance,                 
Sr. Notes    7.88    11/15/10    110,000    118,938 
Ohio Power,                 
Sr. Notes, Ser. G    6.60    2/15/33    20,000    20,326 
Peco Energy,                 
First Mortgage Bonds    3.50    5/1/08    135,000    130,198 
Pepco,                 
Notes    5.50    8/15/07    285,000    284,956 
PP&L Capital Funding,                 
Notes, Ser. D    8.38    6/15/07    60,000    61,526 
Southern California Edison,                 
First Mortgage Bonds,                 
Ser. 2004-A    5.00    1/15/14    70,000    66,748 
                1,896,583 
Environmental Control—.4%                 
Oakmont Asset Trust,                 
Notes    4.51    12/22/08    155,000 b    150,047 
Republic Services,                 
Notes    6.09    3/15/35    35,000    32,925 
                182,972 
Food & Beverages—.8%                 
HJ Heinz,                 
Notes    6.43    12/1/20    150,000 b    152,517 
Safeway,                 
Sr. Notes    4.95    8/16/10    135,000    130,866 
Tyson Foods,                 
Sr. Notes    6.60    4/1/16    60,000    58,965 
                342,348 
Health Care—1.0%                 
Quest Diagnostics,                 
Sr. Notes    5.13    11/1/10    70,000    68,518 

The Fund 15

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Health Care (continued)                 
Teva Pharmaceutical Finance,                 
Sr. Notes    6.15    2/1/36    115,000    106,597 
UnitedHealth,                 
Sr. Notes    5.25    3/15/11    150,000    148,245 
WellPoint,                 
Notes    5.00    1/15/11    75,000    73,141 
                396,501 
Lodging & Entertainment—.3%                 
Carnival,                 
Sr. Notes    3.75    11/15/07    140,000    136,558 
Manufacturing—.5%                 
Tyco International,                 
Notes    5.80    8/1/06    115,000    115,112 
Tyco International,                 
Notes    6.88    1/15/29    100,000    103,139 
                218,251 
Media—1.7%                 
Clear Channel Communications,                 
Sr. Notes    7.65    9/15/10    175,000    184,511 
Comcast Cable Communications,                 
Sr. Notes    6.75    1/30/11    250,000 c    260,355 
Media General,                 
Notes    6.95    9/1/06    55,000    55,136 
Univision Communications,                 
Sr. Notes    2.88    10/15/06    135,000    133,402 
Viacom,                 
Sr. Notes    5.75    4/30/11    80,000 b    79,530 
                712,934 
Oil & Gas—.9%                 
Buckeye Partners,                 
Notes    5.30    10/15/14    145,000    137,928 
Enbridge Energy Partners,                 
Sr. Notes    6.30    12/15/34    130,000    121,994 
ONEOK,                 
Notes    5.20    6/15/15    135,000    127,093 
                387,015 

  16
    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Paper & Forest Products—.6%                 
International Paper,                 
Notes    5.85    10/30/12    65,000    64,791 
Temple-Inland,                 
Bonds    6.63    1/15/18    120,000    121,718 
Weyerhaeuser,                 
Notes    6.75    3/15/12    60,000    62,177 
                248,686 
Property-Casualty Insurance—1.3%             
Aegon Funding,                 
Sr. Notes    5.75    12/15/20    140,000    135,767 
American International,                 
Notes    5.05    10/1/15    120,000 b    113,190 
AON,                 
Capital Securities    8.21    1/1/27    115,000    127,577 
Assurant,                 
Sr. Notes    6.75    2/15/34    35,000    35,193 
ING Groep,                 
Bonds    5.78    12/29/49    90,000 a    86,354 
Prudential Financial,                 
Sr. Notes    4.10    11/15/06    45,000 a    44,742 
                542,823 
Real Estate Investment Trusts—5.2%             
Archstone-Smith Operating Trust,                 
Sr. Notes    5.25    5/1/15    175,000    166,137 
Arden Realty,                 
Notes    5.20    9/1/11    140,000    138,443 
Arden Realty,                 
Notes    5.25    3/1/15    25,000    24,080 
Boston Properties,                 
Sr. Notes    6.25    1/15/13    140,000    143,330 
Brandywine Operating Partnership,             
Sub. Notes    5.41    4/1/09    75,000 a    75,034 
Duke Realty,                 
Sr. Notes    5.25    1/15/10    300,000    295,171 
EOP Operating,                 
Notes    5.59    10/1/10    45,000 a    45,424 

The Fund 17

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Real Estate Investment                 
Trusts (continued)                 
EOP Operating,                 
Sr. Notes    7.00    7/15/11    135,000    142,159 
ERP Operating,                 
Notes    5.13    3/15/16    75,000    70,195 
Healthcare Realty Trust,                 
Sr. Notes    5.13    4/1/14    200,000    185,476 
HRPT Properties Trust,                 
Sr. Notes    5.52    3/16/11    100,000 a    100,292 
Mack-Cali Realty,                 
Notes    5.05    4/15/10    100,000    96,999 
Mack-Cali Realty,                 
Sr. Notes    5.13    1/15/15    70,000    65,148 
Mack-Cali Realty,                 
Notes    5.25    1/15/12    35,000    33,880 
National Retail Properties,                 
Sr. Notes    6.15    12/15/15    100,000    97,311 
Regency Centers,                 
Sr. Notes    5.25    8/1/15    105,000    98,663 
Simon Property,                 
Notes    4.60    6/15/10    50,000    48,217 
Simon Property,                 
Notes    5.63    8/15/14    135,000    132,013 
Socgen Real Estate,                 
Bonds, Ser. A    7.64    12/29/49    200,000 a,b    205,386 
                2,163,358 
Residential Mortgage                 
Pass-Through Ctfs.—3.9%                 
American General Mortgage Loan                 
Trust, Ser. 2006-1, Cl. A1    5.75    12/25/35    101,986 b    102,058 
Banc of America Mortgage                 
Securities, Ser. 2004-F, Cl. 2A7    4.15    7/25/34    289,009 a    280,229 
Citigroup Mortgage Loan Trust,                 
Ser. 2005-WF1, Cl. A5    5.01    2/25/35    115,000    110,748 
Impac Secured Assets CMN Owner                 
Trust, Ser. 2006-1, Cl. 2A1    5.31    5/25/36    69,811 a    69,811 
Nomura Asset Acceptance,                 
Ser. 2005-AP1, Cl. 2A5    4.86    2/25/35    285,000    272,724 
Nomura Asset Acceptance,                 
Ser. 2005-AP2, Cl. A5    4.98    5/25/35    190,000    182,218 

18

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 

Residential Mortgage
Pass-Through Ctfs. (continued)
Nomura Asset Acceptance,                 
Ser. 2005-WF1, Cl. 2A5    5.16    3/25/35    105,000    101,526 
Opteum Mortgage Acceptance,                 
Ser. 2005-1, Cl. A2    5.10    2/25/35    63,235 a    63,265 
Washington Mutual,                 
Ser. 2004-AR7, Cl. A6    3.94    7/25/34    150,000 a    144,058 
Washington Mutual,                 
Ser. 2003-AR10, Cl. A6    4.07    10/25/33    125,000 a    121,390 
Washington Mutual,                 
Ser. 2004-AR9, Cl. A7    4.19    8/25/34    195,000 a    187,629 
                1,635,656 
Retail—.7%                 
CVS,                 
Notes    4.00    9/15/09    60,000    57,249 
Darden Restaurants,                 
Sr. Notes    4.88    8/15/10    115,000    111,027 
Owens & Minor,                 
Sr. Notes    6.35    4/15/16    35,000    34,756 
Yum! Brands,                 
Sr. Notes    8.88    4/15/11    90,000    101,201 
                304,233 
State Government—.8%                 
Erie County Tobacco Asset                 
Securitization, Asset-Backed                 
Bonds, Ser. E    6.00    6/1/28    60,000    58,634 
Tobacco Settlement Authority of                 
Iowa, Asset-Backed Bonds, Ser. A    6.50    6/1/23    275,000    269,266 
                327,900 
Technology—.6%                 
Cooper Industries,                 
Notes    5.25    11/15/12    270,000 b    263,564 
Telecommunications—3.2%                 
Cisco Systems,                 
Notes    4.85    2/20/09    135,000 a,c    135,233 
Deutsche Telekom International                 
Finance, Notes    5.12    3/23/09    235,000 a    235,249 
France Telecom,                 
Notes    7.75    3/1/11    90,000 a    98,009 

The Fund 19

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Coupon    Maturity    Principal     
Bonds and Notes (continued)    Rate (%)    Date    Amount ($)    Value ($) 
Telecommunications (continued)                 
New Cingular Wireless Services,                 
Sr. Notes    7.88    3/1/11    170,000    186,241 
Royal KPN,                 
Sr. Notes    8.38    10/1/30    190,000    206,441 
Sprint Capital,                 
Notes    8.75    3/15/32    170,000    211,547 
Verizon Global Funding,                 
Sr. Notes    4.88    8/15/07    100,000 a    100,054 
Verizon Wireless Capital,                 
Notes    5.38    12/15/06    170,000    170,112 
                1,342,886 
Transportation—.5%                 
FedEx,                 
Notes    3.50    4/1/09    70,000    66,524 
Ryder System,                 
Notes    5.00    6/15/12    45,000    42,442 
Union Pacific,                 
Notes    6.50    4/15/12    80,000    83,216 
                192,182 
U.S. Government Agencies/                 
Mortgage-Backed—36.8%                 
Federal Home Loan Mortgage Corp.:             
4.00%, 10/1/09            77,396    74,832 
4.50%, 10/1/09            125,251    122,706 
5.00%, 6/1/33            372,406    353,436 
6.00%, 6/1/12—2/1/14            38,582    38,914 
6.50%, 3/1/11—9/1/29            62,608    63,756 
7.00%, 3/1/12            22,912    23,485 
7.50%, 12/1/25—1/1/31            54,541    56,984 
8.00%, 10/1/19—10/1/30            26,486    27,983 
8.50%, 7/1/30            2,375    2,558 
9.00%, 8/1/30            4,815    5,248 
Federal National Mortgage Association:             
4.50%            1,800,000 d    1,713,924 
5.00%            2,625,000 d    2,516,172 
5.50%            3,450,000 d    3,360,906 
6.00%            455,000 d    460,260 
4.00%, 5/1/10            209,647    200,540 
4.50%, 6/1/10—8/1/18            902,028    862,812 
5.00%, 7/1/11—10/1/11            206,808    203,706 
5.50%, 12/1/24—1/1/34            1,026,565    1,002,665 
6.00%, 9/1/13—2/1/17            182,506    184,921 

20

    Principal     
Bonds and Notes (continued)    Amount ($)    Value ($) 
U.S. Government Agencies/         
Mortgage-Backed (continued)         
Federal National Mortgage         
Association (continued):         
7.00%, 7/1/15—5/1/31    46,927    48,340 
7.50%, 3/1/12—3/1/31    55,159    57,424 
8.00%, 5/1/13—3/1/31    27,928    29,617 
Grantor Trust,         
Ser. 2001-T11, Cl. B,         
5.50%, 9/25/11    210,000    211,254 
Government National Mortgage Association I:     
6.00%, 1/15/29    61,584    61,930 
6.50%, 9/15/08—6/15/29    80,973    83,486 
7.00%, 8/15/25—9/15/31    73,576    76,440 
7.50%, 12/15/26—1/15/31    20,431    21,452 
8.00%, 1/15/30—10/15/30    20,632    22,063 
8.50%, 4/15/25—9/15/30    10,772    11,697 
9.00%, 10/15/27    11,608    12,631 
9.50%, 2/15/25    7,571    8,363 
Ser. 2004-43, Cl. A, 2.82%, 12/16/19    265,704    252,634 
Ser. 2004-23, Cl. B, 2.95%, 3/16/19    250,000    237,039 
Ser. 2004-57, Cl. A, 3.02%, 1/16/19    169,221    161,261 
Ser. 2004-97, Cl. AB, 3.08%, 4/16/22    246,603    235,076 
Ser. 2003-64, Cl. A, 3.09%, 4/16/24    71,365    69,906 
Ser. 2004-9, Cl. A, 3.36%, 8/16/22    240,097    228,620 
Ser. 2004-25, Cl. AC, 3.38%, 1/16/23    326,566    312,285 
Ser. 2004-77, Cl. A, 3.40%, 3/16/20    243,118    233,357 
Ser. 2004-67, Cl. A, 3.65%, 9/16/17    179,739    174,620 
Ser. 2005-50, Cl. A, 4.02%, 10/16/26    117,611    113,861 
Ser. 2005-9, Cl. A, 4.03%, 5/16/22    119,620    116,016 
Ser. 2005-12, Cl. A, 4.04%, 5/16/21    87,000    84,439 
Ser. 2005-42, Cl. A, 4.05%, 7/16/20    125,152    121,704 
Ser. 2004-51, Cl. A, 4.15%, 2/16/18    337,789    328,676 
Ser. 2006-9, Cl. A, 4.20%, 8/16/26    299,317    288,824 
Ser. 2006-3, Cl. A, 4.21%, 1/16/28    99,389    96,074 
Ser. 2005-67, Cl. A, 4.22%, 6/16/21    34,152    33,289 
Ser. 2006-5, Cl. A, 4.24%, 7/16/29    272,917    263,852 
Ser. 2005-59, Cl. A, 4.39%, 5/16/23    65,314    63,788 
        15,335,826 
U.S. Government Securities—24.1%         
U.S. Treasury Bonds:         
4.50%, 2/15/36    920,000    827,066 
5.25%, 11/15/28    825,000    819,456 
7.25%, 5/15/16    470,000    547,917 

The Fund 21

STATEMENT OF INVESTMENTS (Unaudited) (continued)

    Principal     
Bonds and Notes (continued)    Amount ($)    Value ($) 
U.S. Government Securities (continued)     
U.S. Treasury Inflation Protected Securities:     
2.00%, 1/15/16    855,898 e    827,805 
3.00%, 7/15/12    469,642 c,e    489,637 
U.S. Treasury Notes:         
4.75%, 5/15/14    95,000 c    93,260 
4.88%, 4/30/11    6,420,000    6,408,970 
        10,014,111 
Total Bonds and Notes         
(cost $56,268,332)        55,226,820 
    Face Amount     
    Covered by     
Options—.1%    Contracts ($)    Value ($) 
Call Options—.0%         
12-Month Euribor Interest Swap,         
March 2007 @ 4.488    870,000    1,967 
U.S. Treasury Notes, 4.5%,         
2/15/2016, May 2006 @ 99.53125    1,825,000    71 
        2,038 
Put Options—.1%         
6-Month Euribor Interest Swap,         
January 2007 @ 3.56    1,000,000    23,980 
June 2006 5 Year Future,         
May 2006 @ 104.5    800,000    4,125 
        28,105 
Total Options         
(cost $36,022)        30,143 
 
Other Investment—4.0%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Preferred         
Plus Money Market Fund         
(cost $1,671,000)    1,671,000 f    1,671,000 
    Principal     
Short-Term Investment—.1%    Amount ($)    Value ($) 
Agency Discount Note;         
Federal National Mortgage         
Association, 4.65%, 6/7/06         
(cost $49,761)    50,000 g    49,761 

22

Investment of Cash Collateral         
for Securities Loaned—2.4%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Cash         
Advantage Plus Fund         
(cost $992,219)    992,219 f    992,219 
Total Investments (cost $59,017,334)    139.2%    57,969,943 
Liabilities, Less Cash and Receivables    (39.2%)    (16,322,375) 
Net Assets    100.0%    41,647,568 

a Variable rate security—interest rate subject to periodic change.
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 April 30, 2006, these securities
amounted to $4,549,990 or 10.9% of net assets.
c All or a portion of these securities are on loan. At April 30, 2006, the total market value of the fund's securities on
loan is $1,305,804 and the total market value of the collateral held by the fund is $1,346,219, consisting of cash
collateral of $992,219 and U.S. Government and Agency securities valued at $354,000.
d Purchased on a forward commitment basis.
e Principal amount for accrual purposes is periodically adjusted based on changes in the Consumer Price Index.
f Investment in affiliated money market mutual fund.
g Held by a broker as collateral for open financial futures positions.
Portfolio Summary (Unaudited) †         
 
    Value (%)        Value (%) 
Corporate Bonds    40.0    Short-Term/     
U.S. Government Agencies/        Money Market Investments    6.5 
Mortgage-Backed    36.8    State Government    .8 
Asset/Mortgage-Backed    30.9    Futures/Options/Swaps    .2 
U.S. Government    24.1        139.3 

† Based on net assets.
See notes to financial statements.

The Fund 23

  STATEMENT OF FINANCIAL FUTURES
April 30, 2006 (Unaudited)

See notes to financial statements.

STATEMENT OF OPTIONS WRITTEN
April 30, 2006 (Unaudited)
    Face Amount     
    Covered by     
    Contracts ($)    Value ($) 
Call Options:         
U.S. Treasury Notes, 4.5%, 2/15/2016,         
May 2006 @ 100.742188    3,650,000    285 
U.S. Treasury Notes, 4.5%, 2/15/2016,         
June 2006 @ 98.074219    1,250,000    1,074 
Put Options:         
U.S. Treasury Notes, 4.5%, 2/15/2016,         
June 2006 @ 94.050781    1,250,000    3,809 
12-Month Euribor Interest Swap,         
March 2007 @ 5.973    870,000    4,850 
June 2006 5 Year Future,         
May 2006 @ 103.5    800,000    750 
June 2006 5 Year Future,         
May 2006 @ 104    800,000    1,875 
(Premiums received $28,415)        12,643 

See notes to financial statements.

24

STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—See Statement of Investments     
(including securities on loan, valued at $1,305,804)—Note 1(c):     
Unaffiliated issuers    56,354,115    55,306,724 
Affiliated issuers    2,663,219    2,663,219 
Cash denominated in foreign currencies    430    421 
Receivable for investment securities sold        6,957,786 
Dividends and interest receivable        404,188 
Unrealized appreciation on swap contracts—Note 4        73,318 
Receivable for shares of Capital Stock subscribed        23,987 
        65,429,643 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    35,317 
Cash overdraft due to Custodian        48,516 
Payable for investment securities purchased        14,072,824 
Payable for open mortgage-backed dollar rolls—Note 4    8,540,869 
Liability for securities on loan—Note 1(c)        992,219 
Unrealized depreciation on swap contracts—Note 4        40,814 
Payable for shares of Capital Stock redeemed        34,369 
Outstanding options written, at value (premiums         
received $28,415)—See Statement of Options Written    12,643 
Payable to broker from swap transactions—Note 4        82 
Payable for futures variation margin—Note 4        4,422 
        23,782,075 
Net Assets ($)        41,647,568 
Composition of Net Assets ($):         
Paid-in capital        43,469,039 
Accumulated distributions in excess of investment income—net    (53,897) 
Accumulated net realized gain (loss) on investments    (785,716) 
Accumulated net unrealized appreciation (depreciation) on investments,     
foreign currency transactions, options transactions and swap transactions     
(including $17,265 net unrealized appreciation on financial futures)    (981,858) 
Net Assets ($)        41,647,568 

Net Asset Value Per Share                 
    Class A    Class B    Class C    Class R 
Net Assets ($)    15,848,523    8,592,252    6,579,960    10,626,833 
Shares Outstanding    1,467,292    792,966    615,977    983,989 
Net Asset Value Per Share ($)    10.80    10.84    10.68    10.80 

See notes to financial statements.

The Fund 25

  STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Income:     
Interest    1,072,192 
Cash dividends;     
Affiliated issuers    2,453 
Income from securities lending    563 
Total Income    1,075,208 
Expenses:     
Management fee—Note 3(a)    134,628 
Distribution and service fees—Note 3(b)    85,343 
Loan commitment fees—Note 2    287 
Total Expenses    220,258 
Investment Income—Net    854,950 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments and foreign currency transactions    (876,592) 
Net realized gain (loss) on financial futures    101,360 
Net realized gain (loss) on options transactions    (6,516) 
Net realized gain (loss) on swap transactions    13,999 
Net realized gain (loss) on forward currency exchange contracts    103,312 
Net Realized Gain (Loss)    (664,437) 
Net unrealized appreciation (depreciation) on investments, foreign     
currency transactions, options transactions and swap transactions     
[including ($22,297) net unrealized (depreciation) on financial futures]    (66,473) 
Net Realized and Unrealized Gain (Loss) on Investments    (730,910) 
Net Increase in Net Assets Resulting from Operations    124,040 

See notes to financial statements.

  26

STATEMENT OF CHANGES IN NET ASSETS

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Operations ($):         
Investment income—net    854,950    1,722,973 
Net realized gain (loss) on investments    (664,437)    569,229 
Net unrealized appreciation         
(depreciation) on investments    (66,473)    (1,856,316) 
Net Increase (Decrease) in Net Assets         
Resulting from Operations    124,040    435,886 
Dividends to Shareholders from ($):         
Investment income—net:         
Class A shares    (336,488)    (658,622) 
Class B shares    (182,960)    (431,596) 
Class C shares    (128,815)    (258,788) 
Class R shares    (243,332)    (456,688) 
Net realized gain on investments:         
Class A shares    (207,472)    (222,110) 
Class B shares    (136,745)    (189,155) 
Class C shares    (96,730)    (108,849) 
Class R shares    (148,257)    (151,727) 
Total Dividends    (1,480,799)    (2,477,535) 
Capital Stock Transactions ($):         
Net proceeds from shares sold:         
Class A shares    2,107,106    5,663,294 
Class B shares    618,938    1,182,035 
Class C shares    694,611    1,482,037 
Class R shares    187,494    849,558 
Dividends reinvested:         
Class A shares    276,958    474,884 
Class B shares    217,076    403,292 
Class C shares    153,086    255,034 
Class R shares    228,044    353,603 
Cost of shares redeemed:         
Class A shares    (3,317,606)    (7,455,608) 
Class B shares    (3,797,226)    (6,405,479) 
Class C shares    (2,048,584)    (3,250,521) 
Class R shares    (1,237,726)    (2,147,487) 
Increase (Decrease) in Net Assets from         
Capital Stock Transactions    (5,917,829)    (8,595,358) 
Total Increase (Decrease) in Net Assets    (7,274,588)    (10,637,007) 
Net Assets ($):         
Beginning of Period    48,922,156    59,559,163 
End of Period    41,647,568    48,922,156 
Distributions in excess of investment income—net    (53,897)    (17,252) 

The Fund 27

STATEMENT OF CHANGES IN NET ASSETS (continued)

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Capital Share Transactions:         
Class A a         
Shares sold    191,497    497,578 
Shares issued for dividends reinvested    25,186    41,795 
Shares redeemed    (300,890)    (655,500) 
Net Increase (Decrease) in Shares Outstanding    (84,207)    (116,127) 
Class B a         
Shares sold    55,719    103,892 
Shares issued for dividends reinvested    19,656    35,378 
Shares redeemed    (343,720)    (562,088) 
Net Increase (Decrease) in Shares Outstanding    (268,345)    (422,818) 
Class C         
Shares sold    64,177    131,899 
Shares issued for dividends reinvested    14,065    22,694 
Shares redeemed    (188,074)    (288,381) 
Net Increase (Decrease) in Shares Outstanding    (109,832)    (133,788) 
Class R         
Shares sold    17,007    75,580 
Shares issued for dividends reinvested    20,736    31,128 
Shares redeemed    (113,016)    (188,772) 
Net Increase (Decrease) in Shares Outstanding    (75,273)    (82,064) 

  a During the period ended April 30, 2006, 97,907 Class B shares representing $1,081,379 were automatically
converted to 98,203 Class A shares and during the period ended October 31, 2005, 212,314 Class B shares
representing $2,419,649 were automatically converted to 212,954 Class A shares.
See notes to financial statements.
  28

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.

a As required, effective November 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began accreting discount on fixed income securities on a scientific basis and
including paydown gains and losses in interest income.The effect of these changes for the period ended October 31,
2002 was to increase net investment income per share and decrease net realized and unrealized gain (loss) on
investments per share by less than $.01 and increase the ratio of net investment income to average net assets from
4.43% to 4.44%. Per share data and ratios/supplemental data for periods prior to November 1, 2001 have not
been restated to reflect these changes in presentation.
b Based on average shares outstanding at each month end.
c Amount represents less than $.01 per share.
d Exclusive of sales charge.
e Not annualized.
f Annualized.
g The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended April 30, 2006,
October 31, 2005 and October 31, 2004 were 109.69%, 188.33% and 144.28%, respectively.

See notes to financial statements.

The Fund 29

FINANCIAL HIGHLIGHTS (continued)

a As required, effective November 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on fixed income securities on a scientific basis and including paydown gains and losses in interest income.The effect of these changes for the period ended October 31, 2002 was to increase net investment income per share and decrease net realized and unrealized gain (loss) on investments per share by less than $.01 and increase the ratio of net investment income to average net assets from 3.91% to 3.93% . Per share data and ratios/supplemental data for periods prior to November 1, 2001 have not been restated to reflect these changes in presentation. b Based on average shares outstanding at each month end. c Amount represents less than $.01 per share. d Exclusive of sales charge. e Not annualized. f Annualized. g The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended April 30, 2006, October 31, 2005 and October 31, 2004 were 109.69%, 188.33% and 144.28%, respectively.

See notes to financial statements.

30

a As required, effective November 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began accreting discount on fixed income securities on a scientific basis and
including paydown gains and losses in interest income.The effect of these changes for the period ended October 31,
2002 was to increase net investment income per share and decrease net realized and unrealized gain (loss) on
investments per share by less than $.01 and increase the ratio of net investment income to average net assets from
3.88% to 3.90%. Per share data and ratios/supplemental data for periods prior to November 1, 2001 have not
been restated to reflect these changes in presentation.
b Based on average shares outstanding at each month end.
c Amount represents less than $.01 per share.
d Exclusive of sales charge.
e Not annualized.
f Annualized.
g The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended April 30, 2006,
October 31, 2005 and October 31, 2004 were 109.69%, 188.33% and 144.28%, respectively.

See notes to financial statements.

The Fund 31

FINANCIAL HIGHLIGHTS (continued)

a As required, effective November 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began accreting discount on fixed income securities on a scientific basis and
including paydown gains and losses in interest income.The effect of these changes for the period ended October 31,
2002 was to increase net investment income per share and decrease net realized and unrealized gain (loss) on
investments per share by less than $.01 and increase the ratio of net investment income to average net assets from
4.79% to 4.80%. Per share data and ratios/supplemental data for periods prior to November 1, 2001 have not
been restated to reflect these changes in presentation.
b Based on average shares outstanding at each month end.
c Not annualized.
d Annualized.
e The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended April 30, 2006,
October 31, 2005 and October 31, 2004 were 109.69%, 188.33% and 144.28%, respectively.
See notes to financial statements.

32

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Premier Limited Term Income Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series, including the fund.The fund's investment objective is to obtain as high a level of current income as is consistent with safety of principal and maintenance of liquidity.Although the fund may invest in obligations with different remaining maturities,the fund's average maturity normally will not exceed ten years.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.The fund is authorized to issue 250 million shares of $.001 par value Capital Stock.The fund currently offers four classes of shares: Class A (50 million shares authorized), Class B (50 million shares authorized), Class C (50 million shares authorized) and Class R (100 million shares authorized). Class A, Class B and Class C shares are sold primarily to retail investors through financial intermediaries and bear a distribution fee and/or service fee. Class A shares are sold with a front-end sales charge, while Class B and Class C shares are subject to a contingent deferred sales charge ("CDSC"). Class B shares automatically convert to Class A shares after six years. Class R shares are sold primarily to bank trust departments and other financial service providers (including Mellon Financial and its affiliates) acting on behalf of customers having a qualified trust or investment account or relationship at such institution, and bear no distribution or service fees. Class R shares are offered without a front-end sales charge or CDSC. Each class of shares has identical rights and privileges, except with respect to distribution and service fees and voting rights on matters affecting a single class. 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 Fund

33

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Effective March 1, 2006, Class A shares of the fund may be purchased at net asset value ("NAV") without payment of a sales charge:

  • By qualified investors who (i) purchase Class A shares directly through the Distributor, and (ii) have, or whose spouse or minor children have, beneficially owned shares and continuously maintained an open account directly through the Distributor in a Dreyfus-managed fund, including the fund, or a Founders Asset Management LLC
    ("Founders") managed fund since on or before February 28, 2006. Founders is a wholly-owned subsidiary of the Distributor.
  • With the cash proceeds from an investor's exercise of employment- related stock options, whether invested in the fund directly or indi- rectly through an exchange from a Dreyfus-managed money market fund, provided that the proceeds are processed through an entity that has entered into an agreement with the Distributor specifically relating to processing stock options. Upon establishing the account in the fund or the Dreyfus-managed money market fund, the investor and the investor's spouse and minor children become eligi- ble to purchase Class A shares of the fund at NAV, whether or not using the proceeds of the employment-related stock options.
  • By members of qualified affinity groups who purchase Class A shares directly through the Distributor, provided that the qualified affinity group has entered into an affinity agreement with the Distributor.

Effective March 1, 2006, Class A shares of the fund may be purchased at NAV without payment of a sales charge:

For Dreyfus-sponsored IRA "Rollover Accounts" with the distribution proceeds from qualified and non-qualified retirement plans or a Dreyfus-sponsored 403(b)(7) plan, provided that, in the case of a qualified or non-qualified retirement plan, the rollover is processed through an entity that has entered into an agreement with the Distributor specifically relating to processing rollovers. Upon establishing the Dreyfus-sponsored IRA rollover account in the fund, the shareholder becomes eligible to make subsequent purchases of Class A shares of the fund at NAV in such account.

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.

(a) Portfolio valuation: Investments in securities (excluding short-term investments (other than U.S. Treasury Bills), financial futures, options, swaps and forward currency exchange contracts), 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 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 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 considered 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,

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

excluding U.S. Treasury Bills, are carried at amortized cost, which approximates value. Investments in registered investment companies are valued at their NAV. Financial futures and options, which are traded on an exchange, 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. Options traded over-the-counter are priced at the mean between the bid and asked price. Investments in swap transactions are valued each business day by a pricing service approved by the Board of Directors. Swaps are valued by the service by using a swap pricing model which incorporates among other factors, default probabilities, recovery rates, credit curves of the underlying issuer and swap spreads on interest rates. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate.

(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments.

(c) 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, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of the Manager, the fund may lend securities to qualified institutions. It is the fund's policy, that at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager.The fund is entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction.Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

(d) Affiliated issuers: Investments in other investment companies advised by the Manager are defined as "affiliated" in the Act.

(e) 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, if any, 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.

(f) 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

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were as follows: ordinary income $1,805,694 and long-term capital gains $671,841.The tax character of current year distributions will be determined at the end of the current fiscal year.

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 based on prevailing market rates in effect at the time of borrowing. During the period ended April 30, 2006, the fund did not borrow under the Facility.

NOTE 3—Investment Management Fee and Other Transactions With Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .60% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees, service fees and expenses, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and

expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

During the period ended April 30, 2006, the Distributor retained $280 from commissions earned on sales of the fund's Class A shares and $14,008 and $355 from CDSC on redemptions of the fund's Class B and Class C shares, respectively.

(b) Under separate Distribution Plans (the "Plans") adopted pursuant to Rule 12b-1 under the Act, Class A shares may pay annually up to .25% of the value of its average daily net assets to compensate the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of Class A shares. Class B and Class C shares pay the Distributor for distributing their shares at an aggregate

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

annual rate of .50% of the value of the average daily net assets of Class B and Class C shares. Class B and Class C shares are also subject to a service plan adopted pursuant to Rule 12b-1 (the "Service Plan"), under which Class B and Class C shares pay the Distributor for providing certain services to the holders of their shares a fee at the annual rate of .25% of the value of the average daily net assets of Class B and Class C shares. During the period ended April 30, 2006, Class A, Class B and Class C shares were charged $20,478, $25,384 and $17,859, respectively, pursuant to their respective Plans. During the period ended April 30, 2006, Class B and Class C shares were charged $12,692 and $8,930, respectively, pursuant to the Service Plan.

Under its terms, the Plans and Service Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plans or Service Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $22,594, Rule 12b-1 distribution plan fees $9,577 and service plan fees $3,146.

(c) The Company and the Manager have received an exemptive order from the SEC which, among other things, permits the fund to use cash collateral received in connection with lending the fund's securities and other uninvested cash to purchase shares of one or more registered money market mutual funds advised by the Manager in excess of the limitations imposed by the Act.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities, financial futures, options transactions, forward currency exchange contracts and swap transactions, during the period ended April 30, 2006, amounted to $132,822,893 and $136,664,519, respectively, of which $68,600,903 in purchases and $68,664,843 in sales were from mortgage dollar roll transactions.

A mortgage dollar roll transaction involves a sale by the fund of mortgage related securities that it holds with an agreement by the fund to repurchase similar securities at an agreed upon price and date. The securities purchased will bear the same interest rate as those sold, but generally will be collateralized by pools of mortgages with different prepayment histories than those securities sold.

The fund may invest in financial futures contracts in order to gain exposure to or protect against changes in the market.The fund is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments in financial futures require the fund to "mark to market" on a daily basis, which reflects the change in market value of the contracts at the close of each day's trading.Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses.When the contracts are closed, the fund recognizes a realized gain or loss.These investments require initial margin deposits with a broker, which consist of cash or cash equivalents.The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Contracts open at April 30, 2006, are set forth in the Statement of Financial Futures.

The fund may purchase and write (sell) put and call options in order to gain exposure to or to protect against changes in the market.

As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund would incur a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund would realize a loss, if the price of the financial instrument increases between those dates.

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund would incur a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund would realize a loss, if the price of the financial instrument decreases between those dates.

The following summarizes the fund's call/put options written for the

period ended April    30, 2006:             
 
    Face Amount        Options Terminated 
    Covered by    Premiums        Net Realized 
Options Written:    Contracts ($)    Received ($)    Cost ($)    Gain (Loss) ($) 
Contracts outstanding                 
October 31, 2005    4,100,000    15,587         
Contracts written    14,100,000    48,300         
Contracts terminated:                 
Contracts closed    3,610,000    8,365    9,817    (1,452) 
Contracts expired    5,970,000    27,107    —    27,107 
Total contracts                 
terminated    9,580,000    35,472    9,817    25,655 
Contracts outstanding             
April 30, 2006    8,620,000    28,415         

The fund enters into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the fund would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract decreases between those dates.With respect to purchases of forward currency exchange contracts, the fund would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates.

The fund is also exposed to credit risk associated with counterparty nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. At April 30, 2006, there were no open forward currency exchange contracts outstanding.

The fund may enter into swap agreements to exchange the interest rate on, or return generated by, one nominal instrument for the return generated by another nominal instrument.

The fund accrues for the interim payments on swap contracts on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) on swap contracts in the Statement of Assets and Liabilities. Once the interim payments are settled in cash, the net amount is recorded as realized gain (loss) on swaps, in addition to realized gain (loss) recorded upon the termination of swap contracts in the Statement of Operations. Fluctuations in the value of swap contracts are recorded as a component of net change in unrealized appreciation (depreciation) on investments.

Credit default swaps involve commitments to pay a fixed interest rate in exchange for payment if a credit event affecting a third party (the referenced company) occurs. Credit events may include a failure to pay interest or principal, bankruptcy, or restructuring. For those credit default swaps in which the fund is receiving a fixed rate, the fund is providing credit protection on the underlying instrument.The maximum payouts for these contracts are limited to the notional amount of each swap.The following summarizes credit default swaps entered into by the fund at April 30, 2006:

                    Unrealized 
Notional    Reference        Receive (Pay)    Appreciation 
Amount ($)    Entity    Counterparty    Fixed Rate (%) Expiration    (Depreciation)($) 
 
186,000    Alcoa, 6.5%,    Bear Stearns             
    6/1/2011    & Co.    (.52)    6/20/2010    (2,760) 
84,000    Alcoa, 6%,    Bear Stearns             
    1/15/2012    & Co.    (.42)    6/20/2010    (906) 
280,000    BelllSouth, 6%,    Bear Stearns             
    10/15/2011    & Co.    (.62)    3/20/2016    (3,568) 
 
 
 
 
                The Fund    43 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

44
                    Unrealized 
Notional    Reference        Receive (Pay)    Appreciation 
Amount ($)    Entity    Counterparty    Fixed Rate (%) Expiration    (Depreciation)($) 
 
180,000    BelllSouth, 6%,    Deutsche             
    10/15/2011    Bank    (.62)    3/20/2016    (2,294) 
325,000    Structured    Morgan             
    Index    Stanley    (.70)    6/20/2013    (1,260) 
325,000    Structured    Morgan             
    Index    Stanley    2.25    6/20/2016    1,069 
125,000    CMLTI 2006-WMC1,                 
    Cl. M8, 6.71%,    Morgan             
    12/25/2035    Stanley    (1.20)    12/25/2035    458 
270,000    ConocoPhillips,                 
    4.75%,    Bear Stearns             
    10/15/2012    & Co.    (.31)    6/20/2010    (1,615) 
125,000    JPMAC 2005-FRE1,                 
    Cl. M8, 6.62%,    Morgan             
    10/25/2035    Stanley    (1.17)    10/25/2035    570 
370,000    Koninklijke KPN                 
    N.V., 8%,    J.P. Morgan             
    10/1/2010    Chase Bank    (.86)    12/20/2010    (2,953) 
240,000    Koninklijke KPN                 
    N.V., 8%,    Deutsche             
    10/1/2010    Bank    (.85)    12/20/2010    (1,815) 
125,000    MABS Trust,                 
    2005-WMC1, Cl. M8,    J.P. Morgan             
    3/25/2035    Chase Bank    (1.18)    4/25/2009    385 
340,000    Morgan Stanley,                 
    6.6%, 4/1/2012    Citigroup    (.62)    6/20/2015    (7,314) 
126,000    Nucor, 4.875%,    Bear Stearns             
    10/1/2012    & Co.    (.40)    6/20/2010    (1,238) 
560,000    Telefonica, S.A.,                 
    5.125%,    Deutsche             
    2/14/2013    Bank    .54    3/20/2011    4,643 
360,000    Telefonica, S.A.,                 
    5.125%,    J.P. Morgan             
    2/14/2013    Chase Bank    .52    3/20/2011    2,666 
                    (15,932) 

The fund may enter into interest rate swaps which involve the exchange of commitments to pay and receive interest based on a notional principal amount. The following summarizes open interest rate swaps entered into by the fund at April 30, 2006:

                    Unrealized 
Notional    Reference        Receive (Pay)        Appreciation 
Amount ($)    Entity    Counterparty    Fixed Rate (%) Expiration    (Depreciation)($) 
 
1,224,000    USD-3 Month    J.P. Morgan             
    LIBOR BBA    Chase Bank    (4.65)    5/13/2015    63,527 
1,224,000    USD-3 Month    J.P. Morgan             
    LIBOR BBA    Chase Bank    4.17    5/13/2008    (15,091) 
48,436

Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of the agreement and are generally limited to the amount of net payments to be received, if any, at the date of default.

At April 30, 2006, accumulated net unrealized depreciation on investments was $1,047,391, consisting of $82,876 gross unrealized appreciation and $1,130,267 gross unrealized depreciation.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 5—Subsequent Event:

Effective on or about June 1, 2006, the fund will no longer offer Class B shares, except in connection with dividend reinvestment and permitted exchanges of Class B shares.

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and 2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance, Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of retail front-end load, intermediate investment grade debt funds (the "Performance Group") and to a larger universe of funds, consisting of all retail and institutional intermediate investment grade debt funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons.The Board noted that the fund's yield performance for the past ten one-year periods ended November 30th (1996-2005) was lower than the Performance Group and Performance Universe medians. The Board members noted that the fund's total return performance for various periods ended November 30, 2005 was lower than the Performance Group and Performance Universe medians for each of the periods, except it was higher than the Performance Universe for the one-year period and at the Performance Group median for the ten-year period.The Manager also presented the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, noting a significant improvement from the November 30, 2005 relative total returns.A representative of the Manager reminded the Board that, effective March 1, 2005 and as approved by the Board, the fund expanded the types of securities in which it may invest and the types of investment techniques in which it may engage and stated that use of some of those techniques have helped improve recent performance.

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. Noting the fund's "unitary fee structure", the Board members noted that the fund's expense ratio was lower than the Expense Group and Expense Universe medians.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds"), and by other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund (collectively with the Similar Funds, the "Similar Accounts"). The Manager's representatives explained the nature of the Similar Accounts and the differences, from the Manager's perspective, in providing services to such Similar Accounts as compared to managing and providing services to the fund. The Manager's representatives also reviewed the costs associated with distribution through intermediaries. The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure. The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund's management fee.The Board acknowledged that differences in fees paid by the Similar Accounts seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm

regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

  • The Board concluded that the nature, extent and quality of the services provided by the Manager are adequate and appropriate.
  • While the Board was concerned with the fund's performance, it believed that the Manager had taken steps seeking to improve per- formance and was satisfied with the recent trend of improvement.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

NOTES

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

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, 2005, is available 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.

© 2006 Dreyfus Service Corporation 0345SA0406

  Dreyfus Premier
Midcap Stock Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
13    Statement of Assets and Liabilities 
14    Statement of Operations 
15    Statement of Changes in Net Assets 
17    Financial Highlights 
22    Notes to Financial Statements 
30    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus Premier
Midcap Stock Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Premier Midcap Stock Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year. As always, we urge you to discuss with your financial advisor the potential implications of these possibilities on your investments.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

  Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

John O'Toole, Portfolio Manager

How did Dreyfus Premier Midcap Stock Fund perform relative to its benchmark?

For the six-month period ended April 30, 2006, the fund produced total returns of 14.20% for Class A shares, 13.73% for Class B shares, 13.72% for Class C shares, 14.24% for Class R shares and 14.05% for Class T shares.1 This compares with the fund's benchmark, the Standard & Poor's MidCap 400 Index ("S&P 400 Index"), which produced a total return of 15.26% for the same period.2

Despite higher energy prices and rising interest rates, stocks rose in an environment of robust U.S. and global economic growth.While most market sectors responded positively to these conditions, midcap stocks generally outperformed their large-cap counterparts.The fund derived particularly strong returns from investments in the consumer cyclicals, health care and financials sectors. However, the fund's performance relative to the benchmark was undermined by relatively weak returns in the consumer staples, utilities and energy areas.

What is the fund's investment approach?

The fund seeks capital appreciation.To pursue its goal, the fund normally invests at least 80% of its assets in stocks of midsize companies.

The fund invests primarily in a blended portfolio of growth and value stocks of mid-capitalization companies, which are chosen through a disciplined investment process that combines computer-modeling techniques, fundamental analysis and risk management.

The fund's investment process is designed to provide investors with investment exposure to sector weightings and risk characteristics generally similar to those of the S&P 400 Index.

In selecting securities, we use a computer model to identify and rank stocks within an industry or sector, based on several characteristics, including: value, or how a stock is priced relative to its perceived intrin-

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

sic worth; growth, in this case the sustainability or growth of earnings; and financial profile, which measures the financial health of the company.

What other factors influenced the fund's performance?

Midcap stocks continued to produce strong gains during the reporting period, bolstered by the economy's resilience and investors' ample appetite for risk. The fund benefited from this positive market environment across a broad range of industry groups. For example, within the consumer cyclicals sector, retailers, lodging providers and small machinery makers all contributed positively to the fund's results. Top performers in these areas included clothing retailer American Eagle Outfitters, hotel franchiser Choice Hotels International and lawn machinery manufacturer The Toro Company.

Individual holdings within the health care, producer goods and financial sectors further enhanced the fund's performance.Within the health care sector, Magellan Health Services, which manages the delivery of behavioral health care treatment services, benefited from a favorable pricing environment and increased public awareness of mental health issues. In the producer goods sector, three holdings contributed significantly to the fund's positive performance: building materials provider Eagle Materials, coal producer Peabody Energy and specialty chemical manufacturer H.B. Fuller.All of these companies experienced rising demand for their products in the strong economy. Finally, within the financials sector, The Hanover Insurance Group benefited from improved managerial execution and a tighter focus on its property and casualty insurance business, while consumer finance provider AmeriCredit rose on the strength of better-than-expected consumer spending.

The fund's gains were more modest than that of its benchmark, partly because our disciplined, valuation-conscious investment approach produced a marginally less volatile portfolio. Disappointing performance from a few individual holdings also played a part in the fund's underperformance compared to the benchmark. Within the consumer staples area, chicken producers Pilgrim's Pride and Gold Kist were hurt by avian flu concerns, leading us to sell these positions.

4

Among utilities stocks, energy producer Black Hills suffered from uncertainties over the company's struggle to acquire a competitor. Another of the fund's utility holdings, WPS Resources, lost ground when it announced a weak outlook for future earnings. Finally, in the high-flying energy sector, the fund's modestly underweighted position among oil service companies undermined its relative performance.

What is the fund's current strategy?

While the economy has continued to grow, we believe the rate of expansion is slowing as the economy moves into the next phase of its cycle. Accordingly, we have begun to focus on companies that, in our view, offer greater predictability with regard to future revenue and earning prospects. More specifically, we are looking for companies that appear likely to deliver consistently positive financial results under a variety of economic conditions.

At the same time, the fund's holdings have remained broadly diversified within the midcap market, and we have allocated the fund's assets across various market sectors and capitalization ranges in a way that roughly mirrors the benchmark's composition. Our ongoing commitment to midcap investing reflects our belief that carefully selected investments in midcap stocks offer greater growth potential than large-cap stocks, but generally with fewer risks than small-cap stocks.

May 15, 2006

1 Total return includes reinvestment of dividends and any capital gains paid and does not take into
consideration the maximum initial sales charges in the case of Class A and Class T 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: LIPPER INC. — Reflects reinvestment of dividends and, where applicable, capital
gain distributions.The Standard & Poor's MidCap 400 Index is a widely accepted, unmanaged
total return index measuring the performance of the midsize-company segment of the U.S. market.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Midcap Stock Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006         
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 7.17    $ 11.13    $ 11.13    $ 5.84    $ 8.49 
Ending value (after expenses)    $1,142.00    $1,137.30    $1,137.20    $1,142.40    $1,140.50 

COMPARING YOUR FUND'S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 6.76    $ 10.49    $ 10.49    $ 5.51    $ 8.00 
Ending value (after expenses)    $1,018.10    $1,014.38    $1,014.38    $1,019.34    $1,016.86 

† Expenses are equal to the fund's annualized expense ratio of 1.35% for Class A, 2.10% for Class B, 2.10% for Class C, 1.10% for Class R and 1.60% for Class T; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

6

STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
Common Stocks—98.3%    Shares    Value ($) 
Consumer Cyclical—13.2%         
Abercrombie & Fitch, Cl. A    24,500    1,487,885 
American Eagle Outfitters    58,200    1,885,680 
Applebee's International    39,400    914,474 
Barnes & Noble    26,700    1,203,636 
BorgWarner    13,400    813,782 
CDW    15,900 a    946,368 
Chico's FAS    29,600 b    1,096,976 
Choice Hotels International    26,400    1,413,192 
Claire's Stores    43,750    1,540,875 
Continental Airlines, Cl. B    22,300 a,b    580,692 
Cummins    8,300    867,350 
Domino's Pizza    32,200    847,826 
Dress Barn    41,200 b    1,041,948 
HNI    15,800    835,504 
K-Swiss, Cl. A    20,000    573,600 
Longs Drug Stores    16,200    768,042 
Men's Wearhouse    20,800    737,152 
MSC Industrial Direct, Cl. A    20,200    1,047,572 
O'Reilly Automotive    38,800 b    1,314,544 
Polo Ralph Lauren    14,600    886,512 
Sonic    20,600 b    698,546 
Thor Industries    14,300    721,864 
Toro    16,200    801,090 
United Auto Group    16,400    693,720 
        23,718,830 
Consumer Staples—1.5%         
Hormel Foods    53,500    1,795,460 
JM Smucker    20,900    820,534 
        2,615,994 
Energy—10.4%         
Energen    17,000    599,590 
Grant Prideco    46,000 b    2,355,200 
Helix Energy Solutions Group    29,400 b    1,141,308 
Helmerich & Payne    21,100    1,534,814 
Lone Star Technologies    17,500 b    927,675 
Newfield Exploration    32,300 b    1,440,580 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Energy (continued)         
NiSource    37,600 a    793,736 
Noble Energy    30,400    1,367,392 
Oneok    27,200    897,872 
Pioneer Natural Resources    24,000    1,027,680 
Plains Exploration & Production    31,600 b    1,165,092 
Questar    19,150    1,532,957 
Southwestern Energy    25,600 b    922,112 
Tesoro    16,100    1,125,712 
UGI    41,800    936,320 
Unit    14,600 b    843,150 
        18,611,190 
Health Care—9.9%         
Alkermes    47,800 b    1,026,266 
AmerisourceBergen    19,300    832,795 
Henry Schein    17,900 b    834,498 
IDEXX Laboratories    14,800 b    1,231,508 
Invitrogen    21,400 b    1,412,614 
Kindred Healthcare    18,500 b    448,810 
King Pharmaceuticals    45,900 b    798,201 
Kos Pharmaceuticals    12,700 b    614,680 
Laboratory Corp. of America Holdings    22,500 b    1,284,750 
Magellan Health Services    34,700 b    1,410,555 
Mine Safety Appliances    22,400    936,320 
Owens & Minor    21,200    675,644 
Pediatrix Medical Group    18,200 b    921,284 
Respironics    23,000 b    842,260 
Sepracor    26,800 b    1,196,352 
United Therapeutics    10,100 b    601,455 
Universal Health Services, Cl. B    23,800    1,208,802 
Varian Medical Systems    29,950 b    1,568,781 
        17,845,575 
Interest Sensitive—17.7%         
AG Edwards    26,900    1,421,396 
American Capital Strategies    21,000 a    731,220 
American Financial Group/OH    39,700    1,757,916 
AmeriCredit    45,700 b    1,383,796 
AmerUs Group    14,500    850,425 

8

Common Stocks (continued)    Shares    Value ($) 
Interest Sensitive (continued)         
BankUnited Financial, Cl. A    16,968    520,748 
Camden Property Trust    16,900    1,161,537 
CBL & Associates Properties    29,200    1,167,708 
City National/Beverly Hills, CA    20,000    1,459,200 
Colonial BancGroup    77,700    2,014,761 
Colonial Properties Trust    17,100    842,004 
CompuCredit    25,200 b    1,006,740 
Delphi Financial Group, Cl. A    16,900    885,391 
Dime Bancorp (Warrants)    68,300 b    11,474 
Downey Financial    12,100    868,538 
Equity One    40,000    919,200 
First American    42,500    1,810,500 
FirstFed Financial    14,800 b    930,772 
Greater Bay Bancorp    39,000    1,077,180 
Greenhill & Co    9,900 a    702,108 
Hanover Insurance Group    16,700    883,430 
Liberty Property Trust    31,300    1,399,110 
New Plan Excel Realty Trust    63,500    1,565,275 
Selective Insurance Group    15,300    851,598 
Sky Financial Group    35,000    904,750 
Synovus Financial    38,100    1,066,800 
Unitrin    20,700    1,011,195 
Wilmington Trust    19,500    863,850 
WR Berkley    46,500    1,740,030 
        31,808,652 
Producer Goods—18.1%         
Airgas    41,800    1,690,810 
Alliant Techsystems    13,100 b    1,047,869 
Applied Industrial Technologies    26,400    1,096,920 
Ashland    16,100    1,059,702 
Avery Dennison    17,100    1,068,750 
CH Robinson Worldwide    50,300    2,230,805 
Commercial Metals    15,500    843,200 
CommScope    30,700 b    1,014,635 
Eagle Materials    19,800    1,311,750 
Energizer Holdings    19,000 b    971,850 
Florida Rock Industries    14,050    876,298 

The Fund 9

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Producer Goods (continued)         
Flowserve    16,100 b    926,072 
Genlyte Group    10,400 b    716,664 
Graco    19,300    902,275 
HB Fuller    16,800    878,640 
Joy Global    13,200    867,108 
Landstar System    19,300    820,057 
NVR    1,350 b    1,019,250 
Overseas Shipholding Group    21,700    1,059,611 
Pacer International    16,100    552,069 
Packaging Corp. of America    35,600    800,288 
Peabody Energy    59,900    3,825,214 
Quanex    21,000    897,960 
Teleflex    12,400    808,976 
Terex    9,800 b    848,190 
Texas Industries    13,800    782,460 
Thomas & Betts    20,800 b    1,184,560 
Toll Brothers    20,300 b    652,645 
Universal Forest Products    11,500    859,855 
Watsco    14,300    907,335 
        32,521,818 
Services—9.4%         
Catalina Marketing    25,700    608,576 
Ceridian    39,100 b    947,393 
ChoicePoint    23,900 b    1,052,317 
Corporate Executive Board    14,300    1,531,959 
Equifax    26,400    1,017,456 
Fair Isaac    26,000    964,860 
Getty Images    11,600 a,b    742,516 
Global Payments    19,900    943,857 
ITT Educational Services    20,350 b    1,293,243 
John H. Harland    16,400    679,780 
Laidlaw International    21,900    542,025 
Manpower    18,400    1,198,760 
NAVTEQ    10,300 b    427,656 
Republic Services    35,900    1,579,959 
Rollins    25,100    508,275 

10

Common Stocks (continued)    Shares    Value ($) 
Services (continued)         
Washington Post, Cl. B    2,575    1,972,450 
Weight Watchers International    18,600    917,910 
        16,928,992 
Technology—13.3%         
ADTRAN    31,500    791,910 
Amphenol, Cl. A    30,900    1,786,020 
Arrow Electronics    61,200 b    2,215,440 
Cadence Design Systems    71,800 b    1,359,174 
CheckFree    14,400 b    775,728 
Foundry Networks    41,500 b    589,715 
Harris    30,900    1,439,013 
Imation    26,500    1,113,000 
Lam Research    47,100 b    2,302,248 
MEMC Electronic Materials    50,600 b    2,054,360 
Microchip Technology    62,700    2,336,202 
NCR    17,100 b    673,740 
Novell    109,500 b    900,090 
Novellus Systems    32,400 b    800,280 
Palm    45,400 a,b    1,026,040 
Sybase    59,600 b    1,297,492 
Transaction Systems Architects    30,600 b    1,222,164 
Western Digital    58,600 b    1,232,944 
        23,915,560 
Utilities—4.8%         
Black Hills    31,300    1,139,320 
CenturyTel    31,300    1,180,010 
Energy East    61,700    1,490,672 
Great Plains Energy    38,700    1,093,275 
OGE Energy    24,900    750,984 
Pinnacle West Capital    20,400    818,040 
PNM Resources    32,400    820,044 
WPS Resources    25,850    1,292,242 
        8,584,587 
Total Common Stocks         
(cost $154,098,326)        176,551,198 

The Fund 11

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Other Investment—2.1%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Preferred Plus Money Market Fund     
(cost $3,817,000)    3,817,000 c    3,817,000 
 
Investment of Cash Collateral         
for Securities Loaned—2.2%         
Registered Investment Company;         
Dreyfus Institutional Cash Advantage Fund         
(cost $4,001,691)    4,001,691 c    4,001,691 
Total Investments (cost $161,917,017)    102.6%    184,369,889 
Liabilities, Less Cash and Receivables    (2.6%)    (4,687,185) 
Net Assets    100.0%    179,682,704 

  a All or a portion of these securities are on loan. At April 30, 2006 the total market value of the fund's securities on
loan is $3,864,768 and the total market value of the collateral held by the fund is $4,001,691.
b Non-income producing security.
c Investment in affiliated money market mutual fund.
Portfolio Summary (Unaudited) †         
 
    Value (%)        Value (%) 
Producer Goods    18.1    Services    9.4 
Interest Sensitive    17.7    Utilities    4.8 
Technology    13.3    Money Market Investments    4.3 
Consumer Cyclical    13.2    Consumer Staples    1.5 
Energy    10.4         
Health Care    9.9        102.6 

† Based on net assets.
See notes to financial statements.

12

  STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—         
See Statement of Investments (including securities     
on loan, valued at $3,864,768)—Note 1(b):     
Unaffiliated issuers    154,098,326    176,551,198 
Affiliated issuers    7,818,691    7,818,691 
Cash        86,439 
Receivable for investment securities sold        2,425,124 
Dividends and interest receivable        100,391 
Receivable for shares of Capital Stock subscribed    99,897 
        187,081,740 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    221,717 
Liability for securities on loan—Note 1(b)        4,001,691 
Payable for investment securities purchased    3,052,847 
Payable for shares of Capital Stock redeemed    122,781 
        7,399,036 
Net Assets ($)        179,682,704 
Composition of Net Assets ($):         
Paid-in capital        137,725,575 
Accumulated investment (loss)—net        (283,347) 
Accumulated net realized gain (loss) on investments    19,787,604 
Accumulated net unrealized appreciation         
(depreciation) on investments        22,452,872 
Net Assets ($)        179,682,704 

Net Asset Value Per Share                 
    Class A    Class B    Class C    Class R    Class T 
Net Assets ($)    93,855,909    32,906,080    15,732,248    35,459,901    1,728,566 
Shares Outstanding    5,568,779    2,145,373    1,023,276    2,039,879    105,050 
Net Asset Value                     
Per Share ($)    16.85    15.34    15.37    17.38    16.45 

See notes to financial statements.

The Fund 13

  STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Income:     
Cash dividends:     
Unaffiliated issuers    1,018,543 
Affiliated issuers    9,118 
Interest    11,232 
Income on securities lending    6,011 
Total Income    1,044,904 
Expenses:     
Management fee—Note 3(a)    971,327 
Distribution and service plan fees—Note 3(b)    366,058 
Interest expense—Note 2    1,166 
Loan commitment fees—Note 2    1,088 
Total Expenses    1,339,639 
Investment (Loss)—Net    (294,735) 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    19,939,633 
Net unrealized appreciation (depreciation) on investments    3,878,987 
Net Realized and Unrealized Gain (Loss) on Investments    23,818,620 
Net Increase in Net Assets Resulting from Operations    23,523,885 

See notes to financial statements.

  14

STATEMENT OF CHANGES IN NET ASSETS

The Fund 15

STATEMENT OF CHANGES IN NET ASSETS (continued)

a During the period ended April 30, 2006, 154,739 Class B shares representing $2,519,876 were automatically
converted to 142,180 Class A shares and during the period ended October 31, 2005, 382,760 Class B shares
representing $7,006,551 were automatically converted to 360,131 Class A shares.
See notes to financial statements.
16

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.

a    Based on average shares outstanding at each month end. 
b    Exclusive of sales charge. 
c    Not annualized. 
See notes to financial statements. 

The Fund 17

FINANCIAL HIGHLIGHTS (continued)

a    Based on average shares outstanding at each month end. 
b    Exclusive of sales charge. 
c    Not annualized. 
See notes to financial statements. 

18

a    Based on average shares outstanding at each month end. 
b    Exclusive of sales charge. 
c    Not annualized. 
See notes to financial statements. 

The Fund 19

FINANCIAL HIGHLIGHTS (continued)

a    Based on average shares outstanding at each month end. 
b    Amount represents less than $.01 per share. 
c    Not annualized. 
See notes to financial statements. 

20

a    Based on average shares outstanding at each month end. 
b    Exclusive of sales charge. 
c    Not annualized. 
See notes to financial statements. 

The Fund 21

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Premier Midcap Stock Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series, including the fund.The fund's investment objective is to seek capital appreciation. 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. The fund is authorized to issue 488 million shares of $.001 par value Capital Stock.The fund currently offers five classes of shares: Class A (22 million shares authorized), Class B (100 million shares authorized), Class C (100 million shares authorized), Class R (66 million shares authorized) and Class T shares (200 million shares authorized). Class A, Class B, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear a distribution fee and/or service fee. Class A and Class T shares are sold with a front-end sales charge, while Class B and Class C shares are subject to a contingent deferred sales charge ("CDSC"). Class B shares automatically convert to Class A shares after six years. Class R shares are sold primarily to bank trust departments and other financial service providers (including Mellon and its affiliates) acting on behalf of customers having a qualified trust or an investment account or relationship at such institution and bear no distribution or service fees. Class R shares are offered without a front end sales charge or CDSC. Each class of shares has identical rights and privileges, except with respect to distribution and service fees and voting rights on matters affecting a single class. 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.

22

Effective March 1, 2006, Class A shares of the fund may be purchased at net asset value ("NAV") without payment of a sales charge:

  • By qualified investors who (i) purchase Class A shares directly through the Distributor, and (ii) have, or whose spouse or minor children have, beneficially owned shares and continuously maintained an open account directly through the Distributor in a Dreyfus-managed fund, including the fund, or a Founders Asset Management LLC
    ("Founders") managed fund since on or before February 28, 2006. Founders is a wholly-owned subsidiary of the Distributor.
  • With the cash proceeds from an investor's exercise of employment- related stock options, whether invested in the fund directly or indi- rectly through an exchange from a Dreyfus-managed money market fund, provided that the proceeds are processed through an entity that has entered into an agreement with the Distributor specifically relat- ing to processing stock options. Upon establishing the account in the fund or the Dreyfus-managed money market fund, the investor and the investor's spouse and minor children become eligible to purchase Class A shares of the fund at NAV, whether or not using the proceeds of the employment-related stock options.
  • By members of qualified affinity groups who purchase Class A shares directly through the Distributor, provided that the qualified affinity group has entered into an affinity agreement with the Distributor.

Effective March 1, 2006, Class A and Class T shares of the fund may be purchased at NAV without payment of a sales charge:

  • For Dreyfus-sponsored IRA "Rollover Accounts" with the distribu- tion proceeds from qualified and non-qualified retirement plans or a Dreyfus-sponsored 403(b)(7) plan, provided that, in the case of a qual- ified or non-qualified retirement plan, the rollover is processed through an entity that has entered into an agreement with the Distributor specifically relating to processing rollovers. Upon estab- lishing the Dreyfus-sponsored IRA rollover account in the fund, the shareholder becomes eligible to make subsequent purchases of Class A or Class T shares of the fund at NAV in such account.

The Fund 23

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

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.

(a) Portfolio valuation: Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available, are valued at the official closing price or, if there is no official closing price that day, at the last sale price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Investments in registered investment companies are valued at their NAV.When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its NAV, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR's and futures contracts. For other securities that are fair valued by the Board of Directors, certain factors may be considered such as: 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. Financial futures are valued at the last sales price.

(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from

24

securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization premium on investments, is recognized on the accrual basis.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of the Manager, the fund may lend securities to qualified institutions.At origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan will be maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager. The fund will be entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction. Although each security loaned is fully collateralized, the fund would bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counter party default, the fund has the right to use the collateral to offset losses incurred. There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights. The Manager, acting under the supervision of the Board of

The Fund 25

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

(c) Affiliated issuers: Investments in other investment companies advised by the Manager are defined as "affiliated" in the Act.

(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code").To the extent that net realized capital gain, can be offset by capital loss carryovers, 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.

(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were as follows: long-term capital gains $4,220,939. The tax character of current year distributions will be determined at the end of the current fiscal year.

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 at rates based on prevailing market rates in effect at the time of borrowing.

26

The average daily amount of borrowings outstanding under the Facility during the period ended April 30, 2006, was approximately $48,900, with a related weighted average annualized interest rate of 4.81% .

NOTE 3—Investment Management Fee And Other Transactions With Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of 1.10% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, service fees, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and,

The Fund 27

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

During the period ended April 30, 2006, the Distributor retained $8,266 and $1,685 from commissions earned on sales of the fund's Class A and Class T shares, respectively, and $31,801 and $1,056 from CDSC on redemptions of the fund's Class B and Class C shares, respectively.

(b) Under separate Distribution Plans (the "Plans") adopted pursuant to Rule 12b-1 under the Act, Class A shares may pay annually up to .25% of the value of their average daily net assets to compensate the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of Class A shares. Class B, Class C and Class T shares may pay the Distributor for distributing their shares at an aggregate annual rate of .75% of the value of the average daily net assets of Class B and Class C shares and .25% of the value of the average daily net assets of Class T shares.The Distributor may pay one or more agents in respect of advertising, marketing and other distribution services for Class T shares and determines the amounts, if any, to be paid to agents and the basis on which such payments are made. Class B, Class C and Class T shares are also subject to a service plan adopted pursuant to Rule 12b-1, (the "Service Plan") under which Class B, Class C and Class T shares pay the Distributor for providing services to the holders of their shares a fee at the annual rate of .25% of the value of the average daily net assets of Class B, Class C and Class T shares. During the period ended April 30, 2006, Class A, Class B, Class C and Class T shares were charged $115,565, $125,756, $59,229 and $1,923, respectively, pursuant to their respective Plans, and Class B,

28

Class C and Class T shares were charged $41,919, $19,743 and $1,923, respectively, pursuant to the Service Plan.

Under its terms, the Plans and Service Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plans or Service Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $161,947, Rule 12b-1 distribution plans fees $49,434 and service plan fees $10,336.

(c) The Company and the Manager have received an exemptive order from the SEC which, among other things, permits the fund to use cash collateral received in connection with lending the fund's securities and other uninvested cash to purchase shares of one or more registered money market mutual funds advised by the Manager in excess of the limitations imposed by the Act.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2006, amounted to $109,965,261 and $134,326,173, respectively.

At April 30, 2006, accumulated net unrealized appreciation on investments was $22,452,872, consisting of $26,760,777 gross unrealized appreciation and $4,307,905 gross unrealized depreciation.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 5—Subsequent Event:

Effective on or about June 1, 2006, the fund will no longer offer Class B shares, except in connection with dividend reinvestment and permitted exchanges of Class B shares.

The Fund 29

INFORMATION ABOUT THE REVIEW AND
APPROVAL OF THE FUND'S I N V E S T M E N T
MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and

2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of

30

mid-cap core funds (the "Performance Group") and to a larger universe of funds, consisting of all retail and institutional mid-cap core funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was variously above and below the medians of the Performance Group for the periods, and the same as or below the Performance Universe medians for each of the periods. A representative of the Manager also presented the Board with the fund's performance and the quartile, percentile and rank of the fund within its Lipper category (as provided by Lipper) for periods ended December 31, 2005 and provided the Board members with the fund's quartile rankings within its Lipper category for the one-, three-, six- and nine-month periods ended January 26, 2006 (the most up-to-date Lipper information available). The Board noted that the fund's absolute performance and rankings had improved as compared to those of November 30, 2005 and December 31, 2005 for each period.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. The Board members noted that the fund was the only fund in the Expense Group with a "unitary fee" structure. The Board members noted that the fund's expense ratio, including Rule 12b-1 fees, was slightly lower than the Expense Group and Expense Universe medians and, excluding Rule 12b-1 or other service fees, was slightly lower than the Expense Group and slightly higher than the Expense Universe.

The Fund 31

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S
INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds"), and by other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund (the "Adviser Accounts" and, collectively with the Similar Funds, the "Similar Accounts"). The Manager's representatives explained the nature of the Similar Accounts and the differences, from the Manager's perspective, in providing services to such Similar Accounts as compared to managing and providing services to the fund.The Manager's representatives also reviewed the costs associated with distribution through intermediaries. The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure. The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund's management fee.The Board acknowledged that differences in fees paid by the Similar Accounts seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the

32

relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted the Manager's soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • While the Board was concerned about the fund's performance on a relative basis, it was satisfied with the recent trend of improvement.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.

The Fund 33

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S
INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

34

NOTES

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

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, 2005, is available 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.

© 2006 Dreyfus Service Corporation 0330SA0406

  Dreyfus Premier
Small Cap
Value Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
15    Statement of Assets and Liabilities 
16    Statement of Operations 
17    Statement of Changes in Net Assets 
19    Financial Highlights 
24    Notes to Financial Statements 
32    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus Premier
Small Cap Value Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Premier Small Cap Value Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year. As always, we urge you to discuss with your financial advisor the potential implications of these possibilities on your investments.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio managers.

Thank you for your continued confidence and support.

Sincerely,

Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Ronald P. Gala and Adam T. Logan, Portfolio Managers

How did Dreyfus Premier Small Cap Value Fund perform relative to its benchmark?

For the six-month period ended April 30, 2006, the fund's Class A, B, C, R and T shares produced total returns of 13.76%, 13.29%, 13.28%, 13.86% and 13.61%, respectively.1 In comparison, the fund's benchmark, the Russell 2000 Value Index ("the Index"), produced a total return of 17.52% .2

The small-cap value segment of the U.S. stock market significantly outperformed large-cap stocks as investors exhibited an increased appetite for risk in a growing economy.Although the fund posted double-digit returns, its returns lagged its benchmark, primarily due to investors' preference for lower-quality companies, which the fund tends to avoid.

What is the fund's investment approach?

The fund seeks capital appreciation. To pursue its goal, the fund normally invests at least 80% of its assets in stocks of small U.S. companies. We use a disciplined process that combines computer modeling techniques, fundamental analysis and risk management to select undervalued stocks for the fund.

In selecting securities, we use disciplined valuation models to identify undervalued stocks.Undervalued stocks are normally characterized by relatively low price-to-earnings and low price-to-book ratios.The models help analyze how a stock is priced relative to its perceived intrinsic value.

Next, based on fundamental analysis, we generally select the most attractive securities, drawing on a variety of sources, including internal as well as Wall Street research.

Then the fund is constructed with a commitment to diversification, so that its sector weightings and risk characteristics are generally similar to those of the Index.

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

What other factors influenced the fund's performance?

Although energy prices recently hit record highs and interest rates rose by a full percentage point during the reporting period, investors have focused more on the strong economy and surging corporate profits than on the potentially adverse effects of high fuel costs and a less accommodative monetary policy. In addition, consumer confidence hit a four-year high and business spending accelerated during the first four months of 2006. In this robust economic environment, investors demonstrated an ample appetite for risk. As they have for some time now, small-cap stocks outperformed their large-cap counterparts by a substantial margin, and companies with lower-quality characteristics, including many with no earnings, tended to outperform higher-quality businesses during the reporting period.

In addition to higher energy costs, prices of other commodities also escalated, benefiting the earnings of producers of raw materials. The fund's top materials stock for the reporting period was Reliance Steel & Aluminum, a Los Angeles-based maker of aluminum, brass, copper, stainless steel and titanium products. The company benefited from booming global demand as well as increased mergers-and-acquisitions activity in its industry. Meanwhile, shares of energy companies, which led the market in previous reporting periods, cooled off compared to the market as a whole.

Contrary to some analysts' worries about the impact of higher gasoline prices on consumer spending, restaurants and specialty retailing stocks performed well. Video game and software retailer Game Stop represented one of the fund's better performers for the reporting period.

Although the financials sector posted relatively modest returns on average, the fund added significant value in this area, deriving particularly strong results from the investment management and banking industries. For example, Calamos Asset Management, which earns fees based on the size of clients' portfolios, saw its stock price rise along with the overall market. Banks' profit margins generally suffered when short-term interest rates rose more sharply than longer-term bond

4

yields. However, we identified a number of opportunities that bucked this trend.Whitney Holding Corp., which operates Whitney National Bank in Louisiana, had declined sharply after last fall's Gulf Coast hurricanes, but rebounded when the bank reported better-than-expected deposit growth and increased net interest margin.

Indeed, the fund owned shares of a number of companies, including building materials providers USG and Eagle Materials, which benefited from reconstruction along the Gulf Coast. However, the fund's focus on higher-quality companies limited its returns from the sector compared to the benchmark's materials component. The fund also lagged the benchmark in the technology area, particularly among electronic equipment and software companies, as investors rewarded higher-risk companies, many with little or no profitability.

What is the fund's current strategy?

The fund, which owned shares of approximately 240 companies as of April 30, 2006, remains diversified across the industry groups that comprise the Russell 2000 Value Index. We have allocated the fund's assets to various market sectors in proportions that roughly mirror their representation in the benchmark, a strategy that is designed to help us focus more intently on adding value through our security selection strategy.We have maintained the fund's focus on higher-quality companies despite the recent strength of lower-quality companies, which we believe is likely to be temporary. Historically, unprofitable companies have not led the stock market for sustained periods of time.

May 15, 2006

1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into
consideration the maximum initial sales charges in the case of Class A and Class T 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: LIPPER INC. — Reflects the reinvestment of dividends and, where applicable,
capital gain distributions.The Russell 2000 Value Index is an unmanaged index, which measures
the performance of those Russell 2000 companies with lower price-to-book ratios and lower
forecasted growth values.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Small Cap Value Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006         
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 7.95    $ 11.90    $ 11.90    $ 6.63    $ 9.27 
Ending value (after expenses)    $1,137.60    $1,132.90    $1,132.80    $1,138.60    $1,136.10 

COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 7.50    $ 11.23    $ 11.23    $ 6.26    $ 8.75 
Ending value (after expenses)    $1,017.36    $1,013.64    $1,013.64    $1,018.60    $1,016.12 

† Expenses are equal to the fund's annualized expense ratio of 1.50% for Class A, 2.25% for Class B, 2.25% for Class C, 1.25% for Class R and 1.75% for Class T; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

6
STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
Common Stocks—97.8%    Shares    Value ($) 
Banking—10.3%         
1st Source    100,000    2,768,000 
BancorpSouth    107,500    2,755,225 
BankAtlantic Bancorp, Cl. A    234,600    3,500,232 
Berkshire Hills Bancorp    61,000    2,094,740 
Boston Private Financial Holdings    123,600    4,109,700 
Cardinal Financial    102,000    1,205,640 
Citizens Banking    75,000    1,961,250 
Columbia Banking System    107,500    3,628,125 
Community Bancorp/NV    67,000 a    2,186,210 
Corus Bankshares    46,000    3,079,240 
CVB Financial    137,500    2,244,000 
First Charter    98,000    2,329,460 
First Citizens Bancshares/NC, Cl. A    33,000    6,311,910 
First Community Bancorp/CA    57,700    3,346,600 
First Republic Bank/San Francisco, CA    142,000    6,179,840 
Greater Bay Bancorp    186,500    5,151,130 
Irwin Financial    150,000    2,754,000 
MainSource Financial Group    117,628    2,069,077 
Midwest Banc Holdings    52,203    1,224,682 
Provident Financial Services    315,000    5,748,750 
Simmons First National, Cl. A    42,000    1,200,360 
Sterling Bancshares/TX    212,000    3,510,720 
Taylor Capital Group    50,000    1,950,000 
Union Bankshares/VA    30,000    1,234,500 
United Community Banks/GA    160,800    4,762,896 
Whitney Holding    85,600    3,043,936 
        80,350,223 
Consumer Cyclical—9.7%         
American Axle & Manufacturing Holdings    50,000    880,500 
Applebee's International    107,996    2,506,587 
Audiovox, Cl. A    263,000 a    3,192,820 
Casey's General Stores    214,000    4,577,460 
Cato, Cl. A    160,000    3,620,800 
Children's Place Retail Stores    52,300 a    3,231,094 
Commercial Vehicle Group    82,000 a    1,661,320 
CSK Auto    241,300 a    3,100,705 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Consumer Cyclical (continued)         
FelCor Lodging Trust    137,500    2,976,875 
Finish Line, Cl. A    303,000    4,993,440 
GameStop, Cl. B    78,500 a    3,333,895 
Jack in the Box    83,400 a    3,486,120 
K-Swiss, Cl. A    104,100    2,985,588 
K2    220,000 a    2,593,800 
Lone Star Steakhouse & Saloon    176,000    4,797,760 
Longs Drug Stores    62,500    2,963,125 
Marvel Entertainment    129,900 a,b    2,534,349 
Monarch Casino & Resort    96,000 a    3,022,080 
Payless Shoesource    199,400 a    4,580,218 
Sonic Automotive    230,000    6,214,600 
Stein Mart    109,000    1,722,200 
TRW Automotive Holdings    120,800 a    2,679,344 
Wabash National    116,000    2,099,600 
Wolverine World Wide    102,000    2,533,680 
        76,287,960 
Consumer Staples—3.2%         
Chiquita Brands International    306,900    4,977,918 
Elizabeth Arden    115,700 a    2,644,902 
Furniture Brands International    98,800    2,272,400 
Nash Finch    164,000    3,788,400 
Performance Food Group    120,800 a    3,708,560 
Pilgrim's Pride    82,900 b    2,166,177 
Ralcorp Holdings    80,000 a    2,982,400 
Tupperware Brands    123,800    2,612,180 
        25,152,937 
Energy—6.7%         
Armor Holdings    53,900 a    3,291,673 
Atmos Energy    146,000    3,874,840 
Cimarex Energy    149,000    6,399,550 
Edge Petroleum    165,100 a    3,815,461 
Energy Partners    84,000 a    2,166,360 
Frontier Oil    28,400    1,719,052 
Houston Exploration    49,600 a    2,773,632 
Key Energy Services    102,500 a    1,751,725 

8

Common Stocks (continued)    Shares    Value ($) 
Energy (continued)         
Lone Star Technologies    87,200 a    4,622,472 
Metal Management    65,900    2,138,455 
New Jersey Resources    77,000    3,408,790 
Piedmont Natural Gas    124,000    3,041,720 
Pogo Producing    32,000    1,590,080 
Stone Energy    30,700 a    1,445,970 
Swift Energy    60,900 a    2,579,724 
Todco, Cl. A    71,700    3,288,879 
Universal Compression Holdings    41,200 a    2,303,080 
WGL Holdings    90,000    2,647,800 
        52,859,263 
Health Care—6.3%         
Allied Healthcare International    375,000 a    1,747,500 
Alpharma, Cl. A    107,900    2,832,375 
Arena Pharmaceuticals    98,900 a    1,400,424 
Chattem    66,000 a    2,377,980 
CNS    107,900    2,320,929 
Coherent    108,300 a    4,008,183 
Conmed    150,500 a    3,282,405 
Haemonetics/Mass    66,000 a    3,597,000 
HealthTronics    603,000 a    5,125,500 
Kindred Healthcare    175,000 a    4,245,500 
Magellan Health Services    62,000 a    2,520,300 
Medical Action Industries    96,500 a    2,308,280 
MGI Pharma    77,000 a    1,438,360 
NBTY    119,600 a    2,708,940 
Pharmion    124,000 a    2,400,640 
PRA International    104,600 a    2,432,996 
Seattle Genetics/WA    130,000 a    638,300 
Vertex Pharmaceuticals    119,500 a,b    4,346,215 
        49,731,827 
Interest Sensitive—19.1%         
American Campus Communities    110,000    2,656,500 
American Physicians Capital    86,800 a    4,194,176 
BankUnited Financial, Cl. A    215,000    6,598,350 
BioMed Realty Trust    149,100    4,127,088 

The Fund 9

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Interest Sensitive (continued)         
Brandywine Realty Trust    153,600    4,348,416 
Calamos Asset Management, Cl. A    104,000    4,031,040 
CentraCore Properties Trust    70,000    1,680,000 
Colonial Properties Trust    103,000    5,071,720 
Corporate Office Properties Trust    41,200    1,709,800 
Delphi Financial Group, Cl. A    62,000    3,248,180 
Encore Capital Group    237,300 a    3,504,921 
Endurance Specialty Holdings    98,900    3,061,944 
Entertainment Properties Trust    91,600    3,743,692 
Equity One    238,500    5,480,730 
First Niagara Financial Group    325,700    4,559,800 
FirstFed Financial    50,000 a,b    3,144,500 
Franklin Bank/Houston, TX    175,000 a    3,396,750 
Fremont General    125,800    2,797,792 
Great American Financial Resources    75,000    1,602,000 
Health Care REIT    83,000    2,888,400 
Highland Hospitality    419,000    5,405,100 
Jefferies Group    81,000    5,382,450 
Kite Realty Group Trust    337,400    5,152,098 
KNBT Bancorp    179,000    3,016,150 
LandAmerica Financial Group    44,000    3,052,720 
Lexington Corporate Properties Trust    252,000    5,433,120 
NCO Group    118,500 a    2,541,825 
NewAlliance Bancshares    195,000    2,815,800 
Newcastle Investment    120,000    2,689,200 
Odyssey Re Holdings    230,700 b    5,548,335 
Ohio Casualty    157,100    4,658,015 
Omega Healthcare Investors    177,200    2,266,388 
Parkway Properties/Md    89,000    3,524,400 
Pennsylvania Real Estate Investment Trust    142,000    5,759,520 
Phoenix Cos.    186,000    2,825,340 
Platinum Underwriters Holdings    195,000    5,376,150 
Potlatch    70,643    2,750,838 
Scottish Re Group    198,000    4,599,540 
Universal American Financial    153,000 a    2,255,220 
Winston Hotels    264,000    2,843,280 
        149,741,288 

10

Common Stocks (continued)    Shares    Value ($) 
Producer Goods—19.6%         
Actuant, Cl. A    52,800    3,376,560 
AGCO    186,600 a,b    4,416,822 
Blount International    223,000 a    3,454,270 
Bluegreen    122,000 a    1,504,260 
Briggs & Stratton    53,000    1,788,220 
Builders FirstSource    96,000 a    2,068,800 
Building Material Holding    174,400    5,828,448 
Chesapeake    169,000    2,377,830 
Clarcor    111,000    3,885,000 
Commercial Metals    90,800    4,939,520 
Eagle Materials    37,300    2,471,125 
EnPro Industries    174,300 a,b    6,428,184 
ESCO Technologies    49,000 a,b    2,484,300 
Gardner Denver    99,000 a    7,378,470 
General Maritime    99,000    3,288,780 
Genesee & Wyoming, Cl. A    123,950 a    4,061,842 
Georgia Gulf    74,000    2,194,840 
Graco    53,700    2,510,475 
Greif, Cl. A    53,000    3,433,340 
HB Fuller    124,200    6,495,660 
Headwaters    61,500 a    2,071,320 
Kadant    69,000 a    1,629,090 
Kennametal    41,500    2,566,775 
LSI Industries    321,700    5,375,607 
Moog, Cl. A    67,000 a    2,509,150 
Mueller Industries    79,000    2,992,520 
Orbital Sciences    321,000 a,b    5,023,650 
Pacer International    136,000    4,663,440 
Quanex    49,500    2,116,620 
Reliance Steel & Aluminum    45,500    4,047,225 
Rofin-Sinar Technologies    107,000 a    6,003,770 
Silgan Holdings    61,100    2,372,513 
Steel Technologies    83,900    1,948,997 
Superior Essex    113,500 a    3,173,460 
Teledyne Technologies    102,000 a    3,713,820 
Terra Industries    504,000 a,b    4,168,080 
Texas Industries    74,700    4,235,490 

The Fund 11

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares        Value ($) 
Producer Goods (continued)             
United Stationers    85,000    a    4,560,250 
URS    90,700    a    3,906,449 
USG    37,000    a    3,957,890 
Washington Group International    58,100        3,230,941 
Watts Water Technologies, Cl. A    71,000        2,428,910 
WCI Communities    90,000    a,b    2,306,700 
            153,389,413 
Services—7.9%             
ABM Industries    150,700        2,592,040 
eFunds    115,400    a    2,970,396 
Entravision Communications, Cl. A    255,600    a    2,141,928 
First Advantage, Cl. A    183,300    a    4,939,935 
Gray Television    230,000        1,745,700 
Healthcare Services Group    285,000        6,084,750 
Hewitt Associates, Cl. A    98,900    a    2,867,111 
Journal Communications, Cl. A    310,000        3,636,300 
Leap Wireless International    74,000    a    3,400,300 
Lin TV, Cl. A    183,000    a    1,617,720 
MAXIMUS    127,000        4,424,680 
MPS Group    305,000    a    4,867,800 
NeuStar, CL. A    120,000    a,b    4,212,000 
Perot Systems, Cl. A    153,100    a    2,308,748 
Reader's Digest Association    191,000        2,631,980 
Scholastic    90,700    a    2,407,178 
Shaw Group    95,400    a    2,919,240 
Spherion    274,200    a    2,901,036 
Startek    152,500        3,481,575 
            62,150,417 
Technology—12.0%             
Agilysys    153,000        2,215,440 
Anixter International    70,900        3,604,556 
Blackbaud    140,000        2,941,400 
Cabot Microelectronics    98,000    a,b    3,205,580 
Checkpoint Systems    157,000    a    4,136,950 
Comtech Telecommunications    104,800    a    2,981,560 
Cymer    49,000    a    2,532,810 
Digi International    259,000    a    3,276,350 

12

Common Stocks (continued)    Shares    Value ($) 
Technology (continued)         
Emulex    251,500 a,b    4,564,725 
Entegris    280,000 a    2,850,400 
Filenet    112,500 a    3,129,750 
Intergraph    163,000 a    7,175,260 
Komag    62,000 a    2,606,480 
Kronos/MA    60,900 a    2,779,476 
Lawson Software    351,500 a    2,699,520 
Mattson Technology    176,000 a    2,022,240 
Methode Electronics    178,700    1,751,260 
MTS Systems    87,500    3,915,625 
Netgear    124,000 a,b    2,783,800 
Omnivision Technologies    107,100 a,b    3,114,468 
Palm    112,300 a    2,537,980 
Polycom    194,400 a    4,276,800 
Portalplayer    83,800 a,b    925,990 
Premiere Global Services    270,000 a    2,108,700 
SafeNet    120,000 a    2,410,800 
Silicon Image    237,200 a    2,419,440 
Skyworks Solutions    350,000 a    2,502,500 
Solectron    588,600 a    2,354,400 
Spectralink    166,000    1,980,380 
TIBCO Software    235,400 a    2,029,148 
TTM Technologies    225,585 a    3,668,012 
Westell Technologies, Cl. A    546,000 a    2,167,620 
        93,669,420 
Utilities—3.0%         
Allete    124,500    5,822,865 
Black Hills    54,000    1,965,600 
Cincinnati Bell    540,000 a    2,268,000 
Cleco    180,000    4,050,000 
Consolidated Communications Holdings    127,900    1,944,080 
El Paso Electric    108,000 a    2,133,000 
Great Plains Energy    118,000    3,333,500 
Northwest Natural Gas    64,000    2,210,560 
        23,727,605 
Total Common Stocks         
(cost $701,174,528)        767,060,353 

The Fund 13

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Other Investment—2.0%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Preferred Plus Money Market Fund     
(cost $15,418,000)    15,418,000 c    15,418,000 
 
Investment of Cash Collateral         
for Securities Loaned—2.4%         
Registered Investment Company;         
Dreyfus Institutional Cash Advantage Plus Fund     
(cost $19,036,721)    19,036,721 c    19,036,721 
Total Investments (cost $735,629,249)    102.2%    801,515,074 
Liabilities, Less Cash and Receivables    (2.2%)    (17,381,438) 
Net Assets    100.0%    784,133,636 

  a Non-income producing security.
b All or a portion of these securities are on loan. At April 30, 2006, the total market value of the fund's securities on
loan is $22,071,488 and the total market value of the collateral held by the fund is $22,681,221, consisting of
cash collateral of $19,036,721 and U.S. Government and agency securities valued at $3,644,500.
c Investment in affiliated money market mutual fund.
Portfolio Summary (Unaudited) †         
 
    Value (%)        Value (%) 
 
Producer Goods    19.6    Energy    6.7 
Interest Sensitive    19.1    Health Care    6.3 
Technology    12.0    Money Market Investments    4.4 
Banking    10.3    Consumer Staples    3.2 
Consumer Cyclical    9.7    Utilities    3.0 
Services    7.9        102.2 

  † Based on net assets.
See notes to financial statements.

14

  STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—See Statement of         
Investments (including securities on loan,         
valued at $22,071,488)—Note 1(b):         
Unaffiliated issuers    701,174,528    767,060,353 
Affiliated issuers    34,454,721    34,454,721 
Cash        1,167,548 
Receivable for shares of Capital Stock subscribed    1,363,536 
Dividends and interest receivable        618,709 
        804,664,867 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    970,485 
Liability for securities on loan—Note 1(b)        19,036,721 
Payable for shares of Capital Stock redeemed    524,025 
        20,531,231 
Net Assets ($)        784,133,636 
Composition of Net Assets ($):         
Paid-in capital        669,407,516 
Accumulated undistributed investment income—net    801,883 
Accumulated net realized gain (loss) on investments    48,038,412 
Accumulated net unrealized appreciation         
(depreciation) on investments        65,885,825 
Net Assets ($)        784,133,636 

Net Asset Value Per Share                 
    Class A    Class B    Class C    Class R    Class T 
Net Assets ($)    427,059,675    30,928,939    62,216,862    242,467,206    21,460,954 
Shares Outstanding    18,047,088    1,377,781    2,768,835    10,098,552    920,446 
Net Asset Value                     
Per Share ($)    23.66    22.45    22.47    24.01    23.32 

See notes to financial statements.

The Fund 15

  STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Income:     
Cash dividends:     
Unaffiliated issuers    5,749,516 
Affiliated issuers    236,677 
Interest    182,993 
Income on securities lending    169,643 
Total Income    6,338,829 
Expenses:     
Management fee—Note 3(a)    4,652,600 
Distribution and service plan fees—Note 3(b)    1,048,180 
Loan commitment fees—Note 2    4,214 
Total Expenses    5,704,994 
Investment Income—Net    633,835 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    48,692,915 
Net unrealized appreciation (depreciation) on investments    46,012,049 
Net Realized and Unrealized Gain (Loss) on Investments    94,704,964 
Net Increase in Net Assets Resulting from Operations    95,338,799 

See notes to financial statements.

  16

STATEMENT OF CHANGES IN NET ASSETS

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Operations ($):         
Investment income (loss)—net    633,835    (746,328) 
Net realized gain (loss) on investments    48,692,915    23,410,539 
Net unrealized appreciation         
(depreciation) on investments    46,012,049    8,765,500 
Net Increase (Decrease) in Net Assets         
Resulting from Operations    95,338,799    31,429,711 
Dividends to Shareholders from ($):         
Net realized gain on investments:         
Class A shares    (12,843,868)    (7,782,907) 
Class B shares    (1,056,440)    (1,460,300) 
Class C shares    (2,229,215)    (1,827,815) 
Class R shares    (6,445,376)    (992,712) 
Class T shares    (564,643)    (239,379) 
Total Dividends    (23,139,542)    (12,303,113) 
Capital Stock Transactions ($):         
Net proceeds from shares sold:         
Class A shares    82,879,245    347,264,625 
Class B shares    1,120,254    12,769,869 
Class C shares    4,231,333    43,628,795 
Class R shares    66,976,710    210,877,538 
Class T shares    8,091,715    15,371,725 
Dividends reinvested:         
Class A shares    9,478,238    6,389,293 
Class B shares    794,149    1,168,409 
Class C shares    1,133,370    1,190,553 
Class R shares    5,865,616    578,113 
Class T shares    383,430    182,577 
Cost of shares redeemed:         
Class A shares    (93,539,094)    (94,872,009) 
Class B shares    (5,675,583)    (7,580,637) 
Class C shares    (15,188,197)    (7,873,380) 
Class R shares    (39,016,408)    (42,289,173) 
Class T shares    (4,137,341)    (3,970,762) 
Increase (Decrease) in Net Assets         
from Capital Stock Transactions    23,397,437    482,835,536 
Total Increase (Decrease) in Net Assets    95,596,694    501,962,134 
Net Assets ($):         
Beginning of Period    688,536,942    186,574,808 
End of Period    784,133,636    688,536,942 
Undistributed investment income—net    801,883    168,048 

The Fund 17

STATEMENT OF CHANGES IN NET ASSETS (continued)

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Capital Share Transactions:         
Class A a         
Shares sold    3,672,377    16,446,561 
Shares issued for dividends reinvested    442,040    307,832 
Shares redeemed    (4,118,287)    (4,490,014) 
Net Increase (Decrease) in Shares Outstanding    (3,870)    12,264,379 
Class B a         
Shares sold    53,138    633,305 
Shares issued for dividends reinvested    38,942    58,598 
Shares redeemed    (263,380)    (371,837) 
Net Increase (Decrease) in Shares Outstanding    (171,300)    320,066 
Class C         
Shares sold    200,901    2,162,634 
Shares issued for dividends reinvested    55,468    59,709 
Shares redeemed    (702,890)    (385,917) 
Net Increase (Decrease) in Shares Outstanding    (446,521)    1,836,426 
Class R         
Shares sold    2,917,344    9,792,504 
Shares issued for dividends reinvested    269,834    27,556 
Shares redeemed    (1,699,381)    (1,981,416) 
Net Increase (Decrease) in Shares Outstanding    1,487,797    7,838,644 
Class T         
Shares sold    363,855    741,658 
Shares issued for dividends reinvested    18,139    8,889 
Shares redeemed    (185,311)    (190,956) 
Net Increase (Decrease) in Shares Outstanding    196,683    559,591 

  a During the period ended April 30, 2006, 103,404 Class B shares representing $2,223,902 were automatically
converted to 98,377 Class A shares and during the period ended October 31, 2005, 87,149 Class B shares
representing $1,778,502 were automatically converted to 83,446 Class A shares.
See notes to financial statements.
  18

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.

a Based on average shares outstanding at each month end.
b Exclusive of sales charge.
c Not annualized.
See notes to financial statements.

The Fund 19

FINANCIAL HIGHLIGHTS (continued)

Six Months Ended                     
    April 30, 2006        Year Ended October 31,     
Class B Shares    (Unaudited)    2005    2004    2003    2002    2001 
Per Share Data ($):                         
Net asset value,                         
beginning of period    20.50    19.44    16.91    12.04    11.89    11.56 
Investment Operations:                         
Investment income                         
(loss)—net a    (.06)    (.18)    (.13)    (.06)    (.06)    .00b 
Net realized and unrealized                         
gain (loss) on investments    2.71    2.38    3.43    4.93    .26    .33 
Total from                         
Investment Operations    2.65    2.20    3.30    4.87    .20    .33 
Distributions:                         
Dividends from investment                         
income—net    —    —    —    —    (.02)    — 
Dividends from net realized                         
gain on investments    (.70)    (1.14)    (.77)    —    (.03)    — 
Total Distributions    (.70)    (1.14)    (.77)    —    (.05)    — 
Net asset value, end of period    22.45    20.50    19.44    16.91    12.04    11.89 
Total Return (%) c    13.29d    11.44    20.18    40.45    1.69    2.85 
Ratios/Supplemental Data (%):                     
Ratio of total expenses                         
to average net assets    1.12d    2.25    2.25    2.25    2.25    2.27 
Ratio of net expenses                         
to average net assets    1.12d    2.25    2.25    2.25    2.25    2.27 
Ratio of net investment income                     
(loss) to average net assets    (.28)d    (.86)    (.73)    (.45)    (.44)    .03 
Portfolio Turnover Rate    46.13d    100.57    136.35    147.81    95.03    112.09 
Net Assets, end of period                         
($ x 1,000)    30,929    31,755    23,897    19,519    12,804    6,591 

a Based on average shares outstanding at each month end.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
See notes to financial statements.

20

Six Months Ended                     
    April 30, 2006        Year Ended October 31,     
Class C Shares    (Unaudited)    2005    2004    2003    2002    2001 
Per Share Data ($):                         
Net asset value,                         
beginning of period    20.52    19.46    16.94    12.06    11.90    11.57 
Investment Operations:                         
Investment income                         
(loss)—net a    (.06)    (.17)    (.12)    (.06)    (.06)    .01 
Net realized and unrealized                         
gain (loss) on investments    2.71    2.37    3.41    4.94    .25    .32 
Total from                         
Investment Operations    2.65    2.20    3.29    4.88    .19    .33 
Distributions:                         
Dividends from net realized                         
gain on investments    (.70)    (1.14)    (.77)    —    (.03)    — 
Net asset value, end of period    22.47    20.52    19.46    16.94    12.06    11.90 
Total Return (%) b    13.28c    11.49    20.02    40.46    1.61    2.85 
Ratios/Supplemental Data (%):                     
Ratio of total expenses                         
to average net assets    1.12c    2.25    2.25    2.25    2.25    2.27 
Ratio of net expenses                         
to average net assets    1.12c    2.25    2.25    2.25    2.25    2.27 
Ratio of net investment income                     
(loss) to average net assets    (.28)c    (.84)    (.63)    (.45)    (.44)    .05 
Portfolio Turnover Rate    46.13c    100.57    136.35    147.81    95.03    112.09 
Net Assets, end of period                         
($ x 1,000)    62,217    65,973    26,828    6,598    4,996    2,012 

  a Based on average shares outstanding at each month end.
b Exclusive of sales charge.
c Not annualized.
See notes to financial statements.

The Fund 21

FINANCIAL HIGHLIGHTS (continued)

Six Months Ended                     
    April 30, 2006        Year Ended October 31,     
Class R Shares    (Unaudited)    2005    2004    2003    2002    2001 
Per Share Data ($):                         
Net asset value,                         
beginning of period    21.77    20.39    17.54    12.36    12.17    11.80 
Investment Operations:                         
Investment income—neta    .05    .04    .10    .08    .08    .14 
Net realized and unrealized                         
gain (loss) on investments    2.89    2.48    3.52    5.10    .25    .32 
Total from                         
Investment Operations    2.94    2.52    3.62    5.18    .33    .46 
Distributions:                         
Dividends from investment                         
income—net    —    —    —    —    (.11)    (.09) 
Dividends from net realized                         
gain on investments    (.70)    (1.14)    (.77)    —    (.03)    — 
Total Distributions    (.70)    (1.14)    (.77)    —    (.14)    (.09) 
Net asset value, end of period    24.01    21.77    20.39    17.54    12.36    12.17 
Total Return (%)    13.86b    12.58    21.26    41.91    2.64    3.88 
Ratios/Supplemental Data (%):                     
Ratio of total expenses                         
to average net assets    .62b    1.25    1.25    1.25    1.25    1.26 
Ratio of net expenses                         
to average net assets    .62b    1.25    1.25    1.25    1.25    1.26 
Ratio of net investment income                     
to average net assets    .22b    .20    .58    .55    .58    1.07 
Portfolio Turnover Rate    46.13b    100.57    136.35    147.81    95.03    112.09 
Net Assets, end of period                         
($ x 1,000)    242,467    187,464    15,740    1,998    1,154    589 

a Based on average shares outstanding at each month end.
b Not annualized.
See notes to financial statements.

22

a Based on average shares outstanding at each month end.
b Amount represents less than $.01.
c Exclusive of sales charge.
d Not annualized.
e Amount represents less than .01%.
See notes to financial statements.

The Fund 23

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Premier Small Cap Value Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series, including the fund.The fund's investment objective is to seek capital appre-ciation.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.The fund is authorized to issue 100 million shares of $.001 par value Capital Stock in each of the following classes: Class A, Class B, Class C and Class R and 200 million shares of $.001 par value Capital Stock of Class T shares. Class A, Class B, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear a distribution fee and/or service fee. Class A and Class T shares are sold with a front-end sales charge, while Class B and Class C shares are subject to a contingent deferred sales charge ("CDSC"). Class B shares automatically convert to Class A shares after six years. Class R shares are sold primarily to bank trust departments and other financial service providers (including Mellon Financial and its affiliates) acting on behalf of customers having a qualified trust or investment account or relationship at such institution, and bear no distribution or service fees. Class R shares are offered without a front-end sales charge or CDSC. Each class of shares has identical rights and privileges, except with respect to distribution and service fees and voting rights on matters affecting a single class. 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.

Effective March 1, 2006, Class A shares of the fund may be purchased at net asset value ("NAV") without payment of a sales charge:

24

  • By qualified investors who (i) purchase Class A shares directly through the Distributor, and (ii) have, or whose spouse or minor children have, beneficially owned shares and continuously maintained an open account directly through the Distributor in a Dreyfus-managed fund, including the fund, or a Founders Asset Management LLC
    ("Founders") managed fund since on or before February 28, 2006. Founders is a wholly-owned subsidiary of the Distributor.
  • With the cash proceeds from an investor's exercise of employment- related stock options, whether invested in the fund directly or indi- rectly through an exchange from a Dreyfus-managed money mar- ket fund, provided that the proceeds are processed through an entity that has entered into an agreement with the Distributor specifically relating to processing stock options. Upon establishing the account in the fund or the Dreyfus-managed money market fund, the investor and the investor's spouse and minor children become eligi- ble to purchase Class A shares of the fund at NAV, whether or not using the proceeds of the employment-related stock options.
  • By members of qualified affinity groups who purchase Class A shares directly through the Distributor, provided that the qualified affinity group has entered into an affinity agreement with the Distributor.

Effective March 1, 2006, Class A and Class T shares of the fund may be purchased at NAV without payment of a sales charge:

  • For Dreyfus-sponsored IRA "Rollover Accounts" with the distrib- ution proceeds from qualified and non-qualified retirement plans or a Dreyfus-sponsored 403(b)(7) plan, provided that, in the case of a qualified or non-qualified retirement plan, the rollover is processed through an entity that has entered into an agreement with the Distributor specifically relating to processing rollovers. Upon estab- lishing the Dreyfus-sponsored IRA rollover account in the fund, the shareholder becomes eligible to make subsequent purchases of Class A or Class T shares of the fund at NAV in such account.

The Fund 25

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

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.

(a) Portfolio valuation: Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available, are valued at the official closing price or, if there is no official closing price that day, at the last sales price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Investments in registered investment companies are valued at their NAV. When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its NAV, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR's and futures contracts. For other securities that are fair valued by the Board of Directors, certain factors may be considered such as: 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. Financial futures are valued at the last sales price.

(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from

26

securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of the Manager, the fund may lend securities to qualified institutions. It is the funds policy, that at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager.The fund is entitled to receive all income on securities loaned,in addition to income earned as a result of the lending transaction. Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counter party default, the fund has the right to use the collateral to offset losses incurred.There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights.The Manager, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

The Fund 27

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

(c) Affiliated issuers: Investments in other investment companies advised by the Manager are defined as "affiliated" in the Act.

(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code").To the extent that net realized capital gain can be offset by capital loss carryovers, 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.

(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005, were as follows: ordinary income $9,145,430 and long-term capital gains $3,157,683.The tax character of current year distributions, if any, will be determined at the end of the current fiscal year.

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 at rates based on prevailing market rates in effect at the time of borrowing. During the period ended April 30, 2006, the fund did not borrow under the Facility.

28

NOTE 3—Investment Management Fee and Other Transactions With Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of 1.25% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, service fees, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the

The Fund 29

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

During the period ended April 30, 2006, the Distributor retained $23,256 and $86 from commissions earned on sales of fund's Class A and Class T shares, respectively, and $24,366 and $12,704 from CDSC on redemptions of the fund's Class B and Class C shares, respectively.

(b) Under separate Distribution Plans (the "Plans") adopted pursuant to Rule 12b-1 under the Act, Class A shares may pay annually up to .25% of the value of their average daily net assets to compensate the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of Class A shares. Class B, Class C and Class T shares pay the Distributor for distributing their shares at an aggregate annual rate of .75% of the value of the average daily net assets of Class B and Class C shares and .25% of the value of the average daily net assets of Class T shares.The Distributor may pay one or more agents in respect of advertising, marketing and other distribution services for Class T shares and determines the amounts, if any, to be paid to agents and the basis on which such payments are made. Class B, Class C and Class T shares are also subject to a service plan adopted pursuant to Rule 12b-1 (the "Service Plan"), under which Class B, Class C and Class T shares pay the Distributor for providing certain services to the holders of their shares a fee at the annual rate of .25% of the value of the average daily net assets of Class B, Class C and Class T shares. During the period ended April 30, 2006, Class A, Class B, Class C and Class T shares were charged $516,835, $117,972, $245,188 and $23,566, respectively, pursuant to their respective Plans, and Class B, Class C and Class T shares were charged $39,324, $81,729 and $23,566, respectively, pursuant to the Service Plan.

30

Under its terms, the Plans and Service Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plans or Service Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $797,090, Rule 12b-1 distribution plan fees $149,747 and service plan fees $23,648.

(c) The Company and the Manager have received an exemptive order from the SEC which, among other things, permits the fund to use cash collateral received in connection with lending the fund's securities and other uninvested cash to purchase shares of one or more registered money market mutual funds advised by the Manager in excess of the limitations imposed by the Act.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2006, amounted to $340,422,490 and $339,023,034, respectively.

At April 30, 2006, accumulated net unrealized appreciation on investments was $65,885,825, consisting of $99,623,805 gross unrealized appreciation and $33,737,980 gross unrealized depreciation.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 5—Subsequent Event:

Effective on or about June 1, 2006, the fund will no longer offer Class B shares, except in connection with dividend reinvestment and permitted exchanges of Class B shares.

The Fund 31

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and 2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services. The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group

32

of small-cap value funds (the "Performance Group") and to a larger universe of funds, consisting of all retail and institutional small-cap value funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was higher than the Performance Group and Performance Universe medians for each period, except the one-year period ended November 30, 2005. A representative of the Manager noted that high market volatility in the second quarter 2005 had affected the fund's short-term performance. A representative of the Manager also presented the Board with the fund's total return performance and the quartile, percentile and rank of the fund within its Lipper category (as provided by Lipper) for periods ended December 31, 2005 and noted that while the one-year relative total return was generally consistent with the November 30, 2005 one-year relative total return, the fund's three-month relative total return had improved.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. The Board members noted that the fund's expense ratio was higher than the Expense Group and Expense Universe medians, but that that the fund was the only fund in the Expense Group with a "unitary fee" structure.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the "Similar Funds"), and by other accounts managed by the Manager or its affiliates

The Fund 33

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

with similar investment objectives, policies and strategies as the fund (the "Adviser Accounts" and, collectively with the Similar Funds, the "Similar Accounts").The Manager's representatives explained the nature of the Similar Accounts and the differences, from the Manager's perspective, in providing services to such Similar Accounts as compared to managing and providing services to the fund.The Manager's representatives also reviewed the costs associated with distribution through inter-mediaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure.The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund's management fee. The Board acknowledged that differences in fees paid by the Similar Accounts seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit. The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex. The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable. The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including that, effective January 9, 2006, the fund had closed to new investors, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors. The Board members also

34

considered potential benefits to the Manager from acting as investment adviser and noted the Manager's soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • The Board was generally satisfied with the fund's overall perfor- mance. Although it was somewhat concerned with the fund's one- year performance, it was satisfied with the longer-term performance and recent trend of improvement.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.

The Fund 35

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

36

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

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, 2005, is available 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.

© 2006 Dreyfus Service Corporation 0148SA0406

  Dreyfus Premier
Tax Managed
Growth Fund

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
10    Statement of Assets and Liabilities 
11    Statement of Operations 
12    Statement of Changes in Net Assets 
14    Financial Highlights 
19    Notes to Financial Statements 
27    Information About the Review 
    and Approval of the Fund's 
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus Premier
Tax Managed Growth Fund

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Premier Tax Managed Growth Fund, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year. As always, we urge you to discuss with your financial advisor the potential implications of these possibilities on your investments.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

  Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Fayez Sarofim, Portfolio Manager
Fayez Sarofim & Co., Sub-Investment Adviser

How did Dreyfus Premier Tax Managed Growth Fund perform relative to its benchmark?

For the six-month period ended April 30, 2006, the fund produced total returns of 4.80% for Class A shares, 4.36% for Class B shares, 4.44% for Class C shares, 4.96% for Class R shares and 4.66% for Class T shares.1 For the same period, the fund's benchmark, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"), produced a 9.63% total return.2

Despite concerns regarding resurgent energy prices and rising interest rates during the reporting period, stock prices rose due to sustained economic growth and strong corporate earnings. However, the fund's returns underperformed the benchmark, primarily due to weakness among large consumer staples and technology stocks, which remained out of favor among most investors.

What is the fund's investment approach?

The fund invests primarily in large, well-established, multinational companies that we believe are well-positioned to weather difficult economic climates and thrive during favorable times. We focus on purchasing large-cap, "blue-chip" stocks at a price we consider to be justified by a company's fundamentals. The result is a portfolio of stocks in prominent companies selected for what we consider to be sustained patterns of profitability, strong balance sheets, expanding global presence and above-average earnings growth potential.

At the same time, we manage the portfolio in a manner cognizant of the concerns of tax-conscious investors. Our tax-managed approach is based on employing a "buy-and-hold" investment strategy rather than short-term profit.We typically buy and sell relatively few stocks during the course of the year, which may help reduce investors' tax liabilities and the fund's trading costs.

The Fund 3

DISCUSSION OF FUND PERFORMANCE (continued)

What other factors influenced the fund's performance?

Returns from large-cap growth stocks remained limited by concerns regarding the potentially eroding effects of rising interest rates and high energy prices on future financial results. In addition, the fund was adversely affected by investors' continued preference for smaller, lower-quality companies, which have benefited greatly from the low interest rates of the past few years. As interest rates have risen substantially over the past two years, we believe these companies earnings growth will be negatively impacted by higher borrowing and energy costs. Conversely, the large, blue-chip companies we favor generally have track records of steady earnings and dividend growth even in higher interest rate environments.What's more, they recently have been selling at attractively low valuations compared to historical norms.Yet, blue-chip, multinational stocks have remained out of favor among investors.

The fund's consumer staples holdings were among its greatest detractors from performance during the reporting period. U.S. pharmacy chain Walgreen declined on news of higher-than-expected expenses related to the new Medicare Part D prescription drug benefit, which eroded same-store sales growth. However, the company's earnings have remained on track, giving it a more compelling valuation, in our judgment. Similarly, global retailer Wal-Mart Stores' stock price was hurt by controversy surrounding its labor practices and concerns that its customers' purchasing power might be constrained by high gasoline costs. Finally, international food and tobacco giant Altria Group paused after advancing strongly in previous reporting periods as a proposed restructuring continues to be delayed by unresolved legal matters.

The fund's results also were hindered by weakness among its technology holdings, which are concentrated in two of the sector's leaders: software giant Microsoft and microprocessor maker Intel. Intel was hurt by weaker-than-expected earnings reports due to competitive pressures and lackluster customer demand, and Microsoft disappointed investors when it delayed the launch of the next generation of its popular

4

software products.While the fund's energy holdings, such as integrated oil producer Exxon Mobil, fared well as commodity prices rose, they lagged the S&P 500 Index's energy component, which includes some smaller oilfield services and exploration and production companies.

Better results from the fund's consumer discretionary holdings enabled the fund to participate to a degree in the market's rise. The sector's returns were led by publisher McGraw-Hill Cos., which enjoyed improved revenues and earnings from its Standard & Poor's financial data and publishing subsidiary. Other notably strong performers included industrial company Emerson Electric and financial services provider JP Morgan Chase & Co.

What is the fund's current strategy?

Although the reporting period proved to be a difficult time for our "buy-and-hold" approach, we remain committed to our disciplined strategy of focusing on well-established, high-quality companies that we believe are poised to benefit from long-term trends.With the Fed nearing what we believe is the end of its credit tightening campaign and the economy entering a more mature phase, we believe that investors' appetite for risk may wane, and sentiment may begin to shift toward leading companies with track records of consistent earnings and dividend growth.

May 15, 2006

1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into
consideration the maximum initial sales charges in the case of Class A and Class T 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. Return figures
provided reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to
an agreement in effect until October 4, 2006. Had these expenses not been absorbed, the fund's
returns would have been lower.
2 SOURCE: LIPPER INC. — Reflects monthly reinvestment of dividends and, where
applicable, capital gain distributions.The Standard & Poor's 500 Composite Stock Price Index is
a widely accepted, unmanaged index of U.S. stock market performance.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 Tax Managed Growth Fund from November 1, 2005 to April 30, 2006. 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 April 30, 2006         
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 6.70    $ 10.49    $ 10.49    $ 5.23    $ 7.97 
Ending value (after expenses)    $1,048.00    $1,043.60    $1,044.40    $1,049.60    $1,046.60 

  COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
    Class A    Class B    Class C    Class R    Class T 
Expenses paid per $1,000 †    $ 6.61    $ 10.34    $ 10.34    $ 5.16    $ 7.85 
Ending value (after expenses)    $1,018.25    $1,014.53    $1,014.53    $1,019.69    $1,017.01 

† Expenses are equal to the fund's annualized expense ratio of 1.32% for Class A, 2.07% for Class B, 2.07% for Class C, 1.03% for Class R and 1.57% for Class T; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

  6
STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
Common Stocks—100.0%    Shares    Value ($) 
Banking—3.3%         
Bank of America    81,896    4,088,248 
SunTrust Banks    25,000    1,933,250 
        6,021,498 
Capital Goods—8.6%         
Emerson Electric    50,000    4,247,500 
General Electric    325,000    11,241,750 
        15,489,250 
Consumer Services—8.5%         
Home Depot    11,000    439,230 
McDonald's    75,000    2,592,750 
Wal-Mart Stores    110,000    4,953,300 
Walgreen    173,000    7,253,890 
        15,239,170 
Diversified Financial Services—11.9%     
American Express    70,000    3,766,700 
American International Group    18,425    1,202,231 
Ameriprise Financial    15,000    735,600 
Citigroup    165,833    8,283,359 
JPMorgan Chase & Co.    100,000    4,538,000 
Merrill Lynch & Co.    37,000    2,821,620 
        21,347,510 
Energy—19.0%         
BP, ADR    115,000    8,477,800 
Chevron    150,000    9,153,000 
ConocoPhillips    67,000    4,482,300 
Exxon Mobil    180,512    11,386,697 
Total, ADR    5,000 a    690,100 
        34,189,897 
Food, Beverage & Tobacco—19.3%     
Altria Group    150,000    10,974,000 
Anheuser-Busch Cos.    45,000    2,006,100 
Coca-Cola    202,500    8,496,900 
Nestle, ADR    81,800    6,232,342 
PepsiCo    121,000    7,047,040 
        34,756,382 

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)    Shares    Value ($) 
Household & Personal Products—5.6%     
Colgate-Palmolive    20,000    1,182,400 
Estee Lauder Cos., Cl. A    30,000    1,113,600 
Procter & Gamble    135,000    7,858,350 
        10,154,350 
Materials—.3%         
Praxair    10,000    561,300 
Media—7.1%         
CBS, Cl. B    32,500    827,775 
McGraw-Hill Cos.    140,000    7,792,400 
News, Cl. A    161,000    2,762,760 
Time Warner    10,000    174,000 
Viacom, Cl. B    32,500 b    1,294,475 
        12,851,410 
Pharmaceuticals & Biotechnology—9.0%     
Abbott Laboratories    76,000    3,248,240 
Eli Lilly & Co.    60,000    3,175,200 
Johnson & Johnson    100,000    5,861,000 
Merck & Co.    28,000    963,760 
Pfizer    115,000    2,912,950 
        16,161,150 
Technology—5.8%         
Intel    350,000    6,993,000 
Microsoft    145,000    3,501,750 
        10,494,750 
Transportation—1.6%         
United Parcel Service, Cl. B    35,000    2,837,450 
Total Common Stocks         
(cost $146,889,982)        180,104,117 

8
Investment of Cash Collateral         
for Securities Loaned—.2%    Shares    Value ($) 
Registered Investment Company;         
Dreyfus Institutional Cash Advantage Plus Fund         
(cost $309,560)    309,560 c    309,560 
Total Investments (cost $147,199,542)    100.2%    180,413,677 
Liabilities, Less Cash and Receivables    (.2%)    (271,001) 
Net Assets    100.0%    180,142,676 

ADR—American Depository Receipts.
a A portion of this security is on loan. At April 30, 2006, the total market value of the fund's security on loan is
$300,884 and the total market value of the collateral held by the fund is $309,560.
b Non-income producing security.
c Investment in affiliated money market mutual fund.
Portfolio Summary (Unaudited) †         
 
    Value (%)        Value (%) 
Food, Beverage & Tobacco    19.3    Technology    5.8 
Energy    19.0    Household & Personal Products    5.6 
Diversified Financial Services    11.9    Banking    3.3 
Pharmaceuticals & Biotechnology    9.0    Transportation    1.6 
Capital Goods    8.6    Materials    .3 
Consumer Services    8.5    Money Market Investment    .2 
Media    7.1        100.2 

† Based on net assets.
See notes to financial statements.

The Fund 9

STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—See Statement         
of Investments (including securities on loan,     
valued at $300,884)—Note 1(b):         
Unaffiliated issuers    146,889,982    180,104,117 
Affiliated issuers    309,560    309,560 
Receivable for investment securities sold        507,068 
Dividends receivable        301,887 
Receivable for shares of Capital Stock subscribed    8,748 
        181,231,380 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)    234,974 
Cash overdraft due to Custodian        35,740 
Liability for securities on loan—Note 1(b)        309,560 
Bank note payable—Note 2        280,000 
Payable for shares of Capital Stock redeemed    226,892 
Interest payable—Note 2        1,538 
        1,088,704 
Net Assets ($)        180,142,676 
Composition of Net Assets ($):         
Paid-in capital        174,819,967 
Accumulated undistributed investment income—net    515,025 
Accumulated net realized gain (loss) on investments    (28,406,451) 
Accumulated net unrealized appreciation         
(depreciation) on investments        33,214,135 
Net Assets ($)        180,142,676 

Net Asset Value Per Share                 
    Class A    Class B    Class C    Class R    Class T 
Net Assets ($)    98,579,153    43,196,315    35,320,850    1,120.40    3,045,238 
Shares Outstanding    5,797,393    2,656,143    2,177,099    65.690    181,781 
Net Asset Value                     
Per Share ($)    17.00    16.26    16.22    17.06    16.75 

See notes to financial statements.

10

STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Income:     
Cash dividends:     
Unaffiliated issuers (net of $50,889 foreign taxes withheld at source)    2,545,247 
Affiliated issuers    2,461 
Income from securities lending    6,347 
Total Income    2,554,055 
Expenses:     
Management fee—Note 3(a)    1,066,529 
Distribution and service plan fees—Note 3(b)    574,781 
Interest expense—Note 2    8,480 
Loan commitment fees—Note 2    1,258 
Total Expenses    1,651,048 
Less—reduction in management fee     
due to undertaking—Note 3(a)    (42,135) 
Net Expenses    1,608,913 
Investment Income—Net    945,142 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    8,238,542 
Net unrealized appreciation (depreciation) on investments    (211,197) 
Net Realized and Unrealized Gain (Loss) on Investments    8,027,345 
Net Increase in Net Assets Resulting from Operations    8,972,487 

See notes to financial statements.

The Fund 11

STATEMENT OF CHANGES IN NET ASSETS

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Operations ($):         
Investment income—net    945,142    2,031,987 
Net realized gain (loss) on investments    8,238,542    2,641,231 
Net unrealized appreciation         
(depreciation) on investments    (211,197)    14,641,550 
Net Increase (Decrease) in Net Assets         
Resulting from Operations    8,972,487    19,314,768 
Dividends to Shareholders from ($):         
Investment income—net:         
Class A shares    (797,828)    (1,156,603) 
Class B shares    (339,491)    (250,408) 
Class C shares    (265,125)    (203,832) 
Class R shares    (8)    (14) 
Class T shares    (28,024)    (38,935) 
Total Dividends    (1,430,476)    (1,649,792) 
Capital Stock Transactions ($):         
Net proceeds from shares sold:         
Class A shares    14,060,674    43,639,682 
Class B shares    490,906    1,962,002 
Class C shares    1,122,624    3,009,460 
Class T shares    13,030    48,325 
Dividends reinvested:         
Class A shares    609,124    874,338 
Class B shares    228,934    174,313 
Class C shares    167,222    117,279 
Class R shares    8    14 
Class T shares    24,761    34,777 
Cost of shares redeemed:         
Class A shares    (24,671,210)    (38,557,432) 
Class B shares    (17,215,393)    (53,345,543) 
Class C shares    (9,093,333)    (16,392,698) 
Class T shares    (981,974)    (1,183,504) 
Increase (Decrease) in Net Assets from         
Capital Stock Transactions    (35,244,627)    (59,618,987) 
Total Increase (Decrease) in Net Assets    (27,702,616)    (41,954,011) 
Net Assets ($):         
Beginning of Period    207,845,292    249,799,303 
End of Period    180,142,676    207,845,292 
Undistributed investment income—net    515,025    1,000,359 

12

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Capital Share Transactions:         
Class Aa         
Shares sold    842,460    2,701,140 
Shares issued for dividends reinvested    36,193    55,514 
Shares redeemed    (1,474,860)    (2,375,710) 
Net Increase (Decrease) in Shares Outstanding    (596,207)    380,944 
Class B a         
Shares sold    30,653    125,718 
Shares issued for dividends reinvested    14,175    11,468 
Shares redeemed    (1,076,069)    (3,434,764) 
Net Increase (Decrease) in Shares Outstanding    (1,031,241)    (3,297,578) 
Class C         
Shares sold    70,272    193,094 
Shares issued for dividends reinvested    10,380    7,731 
Shares redeemed    (568,446)    (1,057,481) 
Net Increase (Decrease) in Shares Outstanding    (487,794)    (856,656) 
Class R         
Shares issued for dividends reinvested    1    1 
Class T         
Shares sold    790    3,049 
Shares issued for dividends reinvested    1,491    2,235 
Shares redeemed    (59,719)    (74,643) 
Net Increase (Decrease) in Shares Outstanding    (57,438)    (69,359) 

a During the period ended April 30, 2006, 552,671 Class B shares representing $8,832,263 were automatically
converted to 529,492 Class A shares and during the period ended October 31, 2005, 1,539,147 Class B shares
representing $25,967,931 were automatically converted to 1,603,882 Class A shares.
See notes to financial statements.

The Fund 13

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.

a Based on average shares outstanding at each month end.
b Exclusive of sales charge.
c Not annualized.
See notes to financial statements.

14

a Based on average shares outstanding at each month end.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
See notes to financial statements.

The Fund 15

FINANCIAL HIGHLIGHTS (continued)

Six Months Ended                     
    April 30, 2006        Year Ended October 31,     
Class C Shares    (Unaudited)    2005    2004    2003    2002    2001 
Per Share Data ($):                             
Net asset value,                             
beginning of period        15.64    14.59    14.22    13.03    14.82    18.47 
Investment Operations:                             
Investment income (loss)—net a        .05    .08    .00b    .00b    (.05)    (.08) 
Net realized and unrealized                             
gain (loss) on investments        .63    1.03    .38    1.19    (1.74)    (3.57) 
Total from Investment Operations    .68    1.11    .38    1.19    (1.79)    (3.65) 
Distributions:                             
Dividends from investment                             
income—net        (.10)    (.06)    (.01)    —    —    — 
Net asset value, end of period        16.22    15.64    14.59    14.22    13.03    14.82 
Total Return (%) c        4.44d    7.54    2.73    9.13    (12.08)    (19.76) 
Ratios/Supplemental Data (%):                         
Ratio of total expenses                             
to average net assets        1.05d    2.11    2.10    2.10    2.10    2.10 
Ratio of net expenses                             
to average net assets        1.02d    2.11    2.10    2.10    2.10    2.10 
Ratio of net investment income                         
(loss) to average net assets        .28d    .53    .02    .01    (.31)    (.48) 
Portfolio Turnover Rate        —    1.06    .72    3.51    7.25    3.56 
Net Assets, end of period                             
($ x 1,000)        35,321    41,677    51,391    59,007    58,289    59,104 

a Based on average shares outstanding at each month end.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
See notes to financial statements.

16

  a From May 14, 2004 (commencement of initial offering) to October 31, 2004.
b Based on average shares outstanding at each month end.
c Not annualized.
See notes to financial statements.

The Fund 17

  FINANCIAL HIGHLIGHTS (continued)
Six Months Ended                     
    April 30, 2006        Year Ended October 31,     
Class T Shares    (Unaudited)    2005    2004    2003    2002    2001 
Per Share Data ($):                             
Net asset value,                             
beginning of period        16.12    15.04    14.64    13.36    15.12    18.75 
Investment Operations:                             
Investment income—net a        .09    .17    .08    .07    .03    .00b 
Net realized and unrealized                             
gain (loss) on investments        .66    1.05    .39    1.21    (1.79)    (3.63) 
Total from Investment Operations    .75    1.22    .47    1.28    (1.76)    (3.63) 
Distributions:                             
Dividends from investment                             
income—net        (.12)    (.14)    (.07)    —    —    — 
Net asset value, end of period        16.75    16.12    15.04    14.64    13.36    15.12 
Total Return (%) c        4.66d    8.12    3.25    9.58    (11.64)    (19.36) 
Ratios/Supplemental Data (%):                         
Ratio of total expenses                             
to average net assets        .80d    1.61    1.60    1.60    1.60    1.60 
Ratio of net expenses                             
to average net assets        .78d    1.61    1.60    1.60    1.60    1.60 
Ratio of net investment income                         
to average net assets        .53d    1.04    .52    .51    .18    .02 
Portfolio Turnover Rate        —    1.06    .72    3.51    7.25    3.56 
Net Assets, end of period                             
($ x 1,000)        3,045    3,857    4,641    5,135    5,615    7,404 

  a Based on average shares outstanding at each month end.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
See notes to financial statements.

18

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Premier Tax Managed Growth Fund (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series, including the fund. The fund's investment objective is to provide investors with long-term capital appreciation consistent with minimizing realized capital gains and taxable current income.The Dreyfus Corporation (the "Manager" or "Dreyfus") serves as the fund's investment adviser. Dreyfus is a wholly-owned subsidiary of Mellon Financial Corporation ("Mellon Financial"). Fayez Sarofim & Co. ("Sarofim & Co.") 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 Capital Stock in each of the following classes of shares: Class A, Class B, Class C, Class R and Class T. Class A, Class B, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear a distribution fee and/or service fee. Class A and Class T shares are sold with a front-end sales charge, while Class B and Class C shares are subject to a contingent deferred sales charge ("CDSC"). Class B shares automatically convert to Class A shares after six years. Class R shares are sold primarily to bank trust departments and other financial service providers (including Mellon Financial and its affiliates) acting on behalf of customers having a qualified trust or investment account or relationship at such institution, and bear no distribution or service fees. Class R shares are offered without a front-end sales charge or CDSC. Each class of shares has identical rights and privileges, except with respect to distribution and service fees and voting rights on matters affecting a single class. 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 Fund 19

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Effective March 1, 2006, Class A shares of the fund may be purchased at net asset value ("NAV") without payment of a sales charge:

  • By qualified investors who (i) purchase Class A shares directly through the Distributor, and (ii) have, or whose spouse or minor children have,beneficially owned shares and continuously maintained an open account directly through the Distributor in a Dreyfus-managed fund, including the fund, or a Founders Asset Management LLC
    ("Founders") managed fund since on or before February 28, 2006. Founders is a wholly-owned subsidiary of the Distributor.
  • With the cash proceeds from an investor's exercise of employment- related stock options, whether invested in the fund directly or indi- rectly through an exchange from a Dreyfus-managed money mar- ket fund,provided that the proceeds are processed through an entity that has entered into an agreement with the Distributor specifically relating to processing stock options. Upon establishing the account in the fund or the Dreyfus-managed money market fund, the investor and the investor's spouse and minor children become eli- gible to purchase Class A shares of the fund at NAV, whether or not using the proceeds of the employment-related stock options.
  • By members of qualified affinity groups who purchase Class A shares directly through the Distributor, provided that the quali- fied affinity group has entered into an affinity agreement with the Distributor.

Effective March 1, 2006, Class A and Class T shares of the fund may be purchased at NAV without payment of a sales charge:

  • For Dreyfus-sponsored IRA "Rollover Accounts" with the distrib- ution proceeds from qualified and non-qualified retirement plans or a Dreyfus-sponsored 403(b)(7) plan, provided that, in the case of a qualified or non-qualified retirement plan, the rollover is processed through an entity that has entered into an agreement with the Distributor specifically relating to processing rollovers. Upon estab- lishing the Dreyfus-sponsored IRA rollover account in the fund, the shareholder becomes eligible to make subsequent purchases of Class A or Class T shares of the fund at NAV in such account.

20

As of April 30, 2006, MBC Investments Corp., an indirect subsidiary of Mellon Financial, held all of the Class R shares.

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.

(a) Portfolio valuation: Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available, are valued at the official closing price or, if there is no official closing price that day, at the last sales price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Investments in registered investment companies are valued at their NAV.When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of the security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its NAV, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR's and futures contracts. For other securities that are fair valued by the Board of Directors, certain factors may be considered such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which securities are purchased and sold and public trading in similar securities of the issuer or comparable issuers.

The Fund 21

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

(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, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of Dreyfus, the fund may lend securities to qualified institutions. It is the fund's policy, that at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Cash collateral is invested in certain money market mutual funds managed by Dreyfus.The fund is entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transac-tion.Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

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

(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code").To the extent that net realized capital gain can be offset by capital loss carryovers, 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.

(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 pro-

22

visions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The fund has an unused capital loss carryover of $36,644,993 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2005. If not applied, $659,140 of the carryover expires in fiscal 2008, $5,341,001 expires in fiscal 2009, $14,181,361 expires in fiscal 2010, $8,603,573 expires in fiscal 2011 and $7,859,918 expires in fiscal 2012.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were as follows: ordinary income $1,649,792. The tax character of current year distributions will be determined at the end of the current fiscal year.

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 based on prevailing market rates in effect at the time of borrowing.

The average daily amount of borrowings outstanding under the Facility during the period ended April 30, 2006, was approximately $358,000, with a related weighted average annualized interest rate of 4.78% .

NOTE 3—Investment Management Fee and Other Transactions With Affiliates:

(a) Pursuant to an Investment Management Agreement with Dreyfus, Dreyfus provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund. Dreyfus also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay Dreyfus a fee, calculated daily and paid monthly, at the

The Fund 23

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

annual rate of 1.10% of the value of the fund's average daily net assets. Out of its fee, Dreyfus pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, service fees, expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, Dreyfus is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund.These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to Dreyfus, are in fact paid directly by Dreyfus to the non-interested Directors.

Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Sarofim & Co., Dreyfus pays Sarofim & Co. an annual fee of .30% of the value of the fund's average daily net assets, payable monthly. From

24

February 7, 2006 through October 4, 2006, Sarofim & Co. has agreed to waive receipt of a portion of its sub-investment advisory fee, which is paid by Dreyfus out of the management fee received by Dreyfus from the fund. Dreyfus will, in turn, pass the waiver onto the fund. The reduction in management fee, pursuant to the undertaking by Sarofim & Co., amounted to $42,135 during the period ended April 30, 2006.

During the period ended April 30, 2006, the Distributor retained $2,180 and $68 from commissions earned on sales of the fund's Clas A and Class T shares, respectively, and $78,288 and $2,420 from CDSC on redemptions of the fund's Class B and Class C shares, respectively.

(b) Under separate Distribution Plans (the "Plans") adopted pursuant to Rule 12b-1 under the Act, Class A shares may pay annually up to .25% of the value of its average daily net assets to compensate the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of Class A shares. Class B, Class C and Class T shares pay the Distributor for distributing their shares at an aggregate annual rate of .75% of the value of the average daily net assets of Class B and Class C shares and .25% of the value of the average daily net assets of Class T shares.The Distributor may pay one or more agents in respect of advertising, marketing and other distribution services for Class T shares and determines the amounts, if any, to be paid to agents and the basis on which such payments are made. Class B, Class C and Class T shares are also subject to a service plan adopted pursuant to Rule 12b-1 (the "Service Plan"), under which Class B, Class C and Class T shares pay the Distributor for providing certain services to the holders of their shares a fee at the annual rate of .25% of the value of the average daily net assets of Class B, Class C and Class T shares. During the period ended April 30, 2006, Class A, Class B, Class C and Class T shares were charged $128,756, $183,450, $144,682 and $4,258, respectively, pursuant to their respective Plans. During the period ended April 30, 2006, Class B, Class C and Class T shares were charged $61,150, $48,227 and $4,258, respectively, pursuant to the Service Plan.

The Fund 25

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Under its terms, the Plans and Service Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plans or Service Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $163,394, Rule 12b-1 distribution plan fees $69,579 and service plan fees $16,855, which are offset against an expense reimbursement currently in effect in the amount of $14,854.

(c) The Company and Dreyfus have received an exemptive order from the SEC which, among other things, permits the fund to use cash collateral received in connection with lending the fund's securities and other uninvested cash to purchase shares of one or more registered money market mutual funds advised by Dreyfus in excess of the limitations imposed by the Act.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2006, amounted to $0 and $35,870,914, respectively.

At April 30, 2006, accumulated net unrealized appreciation on investments was $33,214,135, consisting of $46,271,226 gross unrealized appreciation and $13,057,091 gross unrealized depreciation.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 5—Subsequent Event:

Effective on or about June 1, 2006, the fund will no longer offer Class B shares, except in connection with dividend reinvestment and permitted exchanges of Class B shares.

26

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and 2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services, and the Sub-Investment Advisory Agreement between the Manager and Fayez Sarofim & Co. ("Sarofim & Co."), with respect to the fund, pursuant to which Sarofim & Co. provides day-to-day management of the fund's investments subject to the Manager's oversight.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager and Sarofim & Co.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement, and by Sarofim & Co. pursuant to the Sub-Investment Advisory Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each.The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also considered the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered Sarofim & Co.'s research and portfolio management capabilities. In response to a question from the Board regarding research personnel, a representative of Sarofim & Co. reviewed recent and upcoming personnel additions in its research department. The Board members also considered that the Manager also provides oversight of day-to-day fund operations, including fund

The Fund 27

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) ( c o n t i n u e d )

accounting and administration and assistance in meeting legal and regulatory requirements, and the Manager's extensive administrative, accounting and compliance infrastructure, as well as the Manager's supervisory activities over Sarofim & Co.

Comparative Analysis of the Fund's Performance, Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of large-cap core funds (the "Performance Group") and to a larger universe of funds, consisting of all retail and institutional large-cap core funds (the "Performance Universe") selected and provided by Lipper Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and the Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was below each of the Performance Group and Performance Universe medians for the one-, two-, three- and four-year periods, below the Performance Universe median for the five-year period and at the Performance Group median for the five-year period.The Board discussed with representatives of the Manager and Sarofim & Co. the investment strategy employed in the management of the fund's assets and how that strategy affected the fund's relative performance. The Board members noted that Sarofim & Co. is an experienced manager with a long-term "buy-and-hold" investment approach to investing in what generally is known as "mega-cap" companies. Sarofim & Co.'s considerable reputation, based on following this investment approach, was noted. A representative of the Manager provided the Board members with industry-related analysis from third party, non-affiliated entities which noted the underperformance of mega-cap companies and the consistent process of Sarofim & Co. Representatives of the Manager asserted that Sarofim & Co. and its investment style were prominently featured in marketing materials so that investors would be informed about, and expect the fund to be

28

sub-advised by Sarofim & Co. and its performance to be consistent with, Sarofim & Co.'s long-term buy-and-hold investment approach to investing in "mega-cap" companies.A representative of Sarofim & Co. informed the Board members that Sarofim & Co. believes the valuations of the fund's portfolio holdings are relatively attractive, noting the aggregate fundamentals of the fund's portfolio holdings, as well as those of certain securities in the portfolio, as compared to the Standard and Poor's 500 Composite Stock Price Index, including, among other things, price/earnings ratios, earnings growth and capital ratios.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. The Board members noted that the fund was the only fund in the Expense Group with a "unitary fee" structure.The Board members noted that the fund's expense ratio was higher than the Expense Group and Expense Universe medians. Representatives of the Manager and Sarofim & Co. and the Board members agreed that Sarofim & Co. would voluntarily waive a portion of its sub-investment advisory fee paid by the Manager (and the Manager would, in turn, waive that portion of the fund's management fee paid by the fund) in the amount of 0.10% of the value of the fund's average daily net assets until October 4, 2006.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included with the fund in the "Large-Cap Core" category, or in the "Large-Cap Core Variable Insurance Products" category, of Lipper (the "Similar Funds"), and by other accounts managed by the Manager, Sarofim & Co. or their respective affiliates with similar investment objectives, policies and strategies as the fund (the "Adviser Accounts," and, collectively with the Similar Funds, the "Similar Accounts"). The Manager's representatives explained the

The Fund 29

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE

FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) ( c o n t i n u e d )

nature of the Similar Accounts and the differences, from the Manager's and Sarofim & Co.'s perspective, as applicable, in providing services to such Similar Accounts as compared to managing and providing services to the fund.The Manager's representatives also reviewed the costs associated with distribution through intermediaries. The Board analyzed differences in fees paid to the Manager or Sarofim & Co. and discussed the relationship of the fees paid in light of the Manager's or Sarofim & Co.'s performance and the services provided, noting the fund's "unitary fee" structure.The Board members considered the relevance of the fee information provided for the Similar Accounts managed by the Manager and Sarofim & Co. to evaluate the appropriateness and reasonableness of the fund's management fee and sub-investment advisory fee.The Board acknowledged that differences in fees paid by the Similar Accounts seemed to be consistent with the services provided.

The Board considered the fee to Sarofim & Co. in relation to the fee paid to the Manager and the respective services provided by Sarofim & Co. and the Manager.The Board also noted that Sarofim & Co.'s fee is paid by the Manager and not the fund.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit. The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex. The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable. The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the recent decline in assets, and the extent to which

30

economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund share-holders.The Board members also considered potential benefits to the Manager or Sarofim & Co. from acting as investment adviser and sub-investment adviser, respectively, and noted the soft dollar arrangements with respect to trading the fund's portfolio.

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. Since the Manager, and not the fund, pays Sarofim & Co. pursuant to the Sub-Investment Advisory Agreement, the Board did not consider Sarofim & Co.'s profitability to be relevant to its deliberations. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement and Sub-Investment Advisory Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager and Sarofim & Co. are adequate and appropriate.

The Fund 31

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) ( c o n t i n u e d )
  • The Board was concerned with the fund's performance, and while management assured the Board members that portfolio manage- ment had been consistent with the strategy description in fund materials and Sarofim & Co.'s stated investment style, the Board determined to continue to closely monitor performance and to renew the Management Agreement and the Sub-Advisory Agreement only for a six-month period, through October 4, 2006.
  • The Board concluded, taking into account the voluntary fee waiver, that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative performance, expense and advisory fee information, cost of services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund and that the fee paid by the Manager to Sarofim & Co. is reasonable and appropriate.
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were to be deter- mined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement and Sub-Investment Advisory Agreement was in the best interests of the fund and its shareholders and that the Management Agreement and Sub-Investment Advisory Agreement would be renewed through October 4, 2006.

For More Information

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

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, 2005, is available 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.

© 2006 Dreyfus Service Corporation 0149SA0406

  Dreyfus
U.S. Treasury
Reserves

SEMIANNUAL REPORT April 30, 2006

Save time. Save paper. View your next shareholder report online as soon as it's available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It's simple and only takes a few minutes.

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    Understanding Your Fund's Expenses 
6    Comparing Your Fund's Expenses 
With Those of Other Funds
7    Statement of Investments 
8    Statement of Assets and Liabilities 
9    Statement of Operations 
10    Statement of Changes in Net Assets 
11    Financial Highlights 
13    Notes to Financial Statements 
18    Information About the Review 
and Approval of the Fund's
    Investment Management Agreement 
FOR MORE INFORMATION
    Back Cover 

  Dreyfus
U.S. Treasury Reserves

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus U.S. Treasury Reserves, covering the six-month period from November 1, 2005, through April 30, 2006.

Since June 2004, the Federal Reserve Board (the "Fed") has attempted to manage U.S. economic growth and forestall potential inflation by gradually raising short-term interest rates. Recently, Fed Chairman Ben Bernanke suggested that the Fed may soon pause to assess current economic data and evaluate the impact of its credit tightening campaign. In our view, the Fed's efforts so far have largely been successful: the economy has grown at a moderate pace, the unemployment rate has dropped to multi-year lows, corporate profits have risen, and inflation has remained low despite volatile energy prices.

However, the financial markets are more likely to be influenced not by what the Fed already has accomplished, but by investors' expectations of what is to come, including the Fed's decision to increase interest rates further, maintain them at current levels or reduce them to stimulate future growth.We believe that this decision will depend largely on the outlook for core inflation in 2007.The Fed probably can stand pat as long as it expects inflation to remain subdued. But if inflationary pressures build in an expanding economy, the Fed may choose to resume tightening later this year.

For information about how the fund performed, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund's portfolio manager.

Thank you for your continued confidence and support.

Sincerely,

Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2006

2

DISCUSSION OF FUND PERFORMANCE

Patricia A. Larkin, Senior Portfolio Manager

How did Dreyfus U.S. Treasury Reserves perform during the period?

For the six-month period ended April 30, 2006, the fund's Investor shares produced an annualized yield of 3.49%, and its Class R shares produced an annualized yield of 3.69% .Taking into account the effects of compounding, the annualized effective yields for the fund's Investor shares and Class R shares were 3.55% and 3.75%, respectively.1

What is the fund's investment approach?

The fund seeks a high level of current income consistent with stability of principal. As a U.S.Treasury money market fund, we attempt to provide shareholders with an investment vehicle that is made up of Treasury bills and notes with remaining maturities of 13 months or less issued by the U.S. government as well as repurchase agreements with securities dealers, which are backed by U.S. Treasuries. To pursue its goal, the fund invests exclusively in direct obligations of the U.S. Treasury and in repurchase agreements secured by these obligations.

What other factors influenced the fund's performance?

When the reporting period began, the financial markets had already begun to recover from the aftermath of the Gulf Coast hurricanes. Although oil prices had spiked to more than $70 per barrel, the Federal Reserve Board (the "Fed") defied many analysts' expectations and, instead of pausing to assess the hurricanes' damage to the U.S. economy, implemented its eleventh consecutive rate hike since June 2004, increasing the federal funds rate to 3.75% at its September meeting.

By the time the Fed next raised interest rates in early November, the move was widely expected, especially after the announcement that U.S. GDP had expanded at a 4.3% annualized rate during the third quarter of 2005. December saw a decline in the unemployment rate to 4.9%, confirming that the U.S. economy remained on solid footing.

DISCUSSION OF FUND PERFORMANCE (continued)

However, when the Fed raised rates to 4.25% at its December meeting, a change in the language of its accompanying announcement convinced many investors that the credit tightening campaign might be nearing completion.A lower-than-expected GDP growth rate of 1.7% for the fourth quarter of 2005 appeared to lend credence to this view.

Fears of an economic slowdown soon dissipated in January, however, when the unemployment rate slid to 4.7%, a multi-year low.As expected, the Fed raised the federal funds rate to 4.5% at its January meeting, indicating in its statement that "some further policy firming may be needed…."This language was widely viewed as an attempt to give the new Fed Chairman, Ben Bernanke, flexibility to set his own course.

The employment report for February showed a better-than-expected increase of 243,000 workers, helping to alleviate any lingering concerns that the Gulf Coast hurricanes and high energy prices might trigger an economic slowdown. In addition, despite new signs of sustained economic growth, longer-term interest rates remained surprisingly stable, causing the Treasury yield curve to flatten substantially.At times during the first quarter of 2006, the yield curve inverted, a phenomenon that in the past had been considered a harbinger of recession.

By the end of March, however, it had become apparent that fears of a slowdown were overblown, and the inversion of the yield curve was more likely a result of robust demand for U.S.Treasury securities from overseas investors.Accordingly, few investors were surprised when the Fed implemented its fifteenth consecutive increase in the federal funds rate, driving it to 4.75% in late March. Indeed, it later was announced that the initial estimate of annualized first-quarter GDP growth was a robust 4.8% .

The U.S. Treasury securities yield curve began to steepen in April when new economic data suggested that the economy might be stronger than many analysts previously expected. Despite some slowing in the housing market, low unemployment, strong consumer confidence and brisk retail sales suggested that the economy continued to grow at a relatively brisk pace.

In this environment, most investors have focused primarily on securities at the shorter-end of the money market maturity spectrum. We have maintained a similar strategy, generally keeping the fund's weighted average maturity shorter than industry averages.

What is the fund's current strategy?

On May 10, after the close of the reporting period, the Fed raised the federal funds rate to 5% and indicated that economic growth was expected to moderate to a more sustainable pace. In addition, several members of the Federal Open Market Committee have indicated that they feel monetary policy is now in the neutral range, and further changes in interest rates are likely to depend on prevailing economic data.A substantial slowdown in economic growth could preclude further rate increases, but additional gains in global commodity prices might make the Fed more inclined to tighten more aggressively to forestall inflationary pressures. Accordingly, while we have maintained the fund's relatively short weighted average maturity, we are prepared to adjust our strategy when we become convinced that short-term interest rates have peaked.

May 15, 2006

An investment in the fund is not insured or guaranteed by the FDIC or any other government
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
1 Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past
performance is no guarantee of future results.Yields fluctuate.

The Fund 5

UNDERSTANDING YOUR FUND'S EXPENSES (Unaudited)

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 U.S. Treasury Reserves from November 1, 2005 to April 30, 2006. 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 April 30, 2006     
    Investor Shares    Class R Shares 
Expenses paid per $1,000 †    $ 3.50    $ 2.50 
Ending value (after expenses)    $1,017.40    $1,018.40 

COMPARING YOUR FUND'S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)

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 cost) 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 April 30, 2006 
    Investor Shares    Class R Shares 
Expenses paid per $1,000 †    $ 3.51    $ 2.51 
Ending value (after expenses)    $1,021.32    $1,022.32 

† Expenses are equal to the fund's annualized expense ratio of .70% for Investor shares and .50% for Class R shares; multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

  STATEMENT OF INVESTMENTS
April 30, 2006 (Unaudited)
    Annualized         
    Yield on         
    Date of    Principal     
U.S. Treasury Bills—41.4%    Purchase (%)    Amount ($)    Value ($) 
5/11/06             
(cost $49,939,028)    4.40    50,000,000    49,939,028 
 
 
U.S. Treasury Notes—20.7%             
5/15/06             
(cost $24,999,869)    4.52    25,000,000    24,999,869 
 
 
Repurchase Agreements—37.5%             
Citigroup Global Markets Holdings Inc.             
dated 4/28/2006, due 5/1/2006 in the             
amount of $16,006,160 (fully collateralized by         
$16,554,243 U.S. Treasury Strips,             
due 8/15/2006, value $16,320,000)    4.62    16,000,000    16,000,000 
Goldman, Sachs & Co.             
dated 4/28/2006, due 5/1/2006 in the             
amount of $13,205,104 (fully collateralized by         
$13,470,000 U.S. Treasury Notes, 2.875%,         
due 11/30/2006, value $13,464,323)    4.64    13,200,000    13,200,000 
Greenwich Capital Markets             
dated 4/28/2006, due 5/1/2006 in the             
amount of $16,006,240 (fully collateralized by         
$28,935,000 U.S. Treasury Strips,             
due 5/15/2017, value $16,322,522)    4.68    16,000,000    16,000,000 
Total Repurchase Agreements             
(cost $45,200,000)            45,200,000 
 
Total Investments (cost $120,138,897)        99.6%    120,138,897 
 
Cash and Receivables (Net)        .4%    504,902 
 
Net Assets        100.0%    120,643,799 

Portfolio Summary (Unaudited) †         
    Value (%)        Value (%) 
U.S. Treasuries    62.1    Repurchase Agreements    37.5 
            99.6 

† Based on net assets.
See notes to financial statements.

The Fund 7

  STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited)
    Cost    Value 
Assets ($):         
Investments in securities—         
See Statement of Investments (including         
Repurchase Agreements of $45,200,000)—Note 1(b)    120,138,897    120,138,897 
Cash        402,335 
Interest receivable        550,912 
        121,092,144 
Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(b)        64,036 
Dividend payable        377,247 
Payable for shares of Capital Stock redeemed        7,062 
        448,345 
Net Assets ($)        120,643,799 
Composition of Net Assets ($):         
Paid-in capital        120,644,651 
Accumulated net realized gain (loss) on investments        (852) 
Net Assets ($)        120,643,799 

Net Asset Value Per Share         
    Investor Shares    Class R Shares 
Net Assets ($)    99,675,837    20,967,962 
Shares Outstanding    99,676,482    20,968,169 
Net Asset Value Per Share ($)    1.00    1.00 

See notes to financial statements.

8

STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited)
Investment Income ($):     
Interest Income    2,585,087 
Expenses:     
Management fee—Note 3(a)    308,357 
Distribution fees (Investor Shares)—Note 3(b)    98,017 
Total Expenses    406,374 
Investment Income—Net    2,178,713 
Net Realized Gain (Loss) on Investments—Note 1(b) ($)    (852) 
Net Increase in Net Assets Resulting from Operations    2,177,861 

See notes to financial statements.

The Fund 9

STATEMENT OF CHANGES IN NET ASSETS

    Six Months Ended     
    April 30, 2006    Year Ended 
    (Unaudited)    October 31, 2005 
Operations ($):         
Investment income—net    2,178,713    3,165,305 
Net realized gain (loss) on investments    (852)    — 
Net Increase (Decrease) in Net Assets         
Resulting from Operations    2,177,861    3,165,305 
Dividends to Shareholders from ($):         
Investment income—net:         
Investor shares    (1,712,893)    (1,655,181) 
Class R shares    (465,820)    (1,510,955) 
Total Dividends    (2,178,713)    (3,166,136) 
Capital Stock Transactions ($1.00 per share):     
Net proceeds from shares sold:         
Investor shares    69,394,957    108,205,329 
Class R shares    61,621,528    186,629,429 
Dividends reinvested:         
Investor shares    1,670,709    1,604,330 
Class R shares    229,897    252,322 
Cost of shares redeemed:         
Investor shares    (65,362,037)    (92,879,596) 
Class R shares    (66,126,397)    (244,549,321) 
Increase (Decrease) in Net Assets         
from Capital Stock Transactions    1,428,657    (40,737,507) 
Total Increase (Decrease) in Net Assets    1,427,805    (40,738,338) 
Net Assets ($):         
Beginning of Period    119,215,994    159,954,332 
End of Period    120,643,799    119,215,994 

See notes to financial statements.

10

FINANCIAL HIGHLIGHTS

The following tables describe the performance for each share class for the fiscal periods indicated. All information 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.

a Annualized.
See notes to financial statements.

The Fund 11

FINANCIAL HIGHLIGHTS (continued)

  a Annualized.
See notes to financial statements.

12

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus U.S. Treasury Reserves (the "fund") is a separate diversified series of The Dreyfus/Laurel Funds, Inc. (the "Company") which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering sixteen series including the fund.The fund's investment objective is to seek a high level of current income consistent with stability of principal by investing in direct obligations of U.S.Treasury and repurchase agreements secured by these obligations. 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.The fund is authorized to issue 1 billion shares of $.001 par value Capital Stock in each of the following classes of shares: Investor and Class R. Investor shares are sold primarily to retail investors and bear a distribution fee. Class R shares are sold primarily to bank trust departments and other financial service providers (including Mellon Financial and its affiliates) acting on behalf of customers having a qualified trust or investment account or relationship at such institution, and bear no distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution fee and voting rights on matters affecting a single class. 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 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.

(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Directors to represent the fair value of the fund's investments.

The Fund 13

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

It is the fund's policy to maintain a continuous net asset value per share of $1.00 for the fund; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.

(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 accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Cost of investments represents amortized cost.

The fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the fund, through its custodian and sub-custodian, takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the fund's holding period.This arrangement results in a fixed rate of return that is not subject to market fluctuations during the fund's holding period.The value of the collateral is at least equal, at all times, to the total amount of the repurchase obligation, including interest. In the event of a counter party default, the fund has the right to use the collateral to offset losses incurred.There is potential loss to the fund in the event the fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the fund seeks to assert its rights.The Manager, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the fund enters into repurchase agreements to evaluate potential risks.

(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, if any, it is the policy of the fund not to distribute such gain.

14

(d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2005 were all ordinary income.The tax character of current year distributions will be determined at the end of the current fiscal year.

At April 30, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowing. During the period ended April 30, 2006, the fund did not borrow under the line of credit.

NOTE 3—Investment Management Fee and Other Transactions with Affiliates:

(a) Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund

The Fund 15

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .50% of the value of the fund's average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, Rule 12b-1 distribution fees, service fees and expenses, fees and expenses of non-interested Directors (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund's allocable portion of fees and expenses of the non-interested Directors (including counsel fees). Each Director receives $45,000 per year, plus $6,000 for each joint Board meeting of the Company, The Dreyfus/Laurel Tax-Free Municipal Funds, and The Dreyfus/Laurel Funds Trust (collectively, the "Dreyfus/Laurel Funds") attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts).With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Company directly to the non-interested Directors, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Directors.

16

(b) Under the fund's Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Investor shares may pay annually up to .25% (currently limited by the Company's Board of Directors to .20%) of the value of the average daily net assets attributable to its Investor shares to compensate the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of Investor shares. During the period ended April 30, 2006, Investor shares were charged $98,017 pursuant to the Plan.

Under its terms, the Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Directors who are not "interested persons" of the Company and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plan.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $47,845 and Rule 12b-1 distribution plan fees $16,191.

The Fund 17

  INFORMATION ABOUT THE REVIEW AND
APPROVAL OF THE FUND'S INVESTMENT
MANAGEMENT AGREEMENT (Unaudited)

At a meeting of the fund's Board of Directors held on February 1 and 2, 2006, the Board considered the re-approval for an annual period of the fund's Investment Management Agreement ("Management Agreement"), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are "interested persons" (as defined in the Investment Company Act of 1940, as amended) of the fund were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.

Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager's representatives reviewed the fund's distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager's representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager's corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund's distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund's asset size.

The Board members also considered the Manager's research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager's extensive administrative, accounting and compliance infrastructure.

Comparative Analysis of the Fund's Performance and Management Fee and Expense Ratio. The Board members reviewed the fund's performance and placed significant emphasis on comparisons to a group of retail, no-load U.S.Treasury money market funds (the "Performance

18

Group") and to a larger universe of funds, consisting of all retail U.S. Treasury money market funds (the "Performance Universe") selected and provided by Lipper, Inc., an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons for various periods ended November 30, 2005, and noted that the fund's total return performance was variously above and below the Performance Group and Performance Universe medians for each of the periods. The Board noted the rank of the fund's total return within the Performance Group for each period and discussed that when a fund's performance was below median there was generally a spread of only a few basis points between the fund's performance and median performance.The Manager also provided the Board with the fund's total return performance and the quartile, percentile and rank of the fund's total return within its Lipper category (as provided by Lipper) for periods ended December 31, 2005, which showed improvement over the November 30, 2005 relative total returns.

The Board members also discussed the fund's management fee and expense ratio and reviewed the range of management fees and expense ratios as compared to a comparable group of funds (the "Expense Group") and a broader group of funds (the "Expense Universe"), each selected and provided by Lipper. The Board members noted that the fund was the only fund in the Expense Group with a "unitary fee" struc-ture.The Board members noted that the fund's expense ratio, including Rule 12b-1 fees, was higher than the Expense Group and Expense Universe medians and, excluding Rule 12b-1 or other service fees, was lower than the Expense Group and Expense Universe medians.

Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included within the fund's Lipper category (the

The Fund 19

  INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S
INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

"Similar Funds").They also noted that there were no other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund.The Manager's representatives also reviewed the costs associated with distribution through interme-diaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager's performance and the services provided, noting the fund's "unitary fee" structure. The Board members considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund's management fee. The Board acknowledged that differences in fees paid by the Similar Funds seemed to be consistent with the services provided.

Analysis of Profitability and Economies of Scale. The Manager's representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board considered information, previously provided and discussed, prepared by an independent consulting firm regarding the Manager's approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board members also considered that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the recent decline in assets, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investors.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund's portfolio.

20

It was noted that the Board members should consider the Manager's profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund's assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within ranges determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund's Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.

  • The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
  • The Board was generally satisfied with the fund's performance.
  • The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
  • The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Fund 21

INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND'S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)

The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund's Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2007.

22

NOTES

For More Information

Dreyfus    Transfer Agent & 
U.S. Treasury Reserves    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 
Mellon Bank, N.A.     
One Mellon Bank Center     
Pittsburgh, PA 15258     

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

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are 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.

Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2005, is available on the SEC's website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.

© 2006 Dreyfus Service Corporation 0326SA0406

  Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management
Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and
Affiliated Purchasers.
Not applicable.
Item 10. 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 Registrant, c/o The Dreyfus Corporation Legal Department, 200 Park Avenue, 8th Floor East, 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 11. 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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

Item 12. Exhibits.

(a)(1) Not applicable.
(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.

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.

The Dreyfus/Laurel Funds, Inc.

By:    /s/ Stephen E. Canter 
    Stephen E. Canter 
    President 
Date:    June 30, 2006 

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:    June 30, 2006 
 
By:    /s/ James Windels 
    James Windels
    Chief Financial Officer 
Date:    June 30, 2006 

EXHIBIT INDEX

(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)